CHAPTER

ENTREPRENEURSHIP
Learning Objectives:

To introduce the concept of entrepreneur and entrepreneurship.

Discuss characteristics and functions of entrepreneur.
Present the classifications of entrepreneurs.
Introduce the concepts of intrapreneur, ultrapreneur and technical entrepreneur.
Trace the evolution of entrepreneurship.
Present the role of entrepreneurship in economic development.
Discuss the stages in entrepreneurial growth.
Present the barriers to entrepreneurship.

5.1 EVOLUTION OF CONCEPT 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. 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, an entrepreneur is a
bearer of risk, which is non-insurable. SchumPeter 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.

5.2 CONCEPT OF ENTREPRENEUR

As said above entrepreneur is used in various ways and various views. These
views are broadly classified into three groups, namely risk bearer, organizer and
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
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.

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 labourers 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 Schum 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)
(b)
(c)
(d)
(e)

Introduction of new product in the market.

Use of new method of production, which is not yet tested.
Opening of new market.
Discovery of new source of raw materials.
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.
Hence the concept of entrepreneur is associated with three elements risk
bearing, organizing and innovating. Hence 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.
Some more important definitions of entrepreneur
1. According to F.A.Walker: 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 E.E.Hagen: 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.
10. Akhouri describes entrepreneur as a character who combines
innovativeness, readiness to take risk, sensing opportunities, identifying and
mobilizing potential resources, concern for excellence, and who is persistent in
achieving the goal.

5.3 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. Table 5.1
gives core competencies.
Table 5.1: Personal entrepreneurial characteristics

Core competencies
Initiative

Perceiving opportunities

3
4

Persistence
Information gathering

Entrepreneurial activities
Does things before asked for or forced to by events and acts to extend the
business to new areas, products or services.
Identifies business opportunities and mobilizes necessary resources to
make good an opportunity.
Takes repeated or different actions to overcome obstacles.
Consults experts for business and technical advice. Seeks

information of client or suppliers needs. Personally undertakes

market research and make use of personal contacts or information
networks to obtain useful information.
5

Concern for quality work

Commitment to contractual
obligations

Efficiency orientation

States desire to produce or sell a better quality product or service.

Compares his performance favourably with that of others.
Makes a personal sacrifice or expands extraordinary effort to complete a job,
accepts full responsibility in completing a job contract on schedule, pitches
in with workers or work in their place to get the job done and show utmost
concern to satisfy the customer.
Finds ways and means to do things faster, better and economically.

Planning

Various inter-related jobs are synchronized according to plan.

Problem Solving

Conceives new ideas and finds innovative solutions.

10

Self Confidence

Makes decisions on his own and sticks to it in spite of initial setbacks.

11

Experience

Possesses technical expertise in areas of business, finance, marketing, etc.

12

Self Critical

13

Persuasion

14

Use of Influence strategies

15

Assertiveness

16

Monitoring

17

Credibility

18

Concern
welfare

19

Impersonal relationship

Places long-term goodwill over short-term gain in a business relationship.

20

Expansion of capital base

Reinvests a greater portion of profits to expand capital of the firm.

21

Building product image

Concerned about the image of his products among consumers and does
everything possible to establish a niche for his products in the market.

Aware of personal limitations but tries to improve upon by learning from his
past mistakes or experiences of others and is never complacent with
success.
Persuades customers and financiers to patronize his business.

for

employee

Develops business contacts, retains influential people as agents and

restricts dissemination of information in his possession.
Instructs, reprimands or disciplines for failing to perform.
Develops a reporting system to ensure that work is completed and quality
norms.
Demonstrates honesty in dealing with employees, suppliers and customers
even if it means a loss of business.
Expresses concern for employees by responding promptly to their
grievances.

5.4 DISTINCTION BETWEEN ENTREPRENEUR AND MANAGER

Often the two terms namely entrepreneur and manager are considered as
synonym. However the two give different meaning. The major points of
distinction between the two are presented in table 5.2.
Table 5.2: Distinction between entrepreneur and manager
Points
1. Motive
2. Status
3. Risk
4. Rewards
5. Innovation

6. Qualification

Entrepreneur
Manager
The main motive of an entrepreneur is to Main motive of a manager is to render
start a venture for his personal gratification. services in an enterprise already set by
someone else.
Owner
Servant
Assumes risk and uncertainty
Manager does not bear any risk involved in
enterprise.
Profits, which are highly uncertain and not Salary which is certain and fixed.
fixed.
Entrepreneur himself thinks over what and A manager simply executes plans prepared by
how to produce goods to meet the changing the entrepreneur.
needs of the customers. Hence he acts as
innovator / change agent.
An entrepreneur needs to possess qualities A manager needs to possess distinct
and qualifications like high achievement qualifications in terms of sound knowledge
motive, originality in thinking, foresight, risk- in management theory and practice.
bearing ability etc.

5.5 TECHNICAL ENTREPRENEUR

There are large numbers of technical institutions at the degree and diploma level
producing large number of technical personnel. The standard of our technical
education is comparable with international standards. India has the third largest
pool of technical and scientific personnel in the world. However, we are not able
to utilize its full potential and on the other hand there is surplus technical
manpower that are unemployed. This large pool of technical manpower can be
best utilized for developing small-scale industries in the hi-tech areas using

improved technologies and scientific methods of production. They can be trained

to use latest management techniques to manage the projects they set up.
A technically qualified and experienced person can make a more
competent entrepreneur as he acquires special knowledge of science,
engineering materials and machines, production planning and control,
manufacturing technologies and management techniques for successful
launching and smooth running of an industrial unit. Also through training, he
develops an aptitude for objective considerations and evaluation of issues
involved in the process of an enterprise.
A
technical
entrepreneur
develops
characteristics
of
quality
consciousness, adoption of modern technology and management technique and
realization of the importance of research and innovation for productivity
improvement, the absence of which can lead to industrial sickness.
In this regard many technical universities made it mandatory for technical
institute to have Entrepreneurship Development Cell (EDC). Moreover a core
subject on Entrepreneurship Development is introduced for all disciplines of
engineering and technology.

5.6 CHARMS OF BEING AN ENTREPRENEUR

The most exciting 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.
2.
3.
4.
5.

Freedom to work.
Satisfaction of being own boss.
Power to do things as he likes.
Rewards of ownership and retirement assurance.
Respect of family and friends.

Penalties for an Entrepreneur

1. Constraints of financiers, labourers, 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.

5.7 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.
1. 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.
2. 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.
3. 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 PMRY, SASY, REAP etc. in which he can
get government assistance in the form of seed capital, fixed and working capital
for his business.
4. Procurement of machines and materials: Another important function of an
Entrepreneur is to procure raw materials and machines. Entrepreneur has to
identify cheap and regular sources of raw materials which will help him to reduce
the cost of production and face competition boldly. While procuring machineries
he should specify the technical details and the capacity. He should consider the
warranty, after sales service facilities etc before procuring machineries.
5. Market research: Market research is the systematic collection of data
regarding the product which the Entrepreneur wants to manufacture.
Entrepreneur has to undertake market research persistently to know the details
of the intending product, i.e. the demand for the product, size of the
market/customers, the supply of the product, competition, the price of the
product etc.
6. 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.
7. Recruitment of manpower: To carry out this function an Entrepreneur has to
perform the following activities.

(a)
(b)
(c)
(d)
(e)

Estimating man power requirement for short term and long term.
Laying down the selection procedure.
Designing scheme of compensation.
Laying down the service rules.
Designing mechanism for training and development.

8. 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.
All the above functions of the Entrepreneur can precisely be put into three
categories of innovation, risk bearing, and organizing and managing functions.

5.8 TYPES OF ENTREPRENEUR

Today various types of Entrepreneurs are found engaged in different types of
activities, not only in industrial activities but also in agriculture and commercial
activities. Today we can recognize Entrepreneur in industry, service and business
sectors which are technically called as ISB sectors. Entrepreneurs are classified in
a number of ways as discussed below.
Clearance Danhofs Classifications
Danhof classifies Entrepreneur into four types.
1. 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 is very much helpful for their country because they
bring about a transformation in life style.
2. 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.
3. 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.
4. Drone entrepreneurs: Such entrepreneurs are conservative or orthodox
outlook. They always feel comfortable with their old fashioned technology
production even though technologies have changed. They never like to get rid
their traditional business, traditional machineries and traditional system
business even at the cost of reduced returns.
Arthur H Cole Classification

in
of
of
of

Arthur H Cole 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 possess 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 behaviour 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, and beauty parlour 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: Entrepreneurs 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 16 a woman and having
minimum financial interests of 51% of the capital and giving at least 51% of
the employment generated in the enterprise to women. Women entrepreneurs
play an important role in economy especially in rural areas.
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. The
difference between entrepreneurs and Intrapreneurs is given in table 5.3.

5.10 ULTRAPRENEURS
Through the entrepreneurship has been there for a long time, its performance
and execution evolve with the prevalent economic conditions of the day. The
entrepreneurs of the 90s are a different breed in relation to their immediate
predecessors from the 80s. Thus, the path of successful entrepreneurship is ever
changing as the art and science of entrepreneurship, is taking a new colours.
Now-a-days new products and services are conceived, created, tested, produced
and marketed very quickly and with great speed. Therefore todays
entrepreneurs need to have different mindset about establishing and operating a
company. This mindset is what is called ultrapreneuring.
Table 5.3: Difference between entrepreneurs and intrapreneurs
1. Dependency

Entrepreneurs
He is independent in his operation.

Intrapreneurs
He is dependent on the entrepreneurs i.e.
owner.
He does not raise funds for the organization.

2. Raising of funds He himself raises funds required for the

organization.
3. Risk
Entrepreneurs bear the risk involved in the He does not fully bear the risk involved in
business.
the organization.
4. Operation
An entrepreneur operates from outside.
An intrapreneur operates from inside.
Entrepreneurs convert the ideas into viable
opportunities.

Intrapreneurs take the responsibility of

creating innovation.

Entrepreneurs take the profit of the business.

He is provided with a variety of perquisite for

his innovation.

According to James B Arkebaur, the concept of ultrapreneuring is to identify

business opportunity, determine its viability and form a company. It requires
assembling a super competent management team who then develop, produce
and market the product or service. They then sell the majority interest of the
company, all of this with maximum resource leverage of both talent and money
in the shortest optimum time period. Ultra growth companies are not made to

pass on to the next generation.

Ultrapreneur create them and then sell out, merge or combine. Their lifelong
challenge is to do it again and over again.

5.11 CONCEPT OF ENTREPRENEURSHIP

Entrepreneurship is an elusive concept. The concept of entrepreneurship has
been a subject of much debate and is defined differently by different authors.
Some of them view it as risk-bearing; others call it as innovations, yet others
consider it as thrill seeking. 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.
A.H. Cole has defined entrepreneurship as the purposeful activity of an
individual or group of associated individuals, undertaken to initiate, maintain or
earn profit by production and distribution of economic goods and services.
According to Heggins Entrepreneurship is meant the function of
seeking investment and production opportunity, organizing an enterprise to
undertake a new production process, raising capital, hiring labour, arranging the
supply of raw materials and selecting top managers of day-to-day operations.
According to Joseph A Schempeter entrepreneurship is essentially a
creative activity. It consists of doing such things as are not generally done in
ordinary course of business. An entrepreneur is one who innovates i.e., carries
out new business.
According Mc Clelland, there are two characteristics of entrepreneur: first
is doing a thing in a new and better way, second is decision making under
uncertainty.
The various definitions of entrepreneurship identify two basic elements of
entrepreneurship namely innovation and risk bearing.
Innovation: Innovation is doing something new or something different.
Entrepreneurs constantly look out to do something different and unique to meet
the changing requirements of the customers. Entrepreneurs need not be
inventors of new products or new methods of production or service, but may
possess the ability of making use of the inventions for their enterprises. For
example, in order to satisfy the changing needs of the customers, now-a-days
fruit juice (mango, fruits etc.) in being served in tins, instead of bottles so that
customers can carry it and throw away the containers after drinking the juice.
Ratan Tata did not invent automobile. Foreseeing the people desire to have small
cars at lower price, he applied new methods of mass manufacturing, made use of
new, lights and relatively cheaper materials. Hence entrepreneurship needs to
apply inventions on a continuous basis to meet customers changing demands for
products.
Risk bearing: Giving birth to a new enterprise involves risk. Doing
something new and different is also risky. The enterprise may earn profit or incur

loss, which depends on various factors like changing customer preferences,

increased competition, shortage or raw materials etc. An entrepreneur needs to
be bold enough to assume the risk involved and hence an entrepreneur is a riskbearer not risk-avoider. This risk-bearing ability keeps him to try on and on which
ultimately makes him to succeed. The Japanese proverb Fall seven times, stand
up eight applied to entrepreneur.
Though the terms entrepreneur and entrepreneurship are used
interchangeable, yet they are conceptually different. The relationship between
the two is indicated in fig. 5.1 and table-5.4.
ENTREPRENEUR

ENTREPRENEURSHIP

ENTERPRISE

PERSON

PROCESS OF ACTION

OBJECT

Fig. 5.1: Concept of entrepreneurship

Entrepreneur
Person
Organizer
Innovator
Risk-bearer
Motivator
Creator
Visualizes
Leader
Imitator

Entrepreneurship
Process
Organization
Innovation
Risk-bearing
Motivation
Creation
Vision
Leading
Imitation

Table 5.4: Relationships between entrepreneur and entrepreneurship

5.12 EVOLUTION OF ENTREPRENEURSHIP

Emergence of entrepreneurial class is as old as our ancient history itself. It dates
back to the Pre-Vedic period when Harappan culture flourished in India. History of
entrepreneurship and emergence of entrepreneurial class in India may be
presented in two sections viz. entrepreneurship during pre-independence and
post-independence.
Entrepreneurship during pre-independence: In the excavation in Harappan and
Mohanjodaro the handcraft items and metal molded items were found. It is also
found that the craftsmen of the time made, handicraft items as part of their
contribution to the society in which they lived. The entrepreneurship to make
handicraft items existed in India around 2500 B.C. People developed their own
social system and village economy in India. India also developed cast-based
divisions of work, which helped in the development of skills of artisans.
The artisans in different parts of India grouped together and developed their own
artifacts and were well known for their quality. The cities like Banaras, Gaya, Puri,
Allahabad and Mirzapur, which were on the banks of Ganga River, established
their own type of handicrafts work. The royal patronage by the local kings of that

period helped artisan industries to flourish. The handicrafts industry of the time
was basically skill based and started as tiny sector.
The population in India grew in the middle age and spread to the full
geographical area. The local kings gave patronage to the handicrafts, silk,
cotton-ware and development of other cottage based industries for consumption
of higher section of the society. The development of agriculture products like
spices, Ayurvedic medicines also flourished in some parts of the country and
started export them. Spices from kerala, Corah from Bengal, Shawls from
Kashmir and Banaras, brass and Bidriware, Silk from Nagpur and Mysore enjoyed
prestigious status in international market till earlier years of 18 th century. The
craftsmen gathered together in halls, which were called Karkhanas.
Unfortunately the prestigious Indian handicrafts industries which were basically a
cottage and tiny sector declined at the end of 18 th century, because of the
following reasons.
1 Disappearance of royal patronage to the handicrafts
.
2 Lukewarm attitude of British colonial towards Indian
. crafts
3 Imposition of heavy duty on imports of Indian crafts
.
4 Low priced British made goods
.
5 Changes in the tastes and habits of developing Indian
. citizens etc.
In other words East India Company handicapped Indian cottage and tiny sectors.
The company injected various changes in the Indian economy by exporting raw
materials and import of finished goods in India. Parsis established good report
with company. The company established the first shipbuilding industry in Surath
and from 1673 Parsis started manufacturing vessels for the company. In 1677
Manjee Dhanjee was given the contract of building large gun-powder-mill in
Bombay. In 1852 a Parsi foreman who was working in the gun factory started
steel industry in Bombay. That is to say East India Company made some
contribution toward entrepreneurial growth in India.
The actual emergence of manufacturing enterprise can be noticed in the second
half of nineteenth century. In 1854 Cowasjee Nanabhoy started textile mill at
Bombay, R. Chotelal started textile mill in 1861 in Ahamdabad, and in 1880
Nawrojee Wadia opened a mill in Bombay. Jamshadjee Tata established first steel
industry in 1911. Though late, other commercial community namely jains,
vaishyas changed their attitude from commercial entrepreneurship to industrial
entrepreneurship.
The swadeshi campaign provided a seed bed for inculcating and developing
nationalism in the country. Jamshadjee Tata was influenced by this and named
his first mill swadeshi mill and Krishna in its advertisement made the appeal
our concern is financed by native capital and is under native management
throughout.
After the first world war the Indians agreed to discriminating protection to
certain industries and made companies should be registered in India with rupees

capital and have a proportion their directors as Indians. These measures helped
in establishing and extending the factory manufacturing in India during the first
four decades of 20th century during which the relative importance of Parsis
declined and Gujaratis, Marawaris, and Vaishyas gained their importance in
Indias entrepreneurial scene.
The emergence of managing agency system triggered Indian entrepreneurship.
In 1936 Carr, Tagore & Co assumed the management of Calcutta steam tug
association. Dwarakanath Tagore encouraged others to form joint-stock
companies in which management remains in the hands of firm rather than
individual. The European management agency houses, after East India
Company losing its monopoly entered business, trade and banking. It is stated
that the managing agency houses were the real entrepreneurs and these agency
houses emerged to overcome the limitations imposed by shortage of venture
capital
and
entrepreneurial
acumen.
Entrepreneurship
during
postindependence: In 1948 Indian government came forward with the first Industrial
policy, which was revised from time to time. The government identified the
responsibility of the state to promote, assist and develop industries in the
national interest and recognized the role of private sector in accelerating
industrial development.
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 centres 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.
To achieve this, government accorded emphasis on development of small
scale industries in the country by providing various incentives and concessions in
the form of capital, technical know-how markets and land to the entrepreneurs in
the potential areas to remove the regional imbalances in development. To
facilitate the new entrepreneurs in settings up their enterprises, Government
established several institutions like Directorate of Industries, Financial
Corporations, small scale industries corporations, small industry service
institutes etc. Because of this small-scale units emerged very rapidly and their
number increased from 1,21,619 in 1966 to 1,90,727 in 1970. There are also
examples that some entrepreneurs grew from small to medium-scale and from
medium to large scale manufacturing units during the period.
With the invention of digital computer, information technology era started
in 1970. IBM was one of the pioneers in this field. The software developments
created new opportunities and the service industries started growing faster than
manufacturing industry after 1980. The high growth of new industries also had
high risks. The new top rated entrepreneurship opportunities arose such as
communication, food services, entertainment, merchandising, cosmetics, and
apparel with the electronic communication reducing the distances to a Global
Village. The market size is growing and the entrepreneur has to benchmark
himself with the global standards.

5.13 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. The
economic history of the presently developed countries, for example, USA and
Japan tends to support the facts that the economy is an effect for which the
entrepreneurship is the cause. The crucial role played by the entrepreneurs in
the western countries has made the people of underdeveloped countries
conscious of the significance of entrepreneurship in economic development. 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. Parson and Smelter described entrepreneurship
as one of the two necessary conditions for economic development, the other
being increased output of capital. Y.A. Say high describes entrepreneurship as a
necessary dynamic force for economic development. 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 the idle saving of
the public.
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 countrys export trade i.e. an important ingredient for economic
development.

5.14 STAGES IN THE ENTREPRENEURIAL PROCESS

Entrepreneurship is a process of comprising several distinct stages. The first
stage in the entrepreneurial process is some change in the real world. For
example, a war may destroy countrys manufacturing facilities but spare its
trained work force that has happened in West Germany during Second World
War. Such a change leads to changes in every aspect of life in the country. It
creates needs for new goods and services. The distraction of Japans industry
during the Second World War allowed the country to rebuild its industry from
scratch.
The second stage in the entrepreneurial development is the idea. For
example, microprocessor, the brain of personnel computer had been in the
American market since the early 1970s. A company called Altair had put out a
computer that was so personal that one had to put it together oneself. But it was
Apple Computer, which perceived that computer market was potentially very big.
One may become an entrepreneur in various ways. He may start a new
enterprise. Alternatively he may acquire a franchise. Franchising is an
entrepreneurial system whereby an individual runs a business based on the right
to make a product or service granted by a manufacturer or other organization.
Intrapreneuring is another strategy. It is the process of extending the firms

domain of competence by exploiting

combinations of its existing resources.

new

opportunities

through

new

5.15 BARRIERS TO ENTREPRENEURSHIP

A large number of entrepreneurs particularly in the small enterprises fail due to
several problems and barriers. The greatest barrier to entrepreneurship is the
failure of success. Karl. H. Vesper has identified the following entrepreneurship
barriers:
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. Complacencylack of motivation
7. Social stigma
8. Time presence and distractions
9. Legal constraints and regulations
10. Monopoly and protectionism
11. Inhibitions due to patents

Chapter Summary
An entrepreneur is a person who buys factor services at certain prices with a
view to selling its products at uncertain prices. Entrepreneur is a dynamic agent
of change. An entrepreneur is a person of telescopic faculty, drive and talent who
perceives business opportunities and promptly seizes them for exploitation.
Entrepreneur needs to possess some core competencies like innovative,
perceiving opportunities, persistence, information gathering, concern for quality,
planning, problem solving etc. a clear distinction can be made between an
entrepreneur and a manager. An entrepreneur has to perform various functions
like idea generation, determination of business objectives, raising of funds,
procurement of machines and materials, market research, deciding forms of
ownership, recruitment of man power etc. entrepreneurs can be classified based
on various factors. Intrapreneurs take the responsibility of innovation.
Entrepreneurship is purposeful activity of an individual or a group of
associated individuals, undertaken to initiate, maintain or earn profit by
production and distribution of economic goods or services. It is an act of starting
and running an enterprise. Entrepreneurship is as old as ancient history itself and
dates back to pre-Vedic period when Harappan culture flourished in India. The
artisans and royal patronage of Indian kings have contributed for the
entrepreneurship in the early ages of Indian history. East India Company
handicapped the Indian tiny and cottage industries. Later Parsis, Jains and
Vaishyas have contributed for the growth of entrepreneurship. The managing
agency system and the Swadeshi movement have contributed for the growth of
entrepreneurship in India.
After independence, the Government of India has taken measures for
growth of industries through her Industry Policy Resolutions. There are many
barriers to the entrepreneurship. They may be lack of viable concept, lack of
market knowledge, lack of skills, lack of seed capital etc.

QUESTIONS

1. Explain in brief the concept of entrepreneur.

2. Give various definitions of entrepreneur.
3. Enumerate the characteristics of entrepreneur.
4. Distinguish between entrepreneur and manager.
5. Write a note on technical entrepreneur.
6. What are the rewards and penalties for entrepreneurs?
7. Explain in brief the functions of entrepreneur.
8. Explain in brief classification of entrepreneurs.
9. Distinguish between entrepreneur and Intrapreneur.
10. Write a note on ultrapreneur.
11. Explain in brief the concept of entrepreneurship.
12. Explain in brief the evolution of concept of entrepreneurship in India.
13. Explain in brief the role of entrepreneurship in economic development.
14. Explain in brief the stages in entrepreneurial process.
15. Write a note on barriers of entrepreneurship.