Growth of Entrepreneurship - Unit 4-2

Kantipur Valley College, Lalitpur
MBA III semester:

Entrepreneurship
Purbanchal University, Nepal
Development: Unit - 3
GROWTH OF
ENTREPRENEURSHIP
Course Instructor: B. G. Bhattacharya

The Growth Concept
An entrepreneur is one who always

searches for change, responds to it
and exploits it as an opportunity.
Innovation is the basic tool of
entrepreneurs, the means by which
they exploit change as an
opportunity for different business
of service.
- Peter Drucker
The Growth Concept
The purpose of entrepreneurial studies is to understand and
facilitate venture creation and growth. - Low and MacMillan, 1988.
According to Johan Wiklund, there are five basic

perspectives on growth as used in the entrepreneurship
field:
The population ecology perspective
The behavioural and psychological perspective
The resource based perspective
The strategic adaptation perspective
The life cycle perspective
The Growth Concept
Many management researchers evidently associate growth

with entrepreneurship.
Within this rapidly expanding field of entrepreneurship,
business growth has become a major theme.
Gartner (1990) showed that growth was one out of eight
themes that professional users commonly associated with
the entrepreneurship concept.
Livesay (1995) chose Entrepreneurship and Growth as the
title for his two-volume collection of essential readings in the
field.
In 1997, growth was chosen as the theme for the
Babson/Kauffman Conference held in Babson College, USA.
The Growth Concept
If exploitation is included in the definition of

entrepreneurship, it must logically follow that the growth
that results from a better exploitation strategy of a given
opportunity (relative to a worse exploitation strategy) is
entrepreneurship manifested as growth.
A common view, emerging as a common theme in all the
conceptualizations offered by different entrepreneurship
experts, is that entrepreneurship is the creation of new
economic activity. And creation of anything new is definitely
a growth process.
Penrose (1959) suggested that firms that exhibit organic

growth have the ability to detect emerging expansion
opportunities and to recombine existing resources in new
ways so as to take advantage of these opportunities.
The Growth Concept
Davidsson, 1989, Delmar, 1996; Wiklund, 1998 - all three

authors on entrepreneurship have subsequently been
personally involved in conceptual and methodological work
on the topic of growth, as well as in several longitudinal
empirical studies, ranging from growth aspirations during the
prestart-up phase of independent new ventures to
acquisition-based expansion of large corporations.
Cole (1949) defined entrepreneurship as a purposeful activity
to initiate, maintain, and grow (aggrandize) a profit-
oriented business. Here, growth is part of the very definition.
Stevenson and Jarillo state that Entrepreneurship is the

function through which growth is achieved (thus not only the
act of starting new businesses) and describe entrepreneurial
behavior as the quest for growth through innovation.
The Growth Concept
Barney (1988) argues that the reason organizations choose to
grow through acquisitions often is excessive cash flow. This
would suggest that the firm's acquisition growth is
determined by the size of its resource pool rather than by its
determination to develop new economic activities.
It has been effectively argued that when a firm grows as a
consequence of adding new activities, we have a case of
entrepreneurship manifested as growth. This type of organic
growth could justifiably be counted as entrepreneurship,
while growth through acquisition could usually not.
Influential contemporary scholars defines entrepreneurship
as creation of new organizations and creation of new
economic activity. Without any consideration of growth,
entrepreneurship is reduced to a meaningless empirical
variable whose content does not fully reflect any of these
definitions.
Economic factors for growth
The simplest definition of economic growth is an increase in real

gross domestic product (GDP) (that is, GDP adjusted for
inflation).
The growth rate of real GDP is the percentage change in real GDP
from one year to the next.
For example, we can express the rate of growth of GDP in Nepal,
for the period 2009-2010, as follows:
Growth rate of GDP = [GDP(2010) - GDP(2009)]/ GDP(2009) 100
The real GDP (2010) of Nepal as per NRB is US$ 19.057 billion
and that in 2009 was US$ 18.219 billion
So the GDP growth rate = 19.057 18.219 100%
18.219
= 4.6%
For purposes of evaluating how economic growth can feed into
economic development it is often helpful to focus on the growth
rate of GDP per capitathat is, output per personrather than
simply on overall output. Mathematically, GDP per capita is
expressed as:
GDP per capita = GDP / Population
The growth rates of GDP, population, and GDP per capita are
related in the following way:
Growth Rate of GDP = Growth Rate of Population + Growth
Rate of GDP per capita
or:
Growth Rate of GDP per capita = Growth Rate of GDP
Growth Rate of Population
Nepals GDP per capita:
US $465 (2008/ 09); US $556 (2009/ 10); US $642 (2010/ 11)
What causes ECONOMIC GROWTH?
The answers economists have given to this question can be
divided into two broad camps, one following the ideas of Adam
Smith (1776) and the other following the ideas of David Recardo
(1821).
Smith, whose goal was to understand the wealth creation
process, believed on the fact that the division of labor is limited
by the extent of the market. As markets grew, entrepreneur-ship
would lead to innovation, which would lead to an increasing
division of labor and increased production.
Ricardo, in contrast, envisioned economic output as being the
inputs of land, labor and capital. Investment could produce more
capital, but because of diminishing marginal factor productivity
and the existence of fixed factors like land, population growth
will always dominate economic growth, keeping most of the
population at a subsistence level of income.
The ideas of Ricardo and his friend and contemporary Malthus
(1798) created the view of economics as the dismal science,
which contrasts sharply with Smiths view of entrepreneurship
and innovation that would lead to ever increasing wealth.
In the Recardian production function approach, investment is the
key to economic growth, whereas in the Smithian view,
innovation leading to the increases in the division of labor is the
key.
Kirzner (1973) provides an important insight in this regard, by
describing entrepreneurship as the process of acting upon a
previously unnoticed profit opportunity. Thus Kirzners
entrepreneurship can provide an engine to drive Smithian
economic growth.
The acts of entrepreneurship create an environment within
which innovations build on themselves, leading to continually
increasing productivity.
The main economic factors in economic growth are traditionally
land, labor, and capital. These factors have normally been
mentioned in Classic and Neo-classic writings, though,
sometimes, other factors such as technology and management
have been added to the above factors.
Alfred Marshall, in 1895, stated: The agents of production are
commonly classed as Land, Labor, and Capital. Marshall then
added that: Capital consists in a great part of knowledge and
organization.
Rapid progress in technology and its considerable role in
economic growth caused it to be a major factor in economic
growth. Thus, in addition to capital accumulation and the labor
force, Todaro, in 1994, added technological progress to the main
factors that affect economic growth:
y = f ( l, k, t)
y is national output, l is labor, k is capital, and t is technological
progress.
In Thirlwalls view (1994), the economic factors were: land, labor,

agriculture, capital and technological progress. Like Thirlwall,
some other economists have also indicated agriculture as a main
factor in economic development (Kuznets, 1966).
Richard T. Gill (1967) classified economic growth factors as:
labor, land, capital, large scale production, division of labor and
organization.
Livingston and Goodall (1970) listed four economic factors
affecting economic growth: natural resources, capital, knowledge
and human resources.
On the whole, it can be concluded that CAPITAL is at the centre
of all capitalist theories related to economic growth. Economists
over the last forty years have shown economic development
processes depends on the way capital can be accumulated.
Todaro (1994) presented three major factors

necessary for economic growth:
1- Capital accumulation, including all new

investments in land, physical equipment, and
human resources.
2- Growth in population and thus, although
delayed, growth in labor force.
3- Technological progress.
Non-economic factors for growth
Kindleberger (1965) presented several

non-economic factors as significant
contributors towards growth. The
various aspects to be touched upon
include the orientation of the individual
in his society, family, class, race, and
religion, rural-urban differences,
national character, size of social unit,
effect of culture on institutions, and
interaction of cultural values and
economic change.
Culture as a Non-economic Factor
The culture of a society can be a major impetus for

economic development.
Societies which have considerable potential for
economic development, such as discipline and positive
attitudes towards work, capital accumulation,
production, and the quantity and quality of
consumption are in a better position to become
economically developed than those which are deprived
of these attitudes.
Religion as a Non-economic Factor
Some social scientists relate economic growth in the

United Kingdom to the Protestant Reformation.
The substitution of a materialistic world view for a
religious (spiritual) world view has caused a huge
transformation over recent centuries.
Although it seems that religious beliefs generally are
associated with a slower rate of economic growth, this
does not necessarily mean that all religions have the
same effect on economic development.
There are a wide range of religious world views and
various religious attitudes to material life.
Religion as a Non-economic Factor (contd)
One notable point that affects the relationship between

religion and economic development is the degree of
peoples commitment to their religion.
To examine the relationship between religion and
economic growth, one should distinguish between
religion itself and religious people.
There is no evidence to show that religion is necessarily
an obstacle to economic development, but it depends
indirectly on religious world views and how they value
economic development.
Religion as a Non-economic Factor (contd)
One can conclude that both religious and

secular life can lead to economic growth
though at a different rate - but, in a
religious society, the initial aim is doing
religious tasks while, in a materialistic
society, the aim of life is maximizing
material benefits.
Class, Family and Tradition as Non-economic Factors
More than sixty percent of people in Third World

countries live in rural areas. In other words, the majority
in such societies in the world live, produce, consume, and
behave in a traditional way.
Hagen defined traditional society: A society is traditional
if ways of behavior in it continue with little change from
generation to generation. Where traditionalism is present
certain other characteristics are also found. Behavior is
governed by customs, not law. The social structure is
hierarchical. The individuals position in the society is
normally inherited rather than achieved
Class, Family and Tradition (contd)

Family structure is one aspect of traditional societies that can
hinder society from achieving economic development. Three
reasons have been mentioned in this regard:
1) Individuals in extended families are not sufficiently motivated
to adopt economic risks or to work hard.
2) The system of inheritance is another obstacle in families
efforts for economic growth, since dividing land among the
children causes low productivity in economic activities and
prevents society from taking advantage of large-scale
production.
3) Extended families are disinclined to save and this prevents
society from accumulating capital, the main factor in economic
growth. (Kindleberger, 1965).
The Role of the Individual as a Non-economic Factor
Many social scientists have considered the role of certain
individuals in social and economic transformations. These
individuals include entrepreneurs, dynamic persons,
marginal persons, deviants and authoritarian and
innovative persons as well as the elite.
Hoselitz (1957) considered that: A deviant always
engages in behavior which constitutes a breach of existing
order and which is either contrary to, or at least not
positively weighted in, the hierarchy of existing social
values.
This deviant behavior could promote growth if it ran
counter to traditional (including religious, family, etc.)
values that are adverse to development.
Political Dependency as a Non-economic Factor

Political dependency, which is one of the main
characteristics of Third World countries, is a significant
economic factor in development.
After World War II, despite the end of the colonization
period, dependency of weak countries on powerful
countries continued.
Developed countries, and the international organizations
(International Monetary Fund, World Bank, etc.) that they
dominate, tend to control developing countries politically
and economically in ways that serve their own economic
interests.
Political Dependency (contd)
Political dependency has caused instability in

underdeveloped countries, which, in turn, causes
capital flight from them to developed ones.
Thus, even if there are enough entrepreneurs in
developing countries, given that the political
situation is not reliable for long-term investment,
they still prefer to transfer their capital to
developed countries.
Social and Cultural Dependency as a Non-economic

Factor
Fast technological development and consequent welfare in
developed countries, on the one hand, and the failure of
Third World countries to develop appropriately, on the
other, has given rise to an inferiority complex in
underdeveloped societies.
Todaro argued that: With the proliferation of the
modernizing values of developed nations, many
societies in third world countries that had a profound
sense of their own worth suffer from serious cultural
confusion when they come in contact with economically
and technologically advanced societies (Todaro, 1994).
Social and Cultural Dependency (contd)
The most obvious sign of this socio-cultural

transition has been the tendency towards mass
consumption, especially of luxury goods, often
imported. Furthermore, consumption among
the rich in these countries usually leads to
prodigality and dissipation, with the
consequence that the society is disabled in
terms of productive investment.
The Role of Government in Economic Development as

a Non-economic Factor
It is difficult for a government in an underdeveloped
country to achieve an appropriate rate of economic
development without considering global interdependence
and the influence of powerful countries in
underdeveloped societies and their political affairs.
It is obvious that many Third World governments follow
powerful countries and have not enough ability to choose
their own national policies. In fact this is a new form of
the old colonialism.
The Role of Government in Economic Development as

a Non-economic Factor
If the government is not prepared to undertake a
financially tough period, this stage may lead to
many socio-political conflicts, that, in turn, waste
natural and capital resources.
Kuznets pointed out: Only if such conflicts are
resolved without excessive cost, and certainly
without a long-term weakening of political fabric of
the society, is modern economic growth possible
(Kuznets, 1973).
Rural Entrepreneurship in Nepal
Background
Nepal is largely a rural and agrarian country. Agriculture
dominates the economy with large (41%) but declining
contribution to GDP and a source of employment to over 80
percent of the economically active population.
Because of the very poor state of overall agricultural
development, annual per capita income of the Nepalese is low -
estimated at US$ 240 with distribution skewed enough to have
nearly 38 percent population in abject poverty (capacity to
arrange less than 2,124 kcal per day and other basic needs).
Among them 17 percent are hardcore or ultra-poor. The Gini
coefficient of income distribution is on the rise from 0.3 in
1977 to 0.358 in 1999/00 .
Nepal is among the 49 LDCs with low human development index.
The poverty is manifested in different forms -- exclusion,
deprivation, destitution, and even social conflict.
Rural development policies
The rural development plan set its goal to bring down the
number of people below the poverty line to 32 percent.
The plan also set its objective to raise the living standard
of the poor by reducing the level of poverty, to launch
special area and various targeted programs, to uplift the
living standard of ultra-poor who do not have any means
of production as well as income, to empower the
backward, deprived and weak communities and to reduce
the concentration of existing poverty in backward and
remote areas by developing physical, social and economic
infrastructure.
Poverty alleviation
The main strategies of the government for attaining the goal of

poverty alleviation include:
Integrated development of agriculture and forestry sectors and
sustainable and poverty alleviation-oriented economic growth
with a focus on these sectors.
Acceleration of industrial development process through the
advancement of such sectors as agriculture, water resources,
industry, tourism and transportation on the basis of comparative
advantage and competitive capability.
Enabling local institutions to take leadership in rural
development through decentralization, and placing special
priority on the development of backward regions.
Developing human resources for sustainable and high economic
growth.
A number of long term (20 years) social development targets have

also been set in the Rural Development Plan. They include, among
others:
Ensuring primary education to all the school going age children,
Providing primary health service to 90 percent of the
population,
Rendering drinking water facility to all the population, and
ensuring literacy to 90 percent of the population.
The progress in these fronts has remained satisfactory with higher

public resource allocation in social services, evolution of
decentralized local self governance, and social mobilization to
attain these objectives. However, progress in poverty reduction
has remained less than satisfactory.
Youth in rural Nepal and Entrepreneurship
The country is facing problem related to youth unemployment which will

become more acute in the next decade as the labor force in the region is
also expected to grow by around 2.1 percent a year, warns the
International Labor Organization (ILO).
Nearly 33.2 percent of rural youth are unemployed. Due to the lack of
governmental policies and program to provide employment
opportunities, more than 7000 youth leave the country and go abroad in
search of job every year.
Youth are very important from the point of view of socio-economic
productivity in a country. Due to the ever increasing job crisis, Nepali
youth should be encouraged towards entrepreneur-ship and self
ventures
The youth can play important role in the development of a sustainable
community if the unemployed youth are empowered with management
skills for economic development with technical education and vocational
training courses.
Why Nepalese Entrepreneurs are Shy?
Private entrepreneurs in nepal, especially in the rural sector,

have traditionally remained very shy to come forward for
investment in industrial ventures due to various reasons such as:
Limited financial resources,
Lack of proper entrepreneurial education and training facilities,
Low rate of return from industrial investment,
Conservative lending policy of banks and financial institutions,
Lack of adequate protection to investors,
Unstable and unsuitable economic and industrial policies of the
government,
Wide-spread corruption in the public sector and
The aspiration of many people in the private sector to be rich
overnight instead of putting efforts to the industrial
development.
The Need of Entrepreneurial Motivation in Nepal
It is well known that entrepreneurs have key role to play in the

process of industrial development in the country.
In the context of Nepal, it is required to motivate entrepreneurs
especially in the rural private sector.
Motives, abilities and congenial environment all combine to
promote entrepreneurship.
The stronger are the motives and abilities, congenial
environment will be less necessary.
It is especially important to encourage more people to be long
term entrepreneurs interested in permanent business, rather
than short term speculators.
Measures to Support Entrepreneurs in Rural Nepal
Provision of adequate capital

Protection to the investors
Suitable governmental policy
Expansion of institutional services
Economic development cannot be initiated without the pioneering

efforts of entrepreneurs. Entrepreneurs have key role to play in the
process of industrial development in particular and economic
development in general. But entrepreneurs in Nepal are very shy to
invest capital in industrial sector. Therefore, it is essential to induce
entrepreneurs to mobilize their resources in industrial sector.
Government should implement an appropriate policy to motivate
the entrepreneurs and to develop industries in the country. Finally
the attitude of the people to become rich overnight must be
changed through effective policy reforms.
The table below presents the role of entrepreneurs that they

can play in the process of industrial and economic
development of Rural Nepal.
Role of Entrepreneurs (in preferential rank)
Role Businessmen/ Academics Overall
Entrepreneur
Capital formulation and 1 2 1
mobilization
Employment Generation 2 4 4
Industrial Growth 4 3 3
Human Resource 5 1 2
Development
Balanced Regional 3 5 5
Development
Last slide analysis . . .
As shown in the table, Nepalese businessmen viewed that

entrepreneurs can contribute to the formation and
mobilization of capital required for economic development
of the country followed by employment generation and
balanced regional development.
Academics perceived that assist in human resource
development and capital formation were the key roles
played by entrepreneurs.
Overall ranking of the roles stood in the sequence of capital
formation, human resource development, industrial growth,
employment generation and balanced regional
development respectively.
In the following chart, an attempt has been made to identify

the barriers and problems that are being experienced by
Nepalese Entrepreneurs, specially in the rural sector.
Barriers to Nepali Entrepreneurs (in preferential rank)
Barriers Businessmen/ Academics Overall
Entrepreneur
Limited access to capital 1 4 3
Low level of confidence 4 2 2
Low return from industrial 3 3 4
investment
Lack of education and 6 5 6
training
Political instability 2 1 1
Lack of favorable policy 5 6 5
Nepalese entrepreneurs have been facing so many barriers in the

way of creation of new ventures and smooth operation of the
existing ones.
Nepalese businessmen and entrepreneurs have viewed that their
main barriers include limited access to capital, political instability,
low return from industrial investment, low level of confidence
and lack of favorable policy of the government.
Academics viewed the political instability, low level of confidence
and low return from industrial investment are the major causes
responsible for poor entrepreneurial motivation in Nepal.
Overall ranking also indicates the similar results. It can thus, be
concluded that political instability, low level of confidence and
limited access to capital are the main problems of Nepalese
entrepreneurs.
The following table attempts to present the remedial measures to

solve the problems and support the entrepreneurs.
Measures to support entrepreneurs in Nepal (in preferential rank)
Measures Mean Rank

Creation of investment friendly climate 2.62 3
Extension of institutional services 3.98 4
Easy access to finance 1.72 1
Favorable Government policy 2.59 2
Provision of education and learning 4.03 5
The table reveals that easy access to finance and favorable

government policy are the two most important measures to
motivate entrepreneurs in Nepal.
It is also found that other supportive measures include
creation of investment-friendly environment, expansion of
institutional services and provision of training and education.
Here, some suggestive measures are presented to motivate
entrepreneurs as well as to induce industrial investment in
Nepal.
Rural Nepal Entrepreneurship Cases
Rural Nepal Entrepreneurship
Stories
Chyuri? a wish fulfilling tree !
About 200 entrepreneurs have
received training in making herbal
soap out of Chyuri (Aesandra
butyracea ) through the UNDP
Micro Enterprise Development
Programme (MEDEP) .
Statistics show that there are more than 10 million Chyuri trees
in 50 districts of Nepal. As a result of the training, in 2009, the
entrepreneurs produced 84,000 pieces of Chyuri herbal soap (80
gm) with a market value of approximately Rs 1.8 million.
According to a recent survey conducted by MEDEP, there are
5.6 million Chyuri trees at fruit bearing stage with the potential
of collecting nearly 90,000 metric tons of seeds from which
approximately 35,000 metric ton of butter can be extracted.
Chyuri butter substitutes the animal fat ingredient in the soap
production.
Smoke Hood Stove
Residents from Saramthali village
in Rasuwa district is very happy
with the smoke hood stove in their
house. Theysays, the smoke hood
is ideal in their cool highland area
where they need a lot of firewood
to keep their rooms warm.
Generally one head load of firewood (approx. 30 kg) lasts only 3
days. But with the smoke hood, one head load lasts 5 days. It is
equally efficient to keep the room warm and with no smoke inside
the house.
The UNDP/GEF Small Grants Programme has supported Indoor air
Pollution Health Network Forum. The project has 600 members in
18 groups belonging to 12 Village Development Committees of
Rasuwa, to implement the project at the local level.
Bom Khola Micro Hydro Plant
This 100 kw hydro plant is a joint
venture of the Alternative Energy
Promotion Centre of the Government
of Nepal, UNDP Rural Energy
Development Programme (REDP), the
World Bank, and the local community.
This project has brought a huge change in Lukla with the generation
of power. It is the first and the largest system built and owned by a
local community in the country with the support of REDP.
The plant provides electricity to a total of 193 households, of which
147 have been converted into hotels and lodges.The remaining 46
households belong to poor families, who never dreamt of having
electricity in their houses.The generation of electricity has
significantly contributed to the economy and lives of people in Lukla
whose main source of income is tourism.
The Bhadrakali Nursery
When the Pokhara Municipality gave this
public dumping site on lease to Gopal Lama
and his sister, little did they expect that
there would be such a huge change in the
outlook of the place.
The Bhadrakali nursery below the China Bridge in Pokhara
Municipality proved to be a beautiful and an enterprising venture
for the Lamas. The nursery has now 16 staff and houses above 500
varieties of plants.
Pokhara is a tourist destination and it is essential that it remains
clean. This place under the bridge was becoming unbearable and
people literally had to cover their nose when they passed by this
area but now people stop for few seconds and admire the garden.
Allo? A flourishing enterprise for rural entrepreneurs
The indigenous Magar and Rai

communities have used the plant--
Himalayan Nettle (Girardinia
diversifolia), commonly known as
Allo as a weaving thread for
shawls, blankets, bags and clothes.
UNDP Micro-enterprise Development Programme (MEDEP) in

Nepal identified Allo as one of the potential raw material for
starting an enterprise in 1999.
Allo thread-weaving has helped uplift the lives of above 1000
poor women in Nepal, mostly from excluded communities in 20
districts, who are supported by at least 8,000 primary collectors
of the plant all over the country.
New Morning in Kakani!
Strawberry farming has been a
blessing for farmers like Chinimaya
Lama of Kakani, Nuwakot district,
who due to poor family condition
was deprived of the opportunity to
receive formal education.
Micro-enterprise Development Programme (MEDEP) provided
entrepreneurship trainings and established linkages with micro-
finance institutes for micro-credit access, market network and
promotion schemes such as packing and branding to over 200
farmers from the area.
Today there are 312 plus small land holders in the village,
cultivating strawberries who used to live in abject poverty. Of
these, 126 have formed a Multipurpose Cooperative called Nava
Bihani Farmers Multipurpose Cooperative. Chinimaya holds an
official post in the Cooperative.
Blacksmiths benefit from new technology ?...
Krishna Bahadur Bishwokarma makes
iron agriculture tools. A traditional iron
worker, Krishna was earlier paid in
grains once or twice a year- a local
barter system, known as Bhaga Bali.
Today Krishna is making a large profit
out of his iron works as he uses
efficient tools, quality charcoal and
above all, the readily available loan.
The Community Development and Environment Conservation
Forum (CDECF) with the financial support from the UNDP/GEF
Small Grants Programme have benefited 77 blacksmiths till date in
Sipapokhari VDC of Sindhupalchok district.
The blacksmiths produce sickle, hoe, spade, axes and Khukuri
(traditional Nepali knife). These products are sold in shops in
retail as well as wholesale in both rural and urban Nepal.
Livelihood opportunity for the poorest
Rana Maya Tamang, 56, is a seasonal trainer
for briquette production, a member of the
Langhali Community Forest Users Group of
ward 8 in Dharan, she was selected by the
UNDP Micro Enterprise Development
Programme (MEDEP) in 2005 for briquette
making training.
Briquette has become a very good substitute for firewood, which
means less destruction of forests and more conservation of trees.
The raw material for briquette is banmaara (Mikania Micrantha), a
plant which kills other plants by cutting out the light and
smothering them.
Earlier Rana Maya used to survive as a labourer on a daily wage
basis. Her life has completely changed due to the profit she is
makingnow she is earning about Rs. 6000-7000 per month. She
also gives training to other community members and earn an extra
Rs.1000=1500 per training session.
Successful mushroom entrepreneurs in Sarlahi
The Sukdev tole community in
Karmaiya village, Sarlahi district has
started collective mushroom farming.
The hamlet of mostly hill-based
indigenous and a few marginalized
households have sold 1600 kgs of
mushroom, making an income of NRs.
32,000 within 3 months time.
This is a group of 23 women members as Naya Srijana Livelihood
Group formed by UNDP's Livelihood Recovery for Peace (LRP)
project. The LRP project provided basic training on mushroom
farming for these women by coordinating with the officials from
District Agriculture Office and National Mushroom Research
Center. After the training, the group was successful in leasing a land
and constructing a small mushroom shed. Upon receiving NRs 3,
33,000 (US$ 4600) worth support from the LRP project, the
community bought essential raw materials to grow mushroom.
A new life for Bala out of the cantonment
Bala Mahato (name changed), 22, a
former ex-combatant is living a civilian
life today, running her tailoring shop in
Ratnagar, Chitwan, in the Terai area of
central Nepal. I am happy to return
back to my old civilian life and rejoin
my community. Bala.
Upon completion of the training offered by the United Nations
Interagency Rehabilitation Programme (UNIRP), Bala was keen to
utilize her tailoring skills. When she proposed the idea of joining her
friends tailoring shop as a business partner, she received a warm
support from her family and contributed business start-up support
equivalent to Rs. 30,000, provided by the rehabilitation programme,
towards the tailoring shop. From this partnership venture, Bala
earns a good amount to support herself and also contribute to her
family.
Successful entrepreneur Savitri Devi Chaudhary
Life changed for Savitri of Sunsari district
when she attended the UNDP Micro-
Enterprise Development Programme
(MEDEP) training on skills development
and planning small enterprises. The project
also provided a month long technical skills
training on weaving jute products.
A group of 10 women, with Sabitri Devi Chaudhary as their leader,
started producing jute products. To do all the production works, the
women were able to establish a Common Facility Centre, at the
total cost of Rs. 165,000 with the support of MEDEP (Rs. 100,000),
the Village Development Committee (Rs. 25,000), the community
(Rs. 40,000) and the District Development Committee provided in
kind support for the construction of the building.
The members have now increased to 28 from 10 and they formed a
Cooperative in February 2010 with Savitri as the Chairperson.
How Chitra Kali became a millionaire.
Born in a poor Magar peasant family in
Pyuthan district, no one expected that
Chitra Kali Budhamagar will make it big
some day. She is into Allo weaving
business and within a span of 6 years, she
expanded her business to become a
millionaire.
In 2005, Chitra got an opportunity to receive a three-month skill
development training course in making Allo products from the UNDP
Micro-Enterprise Development Programme (MEDEP).MEDEP also
supported her to secure Rs. 8,000 loan from the Agricultural
Development Bank (ADB/N) to start up her weaving business. Later,
she borrowed Rs. 50,000from ADB/N and invested in buying Allo yarn
from local women collectors.
Today Chitras per month income ranges from Rs. 45,000 to 90,000. She
employs 12 rural women for producing different kind of Alloproducts
and has transactions worth NRs. 1.3 million with various financial
institutions and individual money lenders.
INGOs/ NGOs in Nepals
Entrepreneurship
Entrepreneurship
History of Foreign Assistance in Nepal
The history of foreign assistance in Nepal goes back to the 1950s

when the country reopened its doors to visitors after a century of
living in virtual isolation during the Rana reign. Since then, many
wealthy countries have set up aid organizations to help fund
projects and provide technical assistance to meet Nepal's complex
development needs.
There are many differing opinions, however, about the success that
various donor countries have had in providing tangible, long-lasting
assistance to the kingdom. Although developed countries such as
the United States have proven to be invaluable when it comes to
building roads, establishing better communications, and fighting
preventable diseases, they have made costly mistakes along the
way that have tainted people's opinion of their capability to run
such projects on foreign land.
Entrepreneurship
History of Foreign Assistance (contd)
As a result, many new ideologies have formed with regard to development
and foreign aid. People, governments, and organizations are learning from
past mistakes. For example, you rarely hear the word "charity" anymore
when it comes to development. "Charity" breeds dependence,
complacency, and a lack of pride. Instead, people are talking about
"empowerment," "helping people help themselves," "sustainability,"
"access to resources," "participatory management," "collaborative
decision-making," decentralization," etc.
NGOs function on non-profit basis. In Nepal, the term or translation for
nonprofit is not well known. Up until the early 1990s, His Majesty's
Government ran nearly all public social service programs. If the
government did not run a program, it controlled all of the money that
came from donor countries that was meant to go to and encourage small
grassroots movements and local nonprofit agencies. Hence, there were
few incentives for individual Nepalese to establish organizations and
services that could meet the social needs of their communities. In
addition, the bureaucratic process to obtain funds was daunting and often
did not lead anywhere.
Entrepreneurship
After the people's movement and subsequent democratic reforms that
took place in 1990, the Nepalese government announced that local
nongovernment organizations (NGOs) could now directly contact
international nongovernment organizations (INGOs) and donor
governments for "technical, material and financial assistance" to meet
their organizational goals.
As a result, individual, well-intentioned groups of Nepalese could now
directly and much more easily access the funds and expertise they needed
to help their communities prosper, and lead more stable, healthy lives.
They no longer had to go through the Government to seek permission to
operate and acquire the necessary funds.
Since the early nineties the number of NGOs and INGOs in Nepal has
grown exponentially. There are NGOs now for nearly every conceivable
need. One can obtain a list at the Social Service National Coordination
Committee (SSNCC) that is bound together like a book. For most, this
change was welcome. People complained previously that the government
had been ineffective in most of its programs and there was widespread
suspicion that government program administrators had pilfered a great
deal of the money.
Entrepreneurship
The number of NGOs in Nepal is growing rapidly. There are
approximately 6,000 NGOs recognized by the Government. It is
estimated that more than 15, 000 NGOs in Nepal are working in
various sectors. Nepal being one of the poorest countries in the
world, the development of NGOs reaching the grassroots level
seems mandatory. NGOs play a pivotal role in the socioeconomic
structure of the country. The emphasis laid by the Government for
the development of NGO sector has also created a favorable
environment for the increasing number and growth of these non
profit making organizations.
Most of NGOs in Nepal are foreign aided while some have been
established and supported by the local community. There are lots
of International Non Governmental Organizations (INGOs). The
NGOs in Nepal are established with a set goal and they are actively
working in various sectors like rural entrepreneurship, destitute
and orphan children, women empowerment, welfare of senior
citizens, etc.
Entrepreneurship
About AIN
The Association of International NGOs (AIN), formed by INGOs working in

Nepal in September 1996, is an important network in the development
sector of Nepal as members have been implementing various people-
centered development programmes throughout the hills, mountains and
Terai areas.
AIN has come together to promote mutual understanding, exchange
information and share experiences and learning of our work in Nepal for
more effective collaboration. At present the AIN comprises more than 90
INGOs, working on a wide-range of issues and sectors to contribute to
development efforts in Nepal.
Recognizing the growing need to work in a country afflicted by endemic
conflict, AIN is committed to expand its resources on behalf of all
disadvantaged people in Nepal, especially those affected by the ongoing
struggle. Over the years INGOs have played a crucial role as key
stakeholders and partners in the development of Nepal AIN continue to
engage with the Government, donors, various sectors of the civil society,
NGOs and poor and excluded people on these issues.
Entrepreneurship
Nepal faces a colossal task of consolidating the Nepalese national
identity, while at the same time redressing the genuine grievances
of women, various ethnic and caste groups and geographically
disadvantaged areas.
The greatest challenge today is to make the dominant culture

understand that it has to accommodate the dissenting voices
within the nation. On the other hand, various ethnic groups have to
understand that we survive or die together, there is no way history
can be reversed without bloodshed, which does no good for the
people in general.
The civil society including the NGOs and INGOs can and must play a
constructive role in brianging about necessary changes in the
attitudes of the dominant and non-dominant groups for a
harmonious development towards a more equitable social,
economic and political structure in the country.
Entrepreneurship
So far, most NGOs in Nepal have concentrated their attention to
development work, primarily because this is where the funding is available
and that is what attracts people easily. They operate through multi-
dimensional programs, not limiting themselves to one or other sectors at
the village level.
This is partly due to their philosophy of integrated approach and /or
funding possibilities, as many INGOs and donors assist most of them. NGOs
have taken the integrated approach for awareness raising and service
delivery. They mostly work through groups. Activities carried out by NGOs
have been concentrated around creating awareness, playing a catalytic role
in accessing the existing service, human resource development and in
some cases providing services.
Within these broad categories, more specific activities include community

development, income generation, health, agriculture, informal education,
drinking water, population and environment. Most of the NGOs have
added income generation/saving credit components to their programs to
attract participation. However, the focus of the program differs from NGO
to NGO depending upon the availability of funds and donors priority.
Entrepreneurship
A large number of INGOs operate in Nepal, some of them such as the
United Missions to Nepal (UMN) and Helvetas have been doing so for more
than four decades. A substantial amount of resources flow in the country
through them. For example, in 1998, US$17.4 million was spend in Nepal
by INGOs. The largest donors INGOs in 1998 were Foster Parents, 32%;
UMN 16%; International Nepal Fellowship; Action Aid and Lutheran World
Federation.
Different INGOs have varying operational modalities-some of them operate
their own programs while others have been funding government programs
as well as NGOs. As per the present rules, INGOs have been required to get
their programs and those of their collaborating NGOs approved by Social
Welfare Council-SWC.
INGO strategies of local intervention are similar to those of NGOs. But
INGOs also function as donors to NGOs. Awareness raising group formation
and credit are common to almost all programs. Priority of funding and
input components depend upon each INGOs objectives and leadership
vision. Nevertheless, sector-focus of their activities has been rural area
development and health.
Entrepreneurship
Conclusion:
To summarize, although many NGOs and INGOs are performing some
useful developmental work, their intentions, transparency, accountability,
commitment, and capability of independent action---all have been
questioned at various levels. The issue of intention, ownership,
transparency, and accountability are serious ones.
The most serious problem concerning INGO operations in Nepal, as in the
case of NGOs, is their accountability. Donors often create their own
organization to conduct non-government level development activities in
Nepal. Further, donors have tended to fund NGOs established by close
relatives of political and bureaucratic authorities for political purposes
rather than looking at the strength of their programs.
INGOs also have large bureaucracies and often employ expatriates paying
them exorbitant salaries. By such activities and policies, they are
undermining the institutional and professional development in Nepal in
the name of providing assistance to the people of Nepal. Their channel of
funding and financing mechanisms are not transparent. Some of them
have been channeling back resources to their home countries, even
directly as head office overheads.
Entrepreneurship
Conclusion (contd)
Until recently, there was no centralized unit in the country,

which kept track of INGOs and their activities.
The Social Welfare Council (SWC) has taken up this task recently
but it needs to strengthen its infrastructure to perform it
effectively.
The SWC also needs to keep politics out of the process of

funding NGOs.
Entrepreneurship Competency
Development (ECD) in Nepal
Competency Definition
Competency is a
qualitative effort that
positions the organization
for future success by
identifying new
opportunities; builds the
organization by
developing or improving
products or services;
takes calculated risks to
accomplish organizational
objectives.
Entrepreneural Competency
In simple words, the term competence refers to an

underlying characteristics of a person which results in
effective and or superior performance of a job. It is a
unique combination of various qualities and traits that
are required to perform the job effectively. It may be
the motive, traits, skills, aspects of self-image, or a
body of knowledge which the person uses consciously
or unconsciously to perform a given task successfully.
In order to have a better understanding and idea about
entrepreneurial competencies, one should know and
understand the various components of entrepreneurial
competencies which results in superior performance of
a job.
Competency Developmental Activity Levels
All (A)
Applies to all competency levels
Beginner-Basic Knowledge (B)
A person at the Beginner-Basic Knowledge level has limited experience
applying the competency. He/she applies general knowledge in common
situations but has limited practical experience in applying the competency
in a work environment presenting more complex situations.
Mid-level (M)
A person with mid-level proficiency has applied the competency
repeatedly and successfully in the performance of his/her job but still has
much to learn about the advanced aspects or behaviors associated with
the competency. A person at this level can usually apply the competency
on his/her own.
High (H)
A person at the High level has extensive knowledge of and experience with
this competency and can apply the competency exceptionally well on the
job without assistance. At this level one is an expert and has enough
experience to teach the competency to others.
Important Steps Facilitating Entrepreneural Competency
Development
Begin with a clear understanding of the feasibility and objectives

of the programme, focusing on the development of ventures
with the potential for rapid growth.
Develop criteria to select the target group that is the most
entrepreneurial.
Identify the market through an intensive preparation process,
searching for innovate and growth potential.
Provide support through an independent, private-sector-based
organizational structure.
Decide on a basic methodology that integrates the
entrepreneurship development elements with other support and
follow-up.
Practical Ways To Enhance The Entrepreneurial Development
Programme:
There should be a clear-cut policy at the national level.

Designing of viable projects.
Model based EDPs.
Specific course of action to be followed.
Selecting the right type of trainees.
Training of Trainers.
Conducive Environment.
Providing adequate infrastructural facilities.
Duration of EDPs.
Challenges of Nepali Business and Entrepreneurship
An organization is always threatened by some challenges that
may be internal and external as well. To ensure long-term
success, anticipation of future challenges that are likely to
aggravate business is imperative.
Following is a survey conducted with the objective of revealing
future challenges in the context of Nepali entrepreneurship and
the respondents were asked to report the same they have
foreseen now.
The Table in the next slide shows that low productivity, old
production technology and low effort in human resource
development are the most influencing internal challenges
identified by majority of respondents.
Likewise, weak managerial competency, increasing pressure of
trade union, weak information system and poor quality are
among other challenges perceived by the respondents.
Future Challenges of Nepalese Business Organization
Perceived future challenges % of respondents Rank

A. Internal Challenges
Low Productivity 61 i
Poor Quality 39 v
Weak Managerial Competency 44 iv
Old Production Techniques 55 ii
Increasing pressure of trade union 44 iv
HR deterrent to change 39 v
Low efforts in HR development 50 iii
Weak Information System 44 iv
Future Challenges of Nepalese Business Organization (contd)
Perceived future challenges % of respondents Rank

B. External Challenges
Taxation System 72 i
High Inflation 50 iv
Lack of Adequate Financing 44 v
Lack of Skilled Manpower 44 v
Increasing Domestic & Intl. Competition 67 ii
Inadequate Supply of Power & Water 67 ii
Increasing Environmental Regulation 55 iii
Today's modern management regards human resource as the

precious asset of an organization.
Different study reveals that there is a lack of systematic approach
towards human resource development in Nepalese business
organizations.
Most of the organizations neither have a personnel manager to
look after human affairs nor allocate budget in their annual
program for human resource development.
This is a manifestation of low priority assigned to human
resource in organizations.
However, it is a good indication that some of the organizations
have started to provide their employee the training, though they
lack clear policy framework.
Today when most business houses in Nepal are obsessed with Total
Quality Management (TQM) in order to stay ahead of competition, very
few organizations realize that their most precious assets are their
employees. It is Total Quality People (TQP), in other words,
Entrepreneurship Competency Development, that holds the key to a
successful enterprise.
Both the American Society of Training and Development and Motorola
have found that for every dollar invested by a corporation in
competency enhancement and human resource development, they
received a thirty-dollar return on their investment. Training people did
not cost the company much but not training them cost twenty-nine
dollars!
Nepalese business organizations are no longer untouched and
uninfluenced from global trend of increasing competition, rapid change
in technology and demand for competent and multi-skilled workforce.
Consequently, they are experiencing a stiff domestic as well as external
competition with rising demand for trained and skilled manpower.
Entrepreneurial Motivation for ECD
It is required to motivate entrepreneurs, especially in the private sector,
for Entrepreneurship Competency Development.
Motives, abilities and congenial environment all combine to promote
entrepreneurship. The stronger are the motives and abilities, congenial
It is especially important to encourage more people to undergo ECD to
be long term entrepreneurs interested in permanent business, rather
The entrepreneurial ability and talent could be improved by organizing
entrepreneurship development program for present and potential
investors.
Again, adequate institutional services and effective policy changes will
help to create an environment which is conductive to induce industrial
investment.
Entrepreneurial Motivation for ECD (contd)
It is required to motivate entrepreneurs, especially in the private sector,
for Entrepreneurship Competency Development.
Motives, abilities and congenial environment all combine to promote
entrepreneurship. The stronger are the motives and abilities, congenial
It is especially important to encourage more people to undergo ECD to
be long term entrepreneurs interested in permanent business, rather
The entrepreneurial ability and talent could be improved by organizing
entrepreneurship development program for present and potential
investors.
Again, adequate institutional services and effective policy changes will
help to create an environment which is conductive to induce industrial
investment.
Following are some suggestive measures to motivate Entrepreneurship
Competency Development as well as to induce Industrial Investment in
Nepal:
1. Provision of Adequate Capital: It is essential to provide adequate
financial facilities especially to meet the fixed and working capital
requirements of the concerned industries. So, the lending policy of
development banks, commercial banks and other financial
institutions should follow more liberal and practical policies. Similarly,
procedural simplification is required while investing in productive sector.
2. Protection to the Investors: It is especially important to provide
adequate protection to the industrial investors. Most industries have
failed to protect their industry from the competition of foreign products.
Now Government should adopt an appropriate and realistic policy to
protect and develop industries within the country.
3. Suitable Government Policy: Only clear and consistent economic and
industrial policy can help to induce entrepreneurs. Government should
formulate clear, liberal and attractive economic and industrial policies.
4. Expansion of Institutional Services: The concerned agencies, both the
financial and development institutions, should be directly involved in
ECD activity. NIDC and NPEDC (National Productivity and Economic
Development Centre) should launch appropriate entrepreneurship
development program. As an industrial development bank, NIDC has to
identify and motivate the potential investors by providing financial
assistance and technical, administrative as well as managerial guidance
and advice. The activities of the Department of Cottage and Village
Industries (DCVI), the Cottage Industries Development Board (CIDB) and
Industrial Enterprise Development Institute (IEDI) be further improved
to encourage small entrepreneurs. Similarly, Women Development
Section, Women Training Centre and Nari Shilpakala Kendra should
conduct appropriate programs to induce women entrepreneurs and to
bring them into meaningful and remunerative job.
Entrepreneurs play catalyst role in economic development of a country.

Understanding this reality, this programme designed projects to develop
confidence and increase risk-bearing capacity of the potential Nepali
entrepreneurs.
For people who have been challenged due to lack of education and
productive skills, the programme's empirical research has proved that
imparting basic entrepreneurial and management skills could generate an
overwhelming interest towards micro-enterprises.
The indoctrination of the ILO promoted Start and Improve Your Own
Business (SIYB) and Micro Enterprise Creation training for the poor have
proved to be catalysts in the expansion of micro-enterprises in rural Nepal.
To ensure that poor people with an interest in enterprise development are
aware the programme and its activities the following entrepreneurship
development activities are carried out. [ next slide ]
1. Sensitization, awareness building and networking
.
It involves community sensitization, village Community meeting, orientation

on the Programme process, principle and strategy, sensitization workshop,
and networking with partner organization for building network with service
delivery organization.
2. Micro-enterprise creation and development training

.
The Programme has developed a micro-enterprise creation and development

(MECD) training package with the assistance of Industrial Enterprise
Development Institute (IEDI) for potential entrepreneurs. The package
includes Micro-Enterprise Creation Training (MEC) and Micro-Enterprise
Assistance Training (MEA).
3. Identification and selection of potential entrepreneurs.

.
The Programme has developed special screening criteria which tests the
entrepreneurial characteristics of the target participants. The selection
procedures of the Programme aim to assess the potential entrepreneurial
competencies of target groups, particularly women, who are eager to become
entrepreneurs, and to select those who, by virtue of their behavioural and
entrepreneurial profiles, have a better probability of success.
Foundation for Development Management was established in 2000 as a

management consultancy firm by a group of development management
professionals. It offers professional ECD programs and aims to cater the
growing management development needs of Nepal's public, private and
social sector.
Objectives of FDM
To promote and enrich entrepreneurship competency in development
and corporate sector;
To enhance the leadership and management skills and competence of
practicing managers from the public, private and non-governmental
sectors.
To assist government/voluntary/corporate agencies for strengthening
management of development programs and projects.
To contribute to professionalizing management by developing a pool of
young management professionals.

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Kantipur Valley College, Lalitpur

MBA III semester:

Course Instructor: B. G. Bhattacharya

An entrepreneur is one who always

According to Johan Wiklund, there are five basic

Many management researchers evidently associate growth

If exploitation is included in the definition of

Penrose (1959) suggested that firms that exhibit organic

Davidsson, 1989, Delmar, 1996; Wiklund, 1998 - all three

Stevenson and Jarillo state that Entrepreneurship is the

The simplest definition of economic growth is an increase in real

In Thirlwalls view (1994), the economic factors were: land, labor,

Todaro (1994) presented three major factors

1- Capital accumulation, including all new

Kindleberger (1965) presented several

Culture as a Non-economic Factor

The culture of a society can be a major impetus for

Religion as a Non-economic Factor

Some social scientists relate economic growth in the

Religion as a Non-economic Factor (contd)

One notable point that affects the relationship between

Religion as a Non-economic Factor (contd)

One can conclude that both religious and

Class, Family and Tradition as Non-economic Factors

More than sixty percent of people in Third World

Class, Family and Tradition (contd)

Political Dependency as a Non-economic Factor

Political Dependency (contd)

Political dependency has caused instability in

Social and Cultural Dependency as a Non-economic

Social and Cultural Dependency (contd)

The most obvious sign of this socio-cultural

The Role of Government in Economic Development as

The Role of Government in Economic Development as

Rural development policies

The main strategies of the government for attaining the goal of

A number of long term (20 years) social development targets have

The progress in these fronts has remained satisfactory with higher

The country is facing problem related to youth unemployment which will

Why Nepalese Entrepreneurs are Shy?

Private entrepreneurs in nepal, especially in the rural sector,

The Need of Entrepreneurial Motivation in Nepal

It is well known that entrepreneurs have key role to play in the

Measures to Support Entrepreneurs in Rural Nepal

Provision of adequate capital

Economic development cannot be initiated without the pioneering

The table below presents the role of entrepreneurs that they

Last slide analysis . . .

As shown in the table, Nepalese businessmen viewed that

In the following chart, an attempt has been made to identify

Last slide analysis . . .

Nepalese entrepreneurs have been facing so many barriers in the

The following table attempts to present the remedial measures to

Measures Mean Rank

Last slide analysis . . .

The table reveals that easy access to finance and favorable

Rural Nepal Entrepreneurship

The indigenous Magar and Rai

UNDP Micro-enterprise Development Programme (MEDEP) in

The history of foreign assistance in Nepal goes back to the 1950s

The Association of International NGOs (AIN), formed by INGOs working in

The greatest challenge today is to make the dominant culture

Within these broad categories, more specific activities include community

Until recently, there was no centralized unit in the country,