Ch - I - Introduction Ent - Final

8/2/2019 Ch - I - Introduction Ent - Final

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Understanding The Entrepreneur


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Entrepreneur

The man who makes no mistakes does not usually makeanything. Edward John Phelps, American lawyer anddiplomat (1822-1900)

"Nothing great was ever achieved without enthusiasm."Ralph Waldo Emerson

Imagination is more important than knowledge Einstein

"Don't be afraid to take a big step if one is indicated; youcan't cross a chasm in two small jumps." David Lloyd

George

Most of the things worth doing in the world had beendeclared im ossible before the were done Louis D.


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Definition of Entrepreneur

Entrepreneur is derived from the French entreprendre,meaning to undertake.

The entrepreneur is one who undertakes to organize, manage, and

assume the risks of a business.

The French men who organized and led military expeditions in the

early 16th Century were referred to as Entrepreneurs.

Around 1700A.D. the term Entrepreneur was used for architects and

contractors of public work.

Although no single definition of entrepreneur exists and no

one profile can represent todays entrepreneur, research is

providing an increasingly sharper focus on the subject.


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Definition

According to Oxford Dictionary

one who undertakes an enterprise, especially acontractoracting as intermediary between capitaland labor

According to Peter P. Drucker

Innovation is the specific tool of entrepreneurs, themeans by which they exploit changes as an

opportunity for different business or a differentservice


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Schumpeter (1952) An entrepreneur in an

advanced economy is an individual who introduces

something new in the economy a method ofproduction not yet tested by experience in the

branch of manufacture concerned, a product with

which consumers are not yet familiar, a new source

of raw-materials or of new markets and the life.

Accordingly to him the functions of an entrepreneur

are

Introduction of new productIntroduction of new methods of production

Development of new markets and finding fresh sources of

raw-materials and

Making changes.


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DEFINITION .

From our perspective:

Any individual that sees and actsupon anopportunity

This includes introducing a new product or

service, identifying new markets, or puttinga twist on an existing product, process orservice

Also, includes the raising of capital, taking

the risk and controlling the new venture

Embodies creativity, aggressiveness, anddetermination

By assembling various resources, s/he


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An entrepreneur is always action-oriented.

He has the ability to visualise the

necessary steps involved from ideageneration to its actualisation.

He is both a thinker and doer, planner and

worker.

He is accepts risk and manges it.


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Concept of Entrepreneur

Entrepreneur

RiskBearer

Organizer

Innovator


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Entrepreneurship

"Entrepreneurship is the process ofcreating or seizing an opportunity andpursuing it regardless of the resources

currently controlled" (Timmons, 1994).


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The Mindset

Lets begin with why:

To get rich?

Follow a passion? Just got laid off?

To manage your own destiny?

There are lotsof valid reasons to becomean entrepreneur, but youd better know

yourreason.


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Factors that Shape Future Entrepreneurs

Traits

BehaviorEnvironment


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The Entrepreneurial Process

These factors are commonly groupedunder 4 schools of thought

1. Traits Approach: entrepreneurs are

shaped by their character internalattributes

2. Environmental Approach: entrepreneursare a product of their environment

external factors

3. Behavioural/Managerial Approach: it isneither internal nor external factors but

actions & behaviors that lead to


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Contingency Approach

Combination of ALL factors

The ability to sense the opportunity

(result of E traits)

The ability/willingness to exploit(management skill)


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Motivation for Becoming an Entrepreneur

Motivation varies from individual toindividual

Foreign refugees: people escaping political orreligious persecution or to seek economy withgreater opportunities

Corporate Refugees: people dissatisfied withcorporate environment

Parental refugees: children of self-employedparents

Feminist Refugees: women who feel

discriminated against by supervisors, peers,education system, corporate world

Social Refugees: people who do not agree withcertain aspects of their society -- usually start a

business tied to their hobby or craft


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Reasons for growth ofentrepreneurship

Industry structureNew Technologies

Deregulation and privatisation

Formation of new businesscommunities

Increased demand for variety

Services sector

Govt incentives and subsidies

Easier access to resources


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Reasons for growth.

Entrepreneurial education

Return on innovation

Entrepreneur as a heroSelf-employment is highly valued

Rising dissatisfaction at job

Acceptance of ex-entrepreneurs inthe job market


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Sl No. Name of the successfulEntrepreneurs

Areas of enterprises

1. Steve Wozniak Apple Computers2. Bill Gates Microsoft

3. Oprah Winfrey Harpo inc.

4. Michael H & Jay Arrington Harpes Arring toPublishing and media

5. Steven Spielberg Film Industry

6. Vera Wang Vera Wang Fashions

7. Donald Trump Trump Enterprises

8. Russel Simmons Pat Farm Clothing

9. Gordon Moore Intel Corporation10. Tyler Perry Tyler Perry Productions

11. Bill Hewlett Hewlett Packard

12. Mark Burnett Television Show Producer

13. Larry Page & Sergey Brin Google

14. Ted Turner Turner Broadcasting

World famous and Successful Entrepreneurs


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SlNo.

Name of the successfulEntrepreneurs

Area of enterprises (industry)

1. Tulsi Tanti Suzlon Energy Limited

2. Shiv Nadar Hindustan Computers Limited(HCL)

3. Rahul Bajaj Bajaj Group

4. Dr. Pratap Reddy Apollo Hospital Groups

5. Naresh Goyal Jet Airways

6. Narayana Murthy Infosys Technology Limited

7. Anil Dhirubhai Anil Dhirubhai Ambani Groups8. Azim Premji Wipro Technologies

9. Ekta Kapoor Queen of Indian Television

10. Kiran Mazumdar Shaw Biotechnology Company in India

10 most famous Entrepreneurs from India


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Planning

Organisation

Decision-making

Management

Innovation

Risk-bearing

Uncertainty-bearing

PrimaryFunction

OtherFunctions

Functionsimportant fordevelopingcountries

Function ofEntrepreneur

Diversification of

Production

Expansion of the

Enterprise

Employer and Employee

Takling Labour Problem

Coordination with outside agencies

Management of Shares

Public bureaucracy

Acquiring & assembling

New Product

Parallel Opportunities

Marketing Management

Customer relations


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1. Idea generation

The first and the most important function of an

entrepreneur is idea generation. Idea generation implies product selection and project

identification.

Idea generation is possible through vision, insight, keen

observation, education, experience and exposure.

This needs scanning of business environment and market

survey.


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2. Determination of business objectives

Entrepreneur has to state and lay down the business

objectives.

Objectives should be spelt out in clear term. The

entrepreneur must be clear about the nature and type of

business - Whether manufacturing concern or service

oriented unit or a trading business.3. Determining form of enterprise

Entrepreneur has to determine form of enterprise

depending upon the nature of the product, volume of

investment etc.

The form of ownership are sole proprietorship,

partnership, joint stock company, co-operative society

etc.


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4. Raising of funds

All the activities of the business depend upon the

finance and hence fund raising is an important functionof an entrepreneur.

An entrepreneur can raise the fund from internal source

as well as external source. He should be aware of

different sources of funds.

He should also have complete knowledge of

government sponsored schemes PMRY, SASY, REAP

etc. He can get government assistance in the form of seed,

capital, fixed and working capital for his business.


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5. Market Research

Market research is the systematic collection of data

regarding the product which the entrepreneur wants tomanufacture.

Entrepreneur has to undertake market research persistently

to know the details of the intending product i.e.

The demand for the product

Size of the market/customers

The supply of the product

Competition

The price of the product etc.


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6. Procurement of machines and raw materials

Another important function of an entrepreneur

is to procure raw-materials and machines.

Entrepreneur has to identify cheap and regular

sources of raw-materials which will help him to

reduce the cost of production and facecompetition boldly.

While procuring machineries he should specify

the technical details and the capacity. He should consider the warranty, after sales

service facilities etc before procuring

machineries.


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8. Implementation of the project

Entrepreneur has to develop schedule and action plan

for the implementation of the project The project must be implemented in a time bound

manner.

All the activities from the conception stage to the

commissioning stage are to be accomplished by him in

accordance with the implementation schedule to avoid

cost and time overrun.

He has to organize various resources and co-ordinatevarious activities.

This implementation of the project is an important

function of the entrepreneur.


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MD Indo-US Ventures


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Traits of Entrepreneur

High need for achievementStrong desire to do something different from

others

Standard of excellence and success

High self-esteem

Commitment and conviction

Fully commits himself to the project and restsonly when achieved

Leaves no effort to complete the task in time


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Traits

Risk taking

Takes calculated risks

Does not like to undertake tasks

which are either very easy or

impossible to achieve

Undertakes tasks or makes decisionsthat involve a moderate probability of

success and where he is sure that his

efforts can influence success


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Traits

Capacity to analyze

Knows that need for information, its

relevance, where and how to find it.

Has a thought process for diagnosing

problems, conceiving and comparing

alternative courses of actions andapproaches in the direction to solve

rather than to avoid.


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Traits

Initiative and independenceTakes initiative and does not wait for others

to act first

Likes to lead rather than being ledLikes to act on his own rather than follow

others directions

High personal efficiencyHas a sense of effectiveness

Presents himself with ability to do things with

higher degree of efficiency


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Traits

Hopeful about future and search forenvironment

Reasonably optimistic and tends to

look to future with hope

Tends to search the environment in

order to seek answers to questionsSets goal and plans his line of

operations

Perceives opportunities


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Types of skills required in

Entrepreneurship

Technical Skills: Writing

Oral Communication

Monitoring environment

Technical Business Management

Technology

Interpersonal

Listening

Ability to organise

Network building

Management style

Coaching

Being a team player


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Skills required

Business management Skills:

Planning and goal setting

Decision making

Human relations

Marketing Finance

Accounting

Management

Control

Negotiation skill

Venture launch

Managing growth


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Skills required

Personal entrepreneurial Skill:

Inner control/ disciplined

Risk taker

Innovative

Change oriented

Persistent

Visionary leader

Ability to manage change


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Skills required.

Technical BusinessManagement Personal

Writing Planning Inner Control

OralCommunication

Decision MakingRisk Taking

Monitoring The

Environment

Human Relations

Innovative

Use TechnologyMarketing(Selling)

Change-OrientedVisionary


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Higher order skills

Comfortable with lifestyle changes Willingness to break / bend / stretch

Patience to start small

Prepared to make enemies Comfort with confrontations

Dealing with failure

Willingness to learn


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Negatives

You are alone All losses are yours

All decisions are yours

Work may not be satisfying Exiting the business is difficult

You will need to put in long hours

Lack of success will effect self esteem Pressures will affect social and family life


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Positives

You are the boss

All profits are yours

Increases self confidence

Work can be very satisfying

Success will give you immense satisfaction

There will be great variety in roles and tasks


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Characteristics of EntrepreneurE- Effective communication

N - Negotiating skillsT - Total commitment/tactical/team man

R - Risk-taking ability

E - Emotional Stability/Ethical

P - Problem solving

R - Resultoriented

E - Energetic

N - Net working ability

E - Excellence in Economics

U - Unambiguous

R - Real Innovator


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Entrepreneurship

DecisionMaking

Risk Taking

Innovation

Management

of theenterprise A

Success

SkillfulManagement

Organisation

AcceptingChallenges


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Entrepreneurial Characteristics

Not everyone wants to be an entrepreneur and run theirown business. Being an entrepreneur requires specificcharacteristics and skills that are often achieved througheducation, hard work, and planning.

Risk Taker

Businesses face risk. Entrepreneurs minimize riskthrough research, planning, and skill development.

Perceptive (sensitive, insightful, observant)

Entrepreneurs view problems as opportunities andchallenges.

Curious

Entrepreneurs like to know how things work. They take

the time and initiative to pursue the unknown.

Characteristics


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CharacteristicsImaginative

Entrepreneurs are creative. They imagine solutions to problems

that encourage them to create new products and generate ideas.

Persistent

True entrepreneurs face bureaucracy, make mistakes, receivecriticism, and deal with money, family, or stress problems. But

they still stick to their dreams of seeing the venture succeed.

Goal-setting

Entrepreneurs are motivated by the excitement of staring a newbusiness. Once achieved, they seek out new goals or ventures to

try.

Hardworking

Entrepreneurs need a great deal of energy to see a venture startand succeed. Yet they are not deterred by the long hours toachieve their goal.


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Characteristics

Self-confidentEntrepreneurs believe in themselves. Their self-confidence takescare of any doubts they may have.

FlexibleEntrepreneurs must be flexible in order to adapt to changingtrends, markets, technologies, rules, and economicenvironments.

Independent

An entrepreneurs desire for control and the ability to makedecisions often makes it difficult for them to work in acontrolled environment.


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Characteristics.

MarketabilityEntrepreneurs need to ask themselves the following questions abouttheir product, service, or charity:

Does your target market want this product? Prove it. What is you competition? How much of the market do they

own already? How will you take it away from them? Are you competitively priced? Is this a short-term venture? How long will it last? What do you offer that no other product, service, or charity

offers? Why would a customer pay money for what you

provide?

Profitability

To expect a profit, an entrepreneur must ensure that revenueexceeds all costs. Listing expected revenue and expenses can help to

achieve this.


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Characteristics

Often Attributed to

Entrepreneurs

Source: John A. Hornaday, Research about Living Entrepreneurs, inEncyclopedia of Entrepreneurship, ed. Calvin Kent, Donald

Sexton, and Karl Vesper, 1982, 2627. Adapted by permission of Prentice-Hall, Englewood Cliffs, NJ.


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Twenty-First Century Characteristics of

Entrepreneurs

Source: Soo Ji Min, Made Not Born,Entrepreneur of the Year Magazine (fall 1999): 80.


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Entrepreneurs vs. Managers

Reward System -Doing what they like.

Independence.

Activity - Direct

involvement.

Risk - Moderate risk

taker.

Status - Not concernedabout status symbols.

Reward System -Corporate rewards.

Promotion, staff,

office, money.

Activity - Delegates

and supervises.

Risk - Avoids risk.

Status - Concernedabout status symbols.


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Entrepreneurs vs. Managers

Mistakes - Deals andlearns from them.

Decisions - Follows

dreams with decisions. Who serves - Customers

and self.

Relationships - Deal-

making and reciprocity.

Time orientation - 5 - 10

years.

Mistakes - Avoids orshifts blame.

Decisions - Agrees with

those above them. Who serves - Others.

Relationships -

Hierarchy.

Time orientation - Short-

term.

C i E t t


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Comparing Entrepreneurs to

Managers and Leaders

Entrepreneur Manager Leader

Innovates Administers Innovates

Creates Maintains Develops

Sees opportunities See problems Sees the future

Asks how and when Asks how and when Asks what and why

Makes it happen Does things right Uses influence

Builds the team Relies on control Inspires trust


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Types of entrepreneurs

According to Danhof Entrepreneurs are classified

into four types

Entrepreneur

Innovative

Entrepreneur

Imitating or

Adoptive

Entrepreneur

Fabian

Entrepreneur

Drone

Entrepreneur


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Types

Innovative Entrepreneurs

Innovative Entrepreneurs Adventurous

entrepreneurs who attempt to put attractive

possibilities in to practice are included under this

type.They utilize a chance to introduce a new technique

or a new product.

They mobilize sufficient capital to start an enterprise

befitting to this possibility.This type of Entrepreneurs introduce new product

and new production techniques and find out the new

markets for their product.


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Types

Imitative Entrepreneurs.:This type of Entrepreneursattempts to imitate innovative

entrepreneur.

They imitate the techniques and

activities of others .

The Entrepreneur of thedeveloping countries belong to this

type.


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Types

FABIAN ENTREPRENURE: FABIAN ENTREPRENURE - Entrepreneur who attribute

preference to

Customs

Religion Tradition and

Past habits

Being shy and lazy this type of entrepreneur are very

cautious to accepts changes and they view changes with

suspicion.

Being Reluctant to face risk, they continuously follow the

foot steps of their predecessors


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Types

Drone Entrepreneur (whine, go on about)

These entrepreneur are unwilling to make any

change in the production system, even if the system

causes losses repeatedly.They never try to rise in accordance with the

opportunities or to accept the warning given by

times.

Even if their products have lost marketability andthe activities of the enterprise have been proved to

be uneconomical and the enterprise has been thrown

out of the market.


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Types

Following is a list of Entrepreneur who are notincluded in the definition Formulated by

DANHOF:

INDIVIDUAL ENTREPRENEURS And

INSTITUTIONAL ENTREPRENEURS

TECHNOLOGICAL ENTREPRENEURS

INHERITED ENTREPRENEURS INSTIGATED ENTREPRENEURS


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Types

INHERITED ENTREPRENEUR:Sometimes people become entrepreneur

when they inherit family business.

Entrepreneur of large scale businessconcern like TATA, RELIANCE, BIRLA,

KHAITAN

Types


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Types

Individual Entrepreneur and Institutional

Entrepreneur:

Majority of Entrepreneur belonging to the small scaleindustry sector are individual entrepreneur.

Entrepreneur of this type are found in plenty in any

country.

They enjoy the benefits of flexibility, Quick decision

making .

Individual Enterprise are not able to grow or develop

beyond a limit.

So its become necessary to institutionalize enterprises.

When entrepreneurial skills are to be coordinated , it

becomes necessary for a team of entrepreneur to work

united and the enterprise gains an institutions nature.


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Types

TECHNOLOGICAL ENTREPRENEUREducated young men and youth for self

employment began to pour into business

sector at a time when the problem ofunemployment become a threat to the

society and technical and scientific

advancements started creating changes inthe economic structure of the nation.


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Types

Instigated Entrepreneurs:Person who have become entrepreneur due

to the pressure exerted on them by

circumstances are termed as instigatedentrepreneurs.

For example traditional handicraft

products and business men are forced toenter into business on account of the

decline of usages of handicraft goods.

Types


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Stages of economic

Development

1. Innovative Entrepreneur

2. Imitative Entrepreneur

3. Fabian Entrepreneur

4. Drone Entrepreneur

Types of

Business

1. Business Entrepreneur

2. Trading Entrepreneur

3. Industrial Entrepreneur

4. Corporate Entrepreneur5. Agricultural Entrepreneur

6. Retail Entrepreneur

7. Service Entrepreneur

Types

Types


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Use of Technology

1. Technical Entrepreneur2. Non-technical Entrepreneur

3. Professional Entrepreneur4. High-tech Entrepreneur5. Low-tech Entrepreneur

According to Area1. Urban Entrepreneur2. Rural Entrepreneur

Gender and Age

1. Men Entrepreneur2. Women Entrepreneur3. Young Entrepreneur

4. Old Entrepreneur

Types


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Growth Rate1. Growth Entrepreneur2. Super growth Entrepreneur

Stage of Development1. Classical Entrepreneur

2. Modern Entrepreneur

Scale of Entrepreneur

1. Small Scale Entrepreneur

2. Medium Scale Entrepreneur3. Large Scale Entrepreneur

Entrepreneur VS Intrapreneur


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Entrepreneur VS. Intrapreneur

Entrepreneur VS. Intrapreneur:

A new brand of Corporate entrepreneurs called Intrapreneur.

In Big Organization, the top executives with

Entrepreneurial talents are encouraged to generate

new ideas and then convert them into products

through research and development carried out within

the organization.

This concept of Intrapreneurship has gainedpopularity in Developed countries like America.

If the managements are not receptive to their ideas

then, they tend to leave their parent organization and

start Ventures of their own.

E VS I


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Entrepreneur VS. Intrapreneur

ENTREPRENEUR INTRAPRENEUR

Independent Dependent

Need not to be Highly

EducatedHighly Educated

Fund Raising No Fund Raising

Risk Bearing No Risk Bearing

Routine Work Specialist

Operation From Outside Operation from Inside

Strong Authorities Strong Authorities

Factors Entrepreneur Intrapreneur


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p p

Dependency An Entrepreneur is an independentperson in his business operation

An Intrapreneur is completely depend onentrepreneur i.e. owner

Raising offunds An entrepreneur himself raises fundsrequired for the enterprise startingand establishing

An Intrapreneur does not raise fundsfrom any sources no botheration ofraising funds

Risk bearing He bears full risks of the business develops & operates

He does not fully bear the risk of thebusiness he operates

Education &qualification

It is not necessary that anentrepreneur should have a higheducation learns from others

An Intrapreneur enters into an existingorganisation with a high education andqualificationbusiness specialist

Routine work He is more concerned with routinework

An Intrapreneur is a specialist in hischosen field and serve as an outside

professionalOperation from

outsideHe is always operated both insideand outside of organization

He operates within the organization

StrongAuthoritarian

With a strong authority Less authority


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Important functions of an Entrepreneur

1. Idea generation

2. Determination of business objectives

3. Raising of funds

4. Procurement of machines and materials5. Market research

6. Determining the form of enterprise

7. Recruitment of manpower8. Implementation of the project.


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IMPORTANCE OF ENTREPRENEURSHIP

The nature of a developing economy isquite different from a developed

economy. The developing economy can

be an agricultural country moving

towards the industrialization or it may be

the one where in the industry may be in

its infancy lacking advance technology.

IMPORTANCE


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IMPORTANCE

The modern era is an era of changes.

The whole world is becoming a village

due to the industrial revolution and fast

developing communication technology.

The globalization of industry and

commerce is bringing a vast change in

various aspects of life.

Economic development of a country is

the outcome of purposeful human

activity.

IMPORTANCE


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IMPORTANCE

Economic development is a highly

dynamic process characterized by thepattern of demand shifts, new products

are needed, appear for the production of

goods within a country.

A developing country needs

entrepreneurs who are competent to

perceive new opportunities and are

willing to incur the necessary risk in

exploiting them.

IMPORTANCE


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IMPORTANCE.

A developing economy is required to

be brought out of the vicious circle oflow income and poverty.

Entrepreneur can break this vicious

circle.

Entrepreneurs and helping government

can change a developing economy indeveloped economy.

Entrepreneurial failure


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Entrepreneurial failure

Lack of experienced management

Few trained or experienced manpower Poor financial management

Rapid growth

Lack of business linkages

Weak marketing efforts

Lack of information

Incorrect pricing

Improper inventory control

Short term outlook


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The Myths of Entrepreneurship


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The Myths of Entrepreneurship

Myth #1

Get Rich Quick!

Truth isLife as an entrepreneur is not about

money.

Success rarely happens overnight.

It's about what you want to do with your

life.


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Myth # 2

You must be born an entrepreneur(trait theory)

Truth is:

some of the most successful entrepreneurs

are the most unlikely.

It is a lifestyle choice, not an accident.


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Myth # 3

You must be at the right place at the righttime (environment theory)

Truth is:successful entrepreneurs operate whatever

the macroeconomic and structural factors

are


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Myth # 4

"I'll have all this free time"

Truth is entrepreneurs work many

hours

advantages are:

control of timevariety of tasks

M th # 5


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Myth # 5

It get easier.

Truth is it gets more challenging

must work faster, smarter & longer

must enjoy the battle


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Myth # 6

If you build it, they will come.

Truth is building your business is just

the start.

Next is the real work:

planning

timing

strategizing and more.


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Myth # 7

It's all about the bottom line.

Truth is that the bottom line isnecessary but not sufficient

purpose and meaning to the business

inspire customers and employees


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Myth # 8

Entrepreneurs are risk takers

TruthEntrepreneurs are calculators

Studies show entrepreneurs are only

moderate risk takers


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Myth # 9

You have to have a great idea

Truth

Your idea must be good

Your idea must be doable

Your idea must be wanted or neededYour idea must be priced right


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Myth # 10

It takes a lot of money

TruthOver 50% start for under

Rs.500,000

Also look for

Certain business types

Turn-around situations

Possibility of using other peoples money


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THEORIES OF

ENTREPRENEURSHIP

THEORIES OF ENTREPRENEURSHIP


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Entrepreneurship is an evolved thing. With the

advancement of science and technology it has

undergone metamorphosis change and emerged as a

critical input for socio-economic development. Various

writers have developed various theories on

entrepreneurship and popularized the concept amongthe common people. The theories propounded by them

can be categorized as under-

Sociological theories

Economic theories Cultural theories

Psychological theories

THEORIES OF ENTREPRENEURSHIP


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Sociological Theories The following theories explain how sociological factors

accelerate the growth of entrepreneurs:1 - Theory of religious beliefs

2 - Theory of social change

Theory of Religious Beliefs

Max Weberhas propounded the theory of ReligiousBelief. According to him, entrepreneurism is a

function of religious beliefs and impact of religion

shapes the entrepreneurial culture. He emphasized that

entrepreneurial energies are exogenous, supplied bymeans of religious beliefs. the important elements of

Webers theory are -

Sociological Theories


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Spirit of Capitalism-

In the Weber theory, spirit of capitalism ishighlighted. We all know that capitalism is an

economic system in which economic freedom and

private enterprise are glorified, so also the

entrepreneurial culture. Adventurous Spirit-

Weber also made a distinction between spirit of

capitalism and adventurous spirit. According to him,the former is influenced by the strict discipline

whereas the latter is affected by free force of impulse

(desire). Entrepreneurship culture is influenced by

both these factors.

M t l ttit d


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Mental attitude-

According to Max Weber the spirit of

capitalism can be grown only when the

mental attitude in the society is favorable to

capitalism

Inducement of profit-Weber introduced the new businessman into

the picture of tranquil routine. The spirit of

capitalism intertwined with the motive ofprofit resulted in creation of greater number

of business enterprises.

Sociological Theories

I f hi h i d h B i i h l h


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In fact, this theory suited the British rulers, who

desired to encourage European entrepreneurship in

India. This theory was vehemently criticized bymany researchers because of the unrealistic

assumptions.

Theory of Social ChangeEverett E. Hagen, in his theory of social change

propounded how a traditional society becomes one

in which continuing technical progress takes place.

The theory exhorts the following feature which

presumes the entrepreneurs creativity as the key

element of social transformation and economic

growth.

Presentation of general model of the society: the


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g y

theory reveals a general model of the society which

considers interrelationship among physical

environment, social structure, personality and culture.

Economic Growth : product of social change and

political change. According to Hagen, most of the

economic theories of underdevelopment areinadequate.

Rejection of followers syndrome : Hagen rejected the

idea that the solution to economic development lies in

imitating western technology. So the followerssyndrome on the part of the entrepreneur, is

discouraged.

Sociological Theories.


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Historic shift as a factor of initiating change:Hagen

in his book, How Economic Growth Begins,

depicts historic shift as the crucial force which

has brought about social change and

technological progress thereby leading to the

emergence of entrepreneurial class from differentcastes and communities.

Withdrawal of status respects as the mechanism for

rigorous entrepreneurial activity: Closely consistentwith the historic shift it is the social group that plunges

into rigorous entrepreneurism which experiences the

status withdrawal or withdrawal of status respects.


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Hence, Hagens creative personality is the

admixture of Schumpeters innovation and

McClellands high need for achievement.

But Hagens analysis fails to give policy

measures for backward countries which are

striving for economic development as heidentifies status withdrawal as the causal factor

in the emergence of creative personality. There

are many disadvantaged minority groups in Indiawhich have not supplied a good number of

entrepreneurs.

ECONOMIC THEORIES


96/110

Entrepreneurship and economic development are

interdependent. Economic development takes placewhen a countrys real rational income increases over a

long period of time wherein the role of entrepreneurs is

an integral part.

Schumpeters Theory of Innovation Schumpeters theory of entrepreneurship is a pioneering

work of economic development. development in his

sense, implies that carrying out of new combination ofentrepreneurship is basically a creative activity.

According to Schumpeter an entrepreneur is one who

perceives the opportunities to innovate, i.e. to carry out

new combinations or enterprise.

In his view the concept of new combination


97/110

In his view, the concept of new combination

leading to innovation covers the following 5

cases:The introduction of new goods, that is the one

with which consumers are not yet familiar, or

a new quality.The introduction of new method of production

The opening of new market

The conquest of new source of supply of rawmaterial

The carrying out of new organization

Economic Theories


98/110

In view of the above, Schumpeterian theory of

entrepreneurship has got the following features-Distinction between invention and innovation -

Schumpeter makes a distinction between innovation

and invention. Invention means creation of new

things and innovation is application of new thingsonto practical use

Emphasis on entrepreneurial function- Schumpeter

has given emphasis on the role of entrepreneurial

functions in economic development. In his views,

development means basic transformation of the

economy that is brought about by entrepreneurial

functions.

Presentation of disequilibrium situation

th h t i l ti it the


99/110

through entrepreneurial activity - the

entrepreneurial activity represents a

disequilibrium situation, a dynamic

phenomenon and a break from the routine or

a circular flow or tendency towards

equilibrium.

Entrepreneurialism dream and the will to

found a private kingdom - the motives ofcreating things and applying these things

into practice inspire the entrepreneur to

undertake innovation

Critical evaluation


100/110

Schumpeters theory of innovation is criticized on

the following grounds-

The theory has the scope of entrepreneurism in the

sense that it has included the individual

businessman along with the directors and

managers of the company.

Schumpeters innovating entrepreneurs represent

the enterprise with the R & D and innovative

character. But developing countries lack thesecharacter.

Schumpeter remained silent about as to why


101/110

some economies had more entrepreneurial talent

than others.

The theory emphasizes on innovation and

excludes the risk taking and organizing aspects.

Schumpeters entrepreneurs are large scale

businessmen who introduce new technology,

method of production, etc.

However, despite the above criticisms,

Schumpeterian theory is regarded as one of the

best theories in the history of entrepreneurial

development.

CULTURAL THEORIES


102/110

CULTURAL THEORIES

Advocates of cultural theories point out

that entrepreneurship is the product of

culture. Entrepreneurial talents come from

cultural values and cultural system

embedded into the cultural environment.

Hoselitzs Theory


103/110

Hoselitz explains that the supply of

entrepreneurship is governed by culturalfactors, and culturally minority groups are the

spark-plugs of entrepreneurial and economic

development. In many countries, entrepreneurs

have emerged from a particular socio-economic

class. He emphasized the role of culturally

marginalized groups like Jews and the Greeks

in Medieval Europe, the Chinese in SouthAfrica and Indians in East Africa in promoting

economic development.

Psychological theories centers around


104/110

Psychological theories centers around

the psychological characteristics of the

individual in a society. Psychological

characteristics affect the supply of

entrepreneurs in the society.

DRUCKER ON ENTREPRENEURSHIP


105/110

Peter F. Drucker opined that an entrepreneur is one who

always searches for change, responds to it and exploits it

as an opportunity. He laid emphasis on two important factorsinnovation

and resource- that led to emergence of entrepreneurship.

According to him, innovation is the real hub of

entrepreneurship which creates resource.

A thing is regarded as resource when its economic value

is recognized. For example, mineral oil was considered

worthless until the discovery of its use.

Similarly, purchasing power was considered an important

resource by an American innovative entrepreneur who

invented installment buying.

According to Drucker, successful


106/110

g , f

entrepreneurship involves the following

things- Value and satisfaction obtained from resource

by the consumer are increased

New values are created Material is converted into a resource or exiting

resources are combined in a new or more

productive configuration Entrepreneurship is the practice which has a

knowledge base.


107/110

Entrepreneurship is not confined to big

businesses and economic institutions, it is

equally important to small business and non-

economic institutions

Entrepreneurship behavior rather than

personality trait is more important to

enhance entrepreneurship

The foundation of entrepreneurship lies in

concept and theory rather than in intuition


108/110

Thus, Drucker has given his views that an

entrepreneur need not be a capitalist or anowner. A banker who mobilizes others

money and allocates it in areas of higher

yield is very much an entrepreneur thoughhe is not the owner of the money.

Difficult Personality Types


109/110

Shotgun Sam Quickly Identifies New/Promising Opps. But RarelyFollows Through

Simplicity SueThinks Everything Is A Lot Simpler Than Is, Feels

Can Create Business Easily

Prima Donna PaulSo In Love With Own Idea Feels Everyone Out to

Steal It And Take Advantage Of Him

Ralph The RookieWell-Grounded In Theory But Lack Real-World

Business Experience

Meticulous MaryUsed To Having Things Under Control, Cant Handle

Catastrophe, Ambiguity

Underdog EdNot Comfortable Actually Transforming Invention

Into Tangible Business Success

Hidden AgendaHarry

Does Not Have Right Motives/Objectives For

Developing Expediting New Enterprise

Inventor IrvingMore Inventor Than Entrepreneur. More Concerned

With Invention Itself.

Sources of Innovation


110/110

Source ExamplesUnexpected Occurrences

Success: Apple ComputerFailure: Ford Edsel

Incongruities Overnight Package Delivery

Process Needs Sugar-Free Products, Caffeine-FreeCoffee, Microwave Ovens

Industry/Market ChangeHealth Care Industry Changing toHome Health Care

Demographic Changes

Rest Homes/Retirement Centers for

Older People

Perception ChangeExercise (Aerobics) & GrowingConcern for Fitness

K l d B d

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