Entrepreneurship

Module 3
 Introduction
EVOLUTION OF ENTREPRENEUR
• The word ‘entrepreneur’ is derived from
French word ‘Entreprendre’ which was used
to designate an organizer of musical or other
entertainments.

• Later in 16th century it was used for army

leaders. It was extended to cover civil
engineering activities such as construction in
17th century.
• Richard Cantillon, an Irishman living in France
who first used the term entrepreneur to refer
to economic activities.

• According to Cantillon “An entrepreneur is a

person who buys factor services at certain
prices with a view to selling its product at
uncertain prices”.
• Entrepreneur, according to Cantillon, an
entrepreneur is a bearer of risk, which is non-
insurable.

• Schum Peter gave a central position to the

entrepreneur who believed that an entrepreneur
was a dynamic agent of change; that an
entrepreneur was a catalyst who transformed
increasingly physical, natural and human
resources into correspondingly production
possibilities.
 CONCEPT OF ENTREPRENEUR
These views are broadly classified into three
groups, namely

• Risk Bearer
• Organizer
• Innovator.
 Entrepreneur as risk bearer
• Richard Cantilon defined entrepreneur as an agent
who buys factors as production at certain prices in
order to combine them into a product with a view to
selling it at uncertain prices in future.

• He illustrated a former who pays contractual

incomes, which are certain to land owners and
laborers, and sells at prices that are ‘uncertain’. He
includes merchants also who make certain
payments in expectation of uncertain receipts.
Hence both of them are risk-bearing agents of
production.
• P.H. Knight described entrepreneur to be a
specialized group of persons who bear
uncertainty. Uncertainty is defined as risk, which
cannot be insured against and is incalculable. He
made distinction between certainty and risk.

• A risk can be reduced through the insurance

principle, where the distribution of outcome in a
group of instance is known, whereas uncertainty
cannot be calculated.
• Entrepreneur as an organizer: According to J Baptist Say
“an entrepreneur is one who combines the land of one,
the labor of another and capital of yet another, and thus
produces a product.

• By selling the product in the market, he pays interest on

capital, rent on land and wages to laborers and what
remains is his/her profit”.

• Say made distinction between the role of capitalist as a

financer and the entrepreneur as an organizer.

• This concept of entrepreneur is associated with the

functions of coordination, organisation and
supervision.
Entrepreneur as an innovator: Joseph A SchumPeter in
1934 assigned a crucial role of ‘innovation’ to the entrepreneur.
He considered economic development as a dynamic change brought by
entrepreneur by instituting new combinations of factors of production, i.e.
innovations.

The introduction of new combination according to him, may occur in any

of the following forms.

(a) Introduction of new product in the market.

(b) Use of new method of production, which is not yet tested.
(c) Opening of new market.
(d) Discovery of new source of raw materials.
(e) Bringing out of new form of organisation.

Schum Peter also made distinction between inventor and innovator. An

inventor is one who discovers new methods and new materials. An
innovator utilizes inventions and discovers in order to make new
combinations.
Concept of entrepreneur is associated
with three elements risk bearing,
organizing and innovating.
• An entrepreneur can be defined as a person
who tries to create something new, organizes
production and undertakes risks and handles
economic uncertainty involved in enterprise.
• 1. According to [Link]: “Entrepreneur is
one who is endowed with more than average
capacities in the task of organizing and
coordinating the factors of production, i.e.
land, labour capital and enterprises”.
2. Marx regarded entrepreneur as social parasite.

3. According to Gilbraith: “An entrepreneur must

accept the challenge and should be willing hard to
achieve something”.

4. Peter F. Drucker defines an entrepreneur as one

who always searches for change, responds to it and
exploits it as an opportunity. Innovation is the basic
tool of entrepreneurs, the means by which they
exploit change as an opportunity for a different
business or service.
5. According to [Link]: “An entrepreneur is an economic man who
tries to maximize his profits by innovation, involve problem solving and
gets satisfaction from using his capabilities on attacking problems”.

6. According to Mark Casson: “An entrepreneur is a person who

specializes in taking judgmental decision about the coordination of scarce
resources”.

7. Frank Young defined entrepreneur as a change agent.

8. According to Max Weber: “Entrepreneurs are a product of particular

social condition in which they are brought up and it is the society which
shapes individuals as entrepreneurs”.

9. International Labour Organization (ILO) defines entrepreneurs as those

people who have the ability to see and evaluate business opportunities,
together with the necessary resources to take advantage of them and to
initiate appropriate action to ensure success.
 CHARACTERISTICS OF ENTREPRENEUR
Entrepreneur is a person of telescopic faculty
drive and talent who perceives business
opportunities and promptly seizes them for
exploitation.
Entrepreneur needs to possess competencies to
perform entrepreneur activities.
Personal entrepreneurial
characteristics
Distinction between entrepreneur
and manager
 CHARMS OF BEING AN
ENTREPRENEUR
The most exiting part of Entrepreneurship is that
you are your own master. When
you are an employee, you work for others according
to their plans, whims and finances.
In an Entrepreneurship, it is you who set the goal,
plan the action and reap the
satisfaction and rewards of having achieved the
goal.
.
Why should you become an Entrepreneur?
➢ You will be your own boss and boss to other people and make decisions
that are crucial to the business success or failure.

➢ You will make money for yourself rather than for someone else.

➢ You may participate in every aspect of running a business and learn and
gain experience in a variety of disciplines.

➢ You will have the chance to work directly with your customers.

➢ You will have the personal satisfaction of creating and running a

successful business.

➢ You will be able to work in a field of area that you really enjoy.

➢ You will have the chance to build retirement value

 Rewards for an Entrepreneur

1. Freedom to work.

2. Satisfaction of being own boss.

3. Power to do things as he likes.

4. Rewards of ownership and retirement assurance.

5. Respect of family and friends.

 Penalties for an Entrepreneur
1. Constraints of financiers, laborers, customers,
suppliers, and debtors curtail his freedom.

2. Frustration due to availability of limited capital and

other resources.

3. Social and family life is affected due to hard long hours

of working.

4. Frustration due to non-achievement of full objectives.

5. Risk of failure.
 FUNCTIONS OF AN ENTREPRENEUR
• An Entrepreneur has to perform a number of
functions right from the generation of idea up
to the establishment of an enterprise.
• He also has to perform functions for
successful running of his enterprise.
• Entrepreneur has to perceive business
opportunities and mobilize resources like
man, money, machines, materials and
methods.
 The following are the main functions
of an Entrepreneur
Idea generation: The first and the most important
function of an Entrepreneur is idea generation.
Idea generation implies product selection and
project identification.
Idea generation is possible through vision, insight,
keen observation, education, experience and
exposure.
This needs scanning of business environment and
market survey.
Determination of business objectives:
Entrepreneur has to state and lay down the business
objectives. Objectives should be spelt out in clear
terms.

The Entrepreneur must be clear about the nature

and type of business, i.e. whether manufacturing
concern or service oriented unit or a trading business
so that he can very well carry on the venture in
accordance with the objectives
determined by him.
 Rising of funds:
• All the activities of the business depend upon
the finance and hence fund rising is an
important function of an Entrepreneur.

• An Entrepreneur can raise the fund from

internal source as well as external source.

• He should be aware of different sources of

funds.
• He should also have complete knowledge of
government sponsored schemes such as
Prime Minister's Rozgar Yojana (PMRY) ,
in which he can get government assistance in
the form of seed capital, fixed and working
capital for his business.
Procurement of machines and materials
Market research
• Determining form of enterprise: Entrepreneur
has to determine form of enterprise depending
upon the nature of the product, volume of
investment etc.
• The forms of ownership are sole proprietorship,
partnership, Joint Stock Company, co-operative
society etc.
• Determination of ownership right is essential on
the part of the entrepreneur to acquire legal title
to assets.
• Recruitment of manpower: To carry out this
function an Entrepreneur has to perform the
following activities.
(a) Estimating man power requirement for short
term and long term.
(b) Laying down the selection procedure.
(c) Designing scheme of compensation.
(d) Laying down the service rules.
(e) Designing mechanism for training and
development
• Implementation of the project: Entrepreneur has to develop
schedule and action plan for the implementation of the
project.

• The project must be implemented in a time bound manner.

• All the activities from the conception stage to the

commissioning stage are to be accomplished by him in
accordance with the implementation schedule to avoid cost
and time overrun.

• He has to organize various resources and coordinate various

activities.

• This implementation of the project is an important function

of the Entrepreneur
 TYPES OF ENTREPRENEUR
Entrepreneur in industry, service and business sectors
which are technically called as ISB sectors
Danhof classifies Entrepreneur into four types.

Innovative entrepreneur:
This type of Entrepreneur, sense the opportunities for
introduction of new ideas, new technology, discovering of new
markets and creating new organizations.

Such Entrepreneur can work only when certain level of

development is already achieved and people look forward to
change and improve.

Such Entrepreneur are very much helpful for their country

because they bring about a transformation in life style.
Adoptive or imitative entrepreneur: Such entrepreneurs
imitate the existing entrepreneur and set their enterprise in the
same manner.

Instead of innovation, may just adopt the technology and

methods innovated by others.

Such types of entrepreneur are particularly suitable for under-

developed countries for imitating the new combination of
production already available in developed countries.
Fabian entrepreneurs: Fabian entrepreneurs are
characterized by great caution and skepticism, in
experimenting any change in their enterprises.

They imitate only when it becomes perfectly clear that

failure to do so would result in a loss of the relative
position in the enterprises.
Drone entrepreneurs: Such entrepreneurs are
conservative or orthodox in outlook.

They always feel comfortable with their old fashioned

technology of production even though technologies
have changed.

They never like to get rid of their traditional business,

traditional machineries and traditional system of
business even at the cost of reduced returns.
 Arthur H Cole Classification
classifies entrepreneurs as empirical, rational and cognitive
entrepreneur.

Empirical: He is entrepreneur hardly introduces anything revolutionary

and follows the principle of rule of thumb.

Rational: The rational entrepreneur is well informed about the general

economic conditions and introduces changes, which look more
revolutionary.

Cognitive: Cognitive entrepreneur is well informed, draws upon the

advice and services of experts and introduces changes that reflect
complete break from the existing
scheme of enterprise.
 Classification Based on the Scale of
Enterprise
Small scale: These entrepreneurs do not posses the
necessary talents and resources to initiate large-scale
production and to introduce revolutionary
technological changes.
Large scale: They possess the necessary financial and
other resources to initiate and introduce new
technological changes. They possess talent and
research and development facilities.
 Other Classification
Following are some more types of entrepreneurs listed by
behavior scientists.

Solo operators: These are the entrepreneurs who essentially

work alone, introduce their own capital and if essential employ
very few employees. In the beginning most of the entrepreneurs
start their enterprises like them.

Active partners: Such entrepreneurs jointly put their efforts and

resources. They actively participate in managing the daily routine
of the business concern.
Entrepreneurs who only contribute their funds but not actively
participate in the business are called simply ‘Partners’.
Inventors: Such entrepreneurs are creative in character and feel
happy in inventing new products, technologies and methods of
production. Their basic interest lies in research and innovative
activities.

Challenge: According to such entrepreneurs, if there is no

challenge in life, there is no charm in life. Such entrepreneurs
plunge into industry/business because of the challenge it
presents. When one challenge seems to be met, they begin to
look for new challenges. They convert odds and adversities into
opportunities and make profit.

Buyers: These are the entrepreneurs who do not like to face the
hassles of building infrastructure and other facilities. They simply
purchase the existing one and by using their experience and
expertise try to run the enterprise successfully.
Life timers: Such entrepreneurs take business as an integral point
of their life. Family enterprises, which mainly depend on exercise
of personal skill, fall in this category.

Industrial entrepreneurs: Such entrepreneurs engage in

manufacturing and selling products.

Service entrepreneurs: Such entrepreneurs engage in service

activities like repair, consultancy, beauty parlor etc where
entrepreneurs provide service to people.

Business entrepreneurs: They are also called as trading

entrepreneurs which buy and sell goods.
Agricultural entrepreneurs: They engage themselves in
agricultural activities like horticulture, floriculture,
animal husbandry, poultry etc.
Corporate entrepreneurs: Corporate entrepreneurs
undertake their business activities under legally
registered company or trust.
Rural entrepreneurs: Entrepreneur’s selecting rural-
based industrial opportunity in either khadi or village
industries sector or in farm entrepreneurship are
regarded as rural entrepreneurs.
According to khadi and village industry commission (KVIC) Village or rural
industry means any industry located in rural area, population of which do
not exceed 10,000 which produces any goods or services in which fixed
investment of an artisan or a worker does not exceed one thousand rupees.
Women entrepreneurs: According to government of
India an entrepreneurs is defined as an enterprise
owned and controlled by a woman

Women entrepreneurs play an important role in

economy especially in rural areas
 INTRAPRENEURS
A new breed of entrepreneurs is coming to the fore in large industrial organizations.

They are called as ‘Intrapreneurs’.

In large organizations, the top executives are encouraged to catch hold of new ideas
and then convert them into products through R and D activities within the framework
of organizations.

It is found in developed countries that such Intrapreneurs in large number are leaving
the organization and started their own enterprises.

Many of such Intrapreneurs have become exceedingly successful in their ventures

Difference between entrepreneurs and
intrapreneurs
 ULTRAPRENEURS

In a conference of entrepreneurship held in USA, it is defined, as

“Entrepreneurship is the attempt to create value through

recognition of business opportunity, the management of risk
taking appropriate to the opportunity and through the
communicative and management skills to mobilize human,
financial and material resources necessary to bring a project to
fruition”
The terms entrepreneur and entrepreneurship
are used interchangeable, yet they are
conceptually different
Concept of entrepreneurship
Relationships between entrepreneur and
entrepreneurship
 EVOLUTION OF ENTREPRENEURSHIP
Entrepreneurship during pre-independence and
post-independence.
 ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

Economic development essentially means a

process of upward change whereby the real per
capita income of a country increases for a long
period of time.
 Medieval Age

To discuss the growth or development of

entrepreneurship in India, you must
understand that India has one of the oldest
and most civilized business histories.
During the Harappan civilizations around 2700
BC, there was an internal and external trade
culture. Also, due to this, most foreign
countries recognize Indian entrepreneurial
skills.
 Medieval Age

Increase in trade occurred during the era of

Mughal rule. The popularity of Indian
products, arts, crafts, Vedic tools, foods, and
much more attracted attention from different
parts of the world.
The Arab mainland, western colonial counties
and African countries were the major parties
involved in the trade.
• At the same time, different countries like UK,
France and Portugal expanded their colonies in
different parts of the world.

• A significant entrepreneurial change occurred

when the East India Company started its business
from the Bay of Bengal and later occupied parts
of Bengal.
• It indirectly linked the entire Indian state into one
business ecosystem
 Modern and pre-independence

• This was the era of industrialization in India,

where some of India’s best entrepreneurs rise.
The major events changed the face of
entrepreneurship in India.
• The first cotton textile mill was revolutionized
in 1854 by an Indian entrepreneur, Kawasji
Dover. It was one of India’s boldest steps in
the modern development of entrepreneurship
development.
 Modern and pre-independence

• Jamsetji Tata founded the company Tata

Group in the year 1868. With the foundation
of the Tata Group, he has created a bar for
entrepreneurship development in India.
• 1874 Cotton Mill by JRD Tata, TISCO by Dorabji
Tata, 1932 Tata Airlines, Tata Steel Plant, and
more were high-rate businesses in India.
 Post-independence

• Entrepreneurship in India, along with the

national economy, was ground-breaking after
independence.
• There was not much left in the Indian
economy at that time.
• The government took major steps to support
India’s development which is as follows.
 Post-independence

• Prime Minister Nehru adopted the economic

structure line of the Soviet Union.
• It gave a major push to the New Industrial
Policy of 1956. Similarly, this policy liberalized
the bar and standards set by the British
government, which were the ultimate
impediment to industrial development.
 Post-independence

• Economic reforms were carried out in the

initial phase of governance. Also, prominent
economists adopted the Mahalanobis model,
which primarily aims to support
entrepreneurs.
The government took three important
measures namely:
1. To maintain a proper distribution of economic power
between private and public sector.

2. To encourage industrialization from existing centers to other

cities, towns and villages.

3. To disseminate the entrepreneurship acumen concentrated in

a few dominant communities to a large number of industrially
potential people of varied social state.
 Transformation of Entrepreneurship
in India
• The major transformation of entrepreneurship
in India began with the ‘Economic Policy
Reform’ in 1991. The policy was further
expanded in 2022. So, you can easily
categorize the major transformation of
entrepreneurs in India by these two policies
and events.
 New Economic Policy

• The New Economic Policy of 1991 was a huge

turning point. This policy has included three
major aspects, which are as follows.
After the Independence, India has realized that, for
achieving the goal of economic development, it is
necessary to increase the entrepreneurship both
qualitatively and quantitatively in the country
 The important role that an
entrepreneurship plays in the economic development of
an economy can be put in a
more systematic manner as follows.

1. Entrepreneurship promotes capital formation by mobilizing

2. It provides immediate large-scale employment. Thus it helps

to reduce unemployment in the country.

3. It provides balanced regional development.

4. It helps reduce the concentration of economic power.

5. It stimulates the equitable redistribution of wealth, income and
even political power in the interest of the country.

6. It encourages effective resources mobilization of capital and skill

which might otherwise remain unutilized and idle.

7. It also induces backward and forward linkages which stimulated

the process of economic development in the country

8. It promotes country’s export trade i.e. an important ingredient

for economic development
BARRIERS TO ENTREPRENEURSHIP

The greatest barrier to entrepreneurship is the

failure of success
1. Lack of a viable concept
2. Lack of market knowledge
3. Lack of technical skills
4. Lack of seed capital
5. Lack of business know how
6. Complacency—lack of motivation
7. Social stigma
8. Time presence and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents