Concept of

Entrepreneurship Submitted to :-

Prof. Meenu

verma

Compiled by:-

Karan pal

(4571)

Gulshanpreet

(4573)

Evolution of Entrepreneurship

Entrepreneurship is one of the four mainstream economic factors – land ,

labor , capital, and entrepreneurship.

During 14th century references speak about tax contractors – individuals who

paid a fixed some of money to a government for the license to collect taxes

in their the region known as tax contractors , they used to take risk of

collecting taxes if they collected more than the sum paid for their licenses,

they made profits and kept the excess. The concept of entrepreneurship

was existing in 17th century was a common topic in economic essays for

much of the 18th and 19th century . Let us read about how it has evolved as

one of the factor of production over a period of time.

Joseph Aloysius Schumpeter (1934) - An entrepreneur is an innovator. Schumpeter considered economic development as discrete dynamic change.

J.B.Says:- entrepreneur is the most important agent of production . Simply an entrepreneur is one who combine the land of one, the labor of another and the capital of yet another and thus produce a product.

David Ricardo : He didn’t assign any important role to entrepreneurship for economic development of a country . Acc to him ,”profit leads to saving of wealth, which ultimately goes to capital formation and leads to economic development.

Concept of Entrepreneurship

Entrepreneurship is the tendency of person to organize the

business of his own and to run it profitably , using all the

qualities of leadership , decisions making and

managerial caliber etc.

Entrepreneurship involves not only the process that leads to the setting up of a business entity but also the expansion and development of an on going concern. The study of entrepreneurship is concerned with the entrepreneurial behavior, the dynamics of business set up and expansion and development.The term “entrepreneur” is often used interchangeably

with “entrepreneurship” . But conceptually they are

different.

Entrepreneurship

is a continuous economic process which recognizes the

need to change and an Entrepreneur is a key person to

initiate any change.

Refers to a person

Creator

Organizer

Decision maker

Initiator

Leader

Motivator

Risk taker

Refers to a process

Creation

Organization

Decision making

Initiative

Leadership

Motivation

Risk taking

Acc. to A.H.Cole, “ entrepreneurship is the purposeful

activity of an individual or a group of associated individuals,

undertaken to initiate , maintain or organize a profit-oriented

business unit for the production or distribution of economic

goods and services”.

Acc. to H.N Patak, “entrepreneurship involves a wide

range of area on which series of decisions are required

which can be grouped into three categories :- (i) perception

of an opportunity (ii) organizing an industrial unit and (iii)

running the industrial unit as a profitable , going and

growing concern.”

ImportanceEntrepreneurship has an important role in the context of a

developing nation like India which is confronted with major

socio-economic problems.

Entrepreneurship plays a premium mobile role in promoting

development of economy.

Entrepreneurship is consistently equated with the

establishment and management of small business

enterprises .

Is the solution to the baffling problems like overpopulation ,

poverty , unemployment, underemployment etc.

Entrepreneurship helps in finding solution to the giant problems like

concentration of economic power , regional imbalances , exploitation

by monopolists.

The factors which retard the success of entrepreneurship in India are

inadequate infrastructural facilities , shortage of capital, technical

knowledge, and transport , absence of cheap and good quality raw

material and shortage of power etc

Skill of entrepreneurship knows how to turn an ordinary corporation,

managed in a routine manner , into a entrepreneurial organization.

Hence , it is said that an economy is the effect for which

entrepreneurship is the cause .

Features:-Entrepreneurship is a set of activities

performed by an entrepreneur . The main

features of entrepreneurship are as follow :-

Economic activity:- entrepreneurship is

primarily becoming an economic function

because it involves creation and operation

of an enterprise. It involves conscious

decision-making about resource

allocations . It also implies seeking the

best opportunities for using resources for

their highest commercial yields.

Innovative activity:- innovation is the process of doing new things. Entrepreneurship is innovations where new products , services, ideas and information is produced, new efficient production techniques are introduced by the firm, new market opportunities are indentified and better ways of meeting existing demands are looked into. Whenever a new idea occurs, entrepreneurial efforts are essential to convert the idea into practical application.

A function of high achievement:- people differ not in their ability to do but also in their will to do, or motivation. McClelland identified two features of entrepreneurship (a) doing things in different and better way. (b) decision-making under uncertainty. Thus people having high need for achievement and power are more likely to succeed as entrepreneurs and this is a very critical factor that leads one towards entrepreneurship.

Creative and Purposeful activity:- creativity is

the ability to bring something new into existence.”

Entrepreneurship is virtually a creative and a

purposeful activity. The entrepreneur passes

through the five stages during the process of

entrepreneurship viz idea germination,

preparation, incubation, illumination and

verification. Earning profits is never the sole

objective but to introduce something new and

creative is the purpose of entrepreneurship.

A function of risk-bearing: Entrepreneur makes decisions about obtaining and using resources while consequently assuming the risk of enterprise. Acc. to Cantillion, risk-bearing forms an unique constitututivefunction of entrepreneurship.

• An Organizing function. Acc. to J.B. Say, an

entrepreneur is one who combines the land of one, the

labor of another, and capital of yet another, and thus pro

dukes a product. By selling the product in the market, he

pays interest on capital, rent on land, wages to laborers

and what remains is his profit.

Here is an example of a farmer. The farmer pays out contractual income which are “certain” to the landlords and laborers and sells at prices that are “uncertain”. It is illustrated as follows :-

Enter. Buys farm enter. repacks enter. Sells farm

product at certain and transports product at

Prices. farm products uncertain

to the market in the city .

investmentTransformatio

nProfit or loss

Invention and innovation:-

Invention implies creating something new not merely any

new product but new technological processes , new

designs, new technical knowledge, etc. for example ,

Edison’s invention of bulb illustrates the point.

Innovation , is the mean by which the entrepreneur either

creates new wealth – producing resources or endows

existing resources or endows existing resources with

enhanced potential for creating wealth.

Invention is conceiving new ideas while

innovation means to put these ideas into

action.

Innovation is process requiring analytical ability to work out the details in order to carry on the project. An entrepreneur has to obtain , material , select site, arrange staff, acquire manufacturing abilities and then establish his organization in order exploit the idea commercially.

Invention can open up huge markets but the secret lies in spotting the application. Thus we can say that in order to be inventive, one has to be creative and in order to become an innovator , one has to be entrepreneurial. However just to be innovative is not enough unless that innovation is carried into production to benefit consumers.

invention Creating

something new

Resulting in new

knowledge

innovation Transforming an idea

into application

Resulting in new

products, services or

processes

Entrepreneurship and

enterprise:-Entrepreneurship : It is more than mere creation of business

Entrepreneurship is a process of innovation and new venture creation through four major dimensions – individual, organizational, environmental and process.

Entrepreneurship is a process involving various action to be undertaken to set up an enterprise

.

Acc. to J.B. an entrepreneur is one who combines the land of one , labor of another and capital of yet another to set up an enterprise to produce a product.

Joseph Schumpeter's

contribution to entrepreneurship:- Joseph A Schumpeter (1883-1950) is the main figure in the

literature of entrepreneurship as it was gave a well rounded

picture of the theory of an entrepreneur.

Acc to Schumpeter ,” entrepreneurship is essentially a

creative activity or it is an innovation function . The process of

innovation may be in the form of

a) introduction of new product

b) use of new methods of production opening of new market

c) opening of a new market

d) the conquest of new source of supplying raw material

e) a new form of organization.

Theories of

Entrepreneurship

Economic Theory

Sociological Theory

Psychological Theory

Anthropological Theory

Economic theory

• Entrepreneurship and economic growth take place when the economic conditions are favorable.

• Economic incentives are the main motivators for entrepreneurial activities.

• Economic incentives include taxation policy, industrial policy, sources of finance and raw material, infrastructure availability, investment and marketing opportunities, access to informationabout market conditions, technology etc.

• Lack of incentives, unattractive economic policies and unfavorable market conditions tend to reduce the vigor of entrepreneurship

a) Schumpeter’s Theory of innovation

Development implies carrying one of new combinations of entrepreneurship. ‘Entrepreneur’. is an innovator – who carry new combination of:

New goods/ services.

New method of production.

New market.

New source of supply of raw materials.

New organization.

b) HBS ( Harvard Business School) consider entrepreneurship is the outcome of the combination of internal and external Forces.

Internal forces – Individual’s traits and qualities via : Intelligence Skill Knowledge Intuition Exposure & Experience

External forces – Surrounding’s conditions via : Economic Political Social & Cultural Legal frame-work Stable Govt. External security, law & order and legal

process are the influencing factors.

Sociological theory

Entrepreneurship is likely to get a

boost in a particular social culture

Society’s values, religious beliefs,

customs, taboos influence the

behavior of individuals in a society

The entrepreneur is a role performer

according to the role expectations by

the society

a) Max Weber’s Theory

Salient features of his theory are -

Spirit of Capitalism is highlighted

Adventurous spirit facilitate taking risk

Protestant ethic embodying rebellion is conducive

Inducement of profit is the criterion

b) E.E. Hagen’s Theory

Reveals general model of the social- interrelationship among physical environment, social structure, personality and culture.

Thinks economic theories are inadequate

Political & social change – catalyst for entrepreneurs.

Rejects follower’s syndrome imitating western technology. Technology is an integral part of socio- cultural complex .

Historic shift as a factor initiates change

Psychological TheoryPsychological theory of entrepreneurship has fairly high status

among social scientists who study entrepreneurship because it is

very difficult to single out one or several psychological traits as

typical for the entrepreneurial personality. However ,

•Entrepreneurship gets a boost when society has sufficient supply of

individuals with necessary psychological characteristics.

•The psychological characteristics include need for high achievement,

a vision or foresight, ability to face opposition.

•These characteristics are formed during the individual’s upbringing

which stress on standards of excellence, self reliance and low father

dominance.

J.Schumpeter ,supports the psychological theory

and not the economic theory. He asserts that

what matters is the behaviour , and not the actor.

Anthropological Theory

Fredrick Barth made his first attempt to develop an

anthropological theory of entrepreneurship. Acc. To

him, entrepreneurship has essentially to do with

connecting two spheres in the society, between

which there exists a difference in value. Barth, one

of the leading anthropologists of the world, states

that entrepreneurial behaviour means to connect

two different spheres in the society , between

which there is a huge discrepancy in value.

Each of these theories are incomplete

and none of them is right or wrong.

Theories of entrepreneurship are inter-

disciplinary and are influenced by a

multitude of factors. It is the integration

of external environment, achievement

motivation, ability and ambition which

largely determines whether an individual

become an entrepreneur or not.

Problems in growth of

entrepreneurship :-Undoubtedly , entrepreneurship growth in India

is slow as compared to other countries. As far as development of entrepreneurship is concerned , the factors responsible for its slow growth are:

Incompetence and poor management

Low level of commitment

Restriction imposed by custom and tradition

Involvement of high risk

socio- cultural rigidities

Lack of motivation

Lack of infrastructural facilities

Low quality products

Law package of salaries to employees

Market imperfections

Non – availability of power and raw

material

Legal formalities involved to set up a unit.

Low status of businessmen.

Problem of getting the loan sanctioned

Lack of technical know -how

Insufficient infrastructural facilities.

Pros and cons

To everything in life there are advantages and disadvantages;

entrepreneurship is no exception. As a matter of fact, entrepreneurship

involves a lot of risk taking. Yet, it can pay off very nicely as well, with

rewards such as profits and the opportunity to be your own boss and make

your own decisions.

Here are some pros and cons to consider:

Pros

• Excitement: Due to its high capacity for risk, there is a lot of adventure.

• Rules and regulations: Work in a current job is difficult to do because of

all the "red tape" and consistent administration approval needed.

• Originality: Some people feel that they can offer a new service/product

that no one else has offered before.

• Competition: Employees feel they can offer their current company's product/service at a lesser expense to the public.

• Independence: Some people wish to be their own boss and make all the important decisions him/herself.

• Salary potential: Generally, people want to be paid for the amount of work they do in full; they do not want to be "short-changed.“

• Flexibility: Entrepreneurs can schedule their work hours to spend quality time with family or any other reason.

• Rational salary: They are not being paid what they're worth and would rather work on their own and earn the money they should be earning for their efforts.

• Freedom: Entrepreneurs can work whenever they want, wherever they want, and however they want.

: Entrepreneurs are exposed to different types of risk in their pursuit of setting up an enterprise. Risk has got direct relationship with profits. In the event of offailure of their venture entrepreneurs are left with almost nothing to depend upon.

• Salary: Starting your own business means that you must be willing to give up the security of a regular paycheck.• Benefits: There will undoubtedly be fewer benefits, especially when considering that your business will be just starting off.• Work schedule: The work schedule of an entrepreneur is never predictable; an emergency can come up in a matter of a second and late hours will have to be put in

Cons:

• Administration: All the decisions of the business must be made on your own; there is no one ranked higher than you on the chain of command in YOUR business.

• Incompetent staff: Often times, you will find yourself working with an employee who "doesn't know the ropes" as well as you do due to lack of experience.

• Procedures: Many times during your entrepreneurial life, you will find that many policies do not make sense, nor will they ever make sense

IntrapreneurshipEmployees of an organisation who have entrepreneurial talent

and are motivated to use their abilities and initiative and do

something on their own, but who may not want to start their own

business are known as entrepreneurs.

Thus, intrapreneurship is the term given to the establishment and

fostering of entrepreneurial activity in large organizations which

either improve the existing products and services or brand new

products. Intrapreneurship implies that entrepreneurial activities

are explicitly supported within established organizations,

provided with organizational resources, and accomplished by

company employees. Pinchot describes the intrapreneur , also

termed as corporate entrepreneur , as who violates policy,

ignores the chain of command, defies established procedures ,

and , perhaps, comes up with a new product for the company in

which he is employed.

Essentials for Intrapreneurship The strategic and structural environment within the

organization should be ‘right’. Inhibitive internal

‘chimneys’ must be pulled down so that employees can

interact freely with each other and share ideas.

An appropriate work force of enterprising people should

be built in which scientific recruitment is made.

They should be motivated and rewarded from time to

time.

Support system, team working, information sharing and

learning are essentials for invoking the dormant talents

of employees.

Difficulties It is not so easy to achieve effective

intrapreneurship

due to the following factors:

Efficient implementation of facilities and controls, are difficult to implement without conflicts.

Fair remuneration and reward system is difficult to establish to ensure justice.

Employees may feel disappointed if they face failure while trying their new ideas.

In spite of all odds, businesses have to take risks and allow and encourage to take up

intrapreneurship.

Conclusion :-

So one can safely conclude that entrepreneurship

implies a commitment to expand and grow which is

also one of the major determinants of industrial

development. James opines that “ some think of

entrepreneurs primarily as innovators , some as

bearers of risks and others place major emphasis

on their function as mobilizes and allocators of the

capital . The suitable definition of an entrepreneur

is a person or a group of persons who are

responsible for the existence of a new business

enterprise.