Entrepreneurship Development
Entrepreneurship Development
Entrepreneurship Development
Oxford English Dictionary (in 1897): An entrepreneur is the director or a manager of a public musical institution, one who gets-up
entertainment, especially musical performance.
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Early 16 century: Applied to those who were engaged in military expeditions.
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17 century: Extended to cover civil engineering activities such as construction and fortification.
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Beginning of the 18 century: Used to refer to economic aspects.
Thus, the evolution of the concept of entrepreneur is considered over more than four centuries.
Over this period, the term entrepreneur is used in various ways and various views.
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These views are broadly classified into three groups: ( 2 ) describe
Entrepreneur as a Risk-Bearer
Entrepreneur as a Organizer
Entrepreneur as a Innovator
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4. Intrapreneur
An Intrapreneur is a manager within a company who promotes innovative product development and marketing.
An Intrapreneur is a person with entrepreneurial characteristics who is employed within a large corporation.
Intrapreneurs unlike entrepreneur, works for an organization as an employee, but takes hands-on responsibility for initiating
innovative ventures of any kind within an organization.
According to Kuratko & Hodgetts (2001), Intrapreneurs are not necessarily the inventors of new products or services but are the
persons who can turn ideas or prototypes into profitable realities.
Kao (1991) described Intrapreneurs as Persons who tend to be action oriented. They can move quickly to get things done. They are
goal oriented, willing to do whatever it takes to achieve their objectives. They are self-determined goal setters who go beyond the
call of duty in achieving their goals .
Primary Motives Wants promotion and other Wants freedom; goal oriented, Wants freedom and access to
traditional corporate rewards; self-reliant and self motivated corporate resources; goal oriented
power motivated and self motivated, but also
responds to corporate rewards and
recognition.
Tendency to action Delegates action; supervising Gets hands dirty; may upset Gets hands dirty; may know how to
and reporting take most employees by suddenly doing their delegate but, when necessary, does
energy work what needs to be done.
Skills Professional management; Knows business intimately; more Very much like the entrepreneur,
often business school trained; business acumen than managerial but the situation demands greater
uses abstract analytical tools, or political skill; often technically ability to prosper within the
people, management and trained if in technical business; organization.
political skills. may have had formal profit-and-
loss responsibility in the company
Attitudes toward Sees others being in charge of Self-confident, optimistic and Self-confident and courageous;
courage and destiny his or her destiny; can be courageous many are cynical about the system
forceful and ambitious but but optimistic about their ability to
may be fearful of other s outwit it.
ability to do better than him
or her
Focus of attention Primarily on event inside Primarily on technology and Both inside and outside; sells
corporation marketplace insiders on needs of venture and
marketplace; also focuses on
customers
Attitude toward risk cautious Likes moderate risk; invests Like moderate risk; generally not
heavily but expects to succeed. afraid of being fired, so sees little
personal risk
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Attitude toward status Cares about status symbols Happy sitting on an orange crate if Considers traditional status symbols
(corner office, and so on) job is getting done a joke; treasures symbols of
freedom
Attitude toward failure Strives to avoid mistakes and Deals with mistakes and failures as Sensitive to need to appear orderly;
and mistakes surprises; postpone learning experiences attempts to hide risky projects from
recognizing failure view so as to learn from mistakes
without political cost of public
failure
Decision making style Agrees with those in power; Follows private vision; decisive, Adept at getting others to agree
delays making decisions until action oriented with private vision; somewhat more
a feel of what bosses want it patient and willing to compromise
obtained than the entrepreneur but still a
doer
Who serves Pleases others Pleases self and customers Pleases self, customers and
sponsors
2. Entrepreneurs are born, not made: Entrepreneurship has models, processes, and case studies that allow the traits to be acquired.
Traits include aggressiveness, initiative, drive, a willingness to take risks, analytical ability, and skill in human relations.
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3. Entrepreneurs are always inventors: ( 8 )This is a result of misunderstanding and tunnel vision. Many inventors or innovators
are also entrepreneurs. Numerous entrepreneurs encompass all sorts of innovative activities.
4. Entrepreneurs are academic and social misfits: This myth results from people who have started successful enterprises after
dropping out of school or quitting a job. Historically, education and social organizations did not recognize the entrepreneur. The
entrepreneur is now viewed as a professional.
5. Entrepreneurs must fit the ͞profile͟: Many books and articles have presented checklists of characteristics of the successful
entrepreneur. The environment, the venture itself, and the entrepreneur have interactive effects, which result in many different
profiles.
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6. All you need is money to be an entrepreneur: ( 2 Venture needs capital to survive. A large number of business failures occur
because of lack of adequate financing. Failure due to lack of financing indicates other problems- Managerial incompetence, Lack of
financial understanding, Poor investments, Poor planning.
7. All you need is luck to be an entrepreneur: Being in the right place at the right time is always an advantage. Luck happens when
preparation meets opportunity. What appears to be luck could really be several factors- Preparation, Determination, Desire,
Knowledge, Innovativeness.
8. Ignorance is bliss for an entrepreneur: Key factors in successful entrepreneurship- identifying the strengths and weakness of a
venture, setting up clear timetables with contingencies for handling problems, minimizing problems through careful strategy
formulation. Careful planning is the mark of an accomplished entrepreneur.
9. Entrepreneurs seek success but experience high failure rates: Many entrepreneurs suffer a number of failures before they are
successful. Failure can teach many lessons to those willing to learn and often leads to future success.
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10. Entrepreneurs are extreme risk takers (gamblers): The concept of risk is a major element in the entrepreneurship process.
While it may appear that an entrepreneur is gambling on a wild chance, the fact is that the entrepreneur is usually working on a
moderate or calculated risk.
1. Innovating Entrepreneurs: An innovating entrepreneur is one who introduces new goods, inaugurates new method of production,
discovers new market and reorganizes the enterprise.
2. Imitative Entrepreneurs: Imitative entrepreneurs do not innovate the changes themselves, they only imitate techniques and
technology innovated by others.
3. Fabian Entrepreneurs: Fabian entrepreneurs are characterized by very great caution and skepticism in experimenting any changes
in their enterprises.
4. Drone Entrepreneurs: These entrepreneurs are characterized by a refusal to adopt opportunities to make changes in production
methods even at the cost of severely reduced returns relative to other like producers.
Following are some more types of entrepreneurs listed by some other behavioral scientists:
1. Solo Operators: These are the entrepreneurs who essentially work alone and, if needed at all, employ a few employees.
2. Active Partners: Active partners are those entrepreneurs who start/carry on an enterprise as a joint venture and actively
participate in the operations of the business.
3. Inventors: Such entrepreneurs with their competence and inventiveness invent new products.
4. Challengers: These are the entrepreneurs who plunge into industry because of the challenges it presents. When one challenge
seems to be met, they begin to look for new challenges.
5. Buyers: In order to reduce risk involved in setting up a new enterprise, these type of entrepreneurs like to buy the ongoing one.
6. Life timers: These entrepreneurs take business as an integral part of their life. Usually, the family enterprise and business which
mainly depend on exercise of personal skill.
8. Entrepreneurship
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.
According to A.H. Cole, Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken
to initiate, maintain or increase profit by production or distribution of economic goods and services.
According to Schumpeter, Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent
businessman but also company directors and managers who actually carry out innovative functions.
Step 2: Developing successful business ideas: Recognizing opportunities and generating ideas, feasibility analysis, writing a business
plan, industry and competitor analysis, and developing an effective business model.
Step 3: Moving from an idea to an entrepreneurial firm: Preparing the proper ethical and legal foundation, Assessing a new
venture s financial strength and viability, building a new venture team, and getting financing or funding.
Step 4: Managing and growing the entrepreneurial firm: Unique marketing issues, the importance of intellectual property, preparing
for and evaluating the challenges of growth, strategies for firm growth.
11. Role of Entrepreneurship in Economic Development ( 8th , 5th , 7th, 4th ,3rd , 2nd )
What is Economic Development?
A process of upward change whereby the real per capita income of a country increases over a long period of time.
In classical theories of economic development, Adam Smith and David Ricardo gave no room for Entrepreneurship.
BUT, the economic history of the presently developed countries tends to support the fact that the economy is an effect for which
entrepreneurship is the cause.
Development does not occur spontaneously as a natural consequence when economic conditions are in some sense right : a
catalyst or agent is needed, and this requires an entrepreneurial ability.
The important role that entrepreneurship plays in the economic development of an economy can now be put in a
systematic and orderly manner:
1. Entrepreneurship promotes capital formation by mobilizing the idle saving of the public.
2. It provides immediate large-scale employment reducing the unemployment problem, i.e. the root of all socio-economic problems.
5. It stimulates the equitable redistribution of wealth, income and even political power in the interest of the country.
6. It encourages effective resource mobilization of capital and skill which might otherwise remain unutilized and idle.
7. It also induces backward and forward linkages which stimulate the process of economic development in the country.
8. It also promotes country s export trade i.e., an important ingredient to economic development.
These environmental factors may have both positive and negative influences on the growth of entrepreneurship.
Various environmental factors influencing the emergence of entrepreneurship are given below:
4. Governmental influence: Industrial policy, facilities, utilities and services, incentives and concessions.
Uncertain leisure
As always remain absorbed in business problems cannot be open and frank to enjoy pleasure.
Remain tensed and heavy for days together when facing any serious business problem.
Become sometime unnecessary victim of conspiracies by partners, competitors, aggrieved powerful politicians.
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Chapter 2: Approaches of Entrepreneurship
1) Approaches of Entrepreneurship ( 8th , 5th , 2nd )
Entrepreneurship as a field of study draws attention from a wide variety of fields like economics, psychology, sociology,
anthropology etc.
These issues in entrepreneurship were viewed from different angles resulting in multiple approaches.
Cunningham & Lischeron (1991) have identified six different major schools of thought:
1. The great person school: The great person school views an entrepreneur as a person who is born with an intuitive ability –
a sixth sense – and traits such as vigor, energy, persistence and self-esteem.
2. The psychological characteristics school: The psychological characteristics school believes that entrepreneurs have unique
values and attitudes such as honesty, duty, responsibility, ethical behavior, risk-taking propensity and the need for
achievement.
3. The classical school: The classical school identifies entrepreneurship with innovation, creativity and discovery.
4. The management school: The management school describes entrepreneurs as persons who organize, own, manage and
assume the risk of an economic venture.
5. The leadership school: The leadership school views an entrepreneur as one who motivates, directs and leads.
6. The intrapreneurship school: The intrapreneurship school focuses on skillful managers within complex organizations.
Kuratko & Hodgetts (2001) identified six schools of thought under two broader categories of Macro and Micro view :
1. The Macro view: The macro view presents a broad array of factors to success or failure in contemporary entrepreneurial
ventures. This includes external process that are sometimes beyond the control of the individual entrepreneur. This view
includes three schools of thought such as,
I. The environmental school of thought
II. The financial/capital school of thought
III. The displacement school of thought
2. The Micro view: This view examines the factors that are specific to entrepreneurship and are part of the internal locus of
control. The potential entrepreneur has the ability or control, to direct or adjust the outcome of each major influence. This
view includes three schools of thought such as,
I. Trait school of thought
II. Venture opportunity school of thought
III. Strategic formulation school of thought
In line with the scholarly search for answer to the question ͞what makes an entrepreneur?͟ or ͞what determines the supply
of entrepreneurs?͟ or ͞how entrepreneurs can be developed?͟ a number of approaches can be traced as follows:
1. Psychological Approach
2. Demographic Approach
3. Behavioral Approach
4. Socio-cultural Approach
5. Venture Facilitation Approach
6. Entrepreneurial Event Approach
7. Multidimensional Approach
8. Hisrich s Decision Model
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9. Eclectic Model
Its premise is that one s needs, drives, attitudes, beliefs and values are primary determinants of behavior.
As such, this school of thought focuses on personality or psychological factors and characteristics.
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Characteristics/Traits identified within the psychological approach are as follows: ( 8 )
According to O͛Gorman & Cunningham (1997), nAch manifested in the form of following characteristics:
Entrepreneurs actively seek situations and environments which allow them to do their own thing in their own way.
According to McCarthy (2000), individuals with a high nAch appeared to take moderate risks while those with a low nAch were
prepared to take greater risks. Why??? Because---
Finally, to nullify everything and everyone, Hisrich & Peters (1995) claim that, There is no real empirical evidence to prove that
risk-taking propensity is, in fact, a distinguishing characteristic of entrepreneurs!!!
1. Internal locus of control: Individuals having it believe that they can positively determine their own destiny by their behavior, fate
or luck plays a relatively insignificant role. They take responsibility for their successes and failures, attributing the positive results to
ability and effort.
2. External locus of control: Individuals having it believe that external forces are the primary determinants of life s outcomes. They
relate results to the difficulty of the particular task, to the actions of others, and to a combination of luck and fate.
Innovativeness:
Schumpeter (1934) suggests that Innovation is a key factor which differentiates entrepreneurial behavior from managerial activity.
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2. Demographic Approach
Demographic approach focuses on the effects of an individual͛s background and includes some analyses of his/her;
A self-employed father,
An absent father,
An overbearing or controlling mother,
Major upsets such as illness, separation or a death in the family.
Dyer and Handler (1994) identified 4 career nexuses that reflect different points in time where family and entrepreneurial
dynamics intersect:
However, more recent studies have indicated that entrepreneurs now tend to be better educated. 2 surveys of 1986 and 1988 found
23% and 68% of entrepreneurs surveyed respectively who were holding primary university degrees or higher.
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vi. Work Experience:
Work experience has been seen as an important factor in entrepreneurial success, particularly if the experience is in the specific
industry sector of the proposed business venture.
1. The approach assumes that human behavior is strongly influenced by demographic characteristics.
2. The practice of using demographic characteristics is not appropriate. There is a lack of adequate empirical evidence in this
regard.
3. The approach does not help predict who will or will not be an entrepreneur.
Besides, demographic characteristics being static in nature cannot explain a dynamic multifaceted phenomenon like
entrepreneurship.
3. Behavioral Approach
Behavioral approach focuses on the entrepreneur s interaction with the environment which both shapes, and is shaped by,
the entrepreneur (McCarthy, 2000).
The entrepreneur is seen in the context of a set of activities involved in the creation of an organization (Gartner, 1989). In this
case the focus is on understanding how attitudes, behaviors, management skills and know-how, all combine in determining
entrepreneurial success.
According to Drucker (1985), the main supporter of this approach, entrepreneurship is a behavioral pattern rather than a
personality trait and something that people can be taught so that they can, indeed, learn how to behave entrepreneurially.
Drucker s entrepreneurs take risks and make decisions.
4. Socio-cultural Approach
Socio-cultural approach focuses on the socio-cultural events that either force a person or make it desirable to choose
entrepreneurship as a career option.
Some studies indicate that entrepreneurs are more likely to come from ethnic, religious or minority groups (Weber, 1958;
Hirschmeyer, 1964).
Moreover, it is widely believed that some culture is more encouraging to entrepreneurship than others.
A paradox: Economic development in a country works both as a negative force and positive stimuli for entrepreneurship.
Side 1: Increasing real wages raise the opportunity costs of self employment and thus make wage employment more attractive.
Side 2: Increasing wealth leads to higher consumer needs that are likely to be better fulfilled through self-employment. Moreover,
consumers with more disposable income are in a position to afford to commit a mistake in their decisions which, in turn, encourage
entrepreneurship.
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This approach includes the following factors:
Initiative
Organization
Administration
Relative autonomy
Risk taking
Environment
William D. Bygrave (1989) proposed four milestone events in the entrepreneurship process:
7. Multidimensional Approach
William B. Gartner (1985) view entrepreneurship as a complex, multidimensional and dynamic rather than a static framework that
emphasizes theindividual, the environment, the organization and the venture process.
Limitation: It does not relate how different steps in the process are affected by various factors.
This approach attempts to provide a holistic view of supply of entrepreneurship at country level.
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Framework of determinants of entrepreneurship:
…Eclectic Model
Here,
E-E* = The discrepancy between the actual and the optimal rate of entrepreneurship which is expressed through a surplus or lack of
entrepreneurial opportunities, leading to entry and exit of entrepreneurs, respectively
G1 = Government intervention on the demand side of entrepreneurship; influencing the number and type of entrepreneurial
opportunities
G2 = Government intervention on the supply side of entrepreneurship; influencing the number and type of potential entrepreneurs.
G3 = Government policies aimed at influencing the availability of resources, skills and knowledge of individuals. These policies
generally deal with the input factors of entrepreneurship, i.e., labor, finance and information.
G4 = Government policies aimed at influencing the preferences, i.e., values and attitudes of individuals
G5 = Government policies (directly) aimed at the decision-making process of individuals. Given certain opportunities and individual
characteristics, this type of government intervention directly influences the risk-reward profile of entrepreneurship.
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Chapter 3: Meaning of Entrepreneurship Development
The economic factors that affect the growth of entrepreneurship are the following:
I. Capital: If capital is available, people who have innovative ideas would like to put them into reality.
II. Labor: The quality and quantity of labor influences the emergence of entrepreneurship.
III. Raw materials: Raw materials are required for establishing any industrial activity and therefore has an influence in the
emergence of entrepreneurship.
IV. Market: A readily available market attracts entrepreneurial activities.
2. Non-economic factors: The influence of economic factors on entrepreneurial emergence largely depends upon the existence
of non-economic factors.
i. Social factors: Development of entrepreneurship in a society may take place not just because of better economic factors but
because of the presence of positive social factors. The following social factors influence the development of entrepreneurship in
a society:
rd
(a) Social norms and values: ( 3 ) A society sets certain norms and values for the behavior of people who are part of that society. If
people violate or overstep these norms and values, certain restrictions are likely to be imposed on them. As a result, many people
are forced to accept certain types of jobs and tasks that reflect the social environment. If the society has an open and flexible
approach towards various types of jobs and works, then people will feel free to do whatever they like and even go in for innovation
and creativity. When there is more openness and flexibility, entrepreneurship will not only emerge but also thrive.
(b) Role models: Societies that celebrate entrepreneurship and felicitate successful entrepreneurs in a way encourage many future
generations to take up entrepreneurial activities. This is because successful businessmen prove to be role models for the society at
large.
(c) Social pressure/Marginality: Where people were marginalized, they became entrepreneurs just to prove their abilities and
establish an identity in the society.
(d) Respect and Status: Societies where there is respect and recognition for people to do something different are more likely to see
the development of entrepreneurial activities.
(e) Security: One school of thought is of the view that people are more prone to take entrepreneurial risks in secure social
environments. On the other hand, there are others who argue that entrepreneurship will more likely emerge if there are turbulent
conditions. In both cases, there is scope for entrepreneurship development.
ii. Psychological factors: Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate especially
upon psychological factors.
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These are as follows:
(a) Need Achievement: According to David McClelland s theory of need achievement, a group of personality characteristics which
are indicative of high need achievement is the major determinant of entrepreneurship development. Therefore, if the average level
of need achievement in a society is relatively high, one would expect a relatively high amount of entrepreneurship development in
that society.
(b) Withdrawal of Status Respect: According to Everett Hagen, at some points many social groups experience a radical loss of
status. Hagen attributes the withdrawal of status respect of a group to the origin of entrepreneurship. He postulates that four types
of events can produce status withdrawal:
Hagen further postulates that withdrawal of status respect would give rise to four possible reactions and create four
different personality types:
Retreatist: He who continues to work in a society but remains different to his work and position.
Ritualist: He who adopts a kind of defensive behavior and acts in the way accepted and approved in his society but no hopes of
improving his position.
Reformist: He is a person who foments a rebellion and attempts to establish a new society.
Innovator: He is a creative individual and is likely to be an entrepreneur.
Hagen refers that status withdrawal takes a long period of time- as much as five or more generations- to result in the
emergence of entrepreneurship.
3. Government actions:
The government by its actions or failure to act also does influence both the economic and non-economic factors for
entrepreneurship.
Any interested Government in economic development can help, through its clearly expressed industrial policy, promote
entrepreneurship in one way or other.
By creating basic facilities, services and utilities and by providing incentives and concessions, the Government can provide
the prospective entrepreneurs a facilitative socio-economic setting.
Such conducive setting minimizes the risks which the entrepreneurs are to face.
The supportive actions of the Government appear as the most conducive to the entrepreneurial growth.
Entrepreneurs move from one location to another and also from one occupation to another.
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th th
Factors influencing mobility: ( 6 , 5 )
1. Education: Education enlarges one s thinking and understanding horizons. An educated entrepreneur tends to be more mobile
than an uneducated one.
2. Experience: An entrepreneur s past experience in business and industry increases his/her propensity to move.
3. Availability of facilities: Entrepreneurs move from the areas with no or less facilities to the areas with more and better facilities.
4. Political conditions: The entrepreneurial mobility is influenced by the political factors also.
5. Size of enterprise: Larger business houses are found more mobile than smaller ones.
Types of mobility:
1. Occupational mobility
2. Locational mobility
1) Occupational mobility: Movement or changes in occupation. Several factors like one s freedom of choice, motivation, efforts of
an individual and opportunities available in the society determine one s occupational mobility.
1. Inter-generation movement: A movement of son/daughter from the principal occupation of his/her father.
2. Intra-generation movement: A change in one s own occupation during his/her occupational career.
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Intra-generation movement can be two types: ( 4 )
i. Horizontal: When it takes place between the occupational classes of the equal rank.
ii. Vertical: When it occurs between classes of unequal rank.
2) Locational mobility: An entrepreneur s move to a particular area/location to establish his industry. Entrepreneurs most important
consideration for selecting the location of industries: (A survey finding)
Home Land 52
Govt. incentives 8
Availability of Labor 4
Availability of Market 10
Others 4
Total 100
Entrepreneurial mindset refers to a specific state of mind which orientates human conduct towards entrepreneurial
activities and outcomes.
Individuals with entrepreneurial mindsets are often drawn to opportunities, innovation and new value creation.
Characteristics include the ability to take calculated risks and accept the realities of change and uncertainty.
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11.Entrepreneurial Motivation
Motivation is regarded as the inner state that energizes activities and directs or channels behavior towards the goal . It can also be
seen as a process that arouses action, sustains the activity in progress and that regulates the pattern of activity.
Entrepreneurial Motivation is the drive of an entrepreneur to maintain an entrepreneurial spirit in all their actions.
Motivating Factors:
Sharma (1980) classified all the factors motivating the entrepreneurs into two types as follows:
Internal factors
External factors
Motivating Factors:
Murthy et. al. (1986) classified the motivating factors on different bases. According to them, entrepreneurs are motivated to start
business enterprises due to the following three types of factors:
i. Ambitious factors
ii. Compelling factors
iii. Facilitating factors
Motivating Factors:
Khanka (1990) identified the factors which prompted the new entrepreneurs to enter entrepreneurship:
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12.Entrepreneurship Development Program ( 7th )
Entrepreneurship development has become a matter of great concern in all developed and developing countries all over the
world. But, the real problem is how to develop entrepreneurship? Entrepreneurship development programs (EDPs) are designed
and developed to offer solutions to this problem.
Entrepreneurship Development Program (EDP) may be defined as a program designed to help an individual in strengthening his
entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively.
An EDP stresses on entrepreneurial motivation and behavior.
Program which aims at providing informational or managerial inputs or focus on preparation of project without a touch of
entrepreneurial motivation and behavior is not considered as an EDP.
EDP helps in inculcating entrepreneurial traits into a person, imparting the required knowledge, developing technical, financial,
marketing and managerial skills and building the entrepreneurial attitude.
EDP has been recognized as an effective human resource development tool. It is primarily for developing the first-generation
entrepreneurs who on their own cannot become successful entrepreneurs. EDP through its continuous process of training and
motivation help them to set up their own profitable enterprise and become successful entrepreneurs in their own right.
Entrepreneurship Development Program (EDP) is not merely a training program, rather it is a comprehensive program involving
the following process:
It is a process which enhances the knowledge, skill and motivation of the potential entrepreneur.
It is a process which instills entrepreneurial behavior in the minds of entrepreneur in their day-to-day activities, and
It is a process through which the potential entrepreneurs can develop and set up their own enterprise.
EDP by itself therefore, aims at achieving the specific objectives of the programs through continuous training and motivation.
McClelland found that the need for achievement (n Ach) was the answer to this question. n Ach motivate people to work
hard.
McClelland s Kakinada Experiment at Hyderabad found an affirmative answer and got the proper means to it – TRAINING.
Kakinada Experiment was a five-year experimental study, under this experiment, young persons were selected and put
through a three month training program and motivated to see fresh goals.
One of the significant conclusions of the experiment was that the traditional beliefs did not seem to inhibit an entrepreneur and
that the suitable training can provide the necessary motivation to the entrepreneurs.
14.Objectives of EDPs
The important objectives of EDPs are to:
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Some other important objectives:
1. Let the entrepreneur him/herself set/reset objectives for his/her business and strive for their realization.
2. Prepare him/her to accept the uncertainty involved in running a business.
3. Enable him/her to take decisions.
4. Enable to communicate clearly and effectively.
5. Develop a broad vision about the business.
6. Make him/her subscribe to industrial democracy.
7. Develop passion for integrity and honesty.
8. Make him/her learn compliance with law.
16.Phases of EDPs
An entrepreneurship development program consists of the following three phases:
1. Pre-training phase: The activities and preparations required to launch the training program which includes:
II. Selection of entrepreneurs
III. Arrangement of infrastructure
IV. Tie-up of guest faculty for the training purposes
V. Arrangement for inauguration of the program
VI. Selection of necessary tools, techniques to select the suitable entrepreneurs
VII. Formation of selection committee for selecting trainees
VIII. Arrangement for publicity media and campaigning for the program
IX. Development of application form
X. Finalization of training syllabus
XI. Pre-potential survey of opportunities available in the given environmental conditions.
A trainer should see the following changes in the behavior of the trainees:
I. Is he/she attitudinally turned very much towards his/her proposed project idea?
II. Is the trainee motivated to plunge into entrepreneurial career and bear risks involved in it?
III. Is there any perceptible change in his entrepreneurial attitude, outlook, skill, role, etc.?
IV. Should he/she behave like an entrepreneur?
V. What kinds of entrepreneurial traits the trainee lacks the most?
VI. Whether the trainee possesses the knowledge of technology, resources and other knowledge related to entrepreneurship?
VII. Does the trainee possess the required skill in selecting the viable project, mobilizing the required resources at the right
time?
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3. Post-training phase (follow-up): Assessment to judge how far the objectives of the program have been achieved.
Follow-up indicates:
Purposes of Follow-up:
17.Evaluation of EDPs
The evaluation of EDPs is look into how many participants have actually started their own enterprises after completing the
training. Because the main objective of EDPs is to develop and support entrepreneurs to create new enterprises.
18.Criteria used to assess the effectiveness of EDPs in motivating the entrepreneurs are
as follows:
1. Activity level of the respondents
2. New enterprise established
3. Total investments made
4. Investments in fixed assets made
5. No. of people employed
6. No. of jobs created
7. Increase in profit
8. Increase in sales
9. Quality of product/service improved
10. Quicker repayment of loans
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19.The impact of EDPs can be measured with the help of indices relating to the
entrepreneurial behavior.
The entrepreneurial behavior is measured on the following four dimensions:
1. Planning orientation
2. Achievement orientation
3. Expansion orientation
4. Management orientation
So, problems are not mainly with the strategies but with the implementation.
On the basis of these pre-requisites, human needs can be classified into 5 areas:
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3. Need for affiliation
4. Need for security
5. Need for status
1. Need for achievement: People want achievement in life and they can achieve something only by doing better than others.
People can achieve something if they:
2. Need for power: This need emphasizes people on introducing themselves as dominant figures or more enlightened than
others on the following, such as,
3. Need for affiliation: People want affiliation to the society for being loved and valued. People can gain affiliation if they
4. Need for security: People want security in their lives to fulfill their basic needs, wants, & demands, such as:
5. Need for status: People want status for their living and they can symbolically express their status by:
Conclusion: The fulfillment of these needs can create motivators in the society and they can prove themselves worthy
enough for the community. According to the process of entrepreneurship development, n Ach theory helps create a good number
of motivators who can establish themselves as entrepreneurs later on.
High achievers acquired above mentioned motivation in their boyhood through their beliefs, values, and ideologies which are
generally inculcated into their psychological system in early childhood as they are subscribed to by the parents.
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Businessmen, scientists and professionals all rate above average on achievement motivation.
Achievement Motivation can be developed through proper training.
1. Conceiving ideas and transforming those into products and services that people require
2. Developing new cost-effective method of production that never existed before
3. Finding new sources of inputs and skills needed for quality to withstand competition
4. Developing new organizational set-ups (monopoly or any other form)
5. Creating markets for the manufactured products/ services
Schumpeter ignores the risk taking and organizing aspects of entrepreneurship. His theory puts too much emphasis on
innovative functions.
He did not consider imitator as entrepreneur. But underdeveloped countries need more imitator than innovators .
His entrepreneurs are large scale businessman. But due to imperfect market, shortage of capital, and scarcity of skilled labor
underdeveloped countries have to launch on small scale.
He did not explain why some countries had more entrepreneurial talents than others.
Hagen claimed that any of the above status withdrawal would give rise to four possible reactions and create four
different personality traits:
1. Retreatist: A retreatist continues to work in a society but remains different to his work and position.
2. Ritualist: A ritualist adopts a kind of defensive behavior and acts in the way accepted and approved in his society. But no hope
of improving his position.
3. Reformist: A reformist is a rebel and attempts to establish a new society.
4. Innovator: An innovator is a creative individual and is likely to be an entrepreneur.
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26.Herzberg and The ͞two-factor͟ Theory
Motivators: Factors that lead to positive feelings about a job
Hygiene Factors: Factors that lead to negative feelings about a job
X = Workers are lazy, dislike work, are unprepared, and need to be controlled
Y = Workers enjoy what they do, they are creative, and take an active part in what they do
Workers behave in the way they are treated – living up to the expectations of management
The following table shows these three theories from a comparative perspective:
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Chapter 4 - Project Identification
1. Meaning of Project ( 7th , 4th , 2nd )
A project is an idea or plan that is intended to be carried out.
A project is a scheme, design, a proposal of something intended or devised to be achieved.
A project typically has a distinct mission that it is designed to achieve within a specific period of time with a defined budget.
A project is different from on-going business operation in that, it has a definite start pointand a definite finish point. Moreover,
after the objective is achieved the project ends.
According to Encyclopedia of Management, A project is an organized unit dedicated to the attainment of a goal- the successful
completion of a development project on time, within budget, in conformance with pre-determined program specifications .
It can also be defined as a scientifically evolved work plan devised to achieve a specific objective within a specified period of
time.
3. Techno-Economic Projects:
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Break-through opportunities, on the other hand, involve fundamental changes in both the structure and character of
business.
4. Idea Generation/ Opportunity scanning and identification: In order to select the most promising
project, the entrepreneur needs to generate a few ideas about the possible projects he/she can undertake.
7. Project Report
Project report or business plan is a written statement of what an entrepreneur proposes to take up.
Project report serves like a kind of big road map to reach the destination determined by the entrepreneur.
Project report is a well evolved course of action devised to achieve the specified objective within a specified period of time.
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8. Contents of a project report: ( 4th )
General information Transport and communication
Location Manpower
i. General information (bio data of the promoter; industry profile; organizational structure and constitution; product details etc.)
ii. Project description (project site; physical infrastructure; utilities; pollution control; communication system; transportation and
other common facilities; production process; machinery and equipment; plant capacity; R&D etc.)
iii. Market potential (demand and supply; expected price of product; marketing strategy; after-sales services etc.)
iv. Capital costs and source of finance (cost of capital items like land, building, plant and machinery, installation of equipment,
owner s equity, bank debt)
v. Assessment of working capital requirements (working capital requirement; working capital availability; sources of working
capital)
vi. Other financial aspects (Break-even analysis; projected profit and loss statements; projected balance sheet; cash flow
statement)
vii. Economic and social variables (employment generation; import substitution; export; local resource utilization; development of
livelihood in the project area)
viii. Project implementation (draws a tentative time-line to finish the project and implement the various activities within the time-
frame and estimated budget).
11.Network Techniques:
1. Program Evaluation and Review Technique (PERT)
2. Critical Path Method (CPM)
3. Graphical Evaluation and Review Technique (GERT)
4. Workshop Analysis Scheduling Program (WASP)
5. Line of Balance (LOB)
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1) Program Evaluation and Review Technique (PERT)
PERT stands for Program Evaluation and Review Technique, a methodology which was first developed by the U.S. Navy in
October 1958 to manage the Polaris Ballistic Submarine Missile Project.
It is a project management technique that shows the time taken by each component of a project, and the total time required for
its completion.
PERT breaks down the project into events and activities, and lays down their proper sequence, relationships, and duration in the
form of a network.
Lines connecting the events are called paths, and the longest path resulting from connecting all events is called the critical path.
The length (duration) of the critical path is the duration of the project, and any delay occurring along it delays the whole project.
PERT is a scheduling tool, and does not help in finding the best or the shortest way to complete a project.
It is commonly used in conjunction with the critical path method (CPM).
Steps involved in PERT
1. The activities involved in the project are drawn up in a sequential relationship to show what activity follows what.
2. The time required for completing each activity of the project is estimated and noted on network.
3. The critical activities of the project are determined.
4. The variability of the project duration and probability of the project completion in a given time period are calculated.
Advantages of PERT
3. It helps management handle uncertainties involved in the project and thus, reduce the risk element in the project.
5. It presses for the right action, at the right point and at the right time in the organization.
Limitations of PERT
1. PERT network is mainly based on time estimates required for each activity. On account of wrong time estimates, the network is
bound to become highly unrealistic.
2. This technique also does not consider the resources required at different stages of the project.
3. For effective control of a project by using PERT technique requires frequent updating and revising the PERT calculations. But, this
proves quite a costly affair for the organization.
CPM, is akin to PERT. It was developed (Independently) in 1956-57 by the Du Pont Company in the US to solve scheduling
problems in industrial settings.
It resulted in reducing the shutdown period from 130 hours to 90 hours and saving the company $ 1 million.
The CPM differentiates between planning and scheduling of the project. While planning refers to determination of activities to
be accomplished, scheduling refers to the introduction of time schedule for each activity of the project.
The duration of different activities in CPM are deterministic. There is a precise known time that each activity in the project will
take.
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Advantages of CPM/ The important advantages of CPM technique are:
3. It identifies the most critical elements in the project. Thus, the management is kept alert and prepared to pay due attention to the
critical activities of the project.
1. CPM operates on the assumption that there is a precise known time that each activity in the project will take. But, it may not be
true in real practice.
3. It cannot be used, as a controlling device for the simple reason that any change introduced will change the entire structure of
network. In other words, CPM cannot be used as a dynamic controlling device.
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13.Project Appraisal ( 1st )
Project appraisal means the assessment of a project. It is a costs and benefits analysis of different aspects of a project.
1) Economic Analysis
2) Financial Analysis
3) Market Analysis
4) Technical Feasibility
5) Managerial Competence
6) Ecological analysis
1) Economic Analysis
Under economic analysis the aspects highlighted include
Requirements for raw material
Level of capacity utilization
Anticipated sales
Anticipated expenses
Proposed profits
Estimated demand
It is said that a business should have always a volume of profit clearly in view which will govern other economic variable like
sales, purchase, expenses and alike.
It will have to be calculated how much sales would be necessary to earn the targeted profit.
Demand for the product will be estimated for anticipating sales volume.
2) Financial Analysis
It is finance only that facilitates an entrepreneur to bring together the labor of one, machine of another and raw material of
yet another to combine them to produce goods.
In order to decide the financial viability of the project, the following aspects need to be carefully analyzed :
Cost of capital
Means of finance
Estimates of sales and production
Cost of production
Working capital requirement and its financing
Estimates of working results
Break-even point
Projected cash flow
Projected balance sheet.
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Assessment of the financial requirements both- fixed and working capital:
The requirement for fixed assets/capital will vary from enterprise to enterprise depending upon the type of operation, scale of
operation and time when the investment is made
While assessing the fixed capital requirements , all items relating to the asset like the cost of the asset, architect and engineer͛s
fees, electrification and installation charges, depreciation, pre-operation expenses of trial runs, etc., should be taken into
consideration.
If any expense is to be incurred in remodeling, repair and additions should be highlighted in the project report.
Working capital is that amount of funds which is needed in day to day s business operations. Working capital means excess of
current assets over current liabilities.
Current assets refer to those assets which can be converted into cash within a short period of time.
Current liabilities refer to those obligations which can be payable within a short period of time.
It is like a circulating money changing from cash to inventories and from inventories to receivables and again converted into
cash.
3) Market Analysis
Before the production actually starts, the entrepreneur needs to anticipate the possible market for the product.
He/she has to anticipate who will be the possible customers for his product and where and when his product will be sold.
This is because production has no value for the producer unless it is sold.
The methods to estimate the demand for a product are
st
1. Opinion Polling Method; ( 1 )
2. Life cycle segmentation analysis
1. Opinion Polling Method: In this method, the opinions of the ultimate users, i.e., customers of the product is estimated.
i. Complete Enumeration method : All probable customers of the product are approached and their probable demands for
the product are estimated and then summed.
Suppose, there are total N customers of X product and everybody will demand for D numbers of it.
= D1 + D2 + D3 + ……………… + DN
However, to approach a large number of customers scattered all over market becomes tedious, costly and cumbersome.
Moreover, the consumers themselves may not divulge their purchase plans due to the reasons like personal as well as
commercial/business privacies.
ii. Sample Survey : Some number of consumers out of their total population is approached and data on their probable demands for
the product during the forecast period are collected and summed. The total demand of sample customers is finally blown up to
generate the total demand for the product.
Imagine, there are 1000 customers of a product spread over the market.
Out of these, 50 are selected for survey using stratified method.
Now, if the esti ated de a d of these sa ple usto ers is D, the the total de a d for the e tire group of usto ers = ∑
niDi
o = n1D1 + n2D2 + n3D3 + ………… + 50D50
Where, ni is the number of customers in group I and
n1 + n2 + n3 + ………… + 50 = 1000
Survey method is less costly and tedious than the complete enumeration method.
iii. Sales Experience Method: Sample market is surveyed before the new product is offered for sale. The results of the market
surveyed are then projected to the universe in order to anticipate the total demand for the product.
iv. Vicarious method : The consumers of the product are not approached directly but indirectly through some dealers who have a
feel of their customers.
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The dealers opinions about the customers opinion are elicited.
2. Life Cycle Segmentation Analysis:
Divided into 5 stages,
Introduction
Growth
Maturity
Saturation
Decline
Considering the above 5 stages of a product life cycle, the sales at different stages can be anticipated.
Introduction/Launch:
Advertising and promotion campaigns
Target campaign at specific audience?
Monitor initial sales
Create product awareness and trial
Maximise publicity
High cost/low sales
Length of time – type of product
Growth:
Increased consumer awareness
Sales rise
Revenues increase
Offer product extensions, service, warranty
Maximize market share
Average cost per customer, profits may be made
Monitor market – competitors reaction?
Maturity:
Sales reach peak
Cost of supporting the product declines
Low cost per customer
Sales growth likely to be low
Market share may be high
Maximize profit while defending market share
Competition likely to be greater
Price elasticity of demand?
Monitor market – changes/amendments/new strategies?
Saturation:
Necessity to develop new strategies becomes more pressing:
Searching out new markets:
Linking to changing fashions
Seeking new or exploiting market segments
Linking to joint ventures – media/music, etc.
Developing new uses
Focus on adapting the product
Re-packaging or format
Improving the standard or quality
Developing the product range
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Decline and Withdrawal:
Fashions change
Technology changes
Sales decline
Cost of supporting starts to rise too far
- Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around
again?
4) Technical Feasibility
• Technical feasibility implies to mean the adequacy of the proposed plant and equipment to produce the product within the
prescribed norms.
• It should be ensured whether that know-how is available with the entrepreneur or is to be procured from elsewhere.
• If project requires any collaboration, then, the terms and conditions of the collaboration should be spelt out comprehensively
and carefully.
• While assessing the technical feasibility of the project, the following inputs covered in the projects should also be taken into
consideration,
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Availability of land and site.
Availability of water, power, transport, communication facilities.
Availability of servicing facilities like machine shops, electric repair shops.
Coping with anti-pollution law.
Availability of work force as per required skill and arrangements proposed for training-in-plant and outside.
Availability of required raw material as per quality and quantity.
5) Managerial Competence
• The managerial competence or talent of the promoter should be taken into consideration because most of the enterprises fall
sick because of lack of managerial competence or mismanagement.
• This is more so in case of small-scale enterprises where the proprietor is all in all, i.e., owner and manager. Due to his one-man
show, he may be jack of all but master of none.
6) Ecological Analysis
In recent years, environmental concerns have assumed great deal of significance.
Ecological analysis should also be done particularly for major projects which have significant implication like power plant and
irrigation schemes, and environmental pollution industries like chemical and leather processing.
Environmental damage
Restoration measure
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