WELCOME MODULE – 1

Introduction to Entrepreneurship 1
 Synopsis – Module 1
Introduction to Entrepreneurship
 Meaning
 Definition and concept of enterprise
 Entrepreneurship and Entrepreneurship Development.
 Evolution of Entrepreneurship
 Characteristics and skills of Entrepreneurship
 Concepts of intrapreneurship
 Entrepreneur v/s intrapreneur
 Entrepreneur v/s Entrepreneurship
 Entrepreneur v/s manager
 Role of Entrepreneurship in economic development.
 Factors affecting Entrepreneurship
 Problems of Entrepreneurship
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 Definition & Concept of Enterprise
 Definition: An enterprise is an organized business venture that brings together
human, financial, and physical resources to produce goods or services for profit,
growth, or social value.
 Peter F. Drucker (1970s): “An enterprise is a business organization that
transforms resources into goods and services to satisfy human wants and needs,
taking on risks in pursuit of profit and growth.”
 Concept: The concept of enterprise goes beyond mere business activity—it reflects
initiative, innovation, and risk-bearing ability of the entrepreneur. It involves
planning, organizing, and managing resources efficiently to achieve objectives such
as profit, market expansion, employment generation, and economic development.
An enterprise may operate at different scales (micro, small, medium, or large) and
can be industrial, commercial, or service-oriented.

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 Evolution of word Entrepreneur
 The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means
undertaking the risk of enterprise and further it 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.
But it was 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, 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.
Since then the term entrepreneur is used in various ways and various views.
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 Meaning of Entrepreneur - Entrepreneur is a person who tries to create
something new, searches new opportunities, bears risk, unites various factors of
production like land, labour and capital carries innovations and from his skill
and farsightedness faces unforeseen circumstances and thereby earns profits.
Entrepreneurs are the pioneers who are instrumental in the economic
development, growth and development of and prosperity of a country.
 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 farmer who pays
contractual incomes, which are certain to land owners and labourers 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.

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 Joseph A. Schumpeter Peter 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 market
B. Use of new method 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 organization.
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 Characteristics of Entrepreneurship
 Economic and dynamic activity - Entrepreneurship is an economic activity because it
involves the creation and operation of an enterprise with a view to creating value or
wealth by ensuring optimum utilization of scarce resources. Since this value creation
activity is performed continuously in the midst of uncertain business environment,
therefore, entrepreneurship is regarded as a dynamic force.
 Related to innovation - Entrepreneurship involves a continuous search for new ideas.
Entrepreneurship compels an individual to continuously evaluate the existing modes of
business operations so that more efficient and effective systems can be evolved and
adopted. In other words, entrepreneurship is a continuous effort for synergy
(optimization of performance) in organizations.
 Profit potential - “Profit potential is the likely level of return or compensation to the
entrepreneur for taking on the risk of developing an idea into an actual business
venture.” Without profit potential, the efforts of entrepreneurs would remain only an
abstract and a theoretical leisure activity.
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 Risk bearing - The essence of entrepreneurship is the ‘willingness to assume risk’
arising out of the creation and implementation of new ideas. New ideas are always
tentative and their results may not be instantaneous and positive. An entrepreneur
has to have patience to see his efforts bear fruit.
 Skill-full management - Entrepreneurship involves skill-full management. The
basic managerial skill is the most important characteristic feature of
entrepreneurship. For effective management of an enterprise, the role of an
entrepreneur is to initiate and supervise design of organization improvement
projects in relation to upcoming opportunities is very much important.
 Accepting challenges - Entrepreneurship means accepting challenges amidst risk
and uncertainty. While accepting entrepreneurship as a career the entrepreneur
accepts the challenges of all odds and puts his efforts to convert the odds into
viable business opportunities by pooling together the resources of building and
running the enterprise.
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 Goal-oriented Activity - The entrepreneur who creates and operates enterprises seeks to
earn profits through satisfaction of needs of consumers; hence, entrepreneurship is a
goal-oriented activity. Entrepreneurship emphasizes results, achievements and targets
achieved. It is work done not imaginary plans or paper decisions. Hence
entrepreneurship is a goal-oriented activity.
 Value Creation - Through entrepreneurship, new products, services, transactions,
approaches, resources, technologies, and markets are created that contribute some value
to a community or marketplace. We can also see value created when, through
entrepreneurship; resources are transformed into outputs such as products or services.
 Dynamic Process - Entrepreneurship is a dynamic function. Entrepreneur thrives on
changes in the environment, which bring useful opportunities for business. An
entrepreneur deals proactively with changing markets -and environment. He looks at the
changes as the source of market advantages, not as a problem. Uncertainties are market
opportunities for him. He capitalizes on fleeting market anomalies.

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 Uniqueness - Entrepreneurship involves new combinations and new
approaches with which entrepreneurs are willing to experiment. Through
Entrepreneurship unique products are created and unique approaches are tried.
Entrepreneurship isn’t merely imitating what others have done. It’s doing
something new, something untested and untried – something unique.
 Interest and Vision Since - entrepreneurship pays off according to
performance rather than time spent on a particular effort, an entrepreneur must
work in an area that interests him. Otherwise, he will not be able to maintain a
high level of work ethic, and she will most likely fail. This interest must also
translate into a vision for the company’s growth.
 Risk and Rewards - Entrepreneurship requires risk. However, this risk also
tends to relate directly to the rewards involved.

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Entrepreneur V/s Entrepreneurship

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Entrepreneur V/s Intrapreneur

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Entrepreneur V/s Intrapreneur

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Basis Entrepreneur Manager
q
Motive The main motive of an entrepreneur is to The main motive of a manager is render
start a venture for his personal gratification. services in an enterprise already set by
someone else.
Status Owner Servant

Risk Assumes risk and uncertainty Manager does not bear any risk involved in
enterprise.
Rewards Profits, which are highly uncertain and not Salary which is certain and fixed
fixed.
Innovation Entrepreneur himself thinks over what and A manager simply executes plans prepared by
how to produce goods to meet the the entrepreneur.
Qualification An entrepreneur needs to possess qualities A manager needs to possess distinct
and qualifications like high achievement qualifications in terms of sound knowledge in
motive, originality in thinking, foresight, risk management theory and practice.
bearing ability etc.

Target The main target of an entrepreneur is to start The main goal or motive of a manager is give
his venture by setting up as a sole trader or his services to an enterprise set up by
firm or a company. someone else i.e. an entrepreneur.
Decision Making All of the policies and strategic decisions, While all those managerial, operational
like those comprising of expansion decisions which would have impact on the
diversification, take-over etc are taken by the short-and medium-term results are taken by
entrepreneur. the managers.

Skills The skill expected from an entrepreneur is in Whereas manger depends on public dealing
the form of creativity, innovation, desire for abilities and conceptual abilities.
high achievement, intuition etc. 14
 Role of Entrepreneurs in Economic Development
 Capital Formation: Entrepreneurs mobilize the idle savings of the public through the
issues of industrial securities. Investment of public savings 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.
 Improvement in Per Capita Income: Entrepreneurs locate and exploit opportunities. They
convert the latent and idle resources like land, labour and capital into national income and
wealth in the form of goods and services. They help to increase net national product and per
capita income in the country, which are important yardsticks for measuring economic
growth.
 Generation of Employment: Entrepreneurs generate employment both directly and
indirectly. Directly, self-employment as an entrepreneur offers the best way for independent
and honorable life. Indirectly, by setting up large and small scale business units they offer
jobs to millions. Thus, entrepreneurship helps to reduce the unemployment problem in the
country.
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 Balanced Regional Development: Entrepreneurs in the public and private sectors help
to remove regional disparities in economic development. They set up industries in
backward areas to avail various concessions and subsidies offered by the central and
state governments.
 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 help to improve
the standards of life of a common man. These offer goods at lower costs and increase
variety in consumption.
 Economic Independence: Entrepreneurship is essential for national self-reliance.
Industrialists help to manufacture indigenous substitutes of hitherto imported products
thereby reducing dependence on foreign countries. Businessmen 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.
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 Backward and Forward Linkages: An entrepreneur initiates change
which has a chain reaction. Setting up of an enterprise 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 facilitates the growth of machine 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 as important to established firms as it is to new ones.

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 Types of Entrepreneur
 Danhof classifies Entrepreneur into four types.
 Innovative Entrepreneur: This category of entrepreneur is characterized by smell of
innovativeness. 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, he 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.

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 Fabian Entrepreneur : Fabian entrepreneurs are characterized by great caution

and skepticism, in experimenting any change in their enterprise. 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 Entrepreneur : 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.

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 Factors affecting entrepreneurship
The factors responsible for its slow growth are :
 Incompetence and poor management;
 Low level of commitment;
 Restriction imposed by custom and tradition;
 Involvement of high risk;
 Socio-cultural rigidities;
 Lack of motivation;
 Lack of infrastructural facilities;
 Lack of communication network;
 Absence of entrepreneurial aptitude;
 Low status of businessmen;
 Market imperfections;
 Legal formalities involved to set up a unit
 Low quality products
 Low package of salaries to employees

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Sustainability issues in social entrepreneurship.

• Sustainability issues in social entrepreneurship encompass a variety of challenges that

affect the long-term viability and impact of social enterprises. Here are some key
issues:
 Financial Sustainability: Many social enterprises struggle to balance social missions
with financial viability. Reliance on grants and donations can lead to instability, while
generating consistent revenue often requires a strong business model.
 Impact Measurement: Evaluating social impact is complex. Social enterprises need
reliable metrics to demonstrate their effectiveness, which can be resource-intensive
and subjective.
 Scalability: Expanding a social enterprise while maintaining its mission can be
challenging. Growth may dilute impact or compromise core values, leading to
potential mission drift.

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