Unit 1

Entrepreneurship

Concept of Entrepreneurship

Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most prominent
example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and capital can
generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an
indispensable part of a nation’s capacity to succeed in an ever-changing and more
competitive global marketplace.

Meaning of Entrepreneur

The entrepreneur is defined as someone who has the ability and desire to establish, administer
and succeed in a startup venture along with risk entitled to it, to make profits. The best
example of entrepreneurship is the starting of a new business venture. The entrepreneurs are
often known as a source of new ideas or innovators, and bring new ideas in the market by
replacing old with a new invention.

It can be classified into small or home business to multinational companies. In economics, the
profits that an entrepreneur makes is with a combination of land, natural resources, labour
and capital.

In a nutshell, anyone who has the will and determination to start a new company and deals
with all the risks that go with it can become an Entrepreneur.

What are the 4 Types of Entrepreneurship?

It is classified into the following types:

Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber,
electrician, etc. These people run or own their own business and hire family members or local
employee. For them, the profit would be able to feed their family and not making 100 million
business or taking over an industry. They fund their business by taking small business loans
or loans from friends and family.
Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the world.
They attract investors who think and encourage people who think out of the box. The
research focuses on a scalable business and experimental models, so, they hire the best and
the brightest employees. They require more venture capital to fuel and back their project or
business.

Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and sustain by
offering new and innovative products that revolve around their main products. The change in
technology, customer preferences, new competition, etc., build pressure for large companies
to create an innovative product and sell it to the new set of customers in the new market. To
cope with the rapid technological changes, the existing organisations either buy innovation
enterprises or attempt to construct the product internally.

Social Entrepreneurship-

This type of entrepreneurship focuses on producing product and services that resolve social
needs and problems. Their only motto and goal is to work for society and not make any
profits.

Characteristics of Entrepreneurship:

Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

 Ability to take a risk- Starting any new venture involves a considerable amount of
failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate
and take risks, which is an essential part of being an entrepreneur.
 Innovation- It should be highly innovative to generate new ideas, start a company
and earn profits out of it. Change can be the launching of a new product that is new to
the market or a process that does the same thing but in a more efficient and
economical way.
 Visionary and Leadership quality- To be successful, the entrepreneur should have a
clear vision of his new venture. However, to turn the idea into reality, a lot of
resources and employees are required. Here, leadership quality is paramount because
leaders impart and guide their employees towards the right path of success.
 Open-Minded- In a business, every circumstance can be an opportunity and used for
the benefit of a company. For example, Paytm recognised the gravity of
demonetization and acknowledged the need for online transactions would be more, so
it utilised the situation and expanded massively during this time.
  Flexible- An entrepreneur should be flexible and open to change according to the
situation. To be on the top, a businessperson should be equipped to embrace change in
a product and service, as and when needed.
 Know your Product-A company owner should know the product offerings and also
be aware of the latest trend in the market. It is essential to know if the available
product or service meets the demands of the current market, or whether it is time to
tweak it a little. Being able to be accountable and then alter as needed is a vital part of
entrepreneurship.

Importance of Entrepreneurship:

 Creation of Employment- Entrepreneurship generates employment. It provides an

entry-level job, required for gaining experience and training for unskilled workers.
 Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
 Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and
promotes facilities like higher expenditure on education, better sanitation, fewer
slums, a higher level of homeownership. Therefore, entrepreneurship assists the
organisation towards a more stable and high quality of community life.
 Increase Standard of Living- Entrepreneurship helps to improve the standard of
living of a person by increasing the income. The standard of living means, increase in
the consumption of various goods and services by a household for a particular period.
 Supports research and development- New products and services need to be
researched and tested before launching in the market. Therefore, an entrepreneur also
dispenses finance for research and development with research institutions and
universities. This promotes research, general construction, and development in the
economy.
Entrepreneurial Competencies

“Entrepreneurial competencies can be defined as underlying characteristics such as

generic and specific knowledge, motives, traits, self -images, social roles and skills that
result in venture birth, survival, and/or growth.”- Bird (1995)

Competence is a combination of knowledge, skills and appropriate motives or traits that

an individual must possess to perform a given task.

Thus, success of an entrepreneur is governed by entrepreneurial competencies. If he has

all these competencies, he can be expected to achieve his entrepreneurial goals.

Entrepreneurial competencies and traits are as follows:

1. Body of Knowledge
2. Set of Skills
3. Cluster of Appropriate Motives/Traits
1. Body of Knowledge:
Innovation is possible only through knowledge. The inventor or originator of the idea
that led to the knowledge or vision of something new; the artist of creative endeavour.
Inventors include those who identify new technological processes, new forms of plant
life and new designs. Thus, inventions deal with new processes, or new technical
knowledge. In a simple way, knowledge means collections of information and retention
of facts that an individual stores in some parts of his brain.

Creative process provides imaginative people, geminate ideas, nurture them and develop
them successfully. This type of idea has a value. However, it must be proven useful or be
marketable and to achieve either status or achievement, must be developed. But
innovation is the development process which translates an idea into an application. It
requires persistence in analytically working out the details of product design or service,
to develop marketing, obtain finances and plan operations.

2. Set of Skills:
Skill is the ability to demonstrate a system and sequence of behaviour that are
functionally related to attaining a performance or goal. An entrepreneur is required to
have certain skills and these skills also constitute his leadership qualities.

These skills are as follows:

a. Anticipatory Skills:

Foresight into a constantly changing environment;

b. Visioning Skills:

The use of persuasion and example to induce a group to act in accordance with the
leader’s purposes or the shared purposes of a larger group;

c. Value Congruence Skills:

The need to be in touch with employee’s economic, safety, psychological, spiritual,

sexual, aesthetic and physical needs in order to engage people on the basis of shared
motives, values and goals;

d. Empowerment Skills:

The willingness to share power and to do so effectively; and

e. Self-understanding Skills:

Introspective or self under skills as well as framework within which leaders understand
both their own needs and goals and those of their employees.

In practice, an entrepreneur who pursues the idea, planning its application, acquiring
resources and establishing its market through persistence, planning, organising and
leadership needs above skills. With the help of these skills, an entrepreneur is expected
to perform well in his entrepreneurial behaviour.

3. Cluster of Motives and Traits:

Motives deal with recurrent concern for a goal, state or condition appearing in fantasy,
which drives, directs and selects behaviour of the individual. Actually motive represents
thought related to a particular goal, state. McClelland opined that “need achievement” is
a social motive to excel that tends to characterise successful entrepreneurs especially
when reinforced by cultural factors.

ccording to Paul Wilken, “entrepreneurship becomes the link between need achievement
and economic growth. Thus, the need for achievement is the guiding force be hind
entrepreneurial activities. It is the desire to do well and it motivates the people to
undertake innovative activities.”

The trait may be defined as a dispositional or characteristic way in which the person
responds to an equivalent set of stimuli. These responses represent intelligence,
charisma, decisiveness, enthusiasm, strength, bravery, integrity and self-confidence.
Thus, traits are an individual’s personal characteristics.

Traits are contents of leadership qualities. So an effective leader is one who possesses
intelligence, alertness to the needs of others, understanding of the task, good
communication skills, initiative and persistence in dealing with the problems. It is
important to note that personal elements that govern leadership ability are intelligence,
self-confidence, the drive to accept responsibility, good communication skills and
education.

In this way, entrepreneurs are required to have certain traits. These traits are necessary
for leadership qualities expected from an entrepreneur. An entrepreneur should be – (a)
adaptable to situations, (b) alert to social environment, (c) ambitious and achievement
oriented, (d) assertive, (e) cooperative, (f) decisive, (g) dependable, (h) dominant (desire
to influence others), (i) energetic (high activity level); persistent, (j) self-confident, (k)
tolerant of stress and (l) willing to assume responsibility.

Thus, for achieving success in his entrepreneurial behaviour, an entrepreneur is required

to have entrepreneurial competencies and these consist of a set of knowledge, skills,
motives and traits.

Factors affecting Entrepreneurship Development

Entrepreneurship is influenced by four distinct factors: economic development, culture,

technological development and education. In areas where these factors are present, you can
expect to see strong and consistent entrepreneurial growth.

These conditions may have both positive and negative influences on the emergence of
entrepreneurship. Positive influences constitute facilitative and conducive conditions for the
emergence of entrepreneurship, whereas negative influences create inhibiting milieu to the
emergence of entrepreneurship.
Economic Factors

Economic environment exercises the most direct and immediate influence on

entrepreneurship. This is likely because people become entrepreneurs due to necessity when
there are no other jobs or because of opportunity.

The economic factors that affect the growth of entrepreneurship are the following:

1. Capital

Capital is one of the most important factors of production for the establishment of an
enterprise. Increase in capital investment in viable projects results in increase in profits which
help in accelerating the process of capital formation. Entrepreneurship activity too gets a
boost with the easy availability of funds for investment.

Availability of capital facilitates for the entrepreneur to bring together the land of one,
machine of another and raw material of yet another to combine them to produce goods.
Capital is therefore, regarded as lubricant to the process of production.

France and Russia exemplify how the lack of capital for industrial pursuits impeded the
process of entrepreneurship and an adequate supply of capital promoted it.

2. Labor

Easy availability of right type of workers also effect entrepreneurship. The quality rather than
quantity of labor influences the emergence and growth of entrepreneurship. The problem of
labor immobility can be solved by providing infrastructural facilities including efficient
transportation.

The quality rather quantity of labor is another factor which influences the emergence of
entrepreneurship. Most less developed countries are labor rich nations owing to a dense and
even increasing population. But entrepreneurship is encouraged if there is a mobile and
flexible labor force. And, the potential advantages of low-cost labor are regulated by the
deleterious effects of labor immobility. The considerations of economic and emotional
security inhibit labor mobility. Entrepreneurs, therefore, often find difficulty to secure
sufficient labor.

3. Raw Materials

The necessity of raw materials hardly needs any emphasis for establishing any industrial
activity and its influence in the emergence of entrepreneurship. In the absence of raw
materials, neither any enterprise can be established nor can an entrepreneur be emerged

It is one of the basic ingredients required for production. Shortage of raw material can
adversely affect entrepreneurial environment. Without adequate supply of raw materials no
industry can function properly and emergence of entrepreneurship to is adversely affected.
In fact, the supply of raw materials is not influenced by themselves but becomes influential
depending upon other opportunity conditions. The more favorable these conditions are, the
more likely is the raw material to have its influence of entrepreneurial emergence.

4. Market

The role and importance of market and marketing is very important for the growth of
entrepreneurship. In modern competitive world no entrepreneur can think of surviving in the
absence of latest knowledge about market and various marketing techniques.

The fact remains that the potential of the market constitutes the major determinant of
probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding
lies in eating, the proof of all production lies in consumption, i.e., marketing.

The size and composition of market both influence entrepreneurship in their own ways.
Practically, monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market. However, the disadvantage of a competitive
market can be cancelled to some extent by improvement in transportation system facilitating
the movement of raw material and finished goods, and increasing the demand for producer
goods.

5. Infrastructure

Expansion of entrepreneurship presupposes properly developed communication and

transportation facilities. It not only helps to enlarge the market, but expand the horizons of
business too. Take for instance, the establishment of post and telegraph system and
construction of roads and highways in India. It helped considerable entrepreneurial activities
which took place in the 1850s.

Apart from the above factors, institutions like trade/ business associations, business schools,
libraries, etc. also make valuable contribution towards promoting and sustaining
entrepreneurship’ in the economy. You can gather all the information you want from these
bodies. They also act as a forum for communication and joint action.

Social Factors

Social factors can go a long way in encouraging entrepreneurship. In fact it was the highly
helpful society that made the industrial revolution a glorious success in Europe. Strongly
affect the entrepreneurial behavior, which contribute to entrepreneurial growth. The social
setting in which the people grow, shapes their basic beliefs, values and norms.

The main components of social environment are as follows:

1. Caste Factor

There are certain cultural practices and values in every society which influence the’ actions
of individuals. These practices and value have evolved over hundred of years. For instance,
consider the caste system (the varna system) among the Hindus in India. It has divided the
population on the basis of caste into four division. The Brahmana (priest), the Kshatriya
(warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social
mobility of individuals.

By social mobility’ we mean the freedom to move from one caste to another. The caste
system does not permit an individual who is born a Shridra to move to a higher caste. Thus,
commercial activities were the monopoly of the Vaishyas. Members of the three other Hindu
Varnas did not become interested in trade and commence, even when India had extensive
commercial inter-relations with many foreign countries. Dominance of certain ethnical
groups in entrepreneurship is a global phenomenon

2. Family Background

This factor includes size of family, type of family and economic status of family. In a study
by Hadimani, it has been revealed that Zamindar family helped to gain access to political
power and exhibit higher level of entrepreneurship.

Background of a family in manufacturing provided a source of industrial entrepreneurship.

Occupational and social status of the family influenced mobility. There are certain
circumstances where very few people would have to be venturesome. For example in a
society where the joint family system is in vogue, those members of joint family who gain
wealth by their hard work denied the opportunity to enjoy the fruits of their labor because
they have to share their wealth with the other members of the family.

3. Education

Education enables one to understand the outside world and equips him with the basic
knowledge and skills to deal with day-to-day problems. In any society, the system of
education has a significant role to play in inculcating entrepreneurial values.

In India, the system of education prior to the 20th century was based on religion. In this rigid
system, critical and questioning attitudes towards society were discouraged. The caste system
and the resultant occupational structure were reinforced by such education. It promoted the
idea that business is not a respectable occupation. Later, when the British came to our
country, they introduced an education system, just to produce clerks and accountants for the
East India Company, The base of such a system, as you can well see, is very anti-
entrepreneurial.

Our educational methods have not changed much even today. The emphasis is till on
preparing students for standard jobs, rather than marking them capable enough to stand on
their feet.

4. Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship. Certain
societies encourage innovations and novelties, and thus approve entrepreneurs’ actions and
rewards like profits. Certain others do not tolerate changes and in such circumstances,
entrepreneurship cannot take root and grow. Similarly, some societies have an inherent
dislike for any money-making activity. It is said, that in Russia, in the nineteenth century, the
upper classes did not like entrepreneurs. For them, cultivating the land meant a good life.
They believed that rand belongs to God and the produce of the land was nothing but god’s
blessing. Russian folk-tales, proverbs and songs during this period carried the message that
making wealth through business was not right.

5. Cultural Value

Motives impel men to action. Entrepreneurial growth requires proper motives like profit-
making, acquisition of prestige and attainment of social status. Ambitious and talented men
would take risks and innovate if these motives are strong. The strength of these motives
depends upon the culture of the society. If the culture is economically or monetarily oriented,
entrepreneurship would be applauded and praised; wealth accumulation as a way of life
would be appreciated. In the less developed countries, people are not economically
motivated. Monetary incentives have relatively less attraction. People have ample
opportunities of attaining social distinction by non-economic pursuits. Men with
organizational abilities are, therefore, not dragged into business. They use their talents for
non-economic end.

Psychological Factors

Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate

especially upon psychological factors. These are as follows :

1. Need Achievement

The most important psychological theories of entrepreneurship was put forward in the early)
960s by David McClelland. According to McClelland ‘need achievement’ is social motive to
excel that tends to characterise successful entrepreneurs, especially when reinforced by
cultural factors. He found that certain kinds of people, especially those who became
entrepreneurs, had this characteristic. Moreover, some societies tend to reproduce a larger
percentage of people with high ‘need achievement’ than other societies. McClelland
attributed this to sociological factors. Differences among societies and individuals accounted
for ‘need achievement’ being greater in some societies and less in certain others.

The theory states that people with high need-achievement are distinctive in several ways.
They like to take risks and these risks stimulate them to greater effort. The theory identifies
the factors that produce such people. Initially McClelland attributed the role of parents,
specially the mother, in mustering her son or daughter to be masterful and self-reliant. Later
he put less emphasis on the parent-child relationship and gave more importance to social and
cultural factors. He concluded that the ‘need achievement’ is conditioned more by social and
cultural reinforcement rather than by parental influence and such related factors.

2. Withdrawal of Status Respect

There are several other researchers who have tried to understand the psychological roots of
entrepreneurship. One such individual is Everett Hagen who stresses the-psychological
consequences of social change. Hagen says, at some point many social groups experience a
radical loss of status. Hagen attributed the withdrawal of status respect of a group to the
genesis of entrepreneurship.

Hage believes that the initial condition leading to eventual entrepreneurial behavior is the loss
of status by a group. He postulates that four types of events can produce status withdrawal:

i. The group may be displaced by force;

ii. It may have its valued symbols denigrated;

iii. It may drift into a situation of status inconsistency;

iv. It may not be accepted the expected status on migration in a new society.

3. Motives

Other psychological theories of entrepreneurship stress the motives or goals of the

entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige,
security and service to society. Stepanek points particularly to non-monetary aspects such as
independence, persons’ self-esteem, power and regard of the society.

On the same subject, Evans distinguishes motive by three kinds of entrepreneurs

Managing entrepreneurs whose chief motive is security.

Innovating entrepreneurs, who are interested only in excitement.

Controlling entrepreneurs, who above all otter motives, want power and authority.

Finally, Rostow has examined inter gradational changes in the families of entrepreneurs. He
believes that the first generation seeks wealth, the second prestige and the third art and
beauty.

4. Others

Thomas Begley and David P. Boyd studied in detail the psychological roots of
entrepreneurship in the mid-1980s. They came to the conclusion that entrepreneurial attitudes
based on psychological considerations have five dimensions:

First came ‘need-achievement’ as described by McClelland. In all studies of successful

entrepreneurs a high achievement orientation is invariably present.

The second dimension that Begley and Boyd call ‘locus of control’ This means that the
entrepreneur follows the idea that he can control his own life and is not influenced by factors
like luck, fate and so on. Need-achievement logically implies that people can control their
own lives and are not influenced by external forces.
The third dimension is the willingness to take risks. These two researchers have come to the
conclusion that entrepreneurs who take moderate risks earn higher returns on their assets than
those who take no risks at all or who take extravagant risks.

Tolerance is the next dimension of this study. Very few decisions are made with complete
information. So all business executives must, have a certain amount of tolerance for
ambiguity.

Finally, here is what psychologists call ‘Type A’ behavior. This is nothing but “a chronic,
incessant struggle to achieve more and more in less and less of time” Entrepreneurs are
characterize by the presence of ‘Type A’ behavior in all their endeavours.

Entrepreneurial motivation

Meaning

The entrepreneurial motivation is the process that activates and motivates the entrepreneur to
exert higher level of efforts for the achievement of his/her entrepreneurial goals. In other
words, the entrepreneurial motivation refers to the forces or drive within an entrepreneur that
affect the direction, intensity, and persistence of his / her voluntary behaviour as
entrepreneur. So to say, a motivational entrepreneur will be willing to exert a particular level
of effort (intensity), for a certain period of time (persistence) toward a particular goal
(direction).

Definition

Motivation is regarded as “the inner state that energizes activities and directs or channels
behavior towards the goal”.

Motivation is the process that arouses action, sustains the activity in progress and that
regulates the pattern of activity.

Nature of Motivation

The nature of motivation emerging out of above definitions can be expressed as follows:

1. Motivation is internal to man

Motivation cannot be seen because it is internal to man. It is externalized via behavior. It

activates the man to move toward his / her goal.

2. A Single motive can cause different behaviors

A person with a single desire or motive to earn prestige in the society may move towards to
join politics, attain additional education and training, join identical groups, and change his
outward appearance.

3.Different motives may result in single behaviour

It is also possible that the same or single behaviour may be caused by many motives. For
example, if a person buys a car, his such behaviour may be caused by different motives such
 as to look attractive, be respectable, gain acceptance from similar group of persons,
differentiate the status, and so on.

4.Motives come and go

Like tides, motives can emerge and then disappear. Motives emerged at a point of time may
not remain with the same intensity at other point of time. For instance, an entrepreneur overly
concerned about maximization of profit earning during his initial age as entrepreneur may
turn his concern towards other higher things like contributing towards philanthropic activities
in social health and education once he starts earning sufficient profits.

5.Motives interact with the environment

The environment in which we live at a point of time may either trigger or suppress our
motives. You probably have experienced environment or situation when the intensity of your
hunger picked up just you smelled the odour of palatable food.

You may desire an excellent performance bagging the first position in your examination but
at the same time may also be quite sensitive to being shunned and disliked by your class
mates if you really perform too well and get too much of praise and appreciation from your
teachers. Thus, what all this indicates is that human behaviour is the result of several forces
differing in both direction and intent.

Entrepreneurial Motivating Factors

Most of the researchers have classified all the factors motivating entrepreneurs into internal
and external factors as follows:

Internal Factors

These include the following factors:

1. Desire to do something new.
2. Become independent.
3. Achieve what one wants to have in life.
4. Be recognized for one’s contribution.
5. One’s educational background.
6. One’s occupational background and experience in the relevant field.

External Factors

These include:
1. Government assistance and support.
2. Availability of labour and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product.

McClelland’s Needs Theory

 Definition: McClelland’s Needs Theory was proposed by a psychologist David
McClelland, who believed that the specific needs of the individual are acquired over a period
of time and gets molded with one’s experience of the life. McClelland’s Needs Theory is
sometimes referred to as Three Need theory or Learned Needs Theory.

McClelland has identified three basic motivating needs, Viz. Need for Power, Need for
Affiliation and Need for Achievement and, along with his associates performed a
considerable research work on these basic needs.

Need for Power (n-pow): What is Power? Power is the ability to induce or influence the
behavior of others. The people with high power needs seek high-level positions in the
organization, so as to exercise influence and control over others. Generally, they are
outspoken, forceful, demanding, practical/realistic-not sentimental, and like to get involved in
the conversations.

Need for Affiliation (n-affil): People with high need for affiliation derives pleasure from
being loved by all and tend to avoid the pain of being rejected. Since, the human beings are
social animals, they like to interact and be with others where they feel, people accept them.
Thus, people with these needs like to maintain the pleasant social relationships, enjoy the
sense of intimacy and like to help and console others at the time of trouble.

Need for Achievement (n-ach): McClelland found that some people have an intense desire
to achieve. He has identified the following characteristics of high achievers:

 High achievers take the moderate risks, i.e. a calculated risk while performing the activities in
the management context. This is opposite to the belief that high achievers take high risk.
 High achievers seek to obtain the immediate feedback for the work done by them, so as to
know their progress towards the goal.
 Once the goal is set, the high achiever puts himself completely into the job, until it gets
completed successfully. He will not be satisfied until he has given his 100% in the task
assigned to him.
 A person with a high need for achievement accomplishes the task that is intrinsically
satisfying and is not necessarily accompanied by the material rewards. Though he wants to
earn money, but satisfaction in the accomplishment of work itself gives him more pleasure
than merely the cash reward.
Hence, McClelland’s Needs Theory posits that the person’s level of effectiveness and
motivation is greatly influenced by these three basic needs.

BASIS FOR
ENTREPRENEUR INTRAPRENEUR
COMPARISON
Meaning Entrepreneur refers to a person Intrapreneur refers to an employee of the
who set up his own business with organization who is in charge of
a new idea or concept. undertaking innovations in product,
service, process etc.
Approach Intuitive Restorative
Resources Uses own resources. Use resources provided by the company.
Capital Raised by him. Financed by the company.
Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur himself. Taken by the company.
Works for Creating a leading position in the Change and renew the existing
market. organizational system and culture.

Definition of Entrepreneur

An entrepreneur is an individual who conceives the idea of starting a new venture, take all
types of risks, not only to put the product or service into reality but also to make it an
extremely demanding one. He is someone who:

 Initiates and innovates a new concept,

 Recognises and utilises opportunity,
 Arranges and coordinates resources such as man, material, machine and capital,
 Take suitable actions,
 Faces risks and uncertainties,
 Establishes a startup company,
 Adds value to the product or service,
 Takes decisions to make the product or service a profitable one,
 Is responsible for the profits or losses of the company.

Entrepreneurs are always the market leader regardless of the number of competitors because
they bring a relatively new concept in the market and introduce change.
Definition of Intrapreneur

An intrapreneur is nothing but an entrepreneur within the boundaries of the organisation. An

intrapreneur is an employee of a large organisation, who has the authority of initiating
creativity and innovation in the company’s products, services and projects, redesigning the
processes, workflows and system with the objective of transforming them into a successful
venture of the enterprise.

The intrapreneurs believe in change and do not fear failure, they discover new ideas, looks
for such opportunities that can benefit the whole organisation takes risks, promotes
innovation to improve the performance and profitability, resources are provided by the
organisation. The job of an intrapreneur is extremely challenging; hence they are appreciated
and rewarded by the organisation accordingly.

Key Differences Between Entrepreneur and Intrapreneur

The important distinguishing points between entrepreneur and intrapreneur, are given in the
following points:

1. An entrepreneur is defined as a person who establishes a new business with an

innovative idea or concept. An employee of the organisation who is authorised to
undertake innovations in product, service, process, system, etc. is known as
Intrapreneur.
2. An entrepreneur is intuitive in nature, whereas an intrapreneur is restorative in nature.
3. An entrepreneur uses his own resources, i.e. man, machine, money, etc. while in the
case of an intrapreneur the resources are readily available, as they are provided to him
by the company.
4. An entrepreneur raises capital himself. Conversely, an intrapreneur does not need to
raise funds himself; rather it is provided by the company.
5. An entrepreneur works in a newly established company. On the other hand, an
intrapreneur is a part of an existing organisation.
6. An entrepreneur is his own boss, so he is independent to take decisions. As opposed
to intrapreneur, who works for the organisation, he cannot take independent decisions.
7. This is one of the salient features of an entrepreneur; he is capable of bearing risks
and uncertainties of the business. Unlike intrapreneur, in which the company bears all
the risks.
8. The entrepreneur works hard to enter the market successfully and create a place
subsequently. In contrast to Intrapreneur, who works for organization-wide change to
bring innovation, creativity and productivity.

Types of Entrepreneurs

Classification of Entrepreneurs According to Type of Business

Classification According to Type of Business
1. Business Entrepreneur

Business entrepreneur is called solo entrepreneur. He/she is the one who conceives an idea
for a new product/service and establishes a business enterprise to translate his idea into
reality. He/she may establish small or large enterprise to commercially exploit his/he idea.
He/she takes up production, operations and pursues marketing activities.

2. Trading Entrepreneur

Trading entrepreneurs are those who restrict themselves to buying and selling finished goods.
They may be engaged in domestic and international trade. Their core strength lies in
distribution and marketing. They get their income by way of commission and marketing.

3. Industrial Entrepreneur

These are entrepreneurs who manufacture products to cater to the needs of consuming public
after identifying the need left unfulfilled by the manufacturer hitherto. They may be small,
medium and large entrepreneurs. Industrial entrepreneurs mobilise the resources of various
types and create an entity to manufacture the products or service. They add utility to products
rolled out by them which is termed as value addition.

4. Corporate Entrepreneur

Corporate entrepreneur is called promoter. He/she takes initiative necessary to start an entity
under corporate format. He/she arranges to fulfil the formalities to start a corporate entity
under Company law. Corporate entrepreneur assembles all the resources and put in place
organisation to run the business on a day-to-day basis. In corporate form of organisation,
ownership and management are separated. Corporate entities are registered under the
Companies Act or under the Trust Act. Corporate entrepreneurs install a team of experts to
manage the entity on a day to day basis.

5. Agricultural Entrepreneur

Agricultural entrepreneurs are those entrepreneurs who raise farm products and market them.
They use the various inputs like labour, fertilizer, insecticide, water technology etc. to raise
the products and market their products either directly or through co-operative entities or
through brokers or through tie up with large retailers. Those who raise allied products like
poultry, meat, fish, honey, skin, agricultural implements, flower, silk, fruits, prawn etc., are
called agricultural entrepreneur. In short these entrepreneurs pursue their venture in
agriculture and allied sector.

6. Retail Entrepreneurs

Retail entrepreneurs are those who enter into venture of distributing the end-product to final
consumer while wholesale entrepreneurs take up the venture of distributing the product to
retailer. They used to buy the goods in small quantities from numerous wholesalers and make
it available different products of different brands under one roof to end consumer.

7. Service Entrepreneurs

Service entrepreneurs enter into the venture of supplying service products to end consumers.
Hoteliers, airlines, banking, insurance and financial service providers, repair service
organisation, bus operators, train service, advisory organisation, advertising firms, manpower
supplier etc., come under service entrepreneur’s category.
Classification based on Technology Adopted

1. Technical Entrepreneur

Technical entrepreneurs are such of those craftsmen like welder, fitter, moulder,
draughtsman, turner, carpenter, goldsmith, tailor, photographer, repairer, weaver, sculptor,
potter, wiremen or so on who start small ventures. They turnout products/service of high
quality. They simply focus on production rather than on marketing. This type of entrepreneur
demonstrates their creative talents by producing innovative products. Their strength lies in
skill or knowledge of producing specialised product.
2. Non-technical Entrepreneur

Non-technical Entrepreneurs are those who do not possess any technical competence to
produce the goods or service but have special talents to market the products successfully or
expertise to distribute the products produced by technical entrepreneur effectively to channel
members and end consumers.

3. Professional Entrepreneur

Professional entrepreneur is one who is having a rich expertise in starting a venture but lack
interest in continuing the venture as a manager or as a owner. He/she simply sells out the
venture started by him to someone else after its successful take-off. They keep on conceiving
new ideas to develop alternative projects. In short, these entrepreneurs have got professional
expertise in starting the venture and exiting it after the establishment.

Classification in Terms of Motivation

1. Pure Entrepreneur

Pure entrepreneurs are individuals who are propelled to enter into venture by psychological
and economic motives. Their egos do not permit them to work for somebody else. They
nurture desire of starting a particular venture and earning high profit there from and thus
attaining a social status. They apply their knowledge, skill and insight in making the venture
a great success in order to earn maximum profit out of the venture. Example Dhirubai
Ambani, Jamshadji Tata, T.V. Sundaram Iyengar, Seshadriji, Birla, Narayanamurthi, Aziz
Premji and so on.

2. Induced Entrepreneur

An induced entrepreneur is one who is inspired to take up entrepreneurial activity thanks to

entrepreneurship friendly policies put in place by the Government. In other words,
concessions, incentives and soaps provided by the government drive them to enter into
venture. Government provides a great deal of support in the form of loans, subsidies, nominal
rate of interest, tax breaks, tax holidays, training, import of technology from abroad,
concessions for export oriented item, allotment of sheds, and lands at subsidised price etc.
impel the potential entrepreneurs to start the venture.

3. Motivated Entrepreneur

Motivated entrepreneurs are those motivated to take up venture by the desire for self
fulfilment. They are motivated to produce and market product or service by sheer prospect of
making huge profit. They are further motivated to develop the venture to a saleable stage so
that he/she can sell the venture at a super profit to certain entrepreneurs(buyers) who do not
like to take risks in setting up a new venture but desire to buy well developed venture
promising great profit prospects.
4. Spontaneous Entrepreneur

These entrepreneurs have natural inclination to start venture. They are supposed to be bold,
optimistic and enterprising persons. They have passion for meeting the challenges. Their
inner urge and inborn traits drive them to commence their ventures.

Classification Based on Development Stage

1. First Generation Entrepreneur

First generation entrepreneur is one who starts venture by virtue of his knowledge, skill,
talent and competence. He/she innovates a product/service by technical expertise possessed
by him/her. These entrepreneurs do not have any family background or prior exposure to the
venture initiated by them. They are self made entrepreneurs.

2. Modern Entrepreneur

Modern entrepreneur is one who keenly observes the dynamics of the market with eagle eye
and identify the unfilled gaps, if any in product/service marketed. He/she takes initiative in
starting the venture to cater to the unmet needs of the market.

3. Classical Entrepreneur

Classical entrepreneur is one who starts his own venture as a family business. They are called
life timers. They engage in business as a matter of routine. Their prior exposure to business
environment impels them to commence venture of their own. Entrepreneurs from the
business families are called classical entrepreneurs. For instance where son of provision
merchant start his own provision shops, the former is called classical entrepreneur.

Classification According to Area

1. Urban Entrepreneur

Entrepreneur who commences his entrepreneurial activity in urban areas like State Capital,
District Headquarters, Towns, Municipalities etc., They may be industrial entrepreneur or
corporate entrepreneur or retail entrepreneur.

2. Rural Entrepreneur

These are people who start venture in rural locations. They are provided a lot of economic
and fiscal incentives to start their venture in rural and semi urban areas in order to check the
exodus of rural people to urban centres in pursuit of employment opportunity. Thanks to their
immediate access to material, labour or other facilities at low cost. As a result the cost of
operation of rural ventures tends to be low. Agricultural and trading entrepreneurs prefer to
set up their venture in rural areas.

Classification According to Ownership

1. Private Entrepreneur

Ventures started by individual either singly or collectively at their own risk after mobilising
various resources in order to earn profit are called private entrepreneurship.

2. State Entrepreneurship

Trading/industrial ventures started by Government under various formats like company,

corporation, departments, board denotes state entrepreneurship.

3. Joint Entrepreneurship

Ventures started and owned by both private individuals and government denote joint
ownership.

Classification of Entrepreneur

Classification of Entrepreneur – Innovating Entrepreneurs, Imitating Entrepreneurs,

Fabian Entrepreneurs and Drone Entrepreneurs
The economic development of an economy depends upon the nature of entrepreneur. An
entrepreneur should be innovative, skillful enough to help in the real development of an
economy. When the question arises for the development of an economy the entrepreneur
should be potent enough to help the development in a healthy way.

When the entrepreneur is shy and humble the environment is underdeveloped and it is
developed only when he is strong, skillful and innovative. In a study of American
Agriculture, Clarence Danhot has made classification of entrepreneurs according of
limit.

The entrepreneur can be classified as:

1. Innovating Entrepreneurs

2. Imitating Entrepreneurs

3. Fabian Entrepreneurs, and

4. Drone Entrepreneurs.

Type # 1. Innovative Entrepreneurs:

Such entrepreneurs are aggressive in nature and they include innovation in their nature.
Such entrepreneurs produce new product technologies etc. in a developed economy.
Such entrepreneurs are capable of providing new and better technologies and products to
an existing product and technology.

Type # 2. Imitating Entrepreneurs:

Such entrepreneurs are mere imitators. They include adoption of changes in technology
and techniques. They do not but only imitate into the existing technologies of a
developed economy. Such entrepreneur look forward the changes and the new
innovations of a developed economy and adopt them in a developing economy. Such
entrepreneurs not only adapt but also change and adjust themselves as per the changing
situations.

Type # 3. Fabian Entrepreneurs:

This category of entrepreneurs include such groups of persons which neither accept the
new trends, technologies and innovations nor leave the old customs, traditions and
beliefs. They are neither imitators nor innovators, they are just the ones who proceed in
with the situations they are in and use only traditional methods of production. Such
entrepreneur are lazy and not interested in bearing risks.

Type # 4. Drone Entrepreneurs:

Such entrepreneurs exist in underdeveloped countries and refer to the category of
persons who are neither interested in imitating the new technologies nor in the
acceptance of already existing technologies in a developed economy. Such entrepreneurs
bear losses as they keep on sticking to those technologies which are responsible for their
losses.

Classification of entrepreneurship can be made on the basis of definitions which include

functions of an entrepreneur. J.B. Say was the first to use the word entrepreneur. But
later on Schumpeter also gave definition based on functions of an entrepreneur.

Entrepreneur is one who puts innovations into successful entrepreneurship with the help
of “head-quarter of capitalism”, i.e. the capital and credit makers and who averts risks
and then bears the rest of them. He is the path breaker, the leader and egoist who wants
success for the sake of success. He is the top notched. There can be many other like him.
Others are imitators, or those who make induced, complementary and supplementary
investments. Top entrepreneurs make autonomous investments for super normal profits.

Entrepreneurship Development Programme (EDP)

Entrepreneurship Development Programme means a programme conducted to help a

person in strengthening his entrepreneurship motive and in acquiring skill and
capabilities required for promoting and running an enterprise efficiently. A programme
which is conducted with a motive to promote potential entrepreneurs, understanding of
motives, motivational pattern, their impact on behaviour and entrepreneurship value is
termed as entrepreneurship development programme.

There are a number of programmes which give information to the prospective

entrepreneurs regarding new business ideas, how to set up a new venture, how to prepare
a project report, sources of finance etc. These programmes should not be confused with
EDP; these are all a part of EDP. EDP is primarily concerned with developing,
motivating entrepreneurship talent and understanding the impact of motivation on
behaviour.

A well designed EDP envisages three tiered approach:

 1. Developing achievement motivation and sharpening entrepreneurship traits and
behaviour.
2. Guidance on industrial opportunities, incentives, facilities, rules and regulations.
3. Developing managerial and operational capabilities.
4. Definitions of Entrepreneurship Development Programme
5. According to Joseph E. Schumpeter, “Intelligence, motivation, knowledge and
Opportunities are the perquisites of entrepreneurship Development.”
6. According to other Experts, “A programme designed to help an individual in
strengthening his entrepreneurship motive and acquiring skills and capacities
necessary for playing his entrepreneurship role effectively.”

Features of Entrepreneurship Development Programme (EDP)

The basic features of the entrepreneurship development programme has gone

through several modifications over time as:

1. Identification and careful selection of entrepreneurs for training;

2. Developing the entrepreneurship capabilities of the trainee;
3. Equipping the trainee with the basic managerial understanding and strategies;
4. Ensuring a viable industrial project for each potential entrepreneur;
5. Helping him to secure the necessary financial, infrastructural and related
assistance; and
6. Training cost is highly subsidised and only a token fee is charged. A deposit is,
however, taken to ensure commitment of participants.

Need of Entrepreneurship Development Programme

Entrepreneurship Development Programme means a programme conducted to help a

person in strengthening his entrepreneurship motive and in acquiring skill and
capabilities required for promoting and running an enterprise efficiently. It is a
programme which is conducted with a motive to promote potential entrepreneurs,
understanding of motives, motivational pattern, their impact on behaviour and
entrepreneurship value is termed as entrepreneurship development programme.

The need of EDP is as follows:

1. It helps in developing entrepreneurs

2. It helps entrepreneurs in developing and improving their skills
3. EDP is a tool of industrialisation and path to economic growth through
entrepreneurship
4. EDP helps in dispersal of economic activities in different regions by providing
training and other support to local people
5. It provides opportunities for self-employment and entrepreneurship careers
6. EDP develops motivation, competence and skills necessary for successful
launching, management and growth of the enterprise
7. EDP, by inculcating entrepreneurship capabilities and skill in the trainees, creates
a new generation of entrepreneurs
The urge to achieve is one of the most significant variables connected with economic
development. People with high need for achievement tend to be more successful
entrepreneurs as compared to people who are with low need for achievement.

Objectives of Entrepreneurship Development Programme

The objectives of an entrepreneurship development programme (EDP) are

categorised into two types:

1. Short-Term Objectives
2. Long-Term Objectives

1. Short-Term Objectives:
These imply the objectives which are to be achieved immediately after the completion of
the programme.

The short-term objectives are:

1. Preparing a person mentally for the entrepreneurship venture

2. Making him competent to scan the environment and situation within the existing
regulatory framework
3. Help a participant in the fixation of his/her goal of life as entrepreneur as an
objective in general.

2. Long-Term Objectives:
An entrepreneurship development programme seeks to equip the participants with all the
skills required for the establishment and smooth running of business ventures. The
ultimate objective is that the participant under training should establish his/her own
venture.

The objectives of an EDP are as follows:

1. To enlarge the supply of entrepreneurs for rapid industrial development

2. To develop small and medium scale sector which is necessary
3. To industrialise rural and backward regions
4. To provide gainful employment to educated young men and women
5. To diversify the sources of entrepreneurship and
6. To improve the performance of small industries by developing managerial skills
among small entrepreneurs

EDP Programs

EDP programs are organised to address the needs of various types and levels of people.
The EDP are directed at students, aspiring entrepreneurs, faculty, local entrepreneurs etc.
The objective of the EDP would be to foster entrepreneurship spirit, quality, enable
product design, help in project identification, report preparation, understand finance,
compliance etc. Entrepreneurship being multi-disciplinary, the program should be
structured to handle various subjects, domains and skills.
A typical program should cover:

1. entrepreneurship motivation
2. Business skills
3. Industry Interactions
4. Compliance and statutory aspects
5. Venture Creation and Management
6. Schemes, Grants, incentives and subsidies
7. Support Systems

EDP is structured in three phases:

1. Pre-training phase where participants are identified, program is designed and

relevant tie-ups all achieved
2. Training Phase – Execution of training
3. Post training support.

Success of EDP is evaluated by looking at the number of participants who have turned
into entrepreneurs. More recent measure is also to see how the participants assu me other
critical roles post the training to further the entrepreneurship ecosystem.

Importance of Entrepreneurship Development Programme

Entrepreneurs are considered as agents of economic growth. They create wealth,

generate employment, provide new goods and services and raise the standard of living.
EDP is an effective way to develop entrepreneurs which can help in accelerating the pace
of socio-economic development, balanced regional growth, and exploitation of locally
available resources. It can also create gainful self-employment.

An EDP equips entrepreneurs and makes them competent to anticipate and deal with a
variety of problems that any entrepreneur may have to face. It gives confidence to the
entrepreneur to face uncertainties and take profitable risks. It prepares them to deserve
and make good use of various forms of assistance.

EDP can be beneficial in the following ways:

1. Economic Growth:

EDP is a tool of industrialisation and path to economic growth through entrepreneurship.

2. Balanced Regional Development:

EDP helps in dispersal of economic activities in different regions by providing training

and other support to local people.

3. Eliminates Poverty and Unemployment:

EDPs provide opportunities for self-employment and entrepreneurship careers.

4. Optimum use of Local Resources:

The optimum use of natural, financial and human resources can be made in a country by
training and educating the entrepreneurs.

5. Successful Launching of New Unit:

EDP develops motivation, competence and skills necessary for successful launching,
management and growth of the enterprise.

6. Empowers New Generation Entrepreneurs:

EDP, by inculcating entrepreneurship capabilities and skill in the trainees, created a new
generation of entrepreneurs who hitherto were not entrepreneurs.

Role of Entrepreneurship Development Programme (EDP)

EDP is essential for first generation entrepreneurs because they may not become
successful unless a proper training is received. It is a continuous process of motivating
the entrepreneur. The potential entrepreneurs can solve many of their problems provided
proper training is given to them.

1. Eliminates Poverty and Unemployment:

The basic problems of most of the developing countries like India are poverty and
unemployment. Entrepreneurship development programmes can help the unemployed
people to opt for self-employment and entrepreneurship as a career.

Several programmes like National Rural Employment Programme (NREP), Integrated

Rural Development Programme (IRDP) etc., are in operation in India to help the
potential entrepreneurs. All these special schemes intend to eliminate poverty and solve
the problem of unemployment.

2. Balanced Regional Development:

Successful entrepreneurship development programmes help in fostering industrialization
and reduce the concentration of economic power. It is because small-scale entrepreneurs
can set up their units in remote areas with little financial resources which can help in
achieving balanced regional development.

The medium and large enterprises do not help in reducing the disparities in income and
wealth of the people. Thus, entrepreneurship development programmes help in balanced
regional development by spreading industrial units in each, and every part of the
country.

3. Prevents Industrial Slums:

The urban cities are highly congested and leading to industrial slums. Decentralisation of
industries is very much required by relocating the industries.
entrepreneurship development programmes help in removal of industrial slums as the
entrepreneurs are provided with various schemes, incentives, subsidies and
infrastructural facilities to set up their own enterprises in all the non-industrialized areas.

his will control the industrial slums and also reduce the pollution, traffic congestion,
overcrowding in cities etc.

4. Harnessing Locally Available Resources:

Since abundant resources are available locally, proper use of these resources will help to
carve out a health base for sound economic and rapid industrialization.

The entrepreneurship development programmes can help in harnessing these resources

by training and educating the entrepreneurs.

5. Defuses Social Tension:

Every young person feels frustrated if he does not get employment after completing his
education. The talent of the youth must be diverted to self-employment careers to help
the country in defusing social tension and unrest among youth which is possible by
entrepreneurship development programmes.

6. Capital Formation:
The various development banks like ICICI, IDBI, IFCI, SFC, SIDC and SIDBI take
initiative in promoting entrepreneurship through assistance to various agencies involved
in EDP and by providing financial help to new entrepreneurs. It is impossible to start a
new enterprise without sufficient funds.

Entrepreneurs are the organisers of factors of production who employ their own and
borrowed money for setting up new ventures. This all results in the process of capital
formation.

7. Economic Independence:
Entrepreneurs develop and produce substituted products of import ed goods and prevent
the over-dependence on other countries.

They also enable the country to produce a variety of better quality goods and services at
competitive prices of imported goods which help in promoting the economic
independence of the country.

8. Improvement in per Capita Income:

Entrepreneurs always explore and exploit the new opportunities which lead to productive
use of factors of production for more output, employment and generation of wealth.

The overall increase in productivity and income help in improvement in per capita
income. EDPs play a significant role in setting up more industrial units to generate more
employment opportunities and to secure improved per capita income.
9. Facilitating Overall Development:
Entrepreneurs act as agents of proper use of various limited resources such as men,
money, material, machines etc., which leads to overall development of an area, an
industry.

The successful entrepreneurs set a motivating example for others to adopt

entrepreneurship as a career. Thus entrepreneurs create a motivating environment for
economic development of a country.

Some of the other role of EDP are as follows:

1. Selection of project and product

2. To analyse the environment regarding the small industry/business
3. To know the process and procedure regarding the establishment of new business
4. Helpful in preparation of the project
5. Helpful to learn the primary stage of managerial skill
6. To know the essential resources for establishing a new venture
7. Giving assistance in appreciating the quality of an entrepreneur
8. To identify the feasible entrepreneur
9. To provide training & education to feasible entrepreneurs
10. To know the EDPs obstacles and their measures
11. Helpful in searching for the incentives subsidy and financial assistance resources

Phases of Entrepreneurship Development Programme

After deciding on course contents and curriculum on EDP, the next important task is to
decide various phases of EDP.

There are three different phases of EDP like:

Phase1 – Pre-Training Phase:

Pre-training phase consists of all activities and preparation to launch the training
programme.

Pre-training phase of EDP consists of the following activities:

1. Selection of entrepreneurs for the training programme

2. Arrangements of infrastructure are for the programme like selection of place of
training
3. Deciding guest faculty for the programme from the education industry and banks
4. Taking necessary steps for the inauguration of the programme
5. Formation of selection committee to select trainees from the programme
6. Making provision with regard to publicity and campaigning for the programme

Phase 2 – Training Phase:

The primary objective of the training programme is to develop motivation and skill or
competency amongst the potential entrepreneurs. Care should be taken to impart bot h
theoretical and practical knowledge to various trainees.
The training phase of EDP will be so designed that it will answer the following
questions:

1. Whether the attitude of the entrepreneur has been tuned towards the proposed
project or not
2. Whether the trainee has been motivated to accept entrepreneurship as a career
3. How the trainee behaves like an entrepreneur
4. Whether the trainee has sufficient knowledge on resources and technology or not
5. What kind of entrepreneurship traits he lacks and what steps should be taken to
set it

Phase3 – Follow-up Phase:

Follow up phase of EDP has been termed as the post-training phase. The ultimate
objective is to develop competent entrepreneurs.

So that they can start their project. Post-training phase is a review phase of a training
programme.

It consists of reviewing of work in the following manner:

1. Review of pre-training work

2. Review of actual training programme
3. Review of the post training programme so that the cost effectiveness of the
present programme can be evaluated.