57

Chapter –II

Entrepreneurship:

A Theoretical Framework

58

Introduction

Since the days of the Industrial Revolution, the enterprises and entrepreneurs

are in the centre stage of modernisation. Economists, sociologists, psychologists and

anthropologists have studied this concept, usually within the frontiers of their

respective disciplines. This has led to more divergence than convergence in moving

towards the goal of practical conceptualization of entrepreneurship.

This chapter presents a theatrical framework of entrepreneurship. At the outset

it seeks to present a glimpse of various theoretical approaches and expositions made

over time and across disciplines to capture the phenomenon of entrepreneurship. And

after familiarizing oneself with the ‘conceptual map’, an attempt is made to project a

‘paradigm shift’ whereby the entrepreneur is recast into a pragmatic mode, keeping in

perspective the need to intervene for augmenting and harnessing the entrepreneurial

skills.

In spite of the fact that entrepreneurship is a significant factor in economic

development, no attempts were made by economists for formulating a systematic

theory of entrepreneurship with the possible exception of Schumpeter who gave a

central place to the innovative role played by entrepreneurs in his theory of economic

development. Before reviewing different theories of entrepreneurship, it is imperative

to give an account of historical evolution of the concept of entrepreneurship.

Evolution of the Concept of Entrepreneur

For a long time there was no equivalent for the term ‘entrepreneur’ in the

English language. Three words are commonly used to connote the sense the French

term carried: adventurer, undertaker and projector; these were used interchangeably

59

and lacked the precision and characteristics of a scientific expression 1 . Hence, the

term ‘entrepreneur’ did not find any prominence in the history of economic thought.

The earliest attempt to invest the concept with some economic content could be traced

to the works of a French writer, Bernard F.de Belidor, in the 18th

century who defines

entrepreneurship as buying labour and materials at uncertain prices and selling the

resultant output at contracted prices 2.

Entrepreneurship as a concept gathered

prominence in economic literature mainly through the writings of Richard Cantillon

(1680-1734), who assigned the entrepreneur an economic role by emphasizing on

‘risk’ as prominent entrepreneurial function.

The Mercantilist writer Cantillon introduced the term entrepreneur. He

defined entrepreneur “as the agent who purchases means of production in order to

combine them to produce a product to sell at prices that are uncertain at the moment at

which he commits himself to his cost”.

The distinction between the entrepreneur and capitalist was facilitated in the

second half of the 19th

century by the fact that changing methods of business finance

produced a rapidly increasing number of instances in which capitalists were no

entrepreneurs and entrepreneurs were no capitalists 3 .

Frank H. Knight emphasized the assumption of risk and uncertainty as the

main function of entrepreneur 4 . Harvey Leibenstein ascribed two more functions to

an entrepreneur—gap filling and input completing. While the former refers to the

discovery and development of markets and creation of other agents to fill-in the

existing gaps the latter is associated with procuring the needed inputs either

domestically or from abroad 5 .

60

On the basis of the degree of innovative zeal, propensity to introduce change,

and qualities of leadership displayed, entrepreneurs have been classified by Danhof

into four distinct types. The first one is innovating entrepreneurship which is

aggressive in experimentation and always ready for putting attractive possibilities into

practice. The second is imitative entrepreneurship distinguished by preparedness to

adopt successful innovations initiated by the innovating entrepreneurs. The third

category is Fabian entrepreneurship, characterized by great caution and skepticism,

which introduces changes only when the non-introduction leads to loss. The fourth

category is the drone entrepreneurship which is characterized by refusal to try new

methods even at the risk of loss 6

. While the innovative and imitative categories form

the active entrepreneurial resource the latter two types the Fabian and drone type,

point to potential entrepreneurship which can be activated by designing and

implementing a scheme of incentives. Infact, the problem in less developed

economies is much more than increasing the supply of innovative or imitative

entrepreneurship.

In India, while certain industrial centers have long experience of more than a

century there are many regions with little or no industrial tradition. It is not feasible

to speak of developing innovative entrepreneurship in these regions. The immediate

need is to supply the imitative type and to activise the Fabian and Drone types of

entrepreneurs. Development of modern small scale industries helps in augmenting the

supply of these types of entrepreneurship in these regions.

Thus, the word ‘entrepreneur’ is drawn from the French language where it

originally meant to designate an organizer of musical or other entertainments. Oxford

English Dictionary (in 1897) also defined an entrepreneur in similar way as “the

director or a manager of a public musical institution, one who ‘gets-up’ entertainment,

61

especially musical performance’7. In the early 16

th century, it was applied to those

who were engaged in military expeditions. It was extended to cover civil engineering

activities such construction and fortification in the 17th

century. It was only in the

beginning of the 18th

century that the word was used to refer to economic aspects 8 .

Since then, the term ‘entrepreneur’ is used in various ways and various views. These

are broadly classified into three groups, viz., risk-bearer, organizer and innovator.

Entrepreneur as a Risk-Bearer: Richard Cantillon, an Irish man living in France,

was the first to introduce the term ‘entrepreneur’ in the early 18th

century. He defined

entrepreneur as an agent who buys factors of production at certain prices in order to

combine them into a product with a view to selling it at uncertain prices in future 9

.

Knight 10

also described entrepreneur to be a specialized group of persons who bear

uncertainty. Thus, entrepreneur is the economic functionary who undertakes such

responsibility of uncertainty which by its very nature cannot be insured, or capitalized

or salaried too.

Entrepreneur as an Organizer: Jean Baptist Say defined an entrepreneur as one

who combines the land of one, the labour of another and the capital of yet another,

and, thus, produces a product. By selling the product in the market, he pays interest

on capital, rent on land and wages to labourers and what remains is his/her profit 11

.Thus, Say has made a clear distinction between the role of the capitalist as a financer

and the entrepreneur as an organizer.

Entrepreneur as an Innovator: Joseph A. Schumpeter, for the first time in 1934,

assigned a crucial role of ‘innovation’ to the entrepreneur in his magnum opus

‘Theory of Economic Development’. Schumpeter considered economic development

as a discrete dynamic change brought by entrepreneur by instituting new

62

combinations of production, i.e., innovations 12

. The introduction of new combination

of factors of production, according to him, may occur in any one of the following

forms: (a) the introduction of a new product in the market, (b) the instituting of a new

production technology, (c) the opening of a new market, (d) the discovery of a new

source of supply of raw material and (e) the carrying out of the new form of

organization of any industry.

while, Harbinson 13

enumerates four distinct entrepreneurial functions; such as

undertaking or managing of risks and handling of economic uncertainty; planning and

innovation; coordinating, administration and control; and routine supervision. Tandon

14 emphasizes that an entrepreneur must possess: a) the capacity to assume risk and

self confidence; b) technological knowledge, alertness to new opportunities,

willingness to accept change and ability to initiate; c) ability to mobilize resources;

and d. ability for organization and administration.

Meredith Geoffrey & others 15

have described entrepreneurs as people who

have the ability to see and evaluate business opportunities together with the necessary

resources to take advantage of them and to ensure success.

Arthur Dewing 16

has conceptualized the function of entrepreneur as one that

promotes ideas into business. Thus, entrepreneur brings an over all change through

innovation for the maximum social good. According to him an entrepreneurs is a

visionary with outstanding leadership qualities.

Peter Drucker 17

has observed that “innovation is the specific tool of entrepreneurs,

the means by which they convert changes into opportunities for a different business or

a different service. It is capable of being presented as a discipline, capable of being

learned, and capable of being practiced. Entrepreneurs need to search purposefully for

63

the sources of innovation, the changes and their symptoms that indicate opportunities

for successful innovation. And they need to know and to apply the principle of

successful innovation”.

Sharma 18

opines that entrepreneurs are those who exhibit qualities of

leadership in solving persistent professional problems and demonstrate an eagerness

to seize unusual opportunities. Habakkuk 19

has points out that entrepreneurs have

certain common characteristics: a flair for identifying and seizing opportunities for

profit, an eye for the possibility of new products, unexploited raw material supplies,

untapped markets, willingness to take considerable risk; vision, drive and initiative,

the ability to devote their whole energies completely to attain their ends.

Of late, a new breed of entrepreneurs is coming to the fore in large industrial

organizations. They are called ‘intrapreneurs. The intrapreneurs are usually top

executives encouraged to catch hold of new ideas to convert them into products. Thus,

intrapreneurship serves as a seed-bed for the development of innovative

entrepreneurship.

ENTREPRENEURSHIP: Concept and background

Entrepreneurship is the propensity of mind to take calculated risks with

confidence to achieve a pre-determined business or industrial objective. In substance,

it is the risk-taking ability of the individual, broadly coupled with correct decision

making. The capacity to take risk independently and individually with a view to

making profits and seizing opportunity to make more earnings in the market-oriented

economy is the dominant characteristic of modern entrepreneurship. However, in

countries like India, a new species of entrepreneurs is desirable because here the

economic progress has to be brought about along with social justice.

64

Entrepreneurship in India therefore, has to sub-serve the national objectives.

The apparent conflict between social objectives and economic imperatives has to be

resolved first by the individual entrepreneur in his own mind and initiate economic

growth which includes industrial development as one of the instruments of attaining

the social objectives. Thus, a high sense of social responsibility is an essential

attribute of the emerging entrepreneurship in India.

In a Conference on Entrepreneurship held in the United States, the term

‘entrepreneurship’ was defined as “the attempt to create value through recognition of

business opportunity, the management of risk-taking appropriate to the opportunity,

and through the communicative and management skills to mobilize human, financial

and material resources necessary to bring a project to fruition” 20

.

In the opinion of A.H. Cole, “entrepreneurship is the purposeful activity of an

individual or a group of associated individuals, undertaken to initiate, maintain or

aggrandize profit by production or distribution of economic goods and services” 21

.

Schumpeter states that “entrepreneurship is based on purposeful and systematic

innovation. It included not only the independent businessman but also company

directors and managers who actually carry out innovative functions” 22

.Thus,

entrepreneurship refers to the functions performed by an entrepreneur in establishing

an enterprise.

THEORIES OF ENTREPRENEURSHIP

The concept and theories of entrepreneurship evolved over more than two

centuries have undergone major changes. Over the years the social scientists have

interpreted the phenomenon of entrepreneurship differently in accordance with their

65

perception and economic environment. Infact, the concept of entrepreneurship is

complex in its content, and it is influenced by not only economical aspects, but also

by sociological, political, psychological, ethical, religious and cultural values. With

the above background, some of the important theories of entrepreneurship are

presented in the following discussion.

a) Schumpeter: The most celebrated theory on entrepreneurship was propounded by

Joseph Schumpeter, who in turn brought the conceptual change in the definition and

functions of entrepreneur. According to him, entrepreneur is a key functionary of

economic development. Further, he said that development implies carrying out of the

new combinations and the concept of combination covers the following five cases23

; i)

the introduction of a new good; ii) the introduction of a new method of production;

iii) the opening of a new market; iv) the conquest of a new source of supply of raw

materials; and v) the carrying out of the new organization of any industry.

Thus, the carrying out of these new combinations, Schumpeter calls

‘enterprise’, the individuals who carryout them he calls ‘entrepreneur’.

b) Max Weber: The core aspect of the Weberian theory of social change consists in

his treatment of the protestant ethic and the spirit of capitalism. He said that the

inducement of profit results in greater number of business enterprises and a complete

re-organization of the industry occur 24

.

In the Weberian system the entrepreneurial energies are generated by

following exogenously supplied religious belief i.e., Protestant ethic. For people who

believe in this ethic, hard work in their walks of life is not only to enable them to have

their worldly desires met but also to have their spiritual needs satisfied.

66

c) Everett.E.Hagen: Hagen makes an attempt to formulate a theory of social change

which explains how a traditional society becomes one in which continuous technical

progress take place. He supports the idea that economic growth occurs interwoven

with political and social change. He rejected the idea that the solution to economic

underdevelopment lies in imitating western technology. The reason is that technology

is a part of the whole socio-cultural complex and transplantation of it into a different

socio-cultural set up may not deliver the goods.

He said that it is the social group which experienced ‘withdrawal of status respects’

that turns to rigorous entrepreneurial activities. They are “a group of individuals,

creative, alienated from traditional values, driven by burning passion to prove

themselves, seek for an area being so far untouched, preferably an area where they

can gain more power, etc 25

.

d) Thomas Cochran: Cochran propounded a sociological theory of entrepreneurial

supply. The basic assumption is that fundamental problems of economic development

are non-economic, he emphasizes cultural values, role expectations and social-

sanctions are the key elements that determine the supply of entrepreneurs. According

to him, an entrepreneur is neither a super-normal individual nor a deviant person but

represents a society’s model personality 26

.

Thus, the individual’s performance as an entrepreneur will be influenced by

his own attitude towards his occupation, the role expectations held by sanctioning

groups and the operational requirements of the job.

e) Frank Young: Frank Young was of the opinion that entrepreneur typically does

not work single handed. He said that, entrepreneur is simply the most visible member

from an economic point of view of what is typically a cluster of families whose

67

activity is mutually reinforcing and co-ordinated by a coherent outlook on the world

27.

Young also claims that many entrepreneurial functions are implied in his

concept of solidarity. And this solidarity of the entrepreneurial group also avoids

many economic problems that crop up in the case of an individual entrepreneur.

f) John.H.Kunkel: Kunkel has given a behavioral model which in turn begins with

the assumption that ‘man’s internal state is beyond the scope of presently available

means of measurement and objective analysis, and knowledge of it is largely

unnecessary for the explanation and prediction of behavior 28

.

According to this behavioral model, the determinants of an individual’s

activities are to be found largely in the conditioning procedures-both deliberate and

accidental to which he has been subjected in the past, and in the sets of reinforcing

and discriminative stimuli which became part of his behavioral chains and are part of

present social context. The relationship between the social environment and the

individual is reciprocal. Thus, entrepreneurship is basically an outcome of the society

and its expectations.

g) David C. McClelland: McClelland was very much concerned with economic

growth and the factors responsible for it. He wanted to find the ‘internal factors’, i.e.,

human values and motives that lead man to exploit opportunities, to take advantage of

favourable trade conditions 29

.

He found that the chief inner concern or motive is that of a need for

achievement: a desire to do well, not so much for the sake of social recognition of

prestige, but for the sake of an inner feeling of personal accomplishment. Infact, it is

68

this motive in turn guides the actions of entrepreneurs. He said that the important

characteristics of an entrepreneur are, no hard work at routine tasks, avoiding

gambling situations, showing interest in finding out results of their decisions, and

prefer to work hard at tasks that involve a real challenge.

h) Harbison: Harbison did not propound any theory pertaining to entrepreneurship,

but made an interesting observation about entrepreneurship as a factor in economic

development. In most enterprises, a hierarchy of individuals is required to perform

them. Thus, the entrepreneur is in essence an organization which comprises of all the

people required to perform entrepreneurial functions 30

.

He suggested that entrepreneurship should be treated as a resource which has

both qualitative attributes and quantitative dimensions. He also said that the

effectiveness of business organizations require dynamic and innovative entrepreneurs.

A dynamic organization needs ideas, creativity and people who can plan and initiate

changes.

i) Hoselitz: Hoselitz emphasizes the role of culturally marginal groups, are

responsible for promoting economic development. ‘Marginal groups, because of their

ambiguous positions from a cultural or social stand point, are peculiarly suited to

make creative adjustments in situations of change and in the course of this adjustment

process to develop genuine innovations in social behaviour 31

.

Thus, it is quite interesting to note that the theories discussed so far give

prominence to either sociological or psychological factors as determinants of supply

of entrepreneurship. Moreover, most of the theories are based on actual experiences

of some countries or regions in countries during specific periods, the general

69

impression one gets from them is that it is not really possible to build an economic

theory of entrepreneurial supply with the given socio-cultural milieu.

But for the first time, Peter Kilby attempted to formulate such an economic

theory of entrepreneurship using the familiar tools of the economist.

j) Kilby: Kilby observed that the psychological drive for pecuniary gain (desire to

maximize profits) is an exogenous factor taken to be given which is supposed to be

operative in all societies. This profit motive combined with a particular definition of

entrepreneurial role provides the highly elastic supply of entrepreneurial services. He

said that given a favourable economic setting, the main function of an entrepreneur is

to make decisions under uncertainty.

Thus, the different theories outlined above involve varied approaches to

grapple with the problem of social and economic change, the change agent and nature

of its motivation. Some theories represent essentially mental constructs like

Schumpeter others are empirical in the sense that they are inspired by social and

economic reality as perceived by theorists.

Weber’s theory draws attention to religious percepts that induce or inhibit the

entrepreneurial activity. McClelland’s theory gives us two important factors for the

policy makers’ viz., it is necessary to create a climate to enable children to grow with

high n-ach. And it is possible to improve the performance of entrepreneurs through

proper training and education.

Hagen’s theory shows that entrepreneurial supply can be expected from

groups which experienced ‘status withdrawal’. Hoselitz’s theory reveals the

importance of minority (marginal) groups which in turn display considerable

70

entrepreneurial drive. The theories of Cochran, Young and Kunkel provide good

insights into the social processes responsible for the development of entrepreneurial

skills in the people.

Finally, Kilby’s model highlights the environmental economic variables

present are responsible for the demand side of market for entrepreneurship.

Thus, there being multi-faceted dimensions to the problem, no simple theory

can prove all the data or conceptual apparatus necessary to develop the “haffa lump”

policy and programme. Planners may take this into account and devise suitable

measures to identify the right type of person, give him the right type of training,

provide effective institutional support and devise suitable modes of evaluating the

impact of such efforts 32

.Therefore; it is quintessential to take into account the holistic

view of all the theories.

Growth of Entrepreneurship in India: Pre-Independence:

The evolution of the Indian entrepreneurship can be traced back to even as

early as Rig-Veda, when metal handicrafts existed in the society 33

.

This brings the point home that handicrafts entrepreneurship in India was as old as the

human civilization itself, and was nurtured by the craftsmen as a part of their duty

towards the society. Then, the village community featured the economic scene in

India. The elaborated cast-based diversion of workers consisted of farmers, artisans

and religious priests. The majority of the artisans were treated as village servants.

Such compact system of village community effectively protecting village artisans

from the onslaughts of external competition was one of the important contributing

factors to the absence of localization of industry in ancient India 34

.

71

Thus, from the immemorial till the earlier years of the eighteenth century,

India enjoyed the prestigious status of the queen of the international trade with the

help of its handicrafts.

Unfortunately, so much prestigious Indian handicraft industry, which was

basically a cottage and small sector, declined at the end of the eighteenth century for

various reasons 35

. These include among other things, disappearance of the Indian

Royal Courts, who patronized the crafts earlier; the lukewarm attitude of the British

Colonial Government towards the Indian crafts; imposition of heavy duties on the

imports; low-priced British-made goods produced on large scale; development of

transport which facilitated the easy access of British products; changes in the tastes

and habits of the Indians;etc.

Some scholars hold the view that manufacturing entrepreneurship in India

emerged as the latent and manifest consequence of East India Company’s advent in

India. Particularly, the Parsis established good rapport with the Company and were

much influenced by the Company’s commercial operations. The Company

established its first ship-building industry in Surat where from 1673 onwards the

Parsis built vessels for the Company. The most important was shipwright Lowjee-

Nushirvan, who migrated to Bombay around 193536

.

In 1677, Manjee Dhanjee was given a contract for building the first large gun-

powder-mill in Bombay for the East India Company. Besides, a Parsi foreman of a

gun factory belonging to the company established a steel industry in Bombay in 1852.

Thus, it can be stated that the East India Company made contribution towards

entrepreneurial growth in India.

72

However, the actual emergence of manufacturing entrepreneurship can be

noticed in the second half of the nineteenth century. Ranchodlal Chotalal, a Nagar

Brahman, was the first Indian to think of setting up the textile manufacturing on the

modern factory lines in 1847, but failed. In his second attempt, he succeeded in

setting up a textile mill in 1861 at Ahmedabad 26.The credit for the expansion of

textile industries up to 1915 goes to the Parsis. Out of 96 textile mills existing in

1915, 43% (41) were set up by Parsis, 24 %( 23) by Hindus, 10 %( 10) by Muslims

and 23 %( 22) by British citizens37

. Later on Jamshedjee Tata was the first Parsi

entrepreneur who established the first steel industry Jamshedpur in 1911.

Infact, the well-known commercial communities, namely, Jains and Vaishyas,

lagged behind in entrepreneurial initiative throughout the nineteenth century. This is

due to two factors viz., the improvement of business climate in the countryside during

this period resulted in an increase in the quantum of trade which assured quick returns

on investments and the conservative attitude to change from commercial

entrepreneurship to industrial entrepreneurship38

.

Indeed, the Swadeshi campaign, i.e., emphasis on indigenous goods, provided

a proper seedbed for inculcating nationalism in the country. Further, the spirit of

indigenousness strengthened its roots so much in the country that the Krishna Mills in

its advertisement of Tribune of April 13 made the following appeal: “Our concern is

financed by native capital and us under native management throughout”39

.

The second wave of entrepreneurial growth in India began after the First

World War. The Indian Government agreed to ‘discriminating’ protection to certain

industries, even requiring that companies receiving its benefits should be registered in

India with rupee capital and have a proportion of their directors as Indian. The

73

advantages of these measures were mostly enjoyed by the Indians. The Europeans

failed to harness the protectionist policies to their interests 40

.

The emergence of Managing Agency System which made its own contribution

to the Indian entrepreneurship can be traced back to 1936 when Carr, Tagore & Co.

assumed the management of Calcutta Steam Tug Association.

The credit for initiation goes to an Indian, Dwarkanath Tagore who

encouraged others to form joint-stock companies and invented a distinct method of

management in which management remained in the hands of the ‘firm’ rather than of

an ‘individual’. Brimmer41

holds the opinion that Agency Houses emerged to

overcome the limitations imposed by a shortage of venture capital and entrepreneurial

acumen though all may not agree squarely with this view.

Post - Independence: After taking a long sigh of political relief in 1947, the

Government of India tried to spell out the priorities to devise a scheme for achieving

balanced growth. For this purpose, the Government came forward with the first

Industrial Policy, 1948 which was revised from time to time 42

.

The Government took three important measures in her industrial resolutions:

(i) to maintain a proper distribution of economic power between private and

public sector;

(ii) to encourage the tempo of industrialization by spreading entrepreneurship

from the existing centres to other cities, towns and villages, and

(iii) to disseminate the entrepreneurship acumen concentrated in a few

dominant communities to a large number of industrially potential

people of varied social strata 43

.

74

To achieve the above objectives, the Government accorded emphasis on the

development of small-scale industries in the country. Particularly since the Third Five

Year Plan, the Government started to provide various incentives and concessions in

the form of capital, technical know-how, markets and land to the potential

entrepreneurs to establish industries in the industrially potential areas to remove the

regional imbalances in development. Several institutions like Directorate of

Industries, Financial Corporations, Small-scale Industries Corporations and Small

Industries Service Institute were also established by the Government to facilitate the

new entrepreneurs in setting up their enterprises. Expectedly, the small-scale units

emerged very rapidly in India witnessing a tremendous increase in their number from

1, 21,619 in 1966 to1,90,727 in 1970 registering an increase of 17,000 units per year

during the period under reference 44

.

However, in the wake of liberalization, privatization and globalization, a new

concept has emerged known as international entrepreneurship. In simple words,

international entrepreneurship is the process of an entrepreneur conducting business

activities across national boundaries. The activities necessary for ascertaining and

satisfying the needs and wants of target consumers often take place in more than one

country. International entrepreneurship occurs when an entrepreneur executives his or

her business in more than one country.

Entrepreneurship Development: Entrepreneurship development refers to a

programme designed to help a person in strengthening his entrepreneurial motives and

in acquiring skills and capabilities necessary for playing his entrepreneurial role

effectively. The fundamental objective of the entrepreneurship development is to

transform the potential entrepreneurs into actual entrepreneurs.

75

Entrepreneurship training aims to effect change in the individual in terms of

knowledge, attitude and skills relevant to the entrepreneurship function. Persons may

be trained for entrepreneurial careers so as to increase the level of confidence and

achievement orientation as well as improve management development skill to enable

them successfully run their business45

. Further, “development of an entrepreneur

means inculcating entrepreneurial traits in a person imparting the knowledge,

developing the technical, financial, marketing and managerial skills. The process of

entrepreneurship development involves equipping a person with the necessary

information for enterprise building and sharpening the entrepreneurial skills 46

.

Many governments in developing countries recognize that small and medium

scale industries continue to play an important role in their socio-economic

development. There is growing interest in developing programmes for stimulating

and encouraging entrepreneurship development in these countries with this the

entrepreneur become the focal point in economic activities, especially in developing

countries.

In fact, the entrepreneurship development should be viewed in the total

perspective and should integrate entrepreneurial training, provision of incentives,

consultancy services, sectoral development and other essential strategies of

intervention. As such, entrepreneurship development is viewed as behavior oriented.

One of the factors contributing to the success of this training intervention in

entrepreneurship development is that is based on experience. In entrepreneurship

training, learning by discovery is usually preferred. Therefore, for any

entrepreneurship development programme to succeed, it is important not only to

motivate the trainees but also to provide them with all the skills necessary to run their

business successfully 47

.

76

Entrepreneurship Development Programmes: It is known that an entrepreneur is

the person with a vision, with the drive and with ability to bear risk. He is the ‘spark

plug’ who transforms the economic scene. An economy is an effect for which

entrepreneurship is the cause. Entrepreneurship development has, therefore, become

a matter of great concern in all developed and developing countries all over the world.

Entrepreneurship development programmes (EDPs) are deemed to offer the solution

to this problem 48

.

Need: The entrepreneurs possess certain traits or competencies. Traits or

competencies are underlying characteristics of the entrepreneurs which result in

superior performance49

. Then the crucial question arises is: Whether these

characteristics are in born in the entrepreneurs or can be induced and developed?

Behavioural scientists have tried to seek answers to these questions.

A well known behavioural scientist, David McClelland, professor at Harvard

University, USA, made an interesting investigation into why certain societies

displayed great creative powers at particular periods of their history? What was the

cause of these creative bursts of energy? He found that ‘the need for achievement’

(nach factor)50

was the answer to this question. It was a need to achieve to motivate

people to work hard.

In order to answer the next question whether this need for achievement could

be induced, he conducted a five year experimental study in one of the prosperous

district of Andhra Pradesh in India in collaboration with Small Industries Extension

and Training Institute (SIET), Hyderabad. His this experiment is popularly known as

‘Kakinada Experiment’. Under this experiment, young persons were selected and put

through a three month training programme and motivated to see fresh goals. One of

the significant conclusions of the experiment was that the traditional beliefs did not

77

seem to inhibit an entrepreneur and that the suitable training can provide the

necessary motivation to the entrepreneurs51

. The achievement motivation had a

positive impact on the performance of entrepreneurs. Thus, the Kakinada Experiment

could be treated as a precursor to the present day EDP inputs on behavioural aspects.

Based on this realization, India embarked in 1971 on a massive programme of

entrepreneurship development. Since then, there is no looking back. At present,

some 686 all India and State level financial institutions and public sector banks had so

far conducted EDPs in hundreds giving training to the candidates in thousands 52

.

Objectives of EDPs: The important objectives of the Entrepreneurship Development

Programmes (EDPs) are to (i) develop and strengthen their entrepreneurial quality,

(ii) analyse environmental set up relating to small industry, (iii) select product, (iv)

formulate project for the product, (v) understand the process and procedure involved

in setting up a small enterprise, (vi) know the sources of help and support available

for starting a small scale industries, (vii) acquire the necessary managerial skills

required to run a small a enterprises, (viii) know the pros and cons in becoming an

entrepreneur, (ix) appreciate the needed entrepreneurial discipline.

The course contents of an EDP are selected in line with the objectives of the

EDPs. The training programme is usually six weeks’ duration consisting of general

introduction to entrepreneurship, motivation training, management skills, support

system and procedure, fundamentals of project feasibility study and plant visits.

An entrepreneurship development programme consists of the following three

phases:

1. Pre-training Phase, 2. Training Phase, and 3. Post-training Phase (Follow

up)53

.

78

1. Pre-training Phase: The activities and preparations required to launch the training

programme come under this phase. This phase includes selection of entrepreneurs,

arrangement of infrastructure, tie-up of guest faculty for the training purposes,

arrangement for inauguration of the programme, selection of necessary tools,

techniques to select the suitable entrepreneurs, formation of selection committee for

selecting trainees, arrangement for publicity media and campaigning for the

programme, development of application form , finalization of training syllabus, and

pre-potential survey of opportunities available in the given environmental conditions.

2. Training Phase: The main objective of this phase is to bring desirable change in

the behaviour of the trainees i.e., to develop “need for achievement”. Accordingly, a

trainer should see the following changes in the behaviour of the trainees 54

.

a. Is he/she attitudinally tuned very much towards his/her proposed project idea?

b. Is the trainee motivated to plunge into entrepreneurial career and bear risks

involved in it?

c. Is there any perceptible change in his entrepreneurial attitude, outlook, skill,

role, etc.?

d. How should he/she behave like an entrepreneur?

e. What kinds of entrepreneurial traits the trainee lacks the most?

f. Whether the trainee possesses the knowledge of technology, resources and

other knowledge related to entrepreneurship?

g. Does the trainee possess the required skill in selecting the viable project,

mobilizing the required resources at the right time?

3. Post-training Phase (Follow-up): This phase involves assessment to judge how

far the objectives of the programmes have been achieved. This indicates our past

performance , drawbacks, if any, in our past work and suggests guidelines for framing

future policies to improve our performance.

79

Evaluation of EDPs: The EDPs have been considered as an effective instrument for

developing entrepreneurship in the countryside. Hundreds of EDPs are conducted by

some 686 organizations to impart entrepreneurial training to participants in

thousands55

. However, there is a need to have a retrospective look into how many

participants have actually started their own enterprises after completing the training.

This calls for evaluation of EDPs.

So far some 16 evaluation studies have been conducted by various

organizations and individual researchers. No doubt, these studies vary in their

objectives, coverage and content, but one common thread in all of them is the

assessment of effectiveness or impact of EDPs, howsoever, loosely defined. One of

the earliest attempts in this direction was made by a team of researchers and experts

appointed by the Gujarat Corporations to evaluate the effectiveness of EDPs56

. The

most recent and nationwide evaluation study on EDPs is one carried out by the

Entrepreneurship Development Institute of India, Ahmedabad 57

.

The bird’s eye view on the findings of this study are presented in the following table.

Sl.No. Description Number Percentage

A. Sample of the Study: 1. EDPs covered (Sample Size) 145 25.00

2. EDP Trainees covered in sample EDPs 1,295 30.00

3. Sample Trainees Interviewed 865 66.80

4. Sample Trainees Not Available and Non traceable 430 33.20

B. Macro Performance of EDPs:

1. number of Units set up by the EDP trainees 277 21.39

2. Trainees actively under process 78 6.02

3. Potential Start ups (1+2) 355 27.41

4. Trainees blocked under process 129 9.96

5. Trainees who gave up 381 29.42

6. Non traceable trainees 146 11.27

7. Trainees not available for interview during survey 284 21.93

(i) Start-ups among non-available 59 4.56

(ii)Non start-ups among non-available 225 17.37

8. Actual start-up Rate (1+7.1) 336 25.95

9. Expected Final Start up Rate (2+8) 414 31.97

-------------------------------------------------------------------------------------------------------

Source: S.S. Khanka, Entrepreneurial Development, S. Chand & Co., New Delhi,

2006 p.65.

It is observed that one out of every four trainees (26 percent) actually started

his/her enterprise after undergoing entrepreneurial training. However, the expected

80

final start-up rate is slightly higher around 32 percent. About 10 percent trainees are

found blocked due to various reasons at various stages in the process of setting up

their enterprises. If not helped effectively, they may join the category of those 29

percent trainees who have already given up the idea of launching their ventures. Out

of 430 trainees who could not be contacted personally during the field survey,

according to the secondary sources, viz., family, friends and neighbors’, 17 percent

have given up the idea of venture launching as they are engaged in other activities.

However, the performance of EDPs across the States and across the ED

organizations has not been uniform. The actual start-up rates are observed to be

oscillating between 9 percent and 56 percent, bringing down the overall national start-

up rate to about 26 percent58

which cannot be considered as impressive performance.

81

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84

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