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ENTREPRENEURIAL DEVELOPMENT
Chapter 1
Concept of Entrepreneurship
And Emergence of Entrepreneurial Class
What is an Entrepreneur?One who creates a new business in the face of risk and uncertainty for the
purpose of achieving profit and growth by identifying opportunities and
assembling the necessary resources to capitalize on them.
Definitions:
1. As per Joseph A-Schumpeter -"Entrepreneur is one who innovates, raises
money, assembles inputs, chooses managers and sets the commercial
organization going with his ability to identify them and opportunities whichothers are not able to identify and is able to fulfil such economic
opportunities
2. As per Peter Drucker - "An entrepreneur is one who always searches for
change, responds to it, exploits it as an opportunity. Entrepreneurs
innovate. Innovation is a specific instrument of entrepreneurship."
3. As per Walker - "An entrepreneur is one who is endowed with more thanaverage capacities in the task of organizing and coordinating the various
factors of production. He should be pioneer, a captain of industry."
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ENTREPRENEUR & HIS SIGNIFICANCE IN THE ECONOMY
1. An Entrepreneur brings in overall change through innovation for the
maximum social good.
2. Human values inspire him to serve society. He has firm belief in social
betterment and he carries out this responsibility with conviction. In the
process, he accelerates: a. personal Economic as well as b. human
development.
3. An Entrepreneur is a visionary and an integrated man with outstanding
leadership qualities, with a desire to excel, the Entrepreneur gives top
priority to Research & Development.
4. He always works for the well being of the society.
5. Entrepreneurial activities, includes all fields/sectors and develops a spirit
of enterprise for the welfare of mankind.
6. Entrepreneur is one of the most important inputs in the economic
development of a country or of regions within the country. Entrepreneurial
competence makes all the difference in the rate of economic growth.
7. The small-scale industrial sector and business are left completely to
private Entrepreneurs. Therefore, an increasingly important rote has been
assigned to the identification and promotion of Entrepreneurs for the
small-scale sectors.
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There is a need for Entrepreneurship in India to speed up the process of
activating the factors of production, leading to:
1. A higher rate of economic growth,
2. Dispersal of economic activities,
3. Development of backward and tribal areas,
4. Creation of employment opportunities
5. Improvement in the standard of living of the society and
6. Involvement of all the sections of the society in the process of growth.
7. Thus entrepreneurs play a significant role to speed up the economic
development of the country.
FACTORS INFLUENCING ENTREPRENEURS
The factors influencing entrepreneurship are as follows –
1. Family tradition: Individuals who, for some reason, initiate, establish,
maintain and expand new enterprises generate entrepreneurship in society.It is observed that entrepreneurs grow in the tradition of their families and
society and accept certain values
2- Religious, Social & Cultural factors: Religious, social and cultural factors
also influence the individual taking up an entrepreneurial career. In some
countries there is religious and cultural belief that, high profit is unethical.
This type of belief inhibits growth of entrepreneurship.
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3. Psychological factors: The psychological factors like high need for
achievement determination of unique accomplishments, self-confidence,
creativity, vision, leadership, etc. promote entrepreneurship amongindividuals On the other hand psychological factors like security,
conformity & compliance, need for affiliation, etc., restrict promotion of
entrepreneurship.
4. Political factors: The political system and also the political stability of a
country influence the growth of entrepreneurship. The political system,
which promotes free market, individual freedom and private enterprise,
will promote entrepreneurship.
5. Economic policies: The economic policies of the Government and other
financial institutions and their policies play a crucial role in exerting direct
influence on entrepreneurship. In view of the haphazard development of
economic zones, Government is encouraging the Entrepreneurs to establish
their business in backward and tribal areas.
This is primarily to arrest the migration of people from the villages to citiesand to create employment opportunities locally. Government is promoting
such development by giving incentives like tax holidays (both sales and
income), subsidized power tariff, raw materials, transportation cost etc.
Chapter 2
THEORIES OF ENTREPRENEURSHIP
Knight on the role of uncertainty
Schumpeter on innovationMe Clelland's achievement and motivation theory
Peter Druckers views on entrepreneurship
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1. KNIGHT ON THE ROLE OF UNCERTAINTY
Knight identifies the entrepreneur as a recipient of pure profit. Profit is the
residual income available after all contractual payments have been
deducted from the revenues of the enterprise. It is the reward to the
entrepreneur for bearing the costs of uncertainty.
Knight identifies uncertainty with a situation where the probalities of
alternative outcomes cannot, be determined either by Priori reasoning or by
statistical inference. A priori reasoning is simply irrelevant to economic
situations. Statistical inference is impossible because the situation involves
a unique event. It does not belong to a larger population of identical
events.
In particular, there is no precedent for it, so that no assessment of
probability can be made on the basis of relative frequency. This is the
foundation for the Knight's distinction between uncertainty and risk.
Uncertainty is a ubiquitous aspect of business decisions because production
takes time. Decisions on inputs must be made now in order, to create
output for the, future. Households, as factor owners, demand spot payment
for their services. At the same time they are unwilling to commit themselves
on future demand for the product because they anticipate that unforeseen
able changes will occur.
But the consumer does not even contract for his goods in advance, generally
speaking. A part of the reason might be the consumer's uncertainty as to his
ability to pay at the end of the period, but this does not seem to be
important in fact.
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The main reason is that he does not know what he will want, and how
much, and how badly. Consequently, he leaves it to producers to create
goods and hold them ready for, his decision, when the time comes. The clue
to the apparent paradox is, of course, in the "law of large numbers'.
2. SCHUMPETER ON INNOVATION
Schumpeter, perhaps more than any other writer, is very explicit about the
economic function of the entrepreneur. The entrepreneur is the prime
mover in economic development, and his function is to innovate, or to
'carry out new combinations'.
Five types of innovation are distinguished:
a. The introduction of new good (or an improvement in the quality of an
existing good);
b. The introduction of a new method of production;
c. The opening of a new market, in particular, a export market in a new
territory;
d. The 'conquest of a new source of supplyof raw materials or half-manufactured goods', and
e. The creation of a new type of industrial organization, in particular, the
formation of a trust or some other type of monopoly.
Anyone who performs this function is an entrepreneur, whether he is an
independent businessman or a "dependent" employee of a company such as
a manager or a director. Not all businessmen are entrepreneurs; the typical
entrepreneur is the founder of a new firm rather than the manager of an
established one.
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Schumpeter is adamant that the entrepreneur is not a risk-bearer. Risk
bearing is the function of the capitalist who lends his funds to the
entrepreneur. The entrepreneur bears risk only in so far as he acts as his
own capitalist.
Entrepreneurs spend a lot of their time doing non-entrepreneurial things:
The entrepreneur of earlier times was not only as a rule a capitalist too, he
was also often as he still is today in the case of small concerns his own
technical expert, in so far as a professional specialist was not called in for
special cases.
Likewise he was (and is) often his own buying and selling agent, the head of
his office, his own personnel manager, and sometimes, even though as a
rule he, of course employed solicitors, his own legal adviser in current
affairs. And it was performing some or all of these functions that regularly
filled his days.
The carrying out of new combinations can no more be a vocation than the
making and execution of strategically decisions, although it is this function
and not his routine work that characterizes the military leader. Therefore,
the entrepreneur's essential function must always appear mixed up with
other kinds of activity which as a rule, must be much more conspicuous
than the essential one.
Hence, the Marshallian definition of the entrepreneur, which simply treats
the entrepreneurial function as 'management' in the widest meaning, will
naturally appeal to most of us. We do not accept it, simply because it does
not bring out what we consider to be the salient point and the only one
which specifically distinguishes entrepreneurial from other activities.
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The climate most favourable to innovation is when the economy is
approaching in equilibrium for then the future seems relatively easy to
foresee. The first Innovations, made by the most talented entrepreneurs,prove successful, and this encourages less talented entrepreneurs to follow
suit in a swarm.
Because they are-adapting ideas which are pioneers have already tried out,
the risks that the capitalists perceive in backing the less talented
entrepreneurs are relatively low.
3. McCLELLAND'S THEORY OF ACHIEVEMENT MOTIVATION
David McClelland has developed an Achievement Motivation Theory.
According to this theory, an individual's need for achievement (nAch) refers
to the need for personal accomplishment.
It is the drive to excel, to strive for success and to achieve in relation to a set
of standards.People with high, achievement motive like to take calculated risks and want
to win.
They like to take on personal responsibility for solving problems and want
to know how well they are doing. High achievers are not motivated by
money per se, but instead; employ money as a method of keeping sure of
their achievements.
Such people strive for personal achievement rather than the rewards of
success.
They want to do something better and more efficiently than has been done
before.
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Need for achievement is simply the desire to do well not so much for the
sake of social recognition or prestige but for the sake of an inner feeling of
personal accomplishment.
It is this need for achievement that motivates people to take risk. People
with high need for achievement behave in an entrepreneurial way. Need for
achievement stimulates the behaviour of a person to be an entrepreneur.
The following psychological factors contribute to entrepreneurial
motivation:
1. Need for achievement through self-study, goal setting and inter-personal
support
2. Keen interest in situations involving moderate risk
3. Desire for taking personal responsibility
4. Concrete measures of task performance
5. Anticipation of future possibilities
6. Energetic or novel instrumental activity
7. Organizational skills, etc.
McClelland considers the need for achievement to be most critical to a
nation's economic development. He held that a strong 'inner spirit' in
individuals to attain is a measurable variable arising from a need, which the
individual develops mainly in childhood and seeks to satisfy throughout his
life.
This 'inner spirit' which he called need for achievement, if higher, would
produce more energetic entrepreneurs capable of generating rapid
economic development. High need for achievement or ambition motivates
an entrepreneur to take risks, work hard, find new things, save more,
reinvest the savings in industry, and so on.
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The limited empirical evidence supports the hypothesis that need for
achievement contributes to entrepreneurial success.
McClelland rated the achievement motivation of different countries on the
basis of ideas related to need for achievement contained in the children's
stories. This has come to be known as n-factor rating. He established a
correlation between n-factor rating and the prosperity of the countries a
generation ahead.
The criterion on n-factor rating was the inherent concern for achievement
or non-induced achievement motivation. McClelland found thatachievement motivation was lower among people in underdeveloped
countries than among these of developed nations.
Even in USA only about ten per cent of the people were actually high
achievers. It is the level of aspirations or ambitions that explains the lack of
enterprise in underdeveloped countries.
Ambition is the lever of all motives and 'aimless life' a goal-less game'.
Ambitions motivate men, activate them, broaden their vision and make lifemeaningful.
Ambition is an index of one's resourcefulness &Ambition builds up
achievement pressure in the individual and provides the base for
McClelland's n-factor.
Ambition is the lever of all motives.The initiative intentions of an individual
are directed by his ambitions. It is the ambition electrifies man's actions.
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KAKINADA EXPERIMENT
Kakinada is an industrial town in Andhra Pradesh. The experiment started
in January 1964. The main objective of the experiment was to break the
barrier of limited aspirations by inducing achievement motivation. A total
of fifty-two persons were selected from business and industrial community
of the town.
They were given an orientation programme at Small Industry Extension
Training Institute (SIET) Hyderabad. The participants were grouped into
three batches. They were put under training for 3 months.
The training programme was designed in such a way that it could help the
trainees improve imagination and enable them introspect their motivation.
Accordingly, the programme included the following items in its syllabi.
a. The individual strived to attain concrete and regular feedback.
b. The participants sought models of achievement to emulate.
c. The participants thought of success and accordingly set plans and goals.
d. The participants were encouraged to think and talk to themselves in a
positive manner.
The impact of this training programme on the participants' behaviour was
observed after a period of two years.
The observations were encouraging. It was found that those attended the
programme performed better than those did not; Using Thematic
Appreciation Test (TAT) assessed the participants' need for achievement.
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In this TAT, ambition related pictures were displayed to the trainees and
then they were asked to interpret the picture and what is happening in the
picture. Thereafter, all the themes related to achievement were counted
and, thus, the final score represented one's need for achievement.
McClelland reached to this conclusion that the training programme
positively influenced the entrepreneurial behaviour of the participants. As
regards caste, the traditional beliefs and imitation of western culture, they
did not determine one's behaviour as an entrepreneur.
That the need for achievement motivation can be developed more especially
in younger minds is well supported by the cross-country experiments.
For example, a 'Junior Achievement Programme" is started in the United
States of America with a view to instill achievement motivation in the
minds of younger generation. Similarly, in United Kingdom, "Young
Enterprise" programme has been started with the same objective of
inducing achievement motivation in younger minds.
The above said experiments / programmes have made us to realize that
entrepreneurship' is to be developed from a very young age. Accordingly,
efforts have been made to develop a school curriculum that would result in
a high need for achievement among the students.
For this purpose, the success stories drawn from history and legends of the
indigenous culture are introduced in course curriculum to induce in young
minds the need for achievement and strong desire to do something good/
great they grow up to.
This is because the younger minds are more susceptible to change.
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4. DRUCKER'S VIEWS ON ENTREPRENEUR
Peter Drucker has aptly observed that, "Innovation is the specific tool of
entrepreneurs, the means by which they exploit changes as an opportunity for a different business or a different service.
It is capable of being presented as a discipline, capable of being learned and
practiced. Entrepreneurs need to search purposefully for the sources of
innovation, the changes and their symptoms that indicate opportunities for
successful innovation. And they need to know and to apply the principles of
successful innovation.
"Systematic innovation, according to him, consists in the purposeful and
organized search for changes and in the systematic analysis of the
opportunities such changes might offer scope for economic and social
innovation.
According to Drucker, three conditions have to be fulfilled
1. Innovation at work. It requires knowledge and ingenuity. It makes great
demands on diligence, persistence and commitment.
2. To succeed, innovation must build on their strengths.
3. Innovation always has to be close to the market focused on the market,
indeed market-driven.
Specially, systematic innovation means monitoring sources for innovative
opportunity. The first three sources lie within the enterprise, whether it bea business or a public service institution or within an industry or service
sector.
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They are therefore, visible primarily to people within that industry or
service sector. They are basically symptoms. But they are highly reliable
indicators of changes that have already occurred or can be made to occur with little effort.
These four source areas are:
1. The unexpected success, the unexpected failure, the unexpected outside
event.
2. The incongruity between reality as it actually is and reality as it is
assumed to be or as it "ought to be.3. Innovation in industry structure or market structure that catches
everyone unawares.
4. The second set of sources for innovative opportunity, a set of three,
involves changes outside the enterprise or industry:
a. Demographics (population changes).
b. Changes in perception, mood and meaning.
c. New knowledge, both scientific and non-Scientific
Hagen considers the withdrawal of status respect as the trigger mechanism
for changes in personality formation. The status withdrawal occurs when
members of some social group perceive that their purposes and values in
life are not respected by groups in the society whom they respect and whose
esteem they value. Hagen postulates four types of events, which can
produce status withdrawal:
• Displacement of a traditional elite group from its previous status by
another traditional group by physical force;• Denigration of value symbols through some change in the attitude of the
superior group;
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• Inconsistency of status symbols with a changing distribution of economic
power; and
• Non-acceptance of expected status on migration to a new society.
For Max Weber the driving entrepreneurial energies are generated by the
adoption of exogenously supplied religious beliefs. It is these beliefs which
produce intensive exertion in occupational pursuits, the systematic
ordering of means to ends, and the accumulation of assets. He further
suggested that the belief systems of Hinduism, Buddhism and Islam do not
encourage entrepreneurship. However, this contention has been challenged
and refuted by sociologists like Fox, Nandy and Singer.
Chapter 3
Characteristics of Entrepreneurial Leadership
ARE ENTREPRENEURS BORN OR MADE
Professor of Psychology Alan Jacobowitz, holds that Entrepreneurs are
born, not made. This is because he observed that entrepreneurs commonly
share certain personality characteristics. These include:a. restlessness,
b. independence and tendency to be a loner and extreme self-confidence,
c. innovative,
d. Action oriented.
In addition to identifying personality traits personality common to
entrepreneurs, Jacobowitz devised a chronological scheme of
entrepreneurial indicators, which he calls as the FIVE AGES oftheentrepreneurs.
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The ages include –
1. Early childhood exposure
2. Trouble in school.
3. Problems with work.
4. Desire to risk.
5. Bliss in business independence.
According to the Trait Theories Jacobowitz suggests that entrepreneurial
attitude is static - that is, either people are born with the related
characteristics or they are not. The intention to be an entrepreneur is
influenced by the interaction of various factors.
These include:
1) individual characteristics,
2) individual environment,
3) business environment,
4) An individual's persona! Goal is set
5) And the existence of a viable business idea.
Through these interacting factors, individuals make several comparisons
between their perceptions of a probable outcome, their intended goals,
intended behaviour and actual outcomes.
When the outcomes meet or exceed perceived outcomes, positive behaviour
is reinforced. It also predicts that the opposite occurs when the perceived
outcomes are not met. Hence it is very clear, to be a successful
entrepreneur one must have the in-born qualities and the available support
system does help the entrepreneur to succeed.
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A classic example is that of Mr.Dh'irubai Ambani. Because he had all the
dynamic qualities of a successful Entrepreneur, as a result of which today,
he is the owner of the largest private company in India. All decisions, whichhe had taken to grow, were instinct and no one had taught him to take
decisions.
CHARACTERISTICS OF ENTREPRENEURSHIP
The characteristics or the personal qualities that contributes to the success
of an Entrepreneur are as follows:
1. Risk Taking: Entrepreneurs are moderate risk takers. They enjoy the
excitement of a challenge, but they do not gamble. Entrepreneurs avoid
low-risk situations because there is a lack of challenge. They avoid high-risk
situations because they want to succeed. They like achievable challenges.
They do not tend to like situations where the outcome of a quest depends
upon a chance and not on their efforts. They like to influence the outcomeof their quest by putting in more efforts and then experiencing a sense of
accomplishment. A risk situation occurs when an entrepreneur is required
to make a choice between two or more alternatives whose potential
outcomes are not known and must be evaluated in advance, with limited
information.
A risk situation involves potential gain and potential loss. As the size of the
business expands the problems and opportunities become more numerousand complex.
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2. Self-Confidence: A man with self-confidence has clear thoughts and well-
defined goals to achieve in his life. An entrepreneur gets into business or
industry with a high level of self-confidence.
He is able to evaluate his competencies and capabilities i a realistic manner.
He can set realistic and challenging goals. He is confident of achieving these
goals. He possesses a sense of effectiveness, which ultimately contributes to
success of his venture. He puts forward his case confidently and gets
needed help from concerned agencies / authorities.
3. Optimist: An entrepreneur is able to visualize the hidden opportunities in
the environment and translate them into business realities. An
entrepreneur exhibits a positive and optimistic attitude towards such
opportunities. The entrepreneur approaches his task with the hope of
success and not with a fear of failure.
In the process of accomplishing his task he may also fail but the failure
experience does not change his thinking. He is always an optimist in his
outlook. The positive outlook develops a drive in the entrepreneur to
attempt new things and innovate.
4. Need for achievement: The need to excel, known as achievement, is a
critical factor in the personality of an entrepreneur. People with high need
for achievement have desire for success in competition with others or with a
self-imposed standard of excellence. They try to accomplish something new
and try to involve themselves in long-term goals. They try to accomplish
challenging tasks. They know their own strengths and weaknesses, the
facilitating factors and constraints in the environment and the resources
needed to accomplish their tasks. If the objectives are accomplished they
feel elated.
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5. Need for independence: The need for independence is the prime
characteristic that has driven the entrepreneurs to start their own business.
These entrepreneurs do not like to be controlled by others. They do not waitfor direction from others and choose their own course of action. They set
their own challenging goals and put efforts to achieve these goals.
Independence provides opportunity for trying out new ideas and helps
them achieve their goals.
6. Creativity: Entrepreneurs are highly creative people. They always try to
develop new products, processes or markets. They are innovative, flexible
and are willing to adopt changes. They are not satisfied with conventionaland routine way of doing things. They involve themselves in finding new
ways of doing the things for the better.
7. Imaginative: Successful entrepreneurs possess a high degree of
imagination and foresightedness. Entrepreneurs have a great vision.
Knowing the present and the past the entrepreneur is able to predict the
future events about the business more accurately than others. It is because
of their visionary nature and power of imagination that helps them inanticipating problems and evolving actions strategies for such problems.
8. Administrative Ability:
A successful Entrepreneur is always a good administrator. He knows the art
of getting things done by other people without hurting their feelings or self-
respect. He has a strong motivation towards the achievement of a task and
puts in necessary efforts in getting things done by others.
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9. Communication Ability: Communication ability is the ability to
communicate effectively. Good communications also means that, both the
sender and the receiver understand each other and are being understood.
An Entrepreneur who can effectively communicate with customers,
employees, suppliers and bankers will always succeed in their business.
10. Clear Objectives: An Entrepreneur has a clear objective as to the exact
nature of the business, the nature of the goods to be produced and the
subsidiary activities to be undertaken. A successful Entrepreneur has the
objective to establish the product, to make profit or to render social service.
11. Business Secrecy: An Entrepreneur who is successful always guards his
business secrets. Leakage of business secrets to trade competitors is a
serious matter; therefore, an Entrepreneur should carefully guard it. An
Entrepreneur must be able to make a proper selection of his assistant since;
most of the time it is the assistant who leaks the trade secret.
12. Emotional Stability: The most important personality factors
contributing to the success of an Entrepreneur are emotional stability,
personal relations, consideration and tactfulness. An Entrepreneur must
maintain good relations with the customers if he wishes to enjoy their
continued patronage. He must also maintain good relation with his
employees, whom he shall motivate to perform their jobs at a high level of
efficiency. An Entrepreneur who maintains good human relations with
customers, employees, suppliers and the community has a better chance to
succeed in his/her business.
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13. Open-mindedness: Open-mindedness means a free and frank approach
in accepting one's own errors and change for the better. An entrepreneur
must be willing to learn from his past experience, mistakes and mouldshimself for better.
14. Technical knowledge: Technical knowledge implies knowledge about
the product, process or technology used in manufacturing. An entrepreneur
who has a reasonable level of technical knowledge will always be successful.
Technical knowledge is easy to acquire if the entrepreneur tries hard to
acquire it.
15. Patience: Patience means ability to wait. Patience also means doing the
work and then waiting for the result. A certain amount of patience is
necessary in any type of vocation. An entrepreneur should not wait for
actions but can certainly wait for result for his efforts.
16. Hard Working & Energetic: Ability and willingness to work hard is an
important quality of an entrepreneur. A person having physical and mental
stamina to cope with the hard work and human relation is fit to become asuccessful entrepreneur. By carrying out well-planned and systematic work,
success is always the end result.
17. Good organizer: Entrepreneurs are good organizers of resources like
men, machines, materials and money needed to start and run the business
smoothly.
They can convince the employees, investors, customers and co- ordinate the
activities of individuals and groups in the accomplishment of businessobjective. An entrepreneur works like a coordinating force among the
resources, mould and manages them effectively.
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EMERGENCE OF ENTREPRENEURIAL CLASS
From times immemorial, the Indian Society has been characterized by a
kind of stratification of religious and regional sections. The Hindu Society projected a type of hierarchy in which the caste groups were separated from
each other on the basis of function. Every member of the society followed
the family occupation.
This caused immobility between occupations. The Bania was a caste that
carried on the trading and money lending business, they specialized in
trade and commerce and came from urban areas. In fact, because of their
good financial, standing, their position was an enviable one in the urbancenters. However they ranked third in the caste-hierarchy: The Brahmins
ranked first and Kshatriyas second.
Following important communites can take the credit for the supply of
entrepreneurs in India.
1. The Parsees: Parsees migrated from Persia in the century. They
performed as artisans, carpenters, weavers etc, in the l7th century. By the
18'h century, they became well-know shipbuilders; they had set up
Merchant Houses in Bombay, Burma, China and London.
They acted as "brokers for the European traders at Bombay and Surat. They
were regarded as merchants and traders of repute. They emerged as the
most prominent and financing community of Bombay and Gujarat
2. Traders from South India: The trading castes of south lndia were the
chettis. They were subdivided into groups such as the Telugu Komatia, the
Tamil Nattukottai chettis, Beri-Chettis etc. The Komattis were the chief
taders not only in the Telugu districts but also in Mysore Coimbatore,
Canara and other places. The chief financiers and bankers of South India
were the Nattukottai Chettis. Trading in drugs, grain and cloth was done by
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the Beri-Chettis. In the early 19th century they were known to be
respectable peddlers who travelled in caravans.
The communities that traded had trade relations with South-East Asian
Countries like Burma, Ceylon, Malaya, Singapore etc. The chettiars
established connections with reputed Indian business firms and also made
good investments in land and property. They became important suppliers
of rural credit. The Nattukottai Chettiars were a well-known business
community in Burma. Their working funds invested abroad, were mainly
employed in Burma.
3. The Marwari Community: This important and fairly developed business
Community came from Marwar in Rajasthan. The trading and money
lending castes got tremendous development in Gujarat and Rajputana on
account of the famous route from Gujarat ports to the historical center of
the Great Mughal State.
Rajputana was torn by feudal strife during the first half of the 19thcentury.
It was not the place for large scale trading and money lending operations.Though the local trade was good, it provided a limited scope for
development. Trade remained fairly constant and it was because of this that
investment crossed the borders of Rajputana. Trade spread in towns
through out the north, east and west of India, especially to the commercial
centres of Bombay and Calcutta. With the rise of British Commerce, these
traders gradually replaced the Bengalis who served as British agents in
Calcutta.
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The Brahmins and the Kayasthas of Bengal who operated as the British
agents started turning their attention to investments in land; They even got
in the professions and Administrative services. But the Subarna Banika, a
Bengali trading community, filled the void created by such an occurrence.
But, Bengal soon became the center for political revolution. The Britishers,
both rulers and traders did not approve of this.
Wherever possible, they tried to replace a Bengali by someone who proved
to be more dependable. The Rajasthani traders tried to be more co-
operative than the Bengali Commercial Castes. It is because of this that the
Bengali names in business are relatively unimportant and where they occur,
they mostly represent the professional agent class and not the indigenous
trading class.
Besides the above trading, money-lending communities that could be
regarded as the source of entrepreneurs in India, there were the Bhatias
and Lohanas. These communities carried out local trade and were spread
all over the country, The "Khatris", a community that traded not only in
Punjab but also in Afghanistan, Central Asia etc. has also been a source of
entrepreneurs.
In Maharashtra, the contribution of Yajurvedi Brahmins and the
Chitapavan Brahmans who took active part in trading, money lending and
indigenous banking, cannot be forgotten. The above was an account of the
origin of entrepreneurs in India
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CAUSES OF SLOW GROWTH OF ENTREPRENEURSHIP IN INDIA
Entrepreneurship developed only in the beginning of the 19th century &
though the base for industrialization had been laid a century ago. The
following be the main reasons, which could be responsible for lack of
initiative, and entrepreneurial spirit among the Indians.
1. Caste System: This decided occupation for members from each caste. The
altitudes were restrictive and therefore there were no chances of
accumulating wealth and promoting production.
2. Agriculture: Agriculture was the main occupation. Farmers and
cultivators were always in the clutches of the moneylenders. The
zamindars, nawabs and rajahs exploited the laborers. They spent money on
enjoyment and luxury and never risked money in industry. Banking and
commercial system was also absent so, even if there were savings, they
could not be utilized for productive use.
3 Educational System: Talented young men were prepared to take white
collared jobs or join Government or professional services. Many were
attracted towards politics. The result was that very few young men got
attracted towards becoming efficient industrialists, technicians, managers,
etc.
4. Colonial Rulers: The British rulers adopted discriminatory policy. Rich
Indian businessmen had special connections with foreign rulers and both
satisfied their selfish interests. Even the few insurance and banking services
catered to the needs of some rich Indian businessmen, Britishers in India
did also not encourage Industrialization.
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5. Managing Agents: There were just a handful of people who were known
to be having managerial skills. On common basis, these agents would lend
their skills to some top industries. Industrialists could not manage theirown units. They were always at the mercy of the managing agents who filled
their pockets with big chunks of the companies profits and took full
advantage of Indian industrialists till the managing agency system was
abolished in 1970.
6. Joint Family System: Younger members of the family always depended
on the Head who never gave any kind of independence or encouraged units
other than family business ones. A number of young men were discouragedfrom diversifying from family business and doing something new and
different.
7. Religious Attitude: Indians were very religious minded. They gave more
time to religion than to earning material wealth. Religion got priority over
business. Some religions even condemned excess earnings and indulgence
in comforts. Industrial activity was, therefore, given secondary
consideration by the religious Indians.
8. Mindset: The mindset of the average Indian was never entrepreneurial.
Our religious literature and epics told us to have patience and to keep on
working without expecting the fruits of labor. This also killed the drive and
desire to get into entrepreneurial activities.
9. Recognition by the Society: In earlier days, the heroes in India were the
social reformers and the politicians. Now it is the era of sportsmen, models,'and film stars. It is sad that successful or the struggling entrepreneurs have
never been recognized as heroes. Entrepreneurial activity did not get due
importance in the Indian society.
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10. Family Background: Empirical studies have shown that a good number
of entrepreneurs come from families with industrial backgrounds.
Unfortunately, only a few entrepreneurial communities in India madeentrepreneurial contribution. These communities could also not make head
way in the entrepreneurial field on account of the colonial rule, lack of
infrastructure and other facilities. Entrepreneurship development could
only take place after independence in India.
STAGES OF EVOLUTION OF ENTREPRENEURSHIP
The evolutionary process of entrepreneurship activities may be divided into
the following broad stages:
1. Hunting Stage The primary stage of the evolution of the economic life of
man was the hunting stage. Wants were limited and very few in numbers.
The family members them- selves satisfied problems of food, clothing and
shelter. Producers were the consumers also.
Robinson Crusoe, living in the deserted island, satisfying his own
requirements had no knowledge of business. People in some parts of Africa
and India still lead this type of life. In this stage problems of production
and distribution were not complex since wants were also simple and
limited.
2. Pastoral Stage
With the progress of mankind gradually mental understanding developed
and people started realizing that instead of killing animals, they should
breed and rear them.
Thus cattle breeding encouraged the use of milk, and they had to think in
terms of grazing areas for their cattle. The surplus milk, meat and other
related products were spared for exchange. This stage can be termed as the
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first stage of economic development and the beginning of commerce.
3. Agricultural Stage
In search of grazing areas, they further realized that they should grow
plants as food for animals. They started testing some grain products and
slowly developed a taste in plants and the land was used for cultivation.
Groups of persons started living together on their agricultural fields, which
were subsequently converted into small villages with their farms. Free
exchange of goods was started and the activities were also divided to the
extent of division of labor at the village level to complement the needs of
each other. Initially each village was self-sufficient, but later they began
small trading activities on barter basis
4. Handicraft State
5. Present Industrial Stage
DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER
Sometimes, the two terms, namely, an entrepreneur and a manager areconsidered as synonym, i.e., meaning the same. In fact, the two terms are
two economic concepts meaning two different meanings. The major points
of distinction between the two are presented in following Table 1.1.
TABLE 1.1: Difference between an Entrepreneur and a Manager
Points Entrepreneur Manager
1. Motive The main motive of an entrepreneur is to start a venture by
setting up an enterprise. He undertakes the venture for his personal
gratification. But, the main motive of a manager is to
render his services in an enterprise already set up by someone else.
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2. Status An entrepreneur is the owner of the enterprise. A manager is the
servant in the enterprise owned by the entrepreneur
3. Risk-bearing An entrepreneur being the ownerof the enterprise assumes all risks and uncertainty involved in running the
enterprise. A manager as a servant does not bear any risk involved in the
enterprise.
4. Rewards The reward an entrepreneur gets for bearing risks involved in
the enterprise is profit which is highly uncertain. A manager gets salary as
reward for the services rendered by him in the enterprise. Salary of a
manager is certain and fixed.
5. Innovation Entrepreneur himself thinks over what and how to produce
goods to meet the changing demands of the customers. Hence, he acts as an
innovator also called a 'change agent'. But, what a manager does is simply
to execute the plans prepared by the entrepreneur. Thus, a manager simply
translates the entrepreneur's ideas into practice.
6. Qualifications An entrepreneur needs to possess qualities and
qualifications like high achievement motive, originality in thinking,
foresight, and risk-bearing ability and so on. On the contrary, a manager
needs to possess distinct qualifications in terms of sound knowledge in
management theory and practice.
After going through the above points of distinctions, it is clear that an
entrepreneur differs from a manager. At times, an entrepreneur can be a
manager also, but a manager cannot be an entrepreneur. After all, an
entrepreneur is an owner, but a manager is a servant.
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FUNCTIONS OF AN ENTREPRENEUR
An entrepreneur does perform all the functions necessary right from the
genesis of an idea up to the establishment of an enterprise. These can belisted in the following sequential manner:
1. Idea generation and scanning of the best suitable idea.
2. Determination of the business objectives.
3. Product analysis and market research.
4. Determination of form of ownership / organisation.
5. Completion of promotional formalities.
6. Raising necessary funds.
7. Procuring machine and material.
8. Recruitment of men.
9. Undertaking the business operations.
Kilby has enumerated about 13 functions of an entrepreneur. While others
can also add certain more functions to this list, the said functions appear to
be major ones. For our convenience, we have classified all theentrepreneurial functions into three broad categories:
1. Risk-bearing
2. Organisation
3. Innovation
We have already discussed these functions in the beginning of our
discussion while elucidating the concept of entrepreneur. Therefore, their
discussion has been avoided here for the sake of repetition.
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TYPES OF ENTREPRENEURS
Clarence Danhof, on the basis of his study of the American Agriculture,
classified entrepreneurs in the manner that at the initial stage of economicdevelopment, entrepre-neurs have less initiative and drive and as economic
development proceeds, they become more innovating and enthusiastic.
Basing on this, he classified entrepreneurs into four types. These are
discussed in seriatim. .
1. Innovating Entrepreneurs: An innovating entrepreneur is one who
introduces new goods, inaugurates new method of production, discovers
new market and reorganizes the enterprise. It is important to note that such
entrepreneurs can work only when a certain level of development is already
achieved, and people look forward to change and improvement.
2. Imitative Entrepreneurs: These are characterized by readiness to adopt
successful innovations inaugurated by innovating entrepreneurs. Imitative
entrepreneurs do not innovate the changes themselves, they only imitate
techniques and technology innovated by others. Such types of entrepreneurs are particularly suitable for the under-developed regions for
bringing a mushroom drive of imitation of new combinations of factors of
production already available in developed regions.
3. Fabian Entrepreneurs: Fabian entrepreneurs are characterised by very
great caution and skepticism in experimenting any change in their
enterprises. They imitate only when it becomes perfectly clear that failure
to do so would result in a loss of the relative position in the enterprise.
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4. Drone Entrepreneurs: These are characterised by a refusal to adopt
opportunities to make changes in production formulae even at the cost of
severely reduced returns relative to other like producers. Such
entrepreneurs may even suffer from losses but they are not ready to make
changes in their existing production methods.
Following are some more types of entrepreneurs listed by some other
behavioural scientists:
1. Solo Operators: These are the entrepreneurs who essentially work alone
and, if needed at all, employ a few employees. In the beginning, most of the
entrepreneurs start their enterprises like them.
2. Active Partners: Active partners are those entrepreneurs who
start/carryon an enterprise as a joint venture. It is important that all of
them actively participate in the operations of the business. Entrepreneurs
who only contribute funds to the enterprise but do not actively participate
in business activity are called simply 'partners'.
3. Inventors: Such entrepreneurs with their competence and inventiveness
invent new products. Their basic interest lies in research and innovative
activities.
4. Challengers: These are the entrepreneurs who plunge into industry
because of the challenges it presents. When one challenge seems to be met,
they begin to look for new challenges.
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5. Buyers: These are those entrepreneurs who do not like to bear much risk.
Hence, in order to reduce risk involved in setting up a new enterprise, they
like to buy the ongoing one.
6. Life timers: These entrepreneurs take business as an integral part to their
life. Usually, the family enterprise and businesses, which mainly depend on
exercise of personal skill, fall in this type/category of entrepreneurs.
INTRAPRENEUR
Of late, a new breed of entrepreneurs is coming to the fore in largeindustrial organizations. They are called 'Intrapreneurs'. They emerge from
within the confines of an existing enterprise. In big organizations, the top
executives are encouraged to catch hold of new ideas and then convert
these into products through research and development activities within the
framework of organization. The concept of intrapreneurship has become
very popular in developed countries like America. It is found that an
increasing number of intrapreneurs is leaving their jobs in big
organizations and is starting own enterprises. Many of such intrapreneurshave become exceedingly successful in their ventures. What is more that
they are causing a threat to the organizations they left. Such intrapreneurs
breed to the innovative entrepreneurs who inaugurate new products.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT
The word development is used in so many ways that its precise connotation
is often baffling. Nevertheless, economic development essentially means a
process of upward change whereby the real per capita income of a country
increases over a long period of time. Then, a simple but meaningful
question arises: what causes economic development?
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This question has absorbed the attention of scholars of socio-economic
change for decades. In this section, we attempt to shed light on an
important aspect of that larger question, the phenomenon of
entrepreneurship. The one major issue we address here is: what is the
significance of entrepreneurship for economic development? Does it add an
important independent influence to that of other factors widely agreed to
promote economic development?
Adam Smith, the foremost classical economist, assigned no significance to
entrepre¬neurial role in economic development in his monumental work
'An Enquiry into the Nature and Causes of the Wealth of Nations',
published in 1776. Smith extolled the rate of capital formation as an
important determinant of economic development. The problem of
economic development was ergo largely the ability of the people to save
more and invest more in any country.
According to him, ability to save is governed by improvement in
productivity to the increase in the dexterity of every worker due to division
of labour. Smith regarded every person as the best judge of his own interest
who should be left to pursue it to his own advantage. According to him,
each individual is led by an „invisible hand' in pursuing his/her interest. He
always advocated the policy of laissez-faire in economic affairs.
In his theory of economic development, David Ricardo identified only three
factors of production, namely, machinery, capital and labour, among whom
the entire produce is distributed as rent, profit and wages respectively.
Ricardo appreciated the virtues of profit in capital accumulation. According
to him, profit leads to saving of wealth, which ultimately goes to capital
formation.
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Thus, in both the classical theories of economic development, there is no
room for entrepreneurship. And, economic development seems to be
automatic and self-regulated. Thus, the attitude of classical economists was
very cold towards the role of entrepreneur-ship in economic development.
They took the attitude: "the firm is shadowy entity, and entrepreneur even
shadower - or at least is shady when he is not shadowy".
The economic history of the presently developed countries, for example,
America, Russia and Japan tends to support the fact that the economy is an
effect for which entrepreneurship is the cause. The crucial role played by
the entrepreneurs in the development of the Western countries has made
the people of under-developed countries too much conscious of the
significance of entrepreneurship for economic development. Now, people
have begun to realize that for achieving the goal of economic development,
it is necessary to increase entrepreneurship both qualitatively and
quantitatively in the country. It is only active and enthusiastic
entrepreneurs who fully explore the potenti-alities of the country's available
resources-labour, technology and capital. Schumpeter visualized the
entrepreneurs as the key figure in economic development because of his
role in introducing innovations. Parson and Smelser described
entrepreneurship as one of the two necessary conditions for economic
development, the other being the increased output of capital.
Harbison includes entrepreneurs among the prime movers of innovations,
and Sayigh simply describes entrepreneurship as a necessary dynamic
force. It is also opined that development does not occur spontaneously as a
natural consequence when economic conditions are in some sense 'right': a
catalyst or agent is needed, and this requires an entrepreneurial ability. It is
this ability that he perceives opportunities, which either others do not see
or care about. Essentially, the entrepreneur searches for change, sees need
and then brings together the manpower, material and capital required to
respond the opportunity what he sees. Akio Morita, the President of Sony
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who adopted the company's products to create Walkman Personal-Stereo
and India's Gulshan Kumar of T-Series who skimmed the audiocassette
starved vast Indian market are the clearest examples of such able
entrepreneurs.
The role of entrepreneurship in economic development varies from
economy to economy depending upon its material resources, industrial
climate and the responsiveness of the political system to the
entrepreneurial function. The entrepreneurs contribute more in favourable
opportunity conditions than in the economies with relatively less
favourable opportunity conditions.
Viewed from opportunity point of view, the underdeveloped regions, due to
the paucity of funds, lack of skilled labour and non-existence of a minimum
social and economic overhead, are less conducive to the emergence
particularly of innovative entrepreneurs. In such regions, entrepreneurship
does not emerge out of industrial background with well-developed
institutions to support and encourage it. Therefore, entrepreneurs in such
regions may not be an "innovator" but an "imitator" who would copy the
innovations introduced by the "innovative" entrepreneurs of the developed
regions. In these areas according to McCelland's concept of personality
aspect of entrepreneurship, some people with high achievement motivation
come forward to behave in an entrepreneurial way to change the stationary
inertia, as they would not be satisfied with the present status that they have
in the society.
Under the conditions of paucity of funds, and the problem of imperfect
market in underdeveloped regions, the entrepreneurs are bound to launch
their enterprises on a small-scale.
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As imitation requires lesser funds than innovation, it is realized that such
regions should have more imitative entrepreneurs. And, it is also felt that
imitation of innovations introduced in developed regions on a massive scale
can bring about rapid economic development in under-developed regions
also. But, it does not mean that such imitation requires in any way lesser
ability on the part of entrepreneurs. In this regard, Berna opines: “It
involves often what has aptly been called 'subjective innovation', that is, the
ability to do things which have not been done before by the particular
industrialists, even though unknown to him, the problem may have been
solved in the same way by the others.” These imitative entrepreneurs
constitute the main spring of development of underdeveloped regions.
Further, India which itself is an under-developed country aims at
decentralized industrial structure to militate the regional imbalances in
levels of economic development, small-scale entrepreneurship in such
industrial structure plays an important role to achieve balanced regional
development. It is unequivocally believed that small-scale industries
provide immediate large-scale employment, ensure a more equitable
distribution of national income and also facilitate an effective resource
mobilization of capital and skill, which might otherwise remain, unutilized.
Lastly, the establishment of Entrepreneurship Development Institutes and
alike by the Indian Government during the last decades is a good testimony
to her strong realisation about the premium mobile role of
entrepreneurship played in economic development.
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The important role that entrepreneurship plays in the economic
development of an economy can now be put in a more systematic and
orderly manner as follows:
1. Entrepreneurship promotes capital formation by mobilizing the idle
saving of the public.
2. It provides immediate large-scale employment. Thus, it helps reduce the
unemploy¬ment problem in the country, i.e., the root of all socio-economic
problems.
3. It promotes balanced regional development.
4. It helps reduce the concentration of economic power.
5. It stimulates the equitable redistribution of wealth, income and even
political power in the interest of the country.
6. It encourages effective resource mobilisation of capital and skill, which
might otherwise remain unutilized and idle.
7. It also induces backward and forward linkages, which stimulate the
process of economic development in the country.
8. Last but no means the least; it also promotes country's export trade i.e.,
an important ingredient to economic development.
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Thus, it is clear that entrepreneurship serves as a catalyst of economic
development. On the whole, the role of entrepreneurship in economic
development of a country can best be put, as "an economy is the effect for
which entrepreneurship is the cause".
WOMEN ENTREPRENEURS
Women constitute around half of the total world population. So is in India
also. They are, therefore, regarded as the better half of the society. In
traditional societies, they were confined to the four walls of houses
performing household activities.
In modern societies, they have come out of the four walls to participate in
all sorts of activities. The global evidences buttress that women have been
performing exceedingly well in different spheres of activities like
academics, politics, administration, social work and so on. Now, they have
started plunging into industry also and running their enterprises
successfully. Therefore, while discussing on entrepreneurial development,
it seems in the fitness of the context to study about the development of
women entrepreneurs in the country. Let us begin with understanding the
concept of women entrepreneurs.
CONCEPT OF WOMEN ENTREPRENEURS
Based on the general concept of entrepreneur just discussed in the previous
chapter, women entrepreneurs may be defined as a woman or group of women who initiate organise and run a business enterprise. In terms of
Schumpeterian concept of innovative entrepreneurs, women who innovate,
imitate or adopt a business activity are called “women entrepreneurs”.
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The Government of India has defined women entrepreneurs based on
women participation in equity and employment of a business enterprise.
Accordingly, a women entrepreneur is def ined as “an enterprise owned andcontrolled by a women having a minimum financial interest of 51 per cent
of the capital and giving at least 51 per cent of the employment generated in
the enterprise to women”.
However, this definition is subject to criticism mainly on the condition of
employing more than 50 per cent women workers in the enterprises owned
and run by the women.
In nutshell, women entrepreneurs are those women who think of a businessenterprise, initiate it, organize and combine the factors of production,
operate the enterprise and undertake risks and handle economic
uncertainty involved in running a business enterprise.
FUNCTIONS OF WOMEN ENTREPRENEURS
As an entrepreneur, a women entrepreneur has also to perform all the
functions involved in establishing an enterprise. These include idea
generation and screening, determination of objectives, project preparation,
product analysis, determination of forms of business organization,
completion of promotional formalities, raising funds, procuring men,
machine and materials and operation of business.
Frederick Harbison has enumerated the following five functions of a
women entrepreneur:
1. Exploration of the prospects of starting a new business enterprise.
2. Undertaking of risks and the handling of economic uncertainties
involved in business.
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3. Introduction of innovations or imitation of innovations.
4. Coordination, administration and control.
5. Supervision and leadership.
The fact remains that, like the definition of the term „entrepreneur‟,
different scholars have identified different sets of functions performed by
an entrepreneur whether man or woman. All these entrepreneurial
functions can be classified broadly into three categories:
1. Risk-bearing
2. Organisation
3. Innovations
These functions have already been discussed. Therefore, these are not
discussed again for the sake of repetition.
GROWTH OF WOMEN ENTREPRENEURSHIP
Woman in India constitute around half of the country's population. Hence,
they are regarded as the “better half of the society”. In the official
proclamation, they are at par with men. But, in real life, the truth prevails
otherwise. Our society is still male-dominated and women are not treated
as equal partners both inside and outside four walls of the house. In fact,
they are treated as abala, i.e., weak and dependent on men.
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As such, the Indian women enjoy a disadvantageous status in the society.
Let some facts be given. The much low literacy rate (40%), low work
participation rate (28%) and low urban population share (10%) of women
as compared to 60%, 52% and 18% respectively of their male counterparts
well confirm their disadvantageous position in the society. Our age-old
socio-cultural traditions and taboos arresting the women within four walls
of their houses also make their conditions more disadvantageous.
These factors - all together - serve as non-conducive conditions for the
emergence and development of women entrepreneur¬ship in the country.
Given these unfavourable conditions, the development of women
entrepreneurship is expectedly low in the country. This is well indicated by
a dismally low level of women (5.2%) in total self-employed persons in the
country. Further, women entrepreneurs in India accounted for 9.01% of the
total 1.70 million entrepreneurs during 1988-89.
A cross-country comparison reveals that emergence and development of
entrepreneur¬ship is largely caused by the availability of supporting
conditions in a country. To quote, with improving supporting conditions,
the share of women owned enterprises in the United States has risen from
7.1 % in 1977 to 32% in 1990. It is likely to reach to 50% by the turn of the
20th century.
In India women entry into business is a new phenomenon. Women entry
into business, or say, entrepreneurship is traced out as an extension of their
kitchen activities mainly to 3 Ps, Viz., Pickles, Powder and Pappad. Women
in India plunged into business for both pull and push factors. Pull factors
imply the - factors, which encourage women to start an occupation or
venture with an urge to do something independently. Push factors refer to
those factors, which compel women to take up their own business to tide
over their economic difficulties and responsibilities. With growing
awareness about business and spread of education among women over the
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period, women have started shifting from 3 Ps to engross to 3 modem Es,
viz., Engineering, Electronics and Energy. They have excelled in these
activities.
Women entrepreneurs manufacturing solar cookers in Gujarat, small
foundries in Maharashtra and T.V. capacitors in Orissa have proved beyond
doubt that given the opportunities, they can excel their male counterparts.
Smt. Sumati Morarji (Shipping Corporation), Smt. Yamutai Kirloskar
(Mahila Udyog Limited), Smt. Neena Malhotra (Exports) and Smt. Shahnaz
Hussain (Beauty Clinic) are some exemplary names of successful and
accomplished women entrepreneurs in our country.
In India, Kerala is a state with highest literacy (including women literacy)
reflecting a congenial atmosphere for the emergence and development of
women entrepreneurship in the State. According to a study, the number of
women‟s industrial units in Kerala was 358 in 1981, which rose to 782 in
March 1984. These 782 units included 592 proprietary concerns, 43
partnership firms, 42 charitable institutions, 03 joint stock companies and
102 co-operative societies covering a wide range of activities.
On the whole, proper education of women in Kerala resulted in high
motivation among them to enter into business. The financial, marketing
and training assistance provided by the State Government also helped
motivate women to assume entrepreneurial career. Women's desire to work
at the place of residence, difficulty of getting jobs in the public and private
sectors and the desire for social recognition also motivated women in
Kerala for self-employment. Like Kerala, an increasing number of women
are entering the business in the State of Maharashtra also.
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PROBLEMS OF WOMEN ENTREPRENEURS
Women entrepreneurs encounter two sets of problems, viz., general
problems of entrepreneurs and problems specific to women entrepreneurs.
These are discussed below:
1. Problem of Finance: Finance is regarded as "life-blood" for any
enterprise, be it big or small. However, women entrepreneurs suffer from
shortage of finance on two counts. Firstly, women do not generally have
property on their names to use them as collateral for obtaining funds from
external sources. Thus, their access to the external sources of funds is
limited. Secondly, the banks also consider women less credit-worthy and
discourage women borrowers on the belief that they can at any time leave
their business. Given such situation, women entrepreneurs are bound to
rely on their own savings, if any, and loans from friends and relatives,
which are expectedly meager and negligible. Thus, women enterprises fail
due to the shortage of finance.
2. Scarcity of Raw Material: Most of the women enterprises are plagued by
the scarcity of raw material and necessary inputs. Added to this are the high
prices of raw material, on the one hand, and getting raw material at the
minimum of discount, on the other. The failure of many women co-operatives in 1971 engaged in basket-making is an example how the scarcity
of raw material sounds the death-knell of enterprises run by women.
3. Stiff Competition: Women entrepreneurs do not have organisational set-
up to pump in a lot of money for canvassing and advertisement. Thus, they
have to face a stiff competition for marketing their products with both
organised sector and their male counterparts. Such a competition
ultimately results in the liquidation of women enterprises.
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4. Limited Mobility: Unlike men, women mobility in India is highly limited
due to various reasons. A single woman asking for room is still looked upon
suspicion. Cumbersome exercise involved in starting an enterprise coupled
with the officials‟ humiliating attitude towards women compels them to
give up idea of starting an enterprise.
5. Family Ties: In India, it is mainly a woman's duty to look after the
children and other members of the family. Man plays a secondary role only.
In case of married women, she has to strike a fine balance between her
business and family. Her total involvement in family leaves little or no
energy and time to devote for business. Support and approval of husbandsseem necessary condition for women's entry into business. Accordingly, the
educational level and family background of husbands positively influence
women's entry into business activities.
6. Lack of Education: In India, around three-fifths (60%) of women are still
illiterate. Illiteracy is the root cause of socio-economic problems. Due to the
lack of education and that too qualitative education, women are not aware
of business, technology and market knowledge. Also, lack of education
causes low achievement motivation among women. Thus, lack of education
creates problems for women in the setting up and running of business
enterprises.
7. 7: Male-Dominated Society: Male chauvinism is still the order of the day
in India. The Constitution of India speaks of equality between sexes. But, in
practice, women are looked upon as abala, i.e. weak in all respects. Womensuffer from male reservations about a woman's role, ability and capacity
and are treated accordingly. In nutshell, in the male¬ dominated Indian
society, women are .not treated equal to men. This, in turn, serves as a
barrier to women entry into business.
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8. Low Risk-Bearing Ability: Women in India lead a protected life. They are
less educated and economically not self-dependent. All these reduce theirability to bear risk involved in running an enterprise. Risk bearing is an
essential requisite of a successful entrepreneur.
In addition to above problems, inadequate infra structural facilities,
shortage of power, high cost of production, social attitude, low need for
achievement and socio-economic constraints also hold the women back
from entering into business.
DEVELOPMENT OF WOMENENTREPRENEUR8-RECENT TRENDS
Days are gone when women in India remained confined to within four walls
of their homes and their immense strength and potential remained
unrecognized and unaccounted for. Now, they are increasingly participating
in all spheres of activities.
The fact remains that the citadels of excellence in academic, politics,
administration, business and industry are no longer the prerogatives of men in India. The general consensus that is emerging in all discussions
relating to the development of women is that promotion of women
entrepreneurs should form an integral part of all development efforts.
The experience of the United States where the share of women-owned
enterprises is continuously on increase strengthens the view that the future
of small-scale industries depends very much on the entry of women into
industry.
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Several national and international organisations and agencies have
appreciated the need for and importance of developing women
entrepre¬neurs in recent years. A brief review of it is given here.
With a view to develop better half of the society, the United Nations
declared the decade 1975-85 as the Decade for Women: The UNIDO
Preparatory Meeting on the Role of Women in Industrialisation in
Developing Countries held at Vienna during 6-10 February, 1978 identified
several constraints such as social, attitudinal and institutional barriers,
inad¬equate employment opportunities, inappropriate and inadequate
training, insufficient information and so on which held women back from
participating in industrial activities. The World Conference of the United
Nations Decade for Women held at Copenhagen in Denmark on 30th June
1980 also adopted a programme aimed at promoting full and equal
opportunities and treatment of women in employment and their access to
non-traditional skilled trades.
The First National Conference of Women Entrepreneurs held at New Delhi
in November 1981 advocated the need for developing women entrepreneurs
for the overall development of the country.
It called for priority to women in allotment of land, sheds, sanction of
power, licensing, etc. The Second International Conference of Women
Entrepreneurs organised by the National Alliance of Young Entrepreneurs
(NAYE) held in 1989 at New Delhi also adopted certain declarations
involving women's participation in industry. .
The Government of India has been assigning increasing importance to the
development of women entrepreneurs in the country in recent years. The
Sixth Five Year Plan, for example, proposed for promoting female
employment in women-owned industries. The Government moved a step
forward in the Seventh Five Year Plan by including a special chapter on
Integration of Women in Development.
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The chapter suggested:
1. To treat women as specific target groups in all development programmes.
2. To devise and diversify vocational training facilities for women to suit
their varied needs and skills.
3. To promote appropriate technologies to improve their efficiency and
productivity. To provide assistance for marketing their products
4. To involve women in decision-making process.
In the recent Industrial Policy 1991, the Government of India further
stressed the need for conducting special entrepreneurship development
programmes for women with a view to encourage women to enter industry.
Product and process-oriented courses enabling women to start small-scale
industries are also recommended in the Policy Statement.
There are several institutional arrangements both at the centre and the
state levels like nationalized banks, state financial corporations, state
industrial corporations, district industry centres and voluntary agencies
like FICCI's Ladies Organization (FLO), National Alliance of Young
Entrepreneurs (NAYE) which have been engaged in protecting and
developing women entrepreneurs in the country. Added to these are
national and international women associations set up with a purpose to
create a congenial environment for developing women entrepreneurship in
rural and urban areas.
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Chapter 111:
RURAL ENTREPRENEURSHIP
Rural entrepreneurship Def:
Rural entrepreneurship can simply be defined, as entrepreneurship
emerging in rural areas is rural entrepreneurship. In other words, es-
tablishing industrial units in the rural areas refers to rural
entrepreneurship. Or say, rural entrepreneurship implies rural
industrialization.
All the village industries have been grouped into seven major categories as
follows:
1. Mineral- based industry,
2. Forest - based industry,
3. Agro - based industry,
4. Polymer and chemical- based industry,
5. Engineering and non-conventional industry,
6. Textile-industry (including khadi), and
7. Service industry.
NEED FOR RURAL ENTREPRENEURSHIP
The need for rural entrepreneurship for developing industries in the rural
areas is imbued with multiplicity of justifications as listed below:
1. Rural industries being labour intensive have high potential in
employment generation. Thus, they serve as an antidote to the widespread
problems of disguised unemployment or under-employment stalking the
rural territory.
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2. By providing employment, these industries have also high potential for
income generation in the rural areas. These, thus, help in reducingdisparities in income between rural and urban areas.
3. These industries encourage dispersal of economic activities in the rural
areas and, thus, promote balanced regional development. .
4. Development of industries in, the rural areas also helps build up village
republics.
5. Rural industries also help protect and promote the art and creativity, i.e.
the age-old rich heritage of the country.
6. Rural industrialization fosters economic development in rural areas. This
curbs rural-urban migration, on the one hand, and also lessens the
disproportionate growth in the cities, reduces growth of slums, socialtensions, and atmospheric pollution, on the other.
7. Last but no means the least, rural industries being environment friendly
lead to development without destruction i.e., the most desideratum of the
time.
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PROBLEMS OF RURAL ENTREPRENEURSHIP
Developing entrepreneurship especially rural entrepreneurship is as
important is not so easy. It is constrained with several problems.
The general bottle-necks in the development of village industries are
financial constraints, lack of technical know-how, lack of training and
extension services, management problems, lack of quality control, high cost
of production due to high input cost, lack of communication and market
information, poor quality of raw materials, lack of storage and warehousing
facilities, obsolete and primitive technology, and lack of promotional
strategy.
According to the Ninth Plan, the major problems faced in developing
entrepreneurship in rural areas are:
1. Inadequate flow of credit,
2. Use of obsolete technology, machinery, and equipment,
3. Poor quality standards, and
4. Inadequate infrastructure facilities.
One of the major problems faced in developing entrepreneurship in rural
areas is lack of awareness and knowledge about the importance of
developing industries in rural areas. Added to this is disinterest shown by
rural people towards assuming the career as an entrepreneur for one reason
or other.
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Rural/village people generally want to take up salaried employment
because of assured income, lesser hours of work, lesser degree of respon-
sibility etc. This is supported by the society's higher degree of status
accorded to the salaried people than to self-employed ones, or say,
entrepreneurs.
Further, the rural people are generally not aware about the entrepreneurial
opportunities available and also about support organisations and other
information required to take the first step in their entrepreneurial career.
Even those who are aware about the facilities and support system for start-
ing entrepreneurial career find organisational climate to be not so helpful.
Thus, the environment in the family, society and the support system is
generally not conducive to encourage the rural people to consider self-
employment and entrepreneurial career as an option to salaried
employment. Besides, developing rural entrepreneurship faces all those
problems that are faced in the development of small-scale industries in the
country.
HOW TO DEVELOP RURAL ENTREPRENEURSHIP?
Establishing an industry and, thereby developing entrepreneurship is not
one-man activity. In fact, it involves multi-pronged activities.Though the
answer to the question how to develop entrepreneurship lies in the
solutions of the problems faced in this regard, yet the following measures
are suggested for developing entrepreneurship in the rural areas in the
country. .
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1. Raw material is a must for any industry. However, the non-availability of
raw materials accompanied by their prohibitive cost has weakened the
viability of these industries. Past experience bears evidence that ruralindustries with employment potential cannot be sustained for long unless a
strong raw material-base is created in rural areas itself. Therefore, an
urgent policy is called for to strengthen the raw material base in rural areas.
2. Finance is considered as lubricant for setting up and running an
industry. Funds, therefore, need to be made available on time at soft terms
and conditions to those who really need it.
3. In order to solve the problem of marketing for rural industries, common
production-cum:-marketing centres need to be set up and developed with
modern infrastructure facilities, particularly, in the areas having good
production and growth potential. This would help in promoting export
business, on the one hand, and bringing the buyers and sellers is close
interaction avoiding middleman in between them, on the other. Legislative
measures have to betaken to make the government purchases compulsory
from rural industries.
4. One peculiarity of rural entrepreneurs is that most of them join their
entrepreneurial career not by choice but by chance.
Lack of aptitude and competency on the part of such entrepreneurs makes
the units sick. Hence, there is a need to develop entrepreneurial attitude
and competencies among the prospective entrepreneurs through the
training interventions like Entrepreneurship Development Programmes
(EDP), Women Entrepreneurship Development Programmes and TRYSEM.