1

Entrepreneur and Entrepreneurship

LEARNING OBJECTIVES
To understand the meaning of Entrepreneur and Entrepreneurship, Characters
and Qualities. Difference between Entrepreneurs and Managers. Nature and
characteristics of Entrepreneurs. Railor &affect-Entripreneurial growth
and Entripreneurial motivation.

1.1 INTRODUCTION
Entrepreneur is an Economic Agent wiho piays a vital role in the economic
development of a country. Economic development of a country refers steady
growth in the income levels. This growth mainly depends on its entrepreneur.
An entrepreneur is an individual with knowledge, skills, initiative, drive and
spirit of innovation who aims at achieving goals. An entrepreneur identifies
opportunities and seizes opportun ies for economic benefits.
Entrepreneurship is a dynamic activity which helps the entrepreneur to bring
changes in the process of production, innovation in production, new usage of
materials, creator of market etc. It is a mental attitude to foresee risk and
uncertainty with a view to achieve certain strong motive. It also means doing
something in a new and effective manner.

1.2 THE CONCEPT OF ENTREPRENEUR

The word "Entrepreneur" is derived from the French verb entrepredre. Itmecans
to undertake. In the early 16th century, the Frenchmen who organised and led
military expeditions were referred as "Entrepreneur'. In the early 18th century
French economist Richard Cantillo used the term entrepreneur to business.
Since that time the word entrepreneur means one who takes the risk of starting
a new organisation or introducing a new idea, product or service to society.
According to J.B. Say, "An Entrepreneur is the economic agent who unites all
means of production, 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 rent of land. wages to labour. interest on capital and what remains is his
profit". Thus an Entrepreneur is an organiser whocombines various factors of
production to produce a socially viable product.
 Entreprencurship Development

Accord1ng toJoseph Schumepeter, "An entrepreneur in an advanced economy

Is an individual who introduces something new in the economy a method oc
production not yet tested by experience in the branch of manufacture con
cerned, a product with which consumers are not yet familiar., a new source of
raw material or of new markets and the like". The functions of an entrepreneur.
ship according to Schumepeter I. Introduction of a new product, 2. Introdue
tion of methods of production, 3. Developing new markets and finding fresh
source of raw materials, and 4. Making changes.
According to Cantillon "An entrepreneur is the 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".
To conclude an entrepreneur is the person who bears risk, unites
various
factors of production, to exploit the perceived opportunities in order to evoke
demand, create wealth and employment.
1.3 CHARACTERISTICS OF AN ENTREPRENEUR
An entrepreneur is a highly achievement oriented, enthusiastic and
individual, who has following characteristics. energetic
1. Entrepreneurs are action oriented, highly motivated
risks to achieve goals. individuals who takes
2. Entrepreneurs will have unwavering
determination and commitment. They
ate creative and result-oriented. They
and financial rewards.
work hard in return for persona!
3. Entrepreneur accept responsibilities with enthusiasm and endurance.
4.
Entrepreneurs have self-confidence, they are dedicated, setting self deter
mined goals and markets for their ideas
5. Entrepreneurs are both thinkers and responding to existing market.
6. Entrepreneurs can forsee the doers, planners and workers.
future, as a salesman's persuasiveness, a
financial talent for manipulating funds, as an auditors
7. Entrepreneur depends on the intelligence, imaginationprecision etc.
and strength of
purpose of the individual.

1.4 QUALITIES OF AN ENTREPRENEUR

Essential qualities of entrepreneurs are as
1. Success and follows:
Achievement: The entrepreneurs are self determined to achieve
high goals in business, this
achievement motive strengthened them to
surmount the obstacles, suppress
sire expedients, to run a anxieties, repair misfortunities and de
2. Risk Bearer: successful business.
Entrepreneur accept risk they select a moderate risk situa
tion, rather than gambling or avoiding risk,
risk. they understand and manag
3. Opportunity Explorer: Always
entrepreneur
seize oPportunity and convert them identifies opportunities.
into realistic achievable goals.
 Entrepreneur and Entrepreneurship 3
4. Perseverance: Entrepreneur make extreme efforts and work hard till the
goal is successfully accomplished. They are deterred by uncertainities
risks and difficulties coming in the way of achievement of ultimate goal
5. Facing Uncertainity: Achievement oriented people tend to tackle an un
familiar but interesting situation. They go ahead with solutions for the
problems even without the guidelines.
6. Feedback: Entrepreneur like to have prompt immediate feedback of their
performance.
7. Independence: Entrepreneur like to be their own master and want to be
responsible for their own decision. An entrepreneur is a job giver and not
a job seeker.
8. Flexibility: Entrepreneur makes decisions based on the prevailing situa
tions. Successful entrepreneur do not hesitate in revising their decision.
Entrepreneur is a person with open minds not rigid.
9. Planner: Entrepreneur frames realistic business plans and follows them
rigorously to achieve the objectives in a stipulated time limit.
10. Self Confidence: Entrepreneur directs his abilities towards the accom
plishment of goals with the help of his strengths and weaknesses.
11. Motivator: Entrepreneur influence and initiate people and make them
think in his way and act accordingly.
12. Stress Taker: Entrepreneur as a focal point he will make many right
decisions which may involve lot of physical and emotional stress. He
keeps cool under a lot of tension while decision making.
Above discussed qualities determines entrepreneurs are born not made. In
other words business family background, knowledge and skills, education and
experience is essential for a successful entrepreneur.

1.5 DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER

Point or Entrepreneur A Manager

Distinction
1. Goal Anentrepreneur starts a ven But the main aim of a man
Management ture by setting up a new en ager is to render his service
terprise for his personal in an enterprise already set up
gratification by someone.
2. Status Entrepreneur is the owner of A manager is the servant in
enterprise. the enterprise.
3. Risk An entrepreneur bears all A manager being a servant
risks and uncertainity in does not bear any risk in
volved in the enterprise. volved in the enterprise.
4. Rewards Entrepreneur for his risk A manager receives salary as
bearing role he receives prof reward for service rendered

(Contd.)
 Entreprencurship Development

(Contd.)
Point or Entrepreneur A Manager
D1stinction
its. It is not only uncertain which is fixed and regular can
and irregular but can at times never be negative.
be negative.
5. Innovation As an innovator he is called A manager executes the plans
as change agent who intro of the entrepreneur. Thus a
duces goods and services to manager translates the ideas
meet changing needs of the into practice.
customer.

1.6 FUNCTIONS OF AN ENTREPRENEUR

An entrepreneur performs all the necessary functions which are essential from
the point of view of expansion of the enterprise.
Functions of Entrepreneur

II III
Primary Other functions Functions important for
function developing countries
1. Planning 1. Diversification of 1. Management of share
2. Organisation production resource
3. Decision making 2. Expansion of the 2. Dealing with public
4. Management enterprise
5. Innovation 3. Maintaining cordial emp
bureaucracy
3. Acquiring and
6. Risk bearing loyer and employee relations assembly of the factory
7. Uncertainity 4. Tackling labour problem 4. Engineering
bearing 5. Co-ordination with outside 5. New product
agencies 6. Parallel opportunities
7. Marketing
8. Management
9. Customer relation
10. Public bureaucracy
Entrepreneur performs various primary functions from
an enterprise to its success level. These functions are in the stage of starins
1. Planning: Planning is the first step in the the sequential mannel.
direction of setting up O
enterprise. He prepares blue print of proposed project in a formal systemaus
format. It is submitted to the authorities concerned for obtaining the leg
sanction for the venture.
Planning process involves the following steps:
a. Scanning of the best suitable idea.
b. Selection of product line.
 Entreprencur and Entreprencurship 5

organisation (Individual or partnership,

C. Determination of type of business
or corporate)
d. Estimation of the capital needed.
e. Selection of capital resources.
f. Selection of location
policies.
g. Studying the government, rules, regulation and
h. Selecting the way to fulfill the govt. forma!ities.
i. Study of availability of labour force.
j. Study of market and market strategy to be adopted.
assembles and supervises
2 Organisation: An entrepreneur co-ordinates
the performance
land, labour and capital during the promotion stage and at
expansion and growth
stage, for optimum utilisation of the resources. Efficient
organisational net
of the enterprise largely depends on the efficiency of the
work employed and monitored by the entrepreneur. entrepreneur as a
3. Decision Making: Aruther H. Cole has described the regarding
decision maker. As a decision maker he takes various decisions
following matters:
a. Determination of the business objectives of the enterprise.
men, money and
b. Decision regarding procurement of machine, material,
market.
new equip
c. Decision regarding requisition of efficient technology and
ments.
product.
d. Decision regarding development of a market for the
e. Maintenance of good relations with public authorities and with society at
large.
entrepreneur stands for not
4. Management: The management with reference to problems.
only the working of the venture but also managing of the day-to-day of men,
Direction
It includes future expansion and policies in the long run.
the enter
machine, material, money, organising of land, labour and capital for
prise. that are already
5. Innovation: Implies "doing of new things or doing of things development as
being done in a newway". Schumepeter considered economic
a desire dynamic change brought by entrepreneur by instituting
new combina
any one of the
tions of production. According to him innovation may occur in
following five forms.
a. Launching of new product in the
market
production
b. Introduction of new technology in the
C. Creation of new market
d. Discovery of new and better source
of raw-material
e. Creation of monopoly or breaking up monopoly. loss that
6. Risk bearing: An entrepreneur undertakes the responsibility for
interest to
may arise due to unforeseen contingencies in future. He guarantees
creditors, wages to labour and rent to the landlord and risk can be insured.
7. Uncertainity bearing: Risk which cannot be insured against and it is incalcu
lable. Entrepreneur bears uncertainity refers to the uncertain trends of market.
6 Entreprencursh1p Devclopment
trade cred1ts ete. which by its nature cannot be insured. nor capitalised nor

Nalaned too.
Besides the above functions, the entrepreneur has per to perform many other
activiies at the later stage
1. DIvers1fication of production
2. Expansion of the enterprise
3. Maintaining cordial employer-employee relations
4. Tackling of labour problems
5. Co-ordination with out side agencies.
The functions of an entrepreneur with reference to the underdeveloped Coun
tries include wide range of activities has been provided by Kilby.
1. Management of scarce resources
2. Dealing with public bureaucracy (concessions licenses, taxes)
3. Acquiring and overseeing assembly of the factory
4. Industrial designing and engineering
5. Marketing of product and responding to competitions.
6. Industrial new product
7. Perception of market opportunities (novel or immitative)
8. Financial and production management
9. Management of customers and supplies relations.
10. Management of scarce resources.

1.7 TYPES OF ENTREPRENEUR

Following are the classification of entrepreneurs on the basis of
acteristics. common char

Entrepreneur

A. Clarence Danhof. IV
B. Arthur C. On the basis D. On the basis of
Classification H. Cole of ownership scale of enterprise
I. Aggressive/Innovative
Classification
2. Immitative 1. Empirical 1. Private 1. Small scale
2. Rational 2. Public
3. Fabian 2. Large Scale
4. Drone 3. Cognitive
A. Clarence Danhof
Classification:
Clarence Danhof classifies
1.
Iumovative: entrepreneurs into four types.
Innovative
Irformation and introduces newentrepreneur is oneof who assembles and synthesis
2.
reur. Immitative: Immitative combinations factors of
is also known as production.
He entrepreneur
Simply adopts successful adoptive entrepre
innovation introduced by other innovators.
 Entrepreneur and Entrepreneursh1p 7
3. Fabian: The Fabian entrepreneur is
timid and
other innovations only if he is certain that failure to cautious.
He immitates
do so may damage his
business.
4. Drone: His entrepreneurial activity may be
restricted to just one or
innovations. He refuses to adopt changes in production even at the risktwo of
reduced returns.
B. Aruther H. Cole Classification:
Aruther H. Cole classifies entrepreneurs as
1. Empirical: He is an entrepreneur hardly introduces anything
ary and follows the principle of rule of thumb. revolution
2. Rational: The rational entrepreneur is well informed about the
general
economic conditions and introduces changes which look more revolutionary.
3. Cognitive: Cognitive entrepreneur is well informed, draws upon the ad
vice and services of experts and introduces changes that reflect complete break
from the existing scheme of enterprise.
C. Classification on the Basis of Ownership:
1. Private: Private entrepreneur is motivated by profit and it would not enter
those sectors of the economy in which prospects of monetary rewards are not
very bright.
2 Public entrepreneurship: In the underdeveloped countries government
will take the initiative to share enterprises.
D. Classification Based on the Scale of Enterprise:
1. Smallscale: This classification is specially popular in the underdeveloped
countries. Small entrepreneurs does not posses the necessary talents and re
sources to initiate large scale production and introduce revolutionary techno
logical changes.
2 Large scale: In the developed countries most entrepreneurs deal with
large scale enterprises. They possess the financial and necessary enterprise to
initiate and introduce new technical changes. The result is the developed coun
tries are able to sustain and develop a high level of technical progress.
1.8 CONCEPT OF ENTREPRENEURSHIP

The term 'entrepreneurship' is often used synonymously with the term 'Entre
preneur' though, they are two sides of the same coin, conceptually they are
different.
Entrepreneurship is the indivisible process flourishes, when the interlinked
dimensions of individual psychological entrepreneurship, entrepreneur iroits,
social encouragement, business opportunities, Government policies, availa il
ity of plenty of resources and opportunities coverage towards the com1 on
good, development of the society and economy.
Entrepreneurship is the process of identifying opportunities in the n rkt
place, arranging the resources required to pursue these opportunities and
investing the resources to exploit the opportunities for long term gair . It
 Entreprencursh1p Development

involves ereating wealth by bringing together resOurces in new wavs to.

and operate an cnterprise.
According to Cole "Entrepreneurship is the purposeful activity of an indi.
Vidual or agroup of associated individuals undertaken to initiate, maintain and
aggrandise profit by production or distribution of economic goods and
ViCes"

According to Higgins "Entrepreneurship is meant the function of

investment and production opportunities, organising an enterprise to undertakaforeseeing
a newproduction process, raising capital, hiring labour, arranging the supply of
raw materials, finding site, introducing a new technique, discovering new a
sources or raw materials an selecting top managers for day to day operations of
the enterprise."
The above definitions highlights risk bearing, innovating and resource
organising aspects and an individual or group of people achieve goal through
production or distribution of products or services.
To conclude entrepreneurship is set f activities performed by an
entrepre
neur thus, entrepreneur proceeds entrepreneurship.
The relationship between entrepreneur and entrepreneurship is given in the
following table.
Entrepreneur Entrepreneurship
person process
visualiser vision
organiser organisation
Decision maker
Innovator
Decision making
Risk bearer
Innovation
Risk bearing
Motivator Motivation
Creator Creation
Leader
Manager Leadership
Initiator Management
Planner Initiation
Technician Planning
Communicator Technology
Administrator Communicator
Administration
Fig. 1.1 Relationship Between
Entrepreneur and Entrepreneurship.
1.9 NATURE AND
CHARACTERISTICS ENTREPRENEURSHIP
OF
Above study of entrepreneurship has shown that
ship is indeed complex the process of entrepre
and also when we say
neur does experts have enlisted the entrepreneur is what an enu
1. Ability to create enterprise: characteristics of
entrepreneurshiP economic
activity because it involves creationEntrepreneurship
and operation ofis anprimarily
enterprise.an It is basi-
cally concerned with
ion and distribution ofsatisfying the needs of customer with the help of produc-
goods and services.
 Entrepreneur and Entrepreneursh1p 9

2. Organising function: An entrepreneur brings together various factors of

production for an economic use. He co-ordinates and controls the factors of
production. efforts of are the persons engaged in his enterprise.
3. Innovation: Entrepreneurship is an automatic, spontaneous and creative
response to changes in the environment. It involves innovation of something
new to cause dynamic change and spectacular success in the economy, and
create conditions for growth of the economy.
4. Risk bearing capacity: Risk is an inherent and inseparable element of
entrepreneurship. He assumes the uncertainityof future. An entrepreneur guar
antees rent to the landlord, wages to employees and interest to the investors in
the hope of earning more than the expenses.
5. Managerial and leadership functions: An-industrial entrepreneur must
have additional personality traits such as managerial and leadership skills. Mana
gerial and leadership qualities predominant orientation is in the direction of
productivity, working relation and creative integration along with desire to
make profit. Entrepreneurship demands tactful handling of risk and uncertainities
because new commodity and its acceptability is uncertain.
6 Gap filling: The gap filling between human needs and the available
products and services leads to Entrepreneurship. An entrepreneur identifies the
gap and takes necessary corrective mneasures to fill the gap, to achieve his
action oriented motive in the enterprise as an entrepreneur with the help of
Entrepreneurship process.
Ability to Organising factors Innovative
create enterprise of production ideas

Risk bearing Managerial and Gap filling

capacity ]leadership activity function

|Entrepreneurship
character

Fig. 1.2 Characteristics of Entrepreneurship.

1.10 SCOPE OF ENTREPRENEURSHIP

Entrepreneurship and the economic development compliment each other. An

economic system of country determines the nature and scope of entrepreneur
ship. Entrepreneurship can bring about drastic changes in the very structure of
the economy.
Entrepreneurship works in different ways in different economic systems
such as capitalism, socialism and mixed economy
Capitalism--A capitalist economy represents free enterprise, me ans free
dom to save and invest, free competition, consumer sovereignty and very less
interference from the government.
10 Entreprencursh1p Development

Price of the product will be determined on the basis of the force of

and supply with reference to cost of production. Ihe entrepreneur controls
the activities with reference to the process of production and
demand
distribution.
Entrepreneurs play vital and prominent role in the enterprise because, he co
trols domestic market by assuming the role of a competitor
Socialism-Private entrepreneurship is absent in a socialist economic sve
tem. Economic and financial experts play important role in
the
entrepreneurship in the system. Such entrepreneurship mainly todevelopment
serve the soci
of
ety not to mint money or to make profit only.
Central Authority in the socialism
tal to make policies, frame plans andeconomy appointed by the Governmen.
is
mobilisation of resources, and mobilisation procedures for the proper and efficient
and allocation of resources into
those industries of national
prominence. In this
entrepreneur has neither a role or responsibility. system of economy private
Mixed Economy-The mixed economy is
both the private and public sectors characterised by co-existence of
in the same line of
goods are left to the private enterprises. production. Consumer
of capital goods Government undertakes the production
In a mixed economy,
the problems of monopolyrestrictions are placed by the Government to eliminate
curbs the growth of monopolies capitalism. Government under this type of economy
and encourage
Mixed economy has built-in stabilisers competition.
which solve the problems of produc
tion, pricing and distribution in a
helping in the various enterprise goals, better manner, apart from
mixed economny also helpssatisfying and
of inequality of incomes in reducing
among people, fixation of
efficient and effective way. minimum wages etc. in an
Thus entrepreneurship plays a great and vital role in all
systems. Its importance stands beyond major
every economic systemn. challenges and making of hugeeconomic
profit in

Mixed Economy
Scope
dius
ciaSlioscmialis forEntreprenu

Enterprise

Fig. 1.3 Scope of

Entrepreneurship.
 Entrepreneur and Entrepreneurship 11
1.11 FACTORS AFFECTINGENTREPRENEURIAL GROWTH
Following are the factors of environment affecting entrepreneurial growth.
conditions are grouped under two These
1. Economic conditions categories.
2. Non-economic conditions
I. Economic conditions
Economic conditions includes the capital, labour, raw material and market.
Capital: I is the essence of enterprise. Availability of capital
mobility of land, machine, material etc. is required to produce goods. facilitates
capital is a lubricant which smoothens the working of vehicle called Therefore.,
enterprise.
Increased capital investment, capital output ratio results in profit, which ulti
mately goes upto capital formation.
Labour: Quality and quantity of labour influence the entrepreneurship mo
bility, dexterity and immobility. Low cost labour and capital intensive technol
ogy oriented enterprises influence
entrepreneurship.
Raw material: Availability of raw material, nature of industrial establish
ment, technological innovation and mobility of raw material
curbs the encourages or
development of entrepreneurship.
Market: The potential of the market constitutes the major department of
probable rewards from entrepreneurial function. The size and composition of
market monopoly in a particular product influence entrepreneurship.
2. Non-economic conditions
Non-economic conditions are as follows: social conditions, psychological con
ditions and political or governmental action. Sociologists and psychologists
view that the influence of economic factors on entrepreneurial emergence largely
depend upon the existence of non-economic factors.
Social conditions are as follows:
1. Socio-cultural norms and values
2. Degree of approval or disapproval of entrepreneurial behavior.
3. Family background, standard of education, technical knowledge and in
formation.
4. Financial stability, caste and religious affiliation.
Psychological conditions are as follows.
1. David Mcdellond's Theory of need achievement'-According to him a
constellation of personality characteristics, and high need achievement is
the major determinant of entrepreneurship.
2. Individual works in the society but remains different.
3. Impact of achievement motivation and training programmes influence
development of entrepreneurship.
Political/Government Action.
1. Government encourage entrepreneurship by creating basic facilities, utili
ties and services and by providing incentives and concessions.
12 Entrepreneurshp Developnment

2. Govenment provides the prospective entrepreneurships a

economic setting. facilitative SoCio-
3. Entrepreneurship devclopment is based on the Government
economic development of the society. interest in
Above discussed factors influence the emergence of
entrepreneurship.
factors are interlocking. mutually dependent and mutually reinforcing. These
ENTREPRENEURSHIP MOTIVATION AND ENTREPRENEURSU
DEVELOPMENT PROGRAMME
1.12 INTRODUCTION TO MOTIVATION

The basic function of an entrepreneur is to

secure maximum performance for
the attainment of organisational objectives, the
depends mainly on their ability to perform and performance of an entreprenelur
willingness perform. Ability
to
is afunction of education and
experience and skill. Willingness to perform
depends upon the level of motivation.
In order to motivate
entrepreneur, an entrepreneur must understand and
satisfy their needs and aspirations and ambitions. Human behaviour is goy
erned by needs and desires.
expectation are satisfied as aEntrepreneurs
feel motivated when their
result of working for the enterprise. needs and
1.13 MEANING OF MOTIVATION
The term 'motivation' has been
be derived as an taker state of ourderived
mind
from the word motive. Motive' may
that moves or activates or
directs our behaviour towards our energies and
goals.
goals or needs. They give direction to Motives are expression of a person's
fulfill needs, motive arouse and human behaviour to achieve goals or
Motivation may be defined asenergize a persons
a process of activities.
desired course of action. In order to stimulating someone to adopt a
work hard for achievement of intensify the willingness of a person
organisational
satisfied by offering incentives. An objectives, his
incentive is something anmotives
ceives as helpful towards achieving his
must 0
needs. goals. Incentives exist toindividual per
satisfy huma
1.14
DEFINITION OF MOTIVATION
According to Robert-Dubin
continues him in the course of"something
that
action moves the person to action and
According to Dalton E McFarland already initiated".
urges, drives, desires, "motivation refers to the in which
behaviour of human striving, aspirations or needs direct control or explain the
way
being"
 Entrepre.ur and Entreprencurship 13

1.15 MOTIVATIONAL PROCESS

Motivation is the result of an interaction between human needs and incentives.

A person feels motivated when available incentives lead to the satisfaction of
his motives or necds. Various steps in the process of motivation are desired
below.

Motive

Behaviour Goal

Fig. 1.4 Motivational Process

Awareness of need is the first step in the motivational process. Motives are
directed towards the realisation of certain goals, which in turn determine hu
man behaviour. This behaviour leads to goal directed behaviour. In, order to
satisfy and achieve goal. Individual looks for a suitable action. He develops
certain goals and makes an effort to achieve them.

1.16 MOTIVATION THEORIES

: Motivation explains about human nature and human needs. Maslow's needs of
hierarchy and Mcdellands acquired needs theory are prominent theories among
these theories which has relevance to entrepreneurship.

Maslow's Need of Hierarchy Theory

Mas!ow classifies needs into a sequential priority from the lower to the higher.
According to him human needs are classified into the five need
Five needs with hierarchy are as follows
1. Psychological needs-Psychological needs influence human behaviour.
These needs are basic to human life such as food, clothing and shelter and
various necessities of life. Being a human being entrepreneur also have psy
chological needs for survival in the business world, prosper and satisfy his
need and societies need. Entrepreneur is motivated to work in the enterprise to
receive economic rewards to meet his basic needs.
2. Safety and security needs-These needs are felt as soon as first basic
needs are satisfied. Economic security and protection from physical danger. As
an entrepreneur to work in the enterprise he needs more money inturn to earn
more money to satisfy safety and security needs. He is promoted to work more
in the enterprise.
3. Social needs--Man being a social animal these needs are belongingness
needs. Belongingness recognition and acceptance by others likewise, an entre
preneur is motivated to interact with fellow entrepreneurs and his employees
and others.
14 Entrepreneurship Development

5
Self
actualisation
needs.

4
Esteem and Ego or
status need

3
Social needs
2
Safety and security needs
1
Psychological needs

Fig. 1.5 Maslow's Need of Hierarchy

4. Esteem needs-These are also known as Ego or status needs. It consists
of self esteem, esteem of others,
achievement competence, knowledge and
independence.
Entrepreneurship and self control over enterprise satisfies entrepreneurs es
teem needs by providing recognition, status, respect, reputation and indepen
dence.
5. Self
archy model ActualisationThe financial and important step under the need hier
is the need for self
Entrepreneur actualisation. This refers to self fulfillment.
may achieve self actualisation
Self actualisation needs which in being a successful
motivate them to work more and entrepreneur.
satisfying them. more for
In Maslows theory, needs are
The second need does not arranged in a lowest to the highest
dominate hierarchy.
process goes on till the last need is unless first is reasonably satisfied. This
Once a need is satisfied i.e. achieved. This is because man is never.
For entrepreneur it is creases to be a motivating
factor.
which motivate them to work mainly social esteem and self
more and more for actualisation needs
1.17 satisfying them.
MCDELLAND'S ACQUIRED NEED THEORY
As a result of ones life
1. Need for experience a person
experiences
affiliation--It
and warm relations with refers to establish and
three types of needs:
maintain
2. Need for others. healthy, friendy
power-These
others by using physical means the ones desire to dominate and
Desire to accomplish objects and actions. influence
excel in his or her efforts.something with own efforts. This
implies ones will tO
Mcdelland
ment is foundsuggests an entrepreneur the
achievement are dominating one.by In his importance
view, the
of
high need for achieve
1. They decide characterised
moderate,
the
following. people with high need for
realistic and attainable goals for them.
 Entrepreneur and Entreprencurship 15
2. Prefer tosituations in which they can find solutions for solving
responsibility. personal
3. They need concrete feedback
4. They have need for
about their performance.
5. They look for achievement for attaining personal accomplishment.
challenging task.
1.18 MOTIVATING FACTORS

Following are the factors motivate an entrepreneur. They are of two types
1. Internal, 2. External
Internal factors
1. Desire to do
something new
2. Educational qualification
3. Technical background
4. No. of years of
experience
5. Occupational background
External factors
1. Government support and
assistance
2. Availability of factors of production
3. Encouragement from already established business house
4. Promising demand for the product

1.19 ENTREPRENEURSHIP DEVELOPMENT PROGRAMME

Entrepreneurship Development: India's Experience

Based on the belief that potential entrepreneurs can be identified and trained,
the entrepreneurship development programme (EDP) has been designed to
promote small enterprises by tapping this latent talent. The programmes unique
ness lies in its integrated approach, which provides instructions and counsel
ling from selection through the actual operation of enterprises.
In India in the 1960's a great deal of discussion centered upon whether
growth could resolve income and regional disparities and whether the fruits of
development were being concentrated in a few areas and classes. India's devel
opment strategy was altered in 1969, to give particular emphasis to industrial
promotion in relatively backward states and districts. It was soon clear, how
ever, that fiscal and financial incentives by themselves would be insufficient.
Technical assistance will also be required if non-traditional sources of entre
preneurial talent were to be tapped. It was in response to this need that Gujarat's
financial institutions evolved a practical,result oriented programme to develop
such entrepreneurs.
EDP was initiated in 1970 under a sponsorship of a state financial cum
promotional institution, the Gujarat industrialand investment corporation. The
programme was run by GHC, and its basic elements and'its characteristics
were crystalised through repeated experience experiments until 1987, when
 promotions agencies
administerJointhley
16 Entrcpcncushup
Devclopment industlaldevelopmentto
mtutio)s and
entrepreneurship India's national

's
financal
(CJatat scpaate
and
entretor tun
convinced
sucCss n rclevantfor
othe
states and a
Development Institute
finatnanciionalal
onsoreda centre's was of India
lhe proeramme Entrepeneurship consultancy and
rTAmme the otfer
institutonsthat nceded.Theconductrescarch programme.
le 1983lo out theil
tratning
ieny would approach has remianed
identifygrounded
set upin carrying
Was agenciesin
(DID evolutionits lesting can
ass1sstatelevel
programme's
psychological
bchaviour selection
of
poten-
andThroughoutthe
ctfective
the
guidance in
develop successful
suitable
the belef that that carcful
in entrepreneurs and practical training can potential entrepre-
Iual appropriate designedto
strengthen entrepreneurs
and knowledge
and
enterprises programme hasbeen necessary skills about
neurs. The impart
own ability, aspects of business;
to provide information
confidence in their managerial implementing projects tot n
and
financial, technicalidentifying formulating and and finally to off
in assistance;
and assistance required financial and technical problems that accompany the
secure the them with the teething
assist
low up servicesto
operation of new company. on operational rather than academic
an emphasis specific need t
EDP is characterised bytraining programmes to meet the
training. flexible design ofinvolvement of the financial and business communi-
active of enterprises and
the participants and ties its training to the setting up
ties. The programme directly strategies to the socio-economic and cultural contexts
tailors its techniques and through
which it operates. Costs are kept down and training kept practical
in entrepreneurs, businessmen and others within
the participation of established programme at their own cost.
the field experience, who participate in the aspects of EDP
While each programme is adapted to local needs, the basic
initial step in
are the same and are summerised here. Selection of trainees is the
the entrepreneurial development the identification process is supervised by the
programme's trainer-motivators work in avery personal manner. By contacting
socialworkers, teachers, bankers and other sOcially respected but non-political
person, they develop a list of suitable candidates. Application are distributed
personal and individually interviews are conducted. In urban areas newspapes
advertisements or posted notices might be used to attract application and 10
are often distributed through the mail.
At successive
stages, applicants are behavioral
science techniques to determine the evaluated, on the basis of
Testing is meant to measure, extent of their entrepreneurial capacity.
among other things, candidates motivation to
achieve, their capacity to take risks
positive self and resolve problems, the extent oftheir
image, and their interest in setting up
new or
un-conventional. Personal business by trying something
permitting a committee that interviews conclude the selection process.
to make a final includes trainer and business and academic experts
what will be assessment
needed
of
in training. entrepreneurial a determination01
aptitude and
 Entrepreneur and Entrepreneursh1p 17

Traning: EDP emphas1s practical hands on experience. It is des1gned to

motivate participants, guide them in the selection of appropriate opportunities
and develop ther management skills. The programme used behavioral and
psychologieal techniques to intensify the desire to achieve. to develop the
abilty to define goals realistically and to fulfill them, and to increase selt
awareness and confidence. In help1ng trainees find appropriate enterprise FDP
counsels trainces on available opportunities and helps them to turn their inter
ests with projects that may already have been identifiea by technical consultancy
agencies or are known to be candidates for start-up funding. Participating
experts from management schools and entrepreneur are on hand to explain to
trainces what will be required to manage a small business.
The trainning process is centered around a subject exercise, which involves
participants in the conduct of market surveys and the preparation of project
plans. Trainees are exposed to the thought processes and field experience
necesary to make a rational choice of business product line, market mix, and
related aspects of the projects. The exercise culminates with the completion of
a project report. ldeally commercial banks and other supporting
institutions are
brought into this process at an early stage. Finance can thus be raised for the
project, and a link thereby established between the completion of training and
support of financial institution for the implementation of the projec:.
Institution
At the meeting of the senior executives of the All India Financiai
best
held on 19 may 1979, it was felt that state level institution cart be the
group (IIG)
agency for conducting EDP's. The state level inter institutional
would, therefore appear to be a suitable agency to co-ordinate, monitor and
meeting
follow up the entire programme at the state level. As suggested at this
comprising
an advisory board of 10/12 persons could be set up at the state level institu
ICICI state level
representatives of the state government, IDBI, IFCI,
out the detailed
tions, SISI, major nationalised banks and dIC's to work
subcommittee of
programme and review progress. This body could at best be a
This plan
IIG, on which all the institutions referred to above are represented.
execute the plan A "lead"
presuppOse an adequate number of trained trainers to districts under its
institution, for a start, could commence with a few of the
the other districts for
charge and as it gains experience could gradually cover
which it is responsible.
and monitorised
The activities of the state level comnmittees will oe supervised
from being too unwildly it
by an All IndiaAdvisory Body. To prevent the body from the DIC.SSI. The
representative each
is suggested that itmay comprise a from the northern/
AIl India Financial institutions and a zonal representative operational
southern/eastern and western zones. An organisational chart of the
machinery is given below: the state level
Advisory body at the all India level coordinating body at regional/district
(preferably asub-committee of IG) "lead" institutions at the
level.
organisational structure for
The "lead" institution in turn will have their Own
counseling/follow up,
EDP's including project leaders persons responsible for
 18 Entreprencursh1p Devclopment
an EDP cell in each circle.
ete. It may be mentioncd that SBI has
institutions could form s1nm1lar cells. "lea'"
The present stage of entrepreneurship development programme as afactor
and
contributing to the industrialisation of backward and other effective
poscful. The contribution of entrepreneurship development programmes is v
uneven among d1fferent regions and definite programmes need to be
out to bring about some degree of uniformity and upgradation. Before thes chalked
problems are tackled, some important issues need immediate attention for e.g.
(1) structure and composition of entrepreneurship development
programmes
(2) area of operations (3) fixing of priorities (4) follow up (5) spatial dispersal
of the entrepreneurship development programmes (6) training of trainees (7,
financing pattern.
Apart from these some of the operational problems experienced in the course
of implementing the entrepreneurship development programmes are listed be.
low:
1. Past experience has shown that the supporting aganeices/organisations
either tend to be slipshod in the first or are less interested in the third
phase which means that the programme fails to tap the entrepreneurial
potential of the area or trained entrepreneurs do not receive the support
and counseling which they need most.
2. Most of the existing support organisations meant for maintenance opera
tion are not for innovative functions. There is also an element of cyni
cism. A re-orientation in the attitude of supporting organisations is called
forth.
3. Post investment on the part of institutions as also trainees and wrong
selection of target groups centributed largely to the failure of a number of
entrepreneurship development programmes.
4. Experience revealed that entrepreneurial failures are mostly due to
incompetence and poor management.
5. I is also said that there is an inherent inability to
identify the needs of
instructions and differences of opinion prevailed amongst the trainees.
6. It is also stated that there is a low
institutional commitment. for local
support to the entrepreneurs. There is also avery low level of involve
ment in the marketing of the products of the units.
7. Non-availability of various inputs i.e. raw
structure support combined with poor follow materials, power etc. and inra
up by the primary monetay
institutions resulted in the failing the entrepreneurship developne
programmes.
8. It is also stated that there is
ill-planned training methodology inconsi
tency in the programme design, its content
focus of the programme is not clear. sequence and theme and ui
9. Training institution do not
have much concern for the objecu
identification and selection of entrepreneurs and the follow-Up
train1ng
 Entreprencur and Entrepreneurship 1

10. Some of the institutions are stilldebating whether to have proper identifi
cation and selection of entrepreneurs for preparting successtul entrepre
neurs.
11. Those involved in and concerned with the selection and follow-up activ1
ties have either limited manpower support or anarrow linkage with other
support agencies.
12. It is also said that there is not standard curricula even in terms of a broad
module being adopted by interventions.
13. A majority of institutions engaged in the entrepreneurship development
programmes are themselves not convinced of what they are doing as the
task is delegated by the government. As a result the social objective
aimed at is not achieved.
14. Perpetual ambiguity in the objective of entrepreneur development
programmes seems to have percolated to the grassroot level with a sig
nificant deterioration in terms of content and interest.
Entrepreneurs are not necessarily born they can be developed through edu
cation, training and experience. Entrepreneurs talent exists in every society and
in all sections of the society. In India socio-economic environment hinders the
emergence of entrepreneurial talent. In India tremendous talent exists if it is
properly harnessed, can help accelerate the pace of socio-economic develop
ment, balanced regional growth, self and gainfulemployment such as realisation
on the part of planners and policy formulators has resulted in the emergence of
Entrepreneurship Development programme, Development of entrepreneurs
means inculcating entrepreneurial skills required for setting up and operating
business units. Entrepreneurship Development is an organised and on going
process. It's basic purpose is to motivate person for entrepreneurial career.
Entrepreneurial development programme is a process which involves the
various steps.
1. In the pretraining phase selection of persons with the required potential in
terms of knowledge attitudes and motivation.
2. Creating of infrastructure for training programme such as NIESBD EDII.
3. Designing techniques for training
4. Selection and training process
5. Survey of environment
6. Various strategies to make entrepreneurship development more effective
Success lies in providing each of the development point in a integrated
manner. Any partial assistance either in the form of finance or training done
would not bring the desired result.
Various organisations are working to promote entrepreneurship develop
ment programme. National Institute for Entrepreneurship and small Business
Development (NIESBD) & EDIl co-ordinates activities of various institution or
agencies engaged in entrepreneurship development of particularly in smnall in
dustries. Industrial activities include effective training strategies and methodol
ogy, standardising model syllabi for training group.
20 Entreprencursh1p Devclopment
tntreprencursh development programmes conduct such programme
promoters traners and cntreprencurs which are not commonly undertaken by
other agcneies.
1.20 OBJECTIVESOF ENTREPRENEURSHIP DEVELOPMENT
PROGRAMMES

Following are the important objectives:

1. Analyse the environmental set up relating to small industry and smalu
business.
2. Selection of product and project.
3. Develop and strengthen enterpreneural qualities.
4. Understand procedure of small scale industries.
5. Develop wide vision about the business.
6. Develop passion for integrity and honesty.
7. Understand the need of entrepreneural discipline.
STRA TEGY FOR ENTREPRENEURSHIP DEVELOPMENT
Keeping this background in view, the following strategies for entrepreneurship
development in India may be suggested.
(i) Public entrepreneur should remain confined only to those industries and
sectors where private enterprises, individual or corporate is generally not
attracted. Existing public entrepreneur be improved through better man
agement and by putting relatively greater emphasis on research and de
velopment. There is need to streamline the r & d wing of public sector
enterprises.
i) All possible efforts made seriously for the dvelopment of an industrial
culture. It should be realised that the central core of entrepreneur is the
motive force, since by its very nature entrepreneurship implies positive
action and initiative. Motivated individuals with the right kind of combi
nation of abilities and attributes can pursue their goal with unremitting
courage and enthusiasm.
(1i) Their is need to develop management education and industrial training in
modern times, management education is being viewed as an effective
suppliment. Facilities should be provided on an increasing scale for send
ing talented young men and women to business schools abroad. New
industrial training congress well equipped may as well be established.
Quite often the entrepreneur transforms himself to a manager.
(iv) The development of backward regions/ares constitutes a new challeng
Programmes for their development be drawn up and should be effectively
implemented. Such programmes await new entrepreneurs whose techni-
cal expertise and managerial competence would bring about the desired
development and fulfill social needs.
 Entrepreneur and Entreprencurship 21

() Economic admin1stration by the state should be improved and made more

effective so that economic policies may fully achieve their objective in
the overall interest of the cconomy administration would go a long way in
ensuring and increasing the supply of entrepreneurship. Monopoly ben
ents to a tew big entrepreneur is an evil and must be checked. The
general policy of encouraging the small entrepreneur will go long way in
the activising and broadening the leadership potential. Improvement in
business climate by state through its well designed economic policies be
it fiscal, commerical, industrial or agricultural will benefit humble entre
preneur in changing society and would facilitate healthy development of
entrepreneurship.
(vi) Greater emphasis should be laid on search from within the emphasis be
put on research relating to proceses and enhacement of the value of
indigenous techniques. This would have an encouraging impact on entre
preneurship and technology at home.

LET US RECOLLECT

Entrepreneur is an economic agent. buys factors of production and convert it

into product with a view to sell it in the market for price, through which he
earns profit. The main characteristics of entrepreneurs are planning, organising,
decision-making, risk and uncertainty bearing besides these primary functions
he also performs special functions for under developed countries economy.
Entrepreneurs have specific qualities which they draw upon for their adven
ture into the Business. Some essential qualities are risk bearing, dream of
achievement, explore new opportunities, analytical ability, interpersonal skill
and positive self concepts.
Entrepreneur differ from a manger on various counts, the former is owner,
whereas later is a servant. Entrepreneur is rewarded with profit which is highly
uncertain. On the other hand manager gets salary as reward.
Entrepreneurship is a indivisible process flourishes when opportunities iden
tified and resources arranged for long term gains. "Entrepreneur is what an
entrepreneur does'. Entrepreneur has ability to create enterprise, assemble fac
tors of production, innovation of ideas, risk bearing capacity,gap filling func
tion decides entrepreneurship character.
Entrepreneurship flourishes in surrounding environmental conditions. They
are economic and non-economicfactors. Economic conditions are labour mar
ket. Capital non-economic factors are social,psychological and political action.
Entrepreneurship works in different ways in different economic situations
such as capitalism, socialism and mixed economy.
Motivation is a inner spirit that directs an individual to behave entrepreneurally
is explained by the behavioural scientists in the theories profounded by various
authors particularly Maslow and Mcdellands needs theory. Entrepreneurship
motivation is influenced by various internal and external factors also.
 Entreprencursh1p Development
inculcating
Entrepreneursh1p development programme means
1al skills
neur
required for setting up and opcrating business enterprises,
Development programme is conducted by various organ1sation. entreEnrpreenperuer
QUESTIONS

Section-A
1. Define entrepreneur.
2. Define entrepreneurship.
3. Distinguish between entrepreneur and manager.
What are the circumstances that led to emergence of
4.
developed countries.
planning in under.
5. Who is a Drone entrepreneur.
6. What is meant by motive
7. What is meant by motivation
8. Name any four external factors which influence motive
9. What is meant by EDP
Section-B

1. Distinguish between manager and entrepreneur. (B.U. April 2001)

2. Describe the type of entrepreneur. (M.Com. Madras Univ., 1988
3. Write short note on the following:
a. cognitive
b. empirical
c. immitative
d. rabian.
4. Explain concept of entrepreneur.
5. Write note an motivation process
6. Ambition is the level of all motives Do you
7. Write note on EDP
agree

Section-C
1. An entrepreneur is born and not made discuss. (Qualities)
(B.U. April 2001)
2. As an entrepreneur how do you scan the business
environment.
(B.U. April 2001)
3. Explain main functions performed by the entrepreneur.
(M.Com. Madras Univ., 1990)
4. Explain Maslows theory of entrepreneurship
5. Explain Mcdellands theory of entrepreneurship
6. Explain how motivation influence entrepreneurship? Elucidate