SYLLABUUS

ANNA UNIVERSITY, CHENNAI

FOR B.E.MECHANICAL &ECE BRANCHES

ENTREPRENEURSHIP DEVELOPMENT

UNIT I: ENTREPRENEURSHIP 9
Entrepreneur - Types of Entrepreneurs - Difference between

Entrepreneur and Intrapreneur Entrepreneurship in Economic

Growth, Factors Affecting Entrepreneurial Growth.

UNIT II: MOTIVATION

Major Motives Influencing an Entrepreneur - Achievement
Motivation Training, Self Rating, Business Games, Thematic
Apperception Test - Stress Management, Entrepreneurship

Development Programs - Need, Objectives.

UNIT III: BUSINESS

Small Enterprises Definition, Classification Characteristics,
Ownership Structures - Project Formulation Steps involved in
setting up a Business - identifying, selecting a Good Business

opportunity, Market Survey and Research, Techno Economic

Feasibility Assessment - Preparation of Preliminary Project

Reports- Project Appraisal - Sources of Information

Classification of Needs and Agencies.
 ACCOUNTING 9
UNIT IV: FINANCING AND

Need Sources of Finance, Loans, Capital Structure,

Term

Financial Institution, Management of working Capital,

Costing,
Break Even Analysis, Taxation Income Tax, Excise Duty
Sales Tax.

UNIT V: SUPPORT TO ENTREPRENEURS 9

Sickness in small Business Concept, Magnitude, Causes and

Incubators
Consequences, Corrective Measures Business
Government Policy for Small Scale Enterprises
Growth
Joint
Strategies in small industry Expansion, Diversification,
-

Venture, Merger and Sub Contracting.

TOTAL: 45 PERIODS
 CONTENTS
UNIT-I
ENTREPRENEURSHIP 1.1 1.52

1.1. Introduction... .1.1

1.2. Meaning.. 1.1

1.3. Definition... *****. s*** . . 1.2

1.4. Evolution of the concept of Entrepreneur. . . 1.2

1.5. Who is an Entrepreneur?... ...1.4

1.6. Characteristics of an Entrepreneur. s1.5S

1.7. Functions of an Entrepreneur . . . .1.7

1.8. Distinction between an Entrepreneur and a Manager

19

1.9. Types/ Classification of Entrepreneurs 1.11

1.10. Intrapreneur... ... 1.16

1.10.1. Characteristic of Intrepreneur ... ... 1.17

1.10.2. Difference between Entrepreneurs and Intrapreneurs

.. 1.18

1.11. Entrepreneurship... 1.19

C.2 Entrepreneurship Development

1.11.1. Relationship between Entrepreneur and

Entrepreneurship ... ... 1.19

1.11.2. Function of Entrepreneurship... ... 1.20

1.11.3. Nature and Characteristics of Entrepreneurship.1.21

1.11.4. Schumpeter views on Entrepreneurship..... 1.23

1.11.5. Process Steps of Entrepreneurship.. ... 1.25

1.11.6. Innovation and Entrepreneurship.. ... 1.27

1.11.7. Barriers to Entrepreneurship ... .1.28

1.12. Qualities of Successful Entrepreneurs... 1.31

1.13. Role of Entrepreneurship in Economic Growth.... 1.332

1.14. Youth Entrepreneurship.. *so 1.36

1.15. Factors Affecting Entrepreneurial Growth.. 1 . 3 7

1.16. Two Marks Question and Answers.. . 1.45

1.17. Review Questions.. ee*******eeceeeee.... 1.51

UNIT I1
MOTIVATION 2.1 2.53

2.1. Introduction..
2.1

2.1.1. Motivation.. ...2.1

2.1.2. Definition.
...2.2
Contents C3
2.1.3. Nature of Motivation... ... 2.2

2.1.4. Motivational Process... . . . 2.5

2.1.5. Theories of Motivation. .. 2.6

2.2. Major Motives Influencing an Entrepreneur... 2.15

2.3. Self Rating. 2.19

2.3.1. Self Rating Questionnaire. ....2.19

2.4. Business Game.. 2.22

2.4.1. Model of Business Game. .2.22

2.5. Thematie Appreciation Test. . 2.24

2.5.1. Thematic Appreciation Test (TAT) Exercises... 2.25

2.5.2. How to Write a Story.... .2.26

2.6. Stress Management......aeeeessssee*ooeeseeeesne**. ...2.28

e******

2.6.1. Definition.. ....2.29

2.6.2. Symptoms of Stress /Causes of Stress. .2.29

2.6.3. Coping Strategies for Stress/Technic

for Stress Management ... .2.31

2.7. Entrepreneurship Development Programmes (EDPs)

..2.34

2.7.1. Objectives of EDPs. ... 2.35

2.7.2. The Indian EDP Model.. .2.36

2.7.3. Phases/Process Methods of EDP... ... 2.37

C Entrepreneurship Development

2.7.4. Problems of EDPs. ..2.40

2.7.5. Importance/Need of Entrepreneurship Development

..2.41
Programme (EDP)....
2.8. Two Marks Question and Answers... ... 2.44

2.9. Review Questions... .2.51

UNIT II
BUSINESS 3.1 3.98

3.1. Small Enterprises... . . 3.1

3.2. Definitions of Micro, Small & Medium Enterprises. 3.1

3.3. Classification of SSI... . 3.4

3.4. Characteristics of SSI... .3.5

*****

3.4.1. Objectives of Small Enterprises.. ... 3.6

3.4.2. Importance of SSI... ...3.6

3.4.3. Advantages of SSI.. ..3.7

3.4.4. Disadvantages of SSI.. .3.8

3.4.5. Diference between Small-Scale Industries and

Large Industries. ..3.8

3.5. Functional risks faced by a small business **.. 3.9

3.6. Ownership Structure. 3.12

Contents
C.5
3.6.1. Sole Proprietorship (Individual). 3.13

3.6.2. Partnership Firm... .3.15

3.6.3. Company... .3.20

3.6.4. Co-operative... ... 3.28

3.7. Selection of An Appropriate Form of Ownership

Structure.. .3.30
3.8. Project Report.. 3.32

3.8.1. Definition. ..3.32

3.8.2. Significance of Project Report. .... 3.33

3.8.3. Contents of a Project Report.. .. 3.34

3.8.4. Elements of Project Formulation. .3.36

3.9. Steps for Starting up a Business.. .3.44

3.9.1. Steps to be taken .... ... 3.44

3.10. Market Survey and Research.. 3.50

3.10.1. Steps in Market Survey.. ... 3.50

3.10.2. Limitation of Marketing Research Survey.3.56

3.11. Techno - Economic Feasibility Assessment . 3.56

3.11.1. Meaning . ...3.57

3.11.2. Feasibility Report. ... 3.57

3.11.3. Contents of a Feasibility Report... .3.57

C.6 Entrepreneurship Development
3.11.4. Factors that have to be considered while preparing
a Feasibility Report. 3.58

3.11.5. General proforma of a feasibility report.. 3.61

3.12. Preparation of Preliminary Project Report..365

3.13. Project Appraisal.. . 3.66

3.14. Stages of the Appraisal Process.. 3.67

3.14.1. Methods/Techniques of Project Appraisal..3.72

3.15. Source of Information ... 77

3.16. Classification of needs and Agencies.. . 3.78

3.16.1. Agencies of Project Formulation. 3.80

3.17. Two Marks Question and Answers.. 3.80

3.18. Review Questions.. ... 3.96

UNIT IV
FINANCING AND ACCOUNTING 4.1 4.128

4.1. Financing... ..4.1

4.1.1. Need for Financial Planning . . 4.1

4.1.2. Classification of Financial Need.. 4.3

4.2. Source of Finance.... 4.5

Contents
C.7
4.2.1. Factors affecting Choice of Source
of Finance...4.13
4.3. Term Loan... ...4.14

4.3.1. Characteristic of Term Loans.... ...4.15

4.3.2. Features of Term Loan.... ...4.15

4.3.3. Benefits of Term Loans.. ...4.15

4.3.4. Types of Term Loan.. ...4.17

4.4. Capital Structure..
..4.19

4.4.1. Capital Structure and Financial Structure.. ..4.19

4.4.2. Features of an Appropriate Capital Stucture ...4.20

4.4.3. Factors Determining Capital Structure...
..4.21
4.4.4. Capital Structure Theories . .
....4.27

4.5. Financial Institutions... 4.33

4.5.1. Classification of Financial Institutions ... 4.34

4.6. Management of Working Capital.. *** 4.48

4.6.1. Concepts of Working Capital. 4.48

4.6.2. Classifications of Working Capital... 4.50

4.6.3. Adequate Working Capital... .4.52

4.6.4. Excessive and Inadequate Working Capital....4.54

4.6.5. Need for Working Capital... ..4.57
C.8 Entrepreneurship Development

4.6.6. Determinants of Working Capital.. 4.59

4.64
4.6.7. Measuring of Working Capital.
4.6.8. Source of Working Capital . ..4.66

.4.71
4.7. Costing...

4.7.1. Cost.. ..4.71

4.7.2. Costing.. ..4.72

4.7.3. Cost Accounting... ..4.73

4.7.4. Essential of a Good Costing System. ..4.73

4.7.5. Classification of Costs. .4.74

4.7.6. Costing Methods and Techniques... ....,4.83

4.8. Break-Even Analysis.. 4.90

4.8.1. Assumption of Break-Even Point . . .4.92

4.8.2. Margin of Safety. .4.92

4.8.3. Limitation of Breakeven Point... .4.92

4.9. Network Analysis Techniques of PERT/CPM.

4.93

4.9.1. Concept of Nework Analysis... .4.94

.4.97
4.9.2. Network...

4.9.3. PERT... 4.101

4.9.4. CPM (Critical Path Method).. ..4.103

 Contents C
4.9.5. Difference between PERT and CPM ... ..4.105

4.10. Taxation..
eee*********e*** 4.107
4.10.1. Types of Taxation... ...4.107

4.11. Kinds of Excise Duties.. ...4.112

4.12. Packages and Incentives available to SSI Units...4.113

4.13. Types of Sales Tax. 4.115

4.14. Two Mark Question and Answers.. ..4.116

4.15. Review Questions. ..4.126

UNIT V
SUPPORT TO ENTREPRENEURS 5.1 5.87

5.1. Small Scale Industry. * s 5.1

5.1.1. Types of Small Scale Industry... 5.1

5.1.2. Characteristics ofSSI.. .5.1

5.1.3. Classification of SSI. ..5.2

5.1.4. Major Role of Small Enterprises in Economic

Development... ..5.3

5.1.5. Problems of SSI. 5.4

5.2. Industrial Sickness... **. 5.5

2
C.10 Entrepreneurship Development
5.2.1. Definition.. .5.5

5.2.2. Types of Sick Companies ... .5.6

S.2.3. Causes of Small Scale Industrial Sicknes... ... 5.7

5.3. Consequences of Small Scale Industries Sicknes..5.9

5.4. Corrective Measure / Remedieal Measures for

Sickness... 5.10

5.5. Magnitude of Sickness.. ****eoceeeeeeosoesceee.5.14

5.5.1. Industry Wise Study of Sickness.. ..5.17

5.5.2. Sickness in SSI Sector... ... 5.17

5.5.3. Sick Industries in India 2015.. .5.18

5.5.4. State Wise Study of Industrial Sickness... .5.20

5.6. Government Policies for Development and

Promotion of Small Scale Enterprises ... .5.25

5.7. Important Features of this Policy.. 5.335

5.8. Contemporary Policy measures for Small Scale

and Cottage Industries.. **** .5.36

5.9. Growth Strategies in Small Industry. 5.40

5.9.1. Objectives of Growth.. .5.41

5.9.2. Stages of Growth... . . S.41

5.9.3. Types of Growth Strategies... .. 5.41

Contents C.11
5.9.4. Types of Joint Ventures . ... 5:49

5.9.5. Reasons for Joint Ventures .. 5.50

5.10. Joint Ventures Vs Partnership. ... 5.52

5.10.1. Advantages and Disadvantages of Joint Venture 5.53

5.10.2. Choosing the Right Joint Venture Partner..5.54

5.10.3. Create a Joint Venture Agreement.. ...5.56

5.10.4. Ending a Joint Venture.. .5.56

5.11. Two Marks Question and Answers.. ..5.74

5.12. Review Questions.. 5.85

Solved Anna University Question Papers. SQ.1- sQ.63

 UNIT-I
ENTREPRENEURSHIP
1.1. INTRODUCTION

Entrepreneur is a person who sets up a business, taking on

financial link in the hope of profit.
Entrepreneur plays a vital role in the economic development
of a country.
Economic development of a country refers to steady growth
in the income levels. This growth mainly depends on its
entrepreneur.
The concept of entrepreneurship has a wide range of
meanings. On the one extreme, an entrepreneur is a person of
very high aptitude who explorers change, possessing
characteristics found in only a very small part of the population.
On the other extreme, anyone who wants to work for himself
or herself is considered to be an entrepreneur.
Entrepreneurship is a dynamic activity which helps the
entrepreneur to bring changes in the process of production,
innovation in production, new stage of materials, creator of
market etc., It is a mental attitude to foreseen risk and
uncertainty with a view to achieve certain strong motive.

1.2. MEANING

Entreneurship means the capacity and willingness to

develop, organize and manage a business venture along with
any of its risks in order to make a profit. The most obvious
example of entreneurship is the starting of new business.
 Entreprene urship Development
1.2
1.3. DEFINITION

Peter F. Dnucker defines "An entrepreneur is the one who

searches for change, responds to it and exploit it as
an
always
opportunity". Innovation is the specific tool of entrepreneur,
exploit change as an opportunity for
a
the means by which he
different business of service.
Robert D.Hisrich believed that an entrepreneur is the person

who will establish a successful new business venture. Besides.

he must also be a visionary leader who has great dreams.

1.4. EVOLUTION OF THE CONCEPT OF ENTREPRENEUR

The word "Entrepreneur" is derived from the French word

entrepredre'. Which means "to undertake'
and
In the early 16" century the Frenchmen who organized
led military expeditions are referred as 'Entrepreneurs.
After 1700, the term was applied to Civil Engineering like
the construction of roads, bridges, harbour and buildings.
In the early 18th century. French economist Richard
Cantillon used the term entrepreneur to business. Since that the
world entrepreneur means that one who takes the risk oí
starting a new organization or introducing a new idea. product

or service to society.
In 1797. Beaudeau says that entrepreneur is a person bearing
risks, planning, supervising, organizing and ovwning.

Jean Baptise Say (1803) an aristocratic industrialist. with his

of
unpleasant practical experiences developed the concept
entrepreneur a little further which survived for almost two
Entrepreneurship 1.3
centuries. His definition associates entrepreneur with the
functions ofco-ordination, organization and supervision.
According to him, an entrepreneur is the one who combines
the land of one, the labour of another and capital of yet another
and their produces, a product. By selling the product in the
market, he/she pays interest on capital rent on land, and wages
to labourers and what remains in his / her profit.
Thus, Say has made a clean definition between the role of
the capitalist as a financier and the entrepreneur as an
organizer. He further elaborates that in the course of
undertaking a number of complex operations like obstacles to
be surmounted, anxieties to be suppressed. Misfortunes to be
repaired and expedients to be devised three more implicit
factor. They are
Moral qualities for the work consisting of judgement.
Effective super intendance and administration to
overcome uncertainty of profits, and

Command on sufficient capital resources.

According to Joseph Sehumepter (1934), "An entrepreneur
is an individual who introduces something new in the economy,
a method or production not yet tested by experience in the
branch of manufacture concerned, a product with which

consumers are not yet familiar, a new source of raw material or

of new market and the like".

'Entrepreneur' is defined in a variety of

Thus, the term
varies from country to
ways. The concept of entrepreneur
It also varies
country as well as from period to period.
 1.4 Entrepreneurship Development

according to the level of economic development and the

perception of various people.
Sociologists, Psychologists, Economists, and management
people have looked at it from their point of view.
The history of entrepreneur shows that a farmer or a dealer
were regarded as entrepreneur in earlier days. It is now changed
to innovators and contributors to the economic growth. Earlier,
all that was required for a person was to start his own business
and be his own boss.

1.5. WHO IS AN ENTREPRENEUR?

Oxford English Dictionary (1933) defines entrepreneur as

one who undertakes an enterprise, especially a contractor
between capital and labour".
Undertaking of an enterprise involves combining capital and
labour for the purpose of production.
According to Evans "An entrepreneur is a person who
initiates, organizes, manages and controls the affairs of a
business until that combines the factors of production to
supply
goods and services, whether the business partners to
agriculture, industry, trade (or) profession.
The term has been defined in various ways
'entrepreneur'
such as, an innovator, a risk taker, a resource assembler and so
on.

Examples of Entrepreneurs

Bill Gates, founder of Microsoft

Steve Jobs, Co-founder of Apple computers

 Entrepreneurship 1.5
Mark Zucker Berg, the founder
of Face book
Ardeshit Godrej, Pirosha Burjorji Godrej, Adi Godrej
founder of Godrej group
Azim Premji, founder of
Wipro
1.6. CHARACTERISTICS OF AN ENTREPRENEUR
An entrepreneur is an individual, who has the following
characteristics.

Risk Bearer

Hard work
Clear objective
Entrepreneur Success and Achievement

Independence
Self confidence
Innovative

Fig. 1.1. Characteristics of an Entrepreneur

1. Risk Bearer

Entrepreneurs accept risk. They select a moderate risk

situation, rather than gambling (or) avoiding risk. They
understand and manage risk.

2. Hard work

Willingness to work hard distinguishes a successful

entrepreneur from unsuccessful one. The entrepreneur with his
1.6 Entrepreneurship Development
tedious, sweat filled hour and perseverance revive their
business even from the verge of failure.
In a nutshell, most of the successful entrepreneurs work hard
endlessly, especially in the beginning and it becomes their
routine throughout.

3. Clear objectives
An entrepreneur should have a clear objective as to the exact
nature of the business, the nature of the goods to be produced
and subsidiary activities to be undertaken.
A successful entrepreneur may have the objective to
establish the product, the make profit (or) to render social

service.

4. Success and Achievement

The entrepreneurs aim to achieve high goals in business; this
achievement motive strengthen them to remove the obstacles,

repair misopportunities and give desire expedients to them to

run a successful business.

5. Independence
The common characteristics of the successtful entrepreneurs
are that they do not like to be guided by others and to follow
their routines.
They like to be independent in the matters of their business.
They always want to make their own decision.

6 Self-confidence

Entreprencurs direct their abilities towards the

accomplishment of goals with the help of their strength and
weakness.
Entrepreneurship 1.7
7. Innovative

An entrepreneur is meant for innovation. In the present

world, the taste of the customer keeps on changing. So the
entrepreneurs initiate activities to produce goods which can
satisfy the customers changing demands for the products.

1.7. FUNCTIONS OF AN ENTREPRENEUR

The functions of an entrepreneur can be summarized as

follows.

(a) Conception of an idea

An entrepreneur is the person with a creative mind who can
identify business opportunities and take steps for the
conversion of ideas into successful business ventures, and give
them a concrete shape.
(b) Promotion
It is felt that generally an entrepreneur undertakes the risk of
setting up a small enterprise as a sole proprietor. But, now-a-
days many entrepreneurs have assumed the role of promoters of

large companies.
In fact, promotion may be undertaken for setting up a new
business, small or large expansion of an existing business or for

combining two or more business firms.

As a promoter, An entrepreneur has to conduct feasibility
studies, decide to the form of organization, assemble the
required funds and people, and give a concrete shape to the
business proposition.
1.8 Entrepreneurship Developmen
(c) Innovation
An entrepreneur is an innovator who tries to develop new
technologies, products and markets. The entrepreneur uses his
creative abilities to do new things and exploit opportunities in

the market.

(d) Bearer of risks and uncertainty

Starting of a new business venture involves good amount of

risk and uncertainty. To start with, it is the entrepreneur who
assumes risks and is prepared for the losses that may arise
because of unforeseen situations in future.

(e) Arranging necessary capital

Arranging funds is one of the biggest hurdles in setting up a
new entrepreneur. It is he who has to provide the initial capital
(otherwise known as 'risk capital' or 'seed capital') for starting
the ventures and then make the necessary arrangements for
raising funds required to carry on and expand the business.

G) Staffing8
An entrepreneur has to design the organizational structure
and recruit suitable persons for various positions.
Kilby has enumerated about 13 functions of an entrepreneur,
which includes some of the management functions also.

These functions are as follows:

1. Searching market opportunities

22. Obtaining the available resources

3 Purchasing inputs
Entrepreneurship 1.9
4 Marketing of the products and overcoming competition
5. Dealing on getting licenses and other formalities

6. Recruitment of persons
7. Managing customer and supplier relations
8. Raising necessary funds

9. Managing production

10. Acquiring and overseeing assembly of the factory

11. Industrial Engineering

12. Upgrading process and product quality
13. Adopting new production techniques and methods

1.8. DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER

S.No. Nature An Entrepreneur A Manager

1. Goal An entrepreneur The main aim

Management | starts a venture by of a manager is
setting up a new to render his
enterprise for his service in an

personal Enterprise
gratification. already set up
by someone.

2 Status An Entrepreneur is A manager is

the owner of an the employee
Enterprise of an enterprise
owned by the
entrepreneur.
1.10 Entrepreeurship Development

S.No. Nature An Entrepreneur A Manager

3. Risk An entrepreneur A manager

bears all risks and being a
employer does
uncertainty
involved in the not take any
enterprise. risk involved
in the
enterprise.
4. Rewards An Entrepreneur A manager
for his risk bearing receives salary
role receives profit. as reward for
The profit of an service
entrepreneur is rendered which
uncertain and is fixed and
irregular. regular.
5. Skills An entrepreneur A manager
needs creative depends more
thinking and on human
creative innovativerelations &
ability among other conceptual
skills. abilities.
6. Innovatioon As an innovator as A manager
change agent he executes the
introduces goods plans of the
and service to meet entrepreneur.
changing needs of Thus a
the customer. manager
translates the
ideas into
practices.
Entrepreneurship L.11
1.9. TYPES/ CLASSIFICATION OF ENTREPRENEURS

Following are the types of entreprencurs on the basis of

common characteristics of an
Entrepreneur.

Types of Entrepreneurs

According to According to On the On the basis

Clarence Danh H.Eole basis of of Investment
ownership

1. Innovative1. Empirical F1. Private F1. Small scale

- 2. Imitature
F2. Rational F2. Public F2. Large scale

3. Fabine F3. Cognitive

4. Drone
Fig. 1.2. Type/ Classification of entrepreneur

I. According to Clarence Danh

In the initial stages of economic development, entrepreneurs

tend to have less initiative and drive. As development proceeds,
they become more innovative and enthusiastic. Business
environment becomes healthy and developed when
entrepreneurs are innovative.

1. Innovative Entrepreneurs

Innovative entrepreneurs are characterized by aggressive of

information and the analysis of result derived from sound
combination of factors. An innovating entrepreneur sees the
opportunity for introducing a new technique or a new product
or a new market.
1.12 Entrepreneurship Development
Among the different types of entrepreneur, the innovat1ing
entrepreneur is the most vigorous type of entrepreneur.
Innovating entrepreneur is very commonly found in developed
countries.
Innovating entrepreneur plays the key role in the rise of
modern capitalism, through his/her enterprising spirit, hope of
money making, ability to recognize and exploit opportunities,
etc.
Eg. Bill Gates, Nikola Tesla, Steve Jobs

2. Imitative Entrepreneurs

Imitative entrepreneurs are characterized by readiness to

adopt successful innovations created by innovative
entrepreneurs. This types of entrepreneurs are revolutionary
entrepreneur with the different that instead of innovating the
changes themselves, they just imitate the technology and
techniques innovated by others. These entrepreneurs are most
suitable for developing countries because such countries prefer
to imitate the technology, knowledge and skill already available
in more advanced countries.

For example, Cochin Shipyard for imitative entrepreneur.

The shipyard has been constructed using the innovative
technology provided by the Mitrabishi Heavy industries Ltd of

Japan.
The importance of these entrepreneurs who exploit
possibilities as they present themselves, merely on a small
scale, must not be under-estimated. In the first place, such
adaptation requires no mean ability. It often involves what has
 Entrepreneurship 1.13
aptly been called subjective innovation that is the ability to do

things which have not been done before by he particular

industrialist, even though, unknown to him, the problem may
have been solved in the same way by others.

3. Fabian Entrepreneurs

Entrepreneurs of this types are very cautious and skeptical

while practicing any change. They have neither the will to
introduce new changes nor the desire to adopt new methods
innovated by the most enterprising entrepreneurs. Such
entrepreneur are shy and lazy.
Their dealings are determined by custom, religion, tradition
and past practices. They are not much interested in taking risk
and try to follow the footsteps of their predecessors.

4. Drone Entrepreneurs

Drone entrepreneurship is characterized by a refusal to adopt

new opportunities to make changes in production methods.
Such entrepreneurs may even suffer losses but they do not
make changes in production methods. They are laggads as they
continue to operate in their traditional way and resist changes.
When their product loss marketability and their operation
becomes uneconomical they are pushed out of the market. They
are conventional in the sense that they stick to conventional
products and idea.
Eg. Handloom sector, Power loom sector, Weaving and
spinning Sector.

3
1.14 Entrepreneurship Development
. H-Cole Type of Entrepreneur

1. Empirical Entrepreneur
The Empirical Entrepreneur hardly introduces anything
revolutionary and follows the principle of rule of thumb.

2. Rational Entrepreneur
The Rational Entrepreneur is well informed about the

general economic conditions and introduces changes that look

more revolutionary.

3. Cognitive Entrepreneur
The Cognitive Entrepreneur is well informed, draws upon

the advice and service of experts and introduces changes that

reflect complete break from the existing scheme of things.

I. On the basis of ownership

1. Private Entrepreneur

by profit and would not

Private Entrepreneur is motivated
enter those sectors of the economy in which prospects of

monetary rewards are not very bright.

2. Public Entrepreneur
will take the
In the developing countries, government
the lack of sufticient
initiative to share enterprises due to
private entrepreneur.

For example: Electricity generation.

Entrepreneurship 1.15
IV. On the basis of Investment

1. Small scale

Small scale classification is especially popular in the under

developed countries. Small entrepreneurs do not posses the
necessary talents and resources to initiate large scale production
and do not introduce revolutionary technological changes.

2. Large Scale

In the developed countries, most of entrepreneurs deal with

large scale enterprise. They posses the financial and necessary
enterprise to initiate and introduce new technical changes. The
result is that the developed countries are able to sustain and
develop a high level of technical progress

In recent years, some new type of entrepreneurs are

classified as follows:

1. Solo operators
2. Active partners

3. Challengers
4.
4. Inheritance

1. Solo operators

Solo operators prefer to setup their business individually.

They introduce their own capital, intellect and business acumen
to run the enterprise successfully. They operate their business
mainly in the form of proprietorship type of concern.
1.16 Entrepreneurship Development
2. Active Partners

Entrepreneurs of this type jointly put their efforts to build

enterprise pooling together their own resources. They actively
business
participate in managing the daily routine of the
concern. As such, the business houses or the firms
which are
in their
managed by the active partners become more successful
operation.

3. Challengers

Entrepreneurs of this type take challenges to establish

on
business ventures as mark of achievement. They keep
odds and
improving their standard and face boldly the
adversities that come in their way. They use their business
and
acumen and talent to convert the odds into opportunities

thereby making profit.

4. Inheritance
and
These entrepreneurs believe that business is the part

parcel of life. Entrepreneur by inheritance (i.e.) family

business, carry out their family business from one generation to
another.

1.10. INTRAPRENEUR

The term 'intrapreneur' was coined in America in the late

1970's. A new entrepreneur comes from a large industrial
organization is called intrapreneurs.
individual or a
Intrapreneurship is the process by which an
within an existing organization createa
group of employees
or innovation.
new venture or instigate change
Entrepreneurship
1.17
Examples
well known examples of
One of the most

is the group at
works group
'Skunk
intrapreneurship
named after
lockhead Martin. The group was originally
a references in a cartoon and was first brought together
Because the
in 1943, to build the P-80 fighter jet.
project was to eventually become a part of the war

internally protected and

effort. The project was

secretive.
Intel also has a tradition of implementing
intrapreneusly.
Google is also known to be intrapreneur friendly,
20% of their
allowing their employees to spend upto
time to pursue project of their choice.

1.10.1. CHARACTERISTICS OF INTRAPRENEUR

(a) Personal skills

A visionary
Perseverance
Creativity and ability to think
Dynamic thought
(b) External (to the organization) skills
Understanding of external environment
(c) Interpersonal skills and experience
Ready capable to challenge the internal and external
factor
Experience at managing cross functional groups
1.18 Entrepreneurship Development
Ability to balance multiple divergent skills sets and
responsibilities

1.10.2. DiFFERENCE BETWEEN ENTREPRENEURS AND INTRAPRENEURS

S.No. Difference Entrepreneur Intrapreneur

1. Independence An entrepreneur An
is an Intrapreneur is

independent a semi-
businessman. independent
businessman.

2. Risk Bearer An entrepreneur An

bears the risk intrapreneur
fully does not bear
the risk of the
business that
he develops
and operates

3. Raising funds An entrepreneur In this case,

himself raises the
funds required intrapreneur
for the business will not raise
fund by
himself.

An entrepreneur An
4. Operation
operates from intrapreneur
outside. operates within
the
organization
itself.
Entrepreneurship L.19
1.11. ENTREPRENEURSHIP

In the words of Stevenson and others Entrepreneurship is the

process of creating value by bringing together a unique package
of resources to exploit an opportunity.
According to A.H. Cole, "Entrepreneurship is the purposeful
activities of an individual or a group of associated individuals
undertaken to initiate, maintain or organize a profit oriented
business unit for the production or distribution of economic
goods and services."

All activities undertaken by an entrepreneur to bring a

business unit into existence are collectively known as
entrepreneurship. It is the process of changing ideas into
commercial opportunities and creating values.
In short, entrepreneurship is the process of creating a
business enterprise.
According to Diamond, "Entrepreneurship is equivalent to
enterprise which involves the willingness to assume risks in
undertaking an economic activity particularly a new one. It may
involve an innovation but not necessarily so'".

1.11.1. RELATIONSHIP BETWEEN ENTREPRENEUR AND

ENTREPRENEURSHIP

S.No. Entrepreneur Entrepreneurship

1. Person Process

2. Organiser Organisation
3. Innovator Innovation
4. Risk Bearer Risk Bearing
1.20 Entrepreneurship Development
S.No. Entrepreneur Entrepreneurship
5. Decision Maker Decision Making
6. Motivator Motivation
7. Creator Creation
8. Visualiser Vision
9. Leader Leadership
10. Imitator Imitation
11. Administrator Administration
1.11.2. FUNCTION OF ENTREPRENEURSHIP

(a) Primary functions

Planning
Organizing
Decision Making
Managing
Innovating
RiskRisk bearing
(6) Secondary functions
Diversification of production
Expansion of the enterprise
Maintaining cordial relationship with employer and
employee.
Tackling labour problem
Co-ordinating and communicating with third parties
Entrepreneurship 1.21
(c) Other functions
Managing of scarce resources
Dealing with public bureaucracy
*Identifying parallel opportunities
Building strong customer relations
1.11.3. NATURE AND CHARACTERISTICS OF ENTREPRENEURSHIP

The nature and characteristics of entrepreneurship are as

follows.
1. Innovative function

Entrepreneurship is a creative activity. Entrepreneur role

involves doing things in a new and better way. A businessman,
who simply behaves in traditional ways, cannot be an
entrepreneur.
An entrepreneur has to make decisions under uncertainty
and to take actions with unknown and unpredictable results.
An entrepreneur is not simply an innovator. He also assumes
risk and organizes human efforts.
2. Organising function

An
An entrepreneur brings together various factors of

production for an economic use. He coordinates and controls

the factors of production efforts of the persons engaged in his
enterprise.
3. A function of group level pattern

Entrepreneur characteristics are found in clusters, which

may qualify themselves as entrepreneurial groups.
1.22 Entrepreneurship Development
Entrepreneurial activity is generated by the particular family
background experience as a member of certain groups and as

reflection of general values.

Young conducted the Thematic Appreciation Test (TAT) on

a group of entrepreneurs.
A group becomes reactive when the following three

conditions coincide.
when a group overcomes low status recognition
when accepts to access important social networks and

when the group has better institutional resources than

other groups in the society at the same level.

4. Managerial and Leadership functions

An individual entrepreneur should have additional

personality skills such as leadership and managerial skill.

Both skills are predominant orientation in the direction of
productivity, working relation and creative integration along
with desire to make profit.

Entrepreneurship demands tactful, handling of risk and

uncertainties because new commodity and its acceptability is
uncertain.

He must have the ability to lead and manage.

5. Gap filling function

The most significant feature of entrepreneurship is gap
the gap to make
filling. It is the job of the entrepreneur to fill
or
Entrepreneurship 1.23
up the deficiencies which always exist in the knowledge above
the production function.
Some inputs like motivation and leadership are vague and
their output is indeterminate. An entrepreneur has to Marshale
all the inputs to realise the final product.
He has to fill the gap between human needs and available
products and services.

Innovation Organizing9
Function Function

Nature &
characteristics of
Entrepreneurship

Gap filling Managerial&

Function Leadership
Function
A function of
group level
pattern

Fig. 1.3. Nature and characteristics of Entrepreneurship

1.11.4. SCHUMPETER VIEWS ON ENTREPRENEURSHIP

According to Foreph Schumpeter, entrepreneurship is

essentially a creative activity.
An entrepreneur is the one who is innovative i.e., carries out
new combination (or) enterprise.
He foresees the potentially profitable opportunity and try to
exploit it.
Innovation involves problem solving and the entrepreneur is
a problem solver.
1.24 Entrepreneurship Development
Innovation may occur in the following ways.
( Introduction of new product
(i) Introduction of a new method of production
(ii) Opening of a new market
(iv) Acquiring new sources of raw material supply
Schumpeter makes a distinction between an innovator and
inventor.

(a) Innovator
An innovator is the one who utilizes or applies invention and
discoveries in order to make new combination and thus
produces newer and better goods which yield both satisfaction
and profits.

(b) Inventor
An inventor discovers new methods and new materials.
Schumpeter stressed the role of the entrepreneurial function
in economic development.
Development requires basic changes and entrepreneur carry
out the required changes. Entrepreneurial growth brings
economic development.
Schumpeter innovating entrepreneur represents the most
vigorous type of enterprise. But this type of entrepreneur is a
rare species in developing countries.
The type of entrepreneur who exploits possibilities as they
present himself within a limited time horizon and mostly on a
small scale can only produce limited result.
Society must produce innovation with a long-time horizon
and who are capable of achieving substantial transformation.
Entrepreneurship 1.25
Schumpeter entrepreneur is a large scale businessman who
creates something new. But an entrepreneur cannot have large
scale operations from the very beginning.
In of under developed countries people who can adapt
case

the existing technology are needed. Such countries need more

imitation than innovation'.
They have to launch on small scale due to imperfect market,
shortage of capital and scarcity of skilled labour.
An individual is said to be an entrepreneur when carries out
new combination and ceases to be an entrepreneur the moment
he is rather down to run the established business.

1.11.5. PROCESS ISTEPS OF ENTREPRENEURSHIP

Identifying an opportunity

Establishing a vision

Persuading others

Gathering resources

Create new venture

Changing/ Adapting with time

Fig. 1.4. Process of Entrepreneurship
1.26 Entrepreneurship Development
(a) Identify an opportunity
The entrepreneurs sense opportunities and visualizesa
market since they are creative and open to new ideas and seek
challenges. They look of needs, wants, problems and challenges
that are not met or dealt effectively. Since their ideas are

innovative, they gain first moves advantage which provide

product identification and higher creditability in the market.

(b) Establishing a vision

Enterpreneur involves generation of ideas using past
experience and creativity to develop new and innovative ways
to "solve a problem', or satisfy a need. Out of many ideas the
most feasible and profitable are chosen and narrowed to one
best idea.
Entrepreneur evaluates different opportunities and the
business environment to asses the:

()Real and perceived value ofthe product/ service.

(i) Risks and rewards associated with the project
(ii) Differential advantage in its competitive environment.

(c) Persuading others

Entrepreneur forms a foundations team which consists of a

group of individuals who work together to turn his vision into
reality. They may be partners, financiers, family members, ete

(d) Gathering resources

Entrepreneur involves using a business plan to attract

investors, ventures, capitalists, partners, financial institutions,.
 Entrepreneurship 1.27
promoters, etc. The main task is to research and identify
resources that are needed to turn the idea into a viable venture.

Resources can be categorized into:

) Financial Resources - Personal savings, retained capital,

banks, government institutions, family, friends, venture

capital, partnership.
(ii) Operating Resources - Machines, raw materials, land

building, operating procedures.

(ii) Human Resource Amount of man power needed,
recruitment, selection and training of staff.

(e) Create new Venture

When all the resources have been arranged, the next step is
creation and establishment of a new venture and running the
business venture successfully. It requires a lot of enthusiasm
and persuasion to gather optimum resources and it requires a lot

of perseverance and passion to believe in self.

) Change/ Adapt with time

Entrepreneur on to monitor and upgrade the organization
with changing market conditions. It requires availability of
funds to make changes and the adaptability of human
resources

towards changed environment.

ENTREPRENEURSHIP
1.11.6. INNOVATION AND
of the underlying dimensions of
Innovation is one

entrepreneurship. It is a key function in the entrepreneurial

entrepreneur cannot survive in
process. Without innovation,
an

the modern competitive business world.

1.28 Entrepreneurship Development

Entrepreneurship is a creative and innovative response to the

environment and an ability to recognize, initiate and exploit
economic opportunity. An entrepreneur is an innovator who

introduces something new in an economny.

As per the Schumpeter's view, a person becomes an

entrepreneur only when he or she is engaged in innovation

further, innovation is equal to competitive advantage.
The entrepreneur today realizes the need for innovation.

Innovation adds value to the product. It is only through

innovation, the organizations can survive the increasing
competition in the market place.

1.11.7. BARRIERS TO ENTREPRENEURSHIP

The barriers to entrepreneurship are classified into three as

follows.
Barriers to Entrepreneurship

Environmental Personal Social

Barrier Barrier Barrier

1. Lack of confidence 1. Low status

1. Non-Avaliability of
Raw Materials 2. Lack of Motivation 2. Custom and
2. Lack of Funds 3. Lack of Patience Tradition of People
3. Lack of Good 4. Lack of Dependability
on the other
Machineries
4. Lack of skilled 5. Lack of Dream
Labours
5. Lack of
Infrastructures

Fig. 1.5. Barriers to Entrepreneurship

 Entrepreneurship 1.29
I. Environmental Barriers
1. Non-Availability of raw materials

Non-availability of new materials especially during peak

seasons is one of the obstacles exhibiting entrepreneurship.
This leads to competition for raw material.
2. Lack of funds

There are various methods by which an entrepreneur

arranges for funds eg. Own saving, borrowing from friends and
relatives, banks and other financial institution. Many people do
not enter into entrepreneurial activities because of lack of
funds.
3. Lack of Good Machineries

Good machines are required for the production of goods,

because of rapid technological developments. Machines
become obsolete very soon. Small entrepreneurs find it difficult
to get large amount of cash for installing modern machinery.

4. Lack of skilled labours

This is the most important resource in any organization.

Unfortunately, desired manpower may not be available in an

organization. This is either due to the lack of skilled labour or
due to lack of committed or loyal employees in the
organization.

5. Lack of Infrastructures
Lack of infrastructure facilities is a major barrier to the
growth of entrepreneurship particularly in under developed and

developing economies. The infrastructural facilities include

4
1.30 Entrepreneurship Development
land and building. adequate and cheap power, proper
transportation, water and drainage facilities etc.

I. Personal Barriers

1. Lack of Confidence

Many people think they will never find a successful business

idea and would be unable to gather atleast necessary resources
Therefore they dismiss the thought ofbeing self-employed.

2. Lack of Motivation

When an individual starts a new venture, he is filled with

enthusiasm and drive to achieve success. But when he faces the
challenges of real business or bears loss, or his ideas don't
work, he loses interest or motivation.

3. Lack of Patience

When desire to achieve success in first attempt or to become

rich instantly are confronted with business challenges
problems they lose interest. They give up during initial losses.

4. Lack of Dependability on others

They aim to gain their additional expertise through trial and

error and experience, rather than seeking futher development
or personal assistance from others.

5. Inability to Dream

Entrepreneurs, who are short of vision or satisfied with what

they have achieved and lose interest in further expansion of
business.
Entrepreneurship 1.31
I11. Social Barriers

1. Low Status

The society thinks that entrepreneurs have exploited the

society. Thus the attitude of the society towards entrepreneurs
is not positive.

2. Custom and Tradition of People

Most of the people want a real job. Even parents who are
entrepreneurs couldn't like their children to be entreprencurs.
Thus lack of support from society and family hinder the growth
of entrepreneur.

1.12. QUALITIES OF SUCCESSFUL ENTREPRENEURS

Successful entrepreneurs tend to have one or more of the

following qualities.
1. Passionate Passionate about their product or service
and about getting things right for the customer.

2 Visionary Entrepreneurs have faith in what they are

trying do. They tend not to get too

to bogged down in
the fine detail of day-to-day business.
3. Energetic and driven - They are prepared to work
consistently long hours, especially in the early stages.

4. Self-starting and decisive - They don't wait for others

to take decisions. Entrepreneurs tend to take the
initiative spolting opportunities early and taking
decisions quickly.
Calculated risk-takers - They are prepared to take a
5.
risk in order to maximize the rewards.
1.32 Entrepreneurship Development
role
6. Multitasker They are able to play more than one
-

(i.e.,) product developer, sales officer, recruiter, etc.

1.13. ROLE OF ENTREPRENEURSHIP IN ECONOMIC GROWTH
The
The entrepreneurship has been identified by many
economics as a virtual force in the process of industrialization
in particular and economic growth in general. Economic growth

essentially means a change. But, at the same time, it is very

difficult to define precisely the phrase economic growth.

Capital Formation

Improvement in per
Innovations on Entrepreneur
capital income

Reducing unrest & social Improvement in

tension among youth living standards
Role of
Balanced Regional Growth Economic
Growth
&
Harnessing locally Economic Independence
Avaliable Resource &
Entrepreneuship
Generation of Employment

Backward &
forward linkager

in economic growth
Fig. 1.6. Role of entrepreneurship
be defined as a move towards even
Economic growth can

more efficient and differentiated methods of supplying people

with the requirements for survival and improvement.

Entrepreneurship 1.33
The entrepreneur is the key to the creation of new
enterprises that energize the economy and rejuvenate the
established enterprises that make up the cconomic structure.
Entrepreneur initiates and sustain the process of economic
growth in following ways.

1. Capital formation

Entrepreneurs mobilize the idle savings of the public

through the issues of industrial securities. Investment of public
saving in industry results in productive utilization of national
resources. Rate of capital formation increases which is essential
for rapid economic growth. Thus an entrepreneur is the creator
of wealth.

2. Improvement in per capital Income

Entrepreneurs locate and exploit opportunities. They convert

the talent and idle resources like land, labour and capital into
national income and wealth in the form of goods and services.
They help to increase our national product and per capital
income in the country, which are important yardstick for
measuring economic growth.

3. Improvement in living standards

Entrepreneurs set up industries which remove scarcity of

essential commodities and introduce new products. Production
of goods on mass scale and manufacture of handicrafts, etc, in
the small scale sector helps to improve the standard of life of a
common man. They offer goods at lower costs and increase
variety in consumption.
1.34 Entrepreneurship Deelopment
4. Economic independence

Entrepreneurship is essential for national self-reliance

Industrialists help to manufacture indigenous substitutes of
imported products thereby reducing dependence on foreign
countries. Business man also export goods and services on a
large scale and thereby earn the scarce foreign exchange for the
country. Such import substitution and export promotion help to
ensure the economic independence of the country without
which political independence has little meaning.

5. Backward and forward linkages

An entrepreneur initiates change which has a chain reaction-

Setting up of an enterprises has several backward and forward
linkages. For example, the establishment of a steel plant
generates several ancillary units and expands the demand for
iron ore, coal etc. These are backward linkages. By increasing
the supply of steel, the plant facilities, the growth of machines,
building, tube making, utensil manufacturing and such other
units.
Entrepreneurs create an atmosphere of enthusiasm and
convey a sense of purpose. They give an organization its
momentum. Entrepreneurial behavior is critical to the long term
vitality of every economy. The practice of entrepreneurship is
an important to established firms as it is to new ones.

6. Generation of employmentt

Al the beginning of seventh five year plan, the backlog of

unemployment was estimated to be around 44 million persons.
At present, the number of unemployed in the country is far
Entrepreneurship 1.35
greater than what it was during 1985. Emphasis on
modernization which usually results in automation, use of high
technology, and technology upgradation initiated during 1980's
and structural changes introduced by the government during
1990's are likely to give much rise to capital intensive rather
than labour intensive industry.
It is feared that there will be
very little additional job
opportunities within the fold of organized public and private
sector. Most of the job opportunities in future are likely to be
emerging from informed and unorganized sector of economy.
Entrepreneurship development training which helps in
strengthening informal and unorganized sector is expected to
motivate enterprising people to opt for self employment and
entrepreneurial career. It will therefore help in solving the
problem of increasing unemployment to some extent.

7. Harnessing Locally Available Resources and

Entrepreneurship
India is considered to be very rich in natural resources. In
spite of above five decade of planned development, a large
number of states have remained economically backward. A few
large scale industries started by entrepreneurs from outside the
state in economically backward areas may help a model of
pioneering efforts, but ultimately the real strength of
industrialization in backward areas depends upon the
involvement of local entrepreneurship. Increased activities of
local entrepreneurs will also result in making use of abundantly
available local resources.
136 Entrepreneurship Development
8. Balanced Regional Growth
Medium and large scale industries can only be started with
huge investment which is either available with well established
industrial houses or need to be drawn from public exchequer.
Also promotion of such industries does not help in reducing
disparities of income and wealth. On the other hand, an
important advantage of small scale enterprise is that they can be
started with meager financial resources and little or no previous
experience or entrepreneurial background.

9. Reducing unrest and social tension among youth

Many problems associated with youth unrest and social

tension is due to not being engaged in productive work. In the

changing environment where we are faced with the problem of

recession in wage employment opportunities, alternative to
wage career is the only viable option.
The country is required to divert the youth with talent
entrepreneurial traits from wage career to self-employment
career. Such alternate path through entrepreneurship could help
the country in defusing social tension and unrest among youth.

1.14. YOUTH ENTREPRENEURSHIP

We strongly believe in theentrepreneurial spirit of India's

tool to develop the
youth. Youth entrepreneurship is a key
the economic
human capital necessary for the future; unleash
on how youth
potential of youth, and promote guidance
to be priority and
entrepreneurship support initiative need
maximise the impact.
adapted in different contexts in order to
 Entrepreneurship 137
Economy Contribution
Many young fearless entrepreneurs have set the path for a
wave of entrepreneurship in the country and this
entrepreneurial spirit has resulted is not just innovation but also
in entrepreneurship being recognized as the diving force of the
market. Innovation is erucial for a thriving economy and
especially in today's increasingly competitive world.
In India, entrepreneurship is accelerating innovation in areas
like education, IT, Health care etc. and generating solutiors to
many such problem areas. India has witnessed several
innovative ideas and business drive by start-ups thus leading to
entrepreneurship emerging as a valuable input to the economic
growth of the country.
Economics slowdown is one of the reasons that has led to a
downturn in employment opportunities in the country.
Unemployment amongst the youth is on the rise and in this
regard entrepreneurship is playing a key role in increasing job.
An entrepreneur is not just creating self employment, but
also building a structure for small to large scale employment.
As thier enterprises grow, the employment opportunities
increase. In India many start-ups that started out as home based
ventures are today employers to hundreds of individuals.
An entrepreneur with an innovative idea has the power to
build employment and in turn stimulate the economy.

1.15. FACTORS AFFECTING ENTREPRENEURIAL GROWTH

There are various factors which contribute to the growth of
entrepreneurship. These factors can be broadly classified into
five.
 Entrepreneurship Development
1.38

Factors affecetingentrepreneurial
growth
Fig. 1.7.
Entrepreneurship 1.39
L. Psychological factors
The important psychological factors influencing
entrepreneurial growth may be outlined as below.

1. Personal Motives

Personal Motives have been found to be one of the crucial

factors responsible for entrepreneurship amongst individuals.
Bill Gates dream that one day he would become the richest
person. His dream becomes a reality later.

2. Need for Achievement

Need for achievement means the drive to achieve a goal.

People having need for achievement will be so much self-
confident that they do not believe in mere luck. If an individual
has need for achievement, he will become a successful
entrepreneur.
3. Need of Authority

Need of authority' will inspire men to work. When they

become entrepreneurs, they can exercise authority over
managers, employees etc.

4. Recognition

Many people become successful entrepreneurs just for

getting recognition from others.

Il.Culturalfactors
The important cultural factors influencing entrepreneurs
growth are briefly explained as follows.
1.40 Entrepreneurship Development
1. Religious Belief

According to Max. Weber, entrepreneurism is a function of

religious belief and the impact of religion shapes the
entrepreneurial culture. He emphasized that the entrepreneurial
energies are exogenous supplied by means of religious belief.
2. Culture
Culture is closely related with accepted values and human
behavior. For example some societies have customs of

polygamy and some have not.

3. Spirit of Capitalism

Spirit of Capitalism guides the entrepreneur to engage in

activities that can bring more and more projects. The profit
motive character coupled with the attitude towards acquisition
of money urges the individual to start new venture.

4. Minority Groups
Hoselitz explained that the supply of entrepreneurship is
governed by cultural factors,and culturally minority groups are
the spark plugs of entrepreneurial and economic development.
Minority groups like the Jews and Greeks in Medieval Europe,
the Lebanes in West Africa, the Indians in East Africa have
important roles in promoting economic development.

1. Social Factors
The social factors include

1. Legitimacy of Entrepreneurship
System of norms and values within a socio-cultural setting is
responsible for the emergence of entrepreneurship. The degree
of approval or disapproval granted to entrepreneurial behaviour
Entrepreneurship 141

will influence its emergence and its characteristics if it does not

emerge.

2. Social Marginality

Individuals or groups on the perimeter of a given social

system or between two social systems provide the personnel to
assume the entrepreneurial roles. Social marginality is likely to
promote entrepreneurship. They are largely determined by two
factors, namely legitimacy of entrepreneurship and social
mobility.
3. Caste system
Certain religious and caste encourage the growth of

entrepreneurial talent. Some religious communities like the

Parsees, Marwaits and Sindhees seem to have an affinity for
entrepreneurial activity. The caste system in Hindu society has
skills.
promoted the growth of business and professional
4. Education and Technical Qualifications

is the best means of developing man's

Education
resourcefulness which encompasses different entrepreneurship.
enable
It may be expected that the high level of education may
talent more
the entrepreneurs to exercise their entrepreneurial
efficiently and effectively.

5. Social Status

social status and once

Every human being aspires for a high
it
he achieves a reasonable level, his aspirations and desires for
work hard to maintain their
start getting multiplied. People
status as it also contributes to their entrepreneurial growth.
142 Entrepreneurship Development
6. Social Responsibility
It is the obligation to the society in which the business
An entrepreneur generates employment for
enterprise operates.
others besides helping himself.

IV. Economic Factors

Economic factors also influence the growth
growth of

entrepreneurship. The important factors are

1. Infrastructural facilities
certain basic
Entrepreneurship development requires
infrastructure like power, transportation, communication,
technical information etc. These provide external economics
and improve the efficiency of investment by entrepreneurs.
These infraatructural facilities are scarce in less developed
countries. The entrepreneurs themselves have to procure these

facilities at their own cost.

They have to obtain these facilities at higher costs. This will

greatly discourage the entrepreneurship development. In
advanced countries, those who are desirous of starting an

enterprise will find no difficulty in procuring the infrastructural

facilities at reasonable costs.

2. Availability of Material and Know-How

Entrepreneurship is encouraged only if there is an adequate

supply of materials and know-how. Easy availability of

materials attract more individuals towards entrepreneurship.
Technical know-how is essential for innovation, with technical

knowledge, men discover more and sophisticated techniques of

production.
 Entrepreneurship 1.43
3. Market

The size and composition of market influence

entrepreneurship in their own ways. Practically, monopoly in a

particular product in a market becomes more influential for

entrepreneurship than a competitive market.
4. Financial Resources
Finance is the life blood of business activity. Capital is

required to obtain materials, machinery, equipment, etc. and to

undertake innovation. Capital is regarded as lubricant to the

process of production. The lack of financial resources

discourages the youth and potential entrepreneurs to start new
ventures. Hence, the need for fixed and working capital should
be adequately met if new entrepreneurs are to come forward
and grow.

5. Labour Conditions
The quality rather than quantity of labour is another factor
which influencesthe emergence and growth of
entrepreneurship. The availability of cheap labour positively
affects entrepreneurship. Labour problem can be solved not by
capital intensive technologies but by increasing their mobility,
offering them facilities, incentives and concessions in every
remote corner of the country.

6. Government Policy
The socio-political and economic policies of the government
inhibit or foster entrepreneurial growth. Land and factory sheds
at concessional rates, adequate sources of power, supply of
1.44 Entrepreneurship Development
materials and other physical facilities should be provided by the
to facilitate the setting up of new enterprises. The
government
government has a dominant role to play in the industrial

development of backward regions with a new aim to attain a

balanced regional development.

V. Personality Factors
The following personality factors contribute to the

entrepreneurial development.
1. Personality
The entrepreneurial personality comprises of the person, his
skills, styles and motives. Impressive personality and individual
skill help to develop entrepreneurship. These qualities are

required for entrepreneurs because they have to work with

officers, managers, engineers, labourers customers, investors
Government officers, Ministers, etc.

2. Independence

Another personality factors which influence

entrepreneurship is independence. An entrepreneur works out
plans on his own, searches and explores resources and
experiences and uses inner urge to make the enterprise a
success instead of waiting for suggestions or directions from
others.

3. Compulsion
Certain compelling reasons also force the people to become

entrepreneurs. These include (a) unemployment (or)

dissatisfaction with existing job or occupation (6) to use
 Entrepreneurship 1.45
technical or professional knowledge and skills (c) to put the
idle funds to use.
A large number of technically qualified people after gaining
initial experience and confidence and not being satisfied by
their growth in the profession have a compulsive reason to try

entrepreneurship.
1.16. TWO MARKS QUESTION AND ANSWERS

1. Who is an entrepreneur proprietor?

(April/May 2008, 2012, 2015, 2017)
Entrepreneur is a person who set up a business or
businesses, taking on financial risks in the hope of profit.

2. Define Entrepreneur.
(A.U., April / May 2008, April / May 2010)
According to Joseph Schumpeter, "An entrepreneur is
an advanced economist, is an individual who introduces
something new in the economy, a method of production
not tested
yet experience in the branch of manufacture
by
concerned a product with which consumers are not yet

of raw materials or new market and

familiar, a new source

the like".
What are the characteristics of an entrepreneur?
3.
are
The characteristics of an entrepreneur
1. Risk Bearer
2. Hard work
3 Clear objectives
4. Independence
5. Self-Confidence

5
 Entrepreneurship Development
1.46
4. Differentiate between an Entrepreneur and a Manuger.
(A.U., May /June 2013)

Nature An Entrepreneur A Manager

S.No.
| But the main
1. Goal An entrepreneur
aim of a
Management starts a venture by
to
a new manager is
setting up
render his
enterprise for his
service in a
personal
enterprise
gratification already set

up by
Someone.

is
2. Status An Entrepreneur is|Amanager
the owner of the employee
enterprise
of an
enterprise
owned by the
entrepreneur

an entrepreneur.
5. Write any two functions of
are
The functions of an entrepreneur
Searching market opportunities
1.
resourees
2. Obtaining the available
entrepreneur?
6. What a r e different types of
2014)
(A.U., April /May 2011,
are
major types of
cntrepreneur
The
1. Innovating entrepreneurs

2. Imitative entrepreneurs

3. Fabian entrepreneurs

4. Drone entrepreneurs
Entrepreneurship 1.47
7. What is Imitative Enterpreneurs?
Imitative entrepreneurs do not innovative the changes
themselves, they only imitiate techniques and technology
innovated by others. This type of entrepreneurs are
particularly suitable for the under developed region for
being a mushroom drive of imitiation of new combination
of factors of production already available in developed
region.
8. What is Fabian Entrepreneurs?
Entrepreneurs of this type are very cautions and
skeptical while practising any change. They have neither
the will to introduce changes nor
new the desire toadopt
new methods innovated by the most entreprising
entrepreneurs. This type of entrepreneur will nor be
interested in taking risk and they try to follow the footsteps
of their predecessors.

9. What is Drone entrepreneurs?

This type of entrepreneurs adopt opportunities to make
change in production formula even at the cost of severely
reduced return, relative to other like producers. They even
suffer from losses but are not ready to make changes in
their existing production methods.
10. Who are intrapreneurs? Give examples.
(A.U., April/May 2011, 2017)
An Intrapreneur is an employee who is given the
authority and support to create a new product without
having to be concerned about whether or not the product
will actually becor.e a source of revenue for the company.
1.48 Entrepreneurship Development

eg. A manager within a company who promotes

innovative product development and marketing.

11. Define a Intrapreneur. (A.U., April/May 2008)

or an
An Intrapreneur is an inside entrepreneur,
uses entrepreneurial
entrepreneur within a large firm who
those
skills without incurring the risks associated with
activities. Intrapreneurs usually employees within a
are

on a special idea or
company who are assigned to work
like
project, and they are instructed to develop the project
an entrepreneur would intrapreneurs usually
have the

resources and capabilities of the firm at their disposal.

and
12. What is the difference between entrepreneur
Entrepreneurship?

S.No. Entrepreneur Entrepreneurship

1. Person Process

2. Organiser Organisation

3. Innovator Innovation
-

4 Risk Bearer Risk Bearing

13. Define the term Entrepreneurship.

(A.U., April/May 2014)
According to Cole, "Entrepreneurship is the purposeful

activity of an individual group of associated

(or) a

individuals undertaken to initiate, maintain and aggrandise

profit by production or distribution of economic goods and

services.
Entrepreneurship 1.49
14. What are the characteristics of Entrepreneurship?
The characteristics of Entrepreneurship are as follows.
1. Innovation function
2. Organising function
3. A function of group level patterm
4. Managerial and leadership function
5. Gap filling function
15. How does an entrepreneur called as Innovator.

(A.U., May/June 2013)

Innovation is one of the underlying dimensions of
entrepreneurship. It is a key function in the entrepreneurial
survive
process, without innovation an entrepreneur cannot
in the modern competitive business world. An entrepreneur
is an innovator who introduces some thing new in a

economy.
16. What is gap filling function?
The most significant features of entrepreneurship is gap

filling. It is the job of the entrepreneur to fill the gap or to

makeup the difficiencies which always exist in the
knowledge above the production function.
17. What is managerial and leadership functions?
An individual entrepreneur should have additional

personality skill such as and managerial skill.

leadership
But skills and predominent orientation in the direction of
productivity, working relation and creative integration
along with desire to make profit.
1.50 Entrepreneurship Development
18. Differentiate between Entrepreneur and ntrapreneur.
(A.U., Apri/May 2012, Nov/Dec 2008, April/May 2010,
2015)
S.No. Difference Entrepreneur | Intrapreneur
1. Independence | An But an
entrepreneur intrapreneur
is an is semi-
independent independent
business man. business man.

2. Risk Bearer An An
entrepreneur intrapreneur
bears the risk | does not bear
fully the risk of the
business he
develops and
operates.
19. Write anyfour barriers ofentrepreneurship.
The barriers of entrepreneurship are
1. Non-availability of raw materials

2. Lack of funds
3. Lack of good machinery
4. Lack of skilled labour
20. Mention any four triggering factors of a person to
become an entrepreneur. (A.U., May/June 2009)
1. Conception of an idea
2. Innovation
3. Bearer of risks and uncertainty
4. Arranging necessary capital
Entrepreneurship 1.51
1.17. REVIEW QUESTIONS

1. What do you understand by the term 'entrepreneur? Give

the main characteristics of an entrepreneur.
Ans: Refer Section No.1.5 Page No.1.4

2. Explain the main functions performed by the entrepreneur.

Ans: Refer Section No.1.7 Page No.1.7
3. Bring out the Schumpeter's views on entrepreneur. Explain
the different types of entrepreneurs in the society.

(A.U., April/May 2008)

Ans: Refer Section No.1.11.4 Page No.1.23, 1.11

4. Briefly explain the concept of entrepreneur. How does an

entrepreneur differ from a manager.

Ans: Refer Section No.1.8 Page No.1.9

5. What do you understand by Entrepreneurship? Explain the

process of Entrepreneurship.
Ans: Refer Section No.1.11.5 Page No.1.25

6. Differentiate between Entrepreneur andIntrapreneur.

(A.U., April/May 2014)
Ans: Refer Section No.1.10.2 Page No.1.18

7. Describe how innovation is important as a dimension of

entrepreneurship. (A.U., Nov/Dec 2009)

Ans: Refer Section No.1.11.6 Page No.1.27

8. What are the barriers of entrepreneurship?

Ans: Refer Section No.1.11.7 Page No.1.28
L.52 Entrepreneurship Development
9. Explain the various factor affecting entrepreneurial growth.
(A.U., April/May 2010, 2014)
Ans: Refer Section No. 1.15 Page No.1.37
OR]
10. Discuss the role of entrepreneurship in promoting
economic growth. (A.U., April/May 2009, 2011)
Ans: Refer Section No.1.13 Page No.1.32

11. Who is an entrepreneur? Discuss the importance and types

of entrepreneurs in detail. (A.U., April 2014)
Ans: Refer Section No.1.5 & 1.9 Page No.1.4 & 1.11