Evolution of Entrepreneurship Entrepreneurship is one of the
four mainstream economic factors land, labor, capital, and
entrepreneurship. During 14 th century references speak about tax
contractors individuals who paid a fixed some of money to a
government for the license to collect taxes in their the region
known as tax contractors, they used to take risk of collecting
taxes if they collected more than the sum paid for their licenses,
they made profits and kept the excess. The concept of
entrepreneurship was existing in 17 th century was a common topic
in economic essays for much of the 18 th and 19 th century. Let us
read about how it has evolved as one of the factor of production
over a period of time.
Slide 3
Joseph Aloysius Schumpeter (1934) - An entrepreneur is an
innovator. Schumpeter considered economic development as discrete
dynamic change. J.B.Says:- entrepreneur is the most important agent
of production. Simply an entrepreneur is one who combine the land
of one, the labour of another and the capital of yet another and
thus produce a product. David Ricardo : He didnt assign any
important role to entrepreneurship for economic development of a
country. Acc to him,profit leads to saving of wealth, which
ultimately goes to capital formation and leads to economic
development.
Slide 4
Concept of Entrepreneurship Entrepreneurship is the tendency of
person to organize the business of his own and to run it
profitably, using all the qualities of leadership, decisions making
and managerial calibre etc. Entrepreneurship involves not only the
process that leads to the setting up of a business entity but also
the expansion and development of an on going concern. The study of
entrepreneurship is concerned with the entrepreneurial behavior,
the dynamics of business set up and expansion and development. The
term entrepreneur is often used interchangeably with
entrepreneurship. But conceptually they are different.
Slide 5
Entrepreneurship is a continuous economic process which
recognizes the need to change and an Entrepreneur is a key person
to initiate any change. Refers to a person Creator Organizer
Decision maker Initiator Leader Motivator Risk taker Refers to a
process Creation Organization Decision making Initiative Leadership
Motivation Risk taking
Slide 6
Acc. to A.H.Cole, entrepreneurship is the purposeful activity
of an individual or a group of associated individuals, undertaken
to initiate, maintain or organize a profit- oriented business unit
for the production or distribution of economic goods and services.
Acc. to H.N Patak, entrepreneurship involves a wide range of area
on which series of decisions are required which can be grouped into
three categories :- (i) perception of an opportunity (ii)
organizing an industrial unit and (iii) running the industrial unit
as a profitable, going and growing concern.
Slide 7
Importance Entrepreneurship has an important role in the
context of a developing nation like India which is confronted with
major socio-economic problems. Entrepreneurship plays a premium
mobile role in promoting development of economy. Entrepreneurship
is consistently equated with the establishment and management of
small business enterprises. Is the solution to the baffling
problems like overpopulation, poverty, unemployment,
underemployment etc.
Slide 8
Entrepreneurship helps in finding solution to the giant
problems like concentration of economic power, regional imbalances,
exploitation by monopolists. The factors which retard the success
of entrepreneurship in india are inadequate infrastructural
facilities, shortage of capital, technical knowledge, and
transport, absence of cheap and good quality raw material and
shortage of power etc Skill of entrepreneurship knows how to turn
an ordinary corporation, managed in a routine manner, into a
entrepreneurial organisation. Hence, it is said that an economy is
the effect for which entrepreneurship is the cause.
Slide 9
Features:- Entrepreneurship is a set of activities performed by
an entrepreneur. The main features of entrepreneurship are as
follow :- Economic activity:- entrepreneurship is primarily
becoming an economic function because it involves creation and
operation of an enterprise. It involves conscious decision-making
about resource allocations. It also implies seeking the best
opportunities for using resources for their highest commercial
yields.
Slide 10
Innovative activity:- innovation is the process of doing new
things. Entrepreneurship is innovations where new products,
services, ideas and information is produced, new efficient
production techniques are introduced by the firm, new market
opportunities are indentified and better ways of meeting existing
demands are looked into. Whenever a new idea occurs,
entrepreneurial efforts are essential to convert the idea into
practical application. A function of high achievement:- people
differ not in their ability to do but also in their will to do, or
motivation. McClelland identified two features of entrepreneurship
(a) doing things in different and better way. (b) decision-making
under uncertainty. Thus people having high need for achievement and
power are more likely to succeed as entrepreneurs and this is a
very critical factor that leads one towards entrepreneurship.
Slide 11
Creative and Purposeful activity:- creativity is the ability to
bring something new into existence. Entrepreneurship is virtually a
creative and a purposeful activity. The entrepreneur passes through
the five stages during the process of entrepreneurship viz idea
germination, preparation, incubation, illumination and
verification. Earning profits is never the sole objective but to
introduce something new and creative is the purpose of
entrepreneurship.
Slide 12
A function of risk-bearing: Entrepreneur makes decisions about
obtaining and using resources while consequently assuming the risk
of enterprise. Acc. to Cantillion, risk-bearing forms an unique
constitututive function of entrepreneurship. An Organising
function. Acc. to J.B. Say, an entreprenuer is one who combines the
land of one, the labour of another, and capital of yet another, and
thus pro duces a product. By selling the product in the market, he
pays interest on capital, rent on land, wages to labourers and what
remains is his profit.
Slide 13
Here is an example of a farmer. The farmer pays out contractual
income which are certain to the landlords and labourers and sells
at prices that are uncertain. It is illustrated as follows :-
Entpr. Buys farm entpr. repacks entpr. Sells farm product at
certain and transports product at Prices. Fram products uncertain
prices to the market in the city. investment Transformatio n Profit
or loss
Slide 14
Invention and innovation:- Invention implies creating something
new not merely any new product but new technological processes, new
designs, new technical knowledge, etc. for example, Edisons
invention of bulb illustrates the point. Innovation, is the mean by
which the entrepreneur either creates new wealth producing
resources or endows existing resources or endows existing resources
with enhanced potential for creating wealth. Invention is
conceiving new ideas while innovation means to put these ideas into
action.
Slide 15
Innovation is process requiring analytical ability to work out
the details in order to carry on the project. An entrepreneur has
to obtain, material, select site, arrange staff, acquire
manufacturing abilities and then establish his organization in
order exploit the idea commercially. Invention can open up huge
markets but the secret lies in spotting the application. Thus we
can say that in order to be inventive, one has to be creative and
in order to become an innovator, one has to be entrepreneurial.
However just to be innovative is not enough unless that innovation
is carried into production to benefit consumers. invention Creating
something new Resulting in new knowledge innovation Transforming an
idea into application Resulting in new products, services or
processes
Slide 16
Entrepreneurship and enterprise:- Entrepreneurship : It is more
than mere creation of business Entrepreneurship is a process of
innovation and new venture creation through four major dimensions
individual, organizational, environmental and process.
Entrepreneurship is a process involving various action to be
undertaken to set up an enterprise. Acc. to J.B. an entrepreneur is
one who combines the land of one, labour of another and capital of
yet another to set up an enterprise to produce a product.
Slide 17
Joseph schumpeters contribution to entrepreneurship:- Joseph A
Schumpeter (1883-1950) is the main figure in the literature of
entrepreneurship as it was gave a well rounded picture of the
theory of an entrepreneur. Acc to schumpeter, entrepreneurship is
essentially a creative activity or it is an innovation function.
The process of innovation may be in the form of a) introduction of
new product b) use of new methods of production opening of new
market c) opening of a new market d) the conquest of new source of
supplying raw material e) a new form of organisation.
Slide 18
Theories of Entrepreneurship Economic Theory Sociological
Theory Psychological Theory Anthropological Theory
Slide 19
Economic theory Entrepreneurship and economic growth take place
when the economic conditions are favourable. Economic incentives
are the main motivators for entrepreneurial activities. Economic
incentives include taxation policy, industrial policy,sources of
finance and raw material,infrastructure availability,investment and
marketing opportunities, access to information about market
conditions, technology etc. Lack of incentives,unattractive
economic policies and unfavourable market conditions tend to reduce
the vigour of entrepreneurship
Slide 20
a) Schumpeters Theory of innovation Development implies
carrying one of new combinations of entrepreneurship. Entrepreneur.
is an innovator who carry new combination of: New goods/ services.
New method of production. New market. New source of supply of raw
materials. New organization.
Slide 21
b) HBS ( Harvard Business School) consider entrepreneurship is
the outcome of the combination of internal and external Forces.
Internal forces Individuals traits and qualities viz : Intelligence
Skill Knowledge Intuition Exposure & Experience External forces
Surroundings conditions viz : Economic Political Social &
Cultural Legal frame-work Stable Govt. External security, law &
order and legal process are the influencing factors.
Slide 22
Sociological theory Entrepreneurship is likely to get a boost
in a particular social culture Societys values, religious beliefs,
customs, taboos influence the behaviour of individuals in a society
The entrepreneur is a role performer according to the role
expectations by the society
Slide 23
a) Max Webers Theory Salient features of his theory are -
Spirit of Capitalism is highlighted Adventurous spirit facilitate
taking risk Protestant ethic embodying rebellion is conducive
Inducement of profit is the criterion b) E.E. Hagens Theory Reveals
general model of the social- interrelationship among physical
environment, social structure, personality and culture. Thinks
economic theories are inadequate Political & social change
catalyst for entrepreneurs. Rejects followers syndrome imitating
western technology. Technology is an integral part of socio-
cultural complex. Historic shift as a factor initiates change
Slide 24
Psychological Theory Psychological theory of entrepreneurship
has fairly high status among social scientists who study
entrepreneurship because it is very difficult to single out one or
several psychological traits as typical for the entrepreneurial
personality. However, Entrepreneurship gets a boost when society
has sufficient supply of individuals with necessary psychological
characteristics. The psychological characteristics include need for
high achievement, a vision or foresight, ability to face
opposition. These characteristics are formed during the individuals
upbringing which stress on standards of excellence, self reliance
and low father dominance.
Slide 25
J.Schumpeter,supports the psychological theory and not the
economic theory. He asserts that what matters is the behaviour, and
not the actor.
Slide 26
Anthropological Theory Fredrick Barth made his first attempt to
develop an anthropological theory of entrepreneurship. Acc. To him,
entrepreneurship has essentially to do with connecting two spheres
in the society, between which there exists a difference in value.
Barth, one of the leading anthropologists of the world, states that
entrepreneurial behaviour means to connect two different spheres in
the society, between which there is a huge discrepancy in
value.
Slide 27
Each of these theories are incomplete and none of them is right
or wrong. Theories of entrepreneurship are inter-disciplinary and
are influenced by a multitude of factors. It is the integration of
external environment, achievement motivation, ability and ambition
which largely determines whether an individual become an
entrepreneur or not.
Slide 28
Problems in growth of entrepreneurship :- Undoubtedly,
entrepreneurship growth in India is slow as compared to other
countries. As far as development of entrepreneurship is concerned,
the factors responsible for its slow growth are: Incompetence and
poor management Low level of commitment Restriction imposed by
custom and tradition Involvement of high risk socio- cultural
rigidities Lack of motivation Lack of infrastructural
facilities
Slide 29
Low quality products Law package of salaries to employees
Market imperfections Non availability of power and raw material
Legal formalities involved to set up a unit. Low status of
businessmen. Problem of getting the loan sanctioned Lack of
technical know -how Insufficient infrastructural facilities.
Slide 30
Pros and cons To everything in life there are advantages and
disadvantages; entrepreneurship is no exception. As a matter of
fact, entrepreneurship involves a lot of risk taking. Yet, it can
pay off very nicely as well, with rewards such as profits and the
opportunity to be your own boss and make your own decisions. Here
are some pros and cons to consider: Pros Excitement: Due to its
high capacity for risk, there is a lot of adventure. Rules and
regulations: Work in a current job is difficult to do because of
all the "red tape" and consistent administration approval needed.
Originality: Some people feel that they can offer a new
service/product that no one else has offered before.
Slide 31
Competition: Employees feel they can offer their current
company's product/service at a lesser expense to the public.
Independence: Some people wish to be their own boss and make all
the important decisions him/herself. Salary potential: Generally,
people want to be paid for the amount of work they do in full; they
do not want to be "short-changed." Flexibility: Entrepreneurs can
schedule their work hours to spend quality time with family or any
other reason. Rational salary: They are not being paid what they're
worth and would rather work on their own and earn the money they
should be earning for their efforts. Freedom: Entrepreneurs can
work whenever they want, wherever they want, and however they
want.
Slide 32
Cons: Entrepreneurs are exposed to different types of risk in
their pursuit of setting up an enterprise. Risk has got direct
relationship with profits. In the event of of failure of their
venture entrepreneurs are left with almost nothing to depend upon.
Salary: Starting your own business means that you must be willing
to give up the security of a regular paycheck. Benefits: There will
undoubtedly be fewer benefits, especially when considering that
your business will be just starting off. Work schedule: The work
schedule of an entrepreneur is never predictable; an emergency can
come up in a matter of a second and late hours will have to be put
in
Slide 33
Administration: All the decisions of the business must be made
on your own; there is no one ranked higher than you on the chain of
command in YOUR business. Incompetent staff: Often times, you will
find yourself working with an employee who "doesn't know the ropes"
as well as you do due to lack of experience. Procedures: Many times
during your entrepreneurial life, you will find that many policies
do not make sense, nor will they ever make sense
Slide 34
Intrapreneurship Employees of an organisation who have
entrepreneurial talent and are motivated to use their abilities and
initiative and do something on their own, but who may not want to
start their own business are known as intrapreneurs. Thus,
intrapreneurship is the term given to the establishment and
fostering of entrepreneurial activity in large organizations which
either improve the existing products and services or brand new
products. Intrapreneurship implies that entrepreneurial activities
are explicitly supported within established organizations, provided
with organizational resources, and accomplished by company
employees. Pinchot describes the intrapreneur, also termed as
corporate entrepreneur, as who violates policy, ignores the chain
of command, defies established procedures, and, perhaps, comes up
with a new product for the company in which he is employed.
Slide 35
Essentials for Intrapreneurship The strategic and structural
environment within the organization should be right. Inhibitive
internal chimneys must be pulled down so that employees can
interact freely with each other and share ideas. An appropriate
work force of enterprising people should be built in which
scientific recruitment is made. They should be motivated and
rewarded from time to time. Support system, team working,
information sharing and learning are essentials for invoking the
dormant talents of employees.
Slide 36
Difficulties It is not so easy to achieve effective
intrapreneurship due to the following factors: Efficient
implementation of facilities and controls, are difficult to
implement without conflicts. Fair remuneration and reward system is
difficult to establish to ensure justice. Employees may feel
disappointed if they face failure while trying their new ideas.
Inspite of all odds, businesses have to take risks and allow and
encourage to take up intrapreneurship.
Slide 37
Conclusion :- So one can safely conclude that entrepreneurship
implies a commitment to expand and grow which is also one of the
major determinants of industrial development. James opines that
some think of entrepreneurs primarily as innovators, some as
bearers of risks and others place major emphasis on their function
as mobilisers and allocators of the capital. The suitable
definition of an entrepreneur is a person or a group of persons who
are responsible for the existence of a new business
enterprise.