Chapter 1: Entrepreneurial Perspective

Objectives
• Understand and define Entrepreneurship.
• Differentiate between creativity and innovation.
• Explain the process of creativity.
• Describe how innovation is important as a dimension of entrepreneurship.
• Focus on various features of entrepreneurship.
• Know that how entrepreneurship plays an importance role in economic development.
• Point out various factors affecting entrepreneurship.
• Study and analyze the barriers in the growth of entrepreneurship.
 What is Entrepreneurship?
“Entrepreneurship is the propensity of mind to take calculated risks with confidence to achieve a
predetermined business or industrial objective. In substance, it is the risk-taking ability of the
individual, broadly coupled with correct decision-making.”
In another view “Entrepreneurship refers to an action process of entrepreneur towards establishing
an enterprise. It is a creative and innovative process and adapting response to environment.
…..Continued

Entrepreneurship may be defined in various ways, but the four key elements involved in it
are:
• (i) Innovation
• (ii) Risk-taking,
• (iii) Vision
• (iv) Organising skill. All the four elements are inter-related and form a continuous
process in business.
…….Continued
According to Frank Knight, “It involves a specialized group or persons who bear ‘risks’ and
meet the uncertainty”.
According to Musselman and Jackson, “Entrepreneurship is the investing and risking of time,
money and effort to start a business and make it successful.”
In the words of B. Higgins, “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, finding site, introducing a new
technique, discovering new sources of raw materials and selecting top managers for day to day
operations of the enterprise.” This definition highlights risk-taking, innovating and resource
organizing aspects of entrepreneurship.
According to Franklin Lindsay, “Entrepreneurship is defined as anticipating the future
requirements of society and successfully meeting these needs with new, creative and imaginative
combinations of resources”.
According to H. Cole, “Entrepreneurship is the purposeful activities of an individuals or a group
of associated individuals undertaken to initiate, maintain and aggrandize profit by production or
distribution of economic goods and services”.
……Continued
Tools of Entrepreneurship
Creativity is “the ability to bring something new into existence.” This definition emphasizes the
“ability,” not the’ “activity,” of bringing something new into existence. Creativity is not only an
important source for building a competitive advantage, but it is also a necessity for survival.
A model of the entrepreneur’s creative process
…..Continued
Innovation . Innovation refers to “doing new things or the doing of things that is already being
done in a new way.” It includes new processes of production, introduction of new products, and
creation of new markets, discovery of a new and better form of industrial organization.
Innovation, therefore, is the transformation of creative ideas into a tangible product, service or
business venture useful.
Note: When people have passed through the Realization and Validation stages of creativity
process, they may have become inventors, but they are not yet innovators.
 Nature and Characteristics of Entrepreneurship
Economic Activity: Entrepreneurship is primarily an economic activity because it involves the
creation and operation of an enterprise. It is basically concerned with the production and
distribution of goods and services and optimally utilizes the resource towards productive use.
Entrepreneurship Involves Innovation: Entrepreneurship involves changing, revolutionizing,
transforming, and introducing new approaches. Entrepreneurship is an innovative function as it
involves doing things in a new and better way.
Goal-oriented Activity: The entrepreneur who creates and operates enterprises seeks to earn
profits through satisfaction of needs of consumers; hence, entrepreneurship is a goal-oriented
activity. Entrepreneurship emphasizes results, achievements and targets achieved.
Goal-oriented Activity: The entrepreneur who creates and operates enterprises seeks to earn
profits through satisfaction of needs of consumers; hence, entrepreneurship is a goal-oriented
activity. Entrepreneurship emphasizes results, achievements and targets achieved.
Enterprise Creation: Entrepreneurship involves enterprise creation.
………Continued
A Function of Risk Bearing: Risk is an inherent and inseparable element of entrepreneurship.
An entrepreneur works under uncertainties and he assumes the uncertainty of future. In the pursuit
of profit, there is possibility of loss also.
Entrepreneurship Implies Growth. Entrepreneurship is about growing a business and pursuing
opportunities as they arise. It’s not about standing still or being content to stay in one market or
with one product.
Managerial Skill and Leadership Function: Managerial skill and leadership are the most
important facets of entrepreneurship. An entrepreneur must have the ability to lead and manage.
He provides direction, create work culture, and build teamwork and cohesiveness among
employees.
Recognition that it is a process. Entrepreneurship is not a one-time phenomenon; it occurs over
time. It involves a series of decisions and actions from initial start-up to managing the
entrepreneurial venture.
Gap Filling Function: The gap between human needs and the available products and services
filled by entrepreneurship. An entrepreneur determines the needs of people and combines
resources to produce goods and services of requirements.
……….Continued
Dynamic Process. An entrepreneur deals proactively with changing markets and environment.
He looks at the changes as the source of market advantages, not as a problem.
Organizing Function: It is the ability to bring together productive resources of society.
Entrepreneur coordinates and control the efforts of all the persons engaged in his enterprises.
Recognition that entrepreneurship can take place in both profit and not-for-profit
environments. Although we tend to assume that entrepreneurial activity is geared at making a
profit (and we agree that much of it is), entrepreneurship also occurs in social service agencies, in
community arts organizations, or in other types of not-for profit settings.
Advantages of entrepreneurship
Job Creation: Entrepreneurial ventures play very important role in it. Small business create more
jobs.
Entrepreneurship Serve Small Markets With New Technology: Large firms, with their
crippling overheads, do not find it profitable to serve small populations. This is where small
entrepreneurial firms serve an invaluable role by providing specialized products to niche
customers
Entrepreneurship Provides Opportunity to Reach Your Full Potential and Reap Impressive
Profit: Too many people find .their work boring, unchallenging, and unexciting, but not
entrepreneurs. They know that the only boundaries on their success are those imposed by their
own creativity, enthusiasm, and vision.
Entrepreneurship Provides an Opportunity to Make a Difference and Create Your Own
Destiny. Owning a business provides entrepreneurs the independence and the opportunity to
achieve what is important to them.
……Continued
Opportunity to Contribute to Society and Be Recognized for Your Efforts: Often, small
business owners are among the most respected and most trusted members of their communities.
These owners enjoy the trust and recognition they receive from the customers they have served
faithfully over the years.
Other advantages include:
• Number of New Start-ups
• Innovation
• Entrepreneurship in small businesses helps in distribution of products of large business. They,
thus, support the large business houses.
• Develop a culture of achievement orientation.
• It results in exploitation of economy’s resources, such as labour, capital and technology to the
fullest extent
 Factors Affecting Entrepreneurship
Economic Factor: Factors such as availability of finance, labour, land, accessibility of
customers, suppliers are the factors that stimulate entrepreneurship. Capital is one of the most
important prerequisites to establish an enterprise.
Socio-Economic Factors: The entrepreneurial activity at any time and place is governed by
varying combination of socio-economic factors such as religion, family background and level of
education.
Personal Factors: Personality traits such as inner desire for control of their activities, tolerance
for risk, high level of tolerance to function in adverse situations and background experiences
such as the family environment.
Political: Some researchers felt that the growth of entrepreneurship cannot be explained fully
unless the politcal set-up of a country is taken into consideration.
Internal Control System: Entrepreneurship largely depends upon the control system designed
for controlling the business activities. If the control system is effective they will result in optimal
inventory, good quality products and high profit margins. This will have a positive effect on the
success of entrepreneurship
……Continued
• Government Incentives ad Subsidies. entrepreneurship is being encouraged in many
countries with a variety of incentives such as tax breaks, preferred sourcing or grants.
• Increasing Demand for Variety. The increasing demand for new products is of advantage to
smaller firms.
• Work Environment: If the environment that a individual is working in is unsatisfactory, that is,
not conducive to his growth needs, it is likely that the individual will quit his job and start his
own business as an entrepreneur. Unsatisfied personal needs for growth and achievement in
employment conditions results in successful entrepreneurship.
• Career Transitions: “Career transition points are circumstances in which an individual is
moving between one type of career-related activity and another.” Retirement from existing
service or completion of a degree course is the factors that boost up a person’s morale to start a
venture of his own.
 Entrepreneurship and Economic Development
• Increasing Income and Per Capita Income: Entrepreneur brings in new products and services and
develops new markets for growth of economy thus increasing gross national product as well as per
capital incomes of the people in the country.
• Wealth Creation and Distribution: Entrepreneurial activity leads to value addition and creation of
wealth and capital in the structure of business and society.
• Entrepreneurship promotes capital formation by mobilizing the idle saving of the public.
• It provides immediate large-scale employment. Thus, it helps reduces the unemployment problem in the
country, i.e. the root of all socio-economic problem.
• It promotes balanced regional development.
• It helps reduces the concentration of economic power.
• It simulates the equitable redistribution of wealth, income and even political power in the interest of the
country.
• It encourages effective resource mobilization of capital and skill which might otherwise remain
unutilized.
• It also induces backward and forward linkages which stimulate the process of economic development in
the country.
• It also promotes country’s export trade i.e., an important ingredient to economic development.
Barriers to Entrepreneurship
• Lack of market knowledge
• Lack of technical know ho
• Lack of seed capital
• Lack of business know how
• Complacency–lack of motivation and individual spirit
• Unfavorable family ground
• Lack of Education
• Lack of attitude and training
• Influence of Gender, Caste, Custom.
• Inadequate infrastructure facilities.
• Lack of transportation and communication facilities.
 ……..Continued
• Unavailability of raw material.
• Absence of regular supply of power.
• Absence of Ideal Market conditions.
• Corruption in administration.
• Unstable state government.
• Monopoly and protectionism
Factors that stimulate entrepreneurship
• Availability of capital is a stimulate to an entrepreneur to start a new firm and/or give birth to a
new idea.
• Supportive government programmes.
• Availability of required training.
• A collaborative relationship between business and research and their direct attempts to transfer
technology.
• Conducive environment for innovation will provide a much needed stimulant to
entrepreneurial activities.
Misconceptions about Entrepreneurship
• Successful Entrepreneurship Needs Only a Great Idea. Having a great idea is only part of
the equation for successful entrepreneurship. Understanding the demands of the different
phases of the entrepreneurial process, taking an organized approach to developing the
entrepreneurial venture, and coping with the challenges of managing the entrepreneurial
venture are also key ingredients to successful entrepreneurship.
• Entrepreneurship is Easy. Entrepreneurship is not easy! It takes commitment, determination,
and hard work. And even if you have these qualities, it still isn’t effortless! Entrepreneurs often
encounter difficulties and setbacks, but the successful entrepreneurs are those who push on in
spite of the difficulties.
• Entrepreneurship is a Risky Gamble. Although entrepreneurs aren’t afraid to take risks,
entrepreneurship involves calculated risks, not unnecessary ones. In fact, there are times when
successful entrepreneurship means avoiding or minimizing risks.
• Entrepreneurship is Found Only in Small Businesses. Many people have the mistaken idea
that entrepreneurship is associated only with small organizations. The truth is that
entrepreneurship can be found in any size organization. On the other hand, just because an
organization is small doesn’t automatically make it entrepreneurial.