Entrepreneurship process and principles Chapter: Introduction to Entrepreneurship process and principles Definition of entrepreneur -According to American Heritage Dictionary, “Entrepreneur is a person who organizes, operates and assumes the risk for business venture” -According to Skinner SJ and Ivancevich JM,” An entrepreneur is a person who takes the risks necessary to organize and manage a business and receives the financial profits and monetary rewards” -Entrepreneur is a person who organizes and assumes the risk of his or her own venture”. Meaning and definition of Entrepreneurship According to R. M. Hodgehs,-‘Entrepreneurship is the process of organizing, managing and assuming the risk of a business. ” Entrepreneurship is the capacity for innovation, investment, and expansion in new markets, products and techniques. So entrepreneurship is considered as the act of assuming the risk and task of an entrepreneur, so it is the act of starting a business. Definition of Intrapreneurship -The term intrapreneurship refers to entrepreneurial activities that receive organizational sanction and resource commitments for the purpose of innovative results.Order now
Definition of Intrapreneur -According to Griffin, “Intrapreneur is an extrepreneurial person employed by a corporation and encouraged to be innovative and creative, a person with entrepreneurial characteristics who is employed within a large corporation, moreover, intrapreneurs are usually found in enterprises that encourage experimentation, tolerate failure, recognize success and share the wealth. Differences between Entrepreneuer and Intrapreneur. The basic differences are: DifferenceEntrepreneurIntrapreneur 1.
DependencyAn entrepreneur is independent in his operationsBut an intrapreneur is dependent on the entrepreneur i. e. , the owner. 2. Raisingof fundsAn entrepreneur himself raises funds required for the enterprise. Funds are not raised by the entrepreneur only operate it. 3. RiskEntrepreneur bears the risk involved in the business. An intrapreneur does not fully bear the risk involved in the enterprise. 4. OperationsAn entrepreneur operates from outside. An intrapreneur operates from within the organization itself.
Characteristics attributed to entrepreneur An entrepreneur’s characteristics attributed are following:- 1. Entrepreneurs are in committed, determine and perseverance. 2. Drive to achieve- Entrepreneur play challenging role to achieve something new. 3. Opportunity orientation- A successful entrepreneur is opportunity hunger, his focus is on opportunity rather than resource structure and strategy. 4. Initiative and Responsibility- An entrepreneur is a person who always take new right initiative and retain greater responsibility of business. . Seeking Feedback-Entrepreneur always evaluate his or her performance, his employees, and overall his business performance. 6. Internal locus of control-Entrepreneur believes and formulates himself as internal locus of controllable person for success of his business. Type A personality. 7. Tolerance of ambiguity- Entrepreneur tolerates of different unacceptable and ambigus situation as well as tactfully solve it. 8. Calculate risk taking-He is a sound calculator of risk and retain the ability of good judgments and analytical skills. 9.
Tolerance of failure- Entrepreneurs use failure as a learning experience. 10. Creativity and innovativeness- He has vast creativity and innovative ideas. 11. Vision-Entrepreneurs know where they want to go. They have a vision and concept of what their firm can be. 12. Independence- The desire for independence s a driving force behind entrepreneurs. Functions of an Entrepreneur(For entrepreneurship) Functions of an entrepreneur are two types:- A) General functions:- 1) Risk taking- without taking risk entrepreneurs cannot take any initiative. Risk involved in every work and effort. ) Innovation- According to economists, an entrepreneur is a person with innovation and creativity. 3) Development and Extension of existing venture:-Entrepreneurs also find out potential customers and markets. He can not only set up a venture but also strive for the extension and continues growth of it. 4) Management and Marketing- When an entrepreneur establishes a new enterprise, he obliged to manage that obligation and run it properly. B) Specific function:- 1) Idea generation and scanning of the best suitable one. 2) Determination of business objectives. ) Product analysis and marketing research 4) Determination and form of ownership. 5) Completion of promotional formalities 6) Raising necessary funds 7) Purchasing machine and materials 8) Recruitment of people 9) Undertaking the business operations. Distinction between entrepreneur and a manager. The major points of distinction are below: PointsEntrepreneurManager 1. MotiveThe main motive of an entrepreneur is to start a venture by setting up an enterprise. But the main motive of a manager is to render his services in an enterprise at ready setup by someone else. . StatusAn entrepreneur is the owner of the enterpriseA manager is the servant in the enterprise owned by the entrepreneur. 3. Risk bearingAn entrepreneur assumes all risks and uncertainty involved in running the organization. A manager as the servant does not bear any risk involved In the enterprise. 4. RewardsThe rewards an entrepreneur gets for bearing risks involved in the enterprise in profit, which is highly uncertain. A manager gets salary as a reward for the services rendered by him in the enterprise. Salary of a manager is certain and fixed. . InnovationEntrepreneur act as innovator also called a change agent. Manager does is simply to calculate the plans prepared by the entrepreneur. 6. QuaifficationsAs entrepreneur needs to process qualities and qualifications like high achievement motive, originality in thinking , foresight ,risk bearing ability and so on. A manager needs to possess distinct qualifications in terms of sound knowledge in management theory and practice. So at times, an entrepreneur can be a manager also but a manager cannot be an entrepreneur. Types of Entrepreneurs. Basing on a research entrepreneurs are classified into four types which are:- 1) Innovative entrepreneur:-An innovating entrepreneur is one who introduces new goods, inaugurates new methods of production, discovers new market and recognizes the enterprise. 2) Imitative Entrepreneur: – These entrepreneurs are characterized by readiness to adopt successful innovations inaugurated by innovating entrepreneurs. Imitative entrepreneurs don’t innovate the changes themselves; they only imitate techniques and technology involved by others. ) Fabian Entrepreneurs: – Fabian entrepreneurs are characterized by very great caution and skepticism in experimenting any change in their enterprises. They imitate only when it becomes perfectly clear that if he not accept the change he will fail in business. 4) Drone entrepreneurs: – These are characterized by a refusal to adopt opportunities to make changes in production formulate even at the cost of severely reduced returns relative to other like producers such entrepreneurs may even suffer from losses but they are not ready to make change in their existing.
Following are some more types of entrepreneurs listed by some other behavioral scientists: Solo operators: these are the entrepreneurs who essentially work alone and, if needed at all, employ a few employees. Active partners: Active partners are those entrepreneurs who start /carry on an enterprise as joint venture it is important that all of them active participate in the operations of the business. Inventors: such entrepreneurs with their competence and inventiveness invent new products. Their basic interest lies in research ad innovative activities.
Challengers: These are the entrepreneurs who plunge into industry because of the challenges it presents. When one challenge seems to be met, they begin to look for new challenges. Buyers: these are those entrepreneurs who do not like to bear some risk. Hence in order to reduce risk involved in setting up new enterprise, the like to buy ongoing on. Life timers: these entrepreneurs take business as an integral part of their life. Usually, family enterprise and business which mainly depend on exercise of personal skill fall in this type/category of entrepreneurs.
Meaning of entrepreneurship development Entrepreneurship development consists of awareness about the entrepreneurial opportunities basing on survey, implementation of training programs to develop motivation and management skill, and providing infrastructural support of counseling, assisting, to establish a new enterprise and to develop existing units. So entrepreneurship development is encouraging I encouraging or developing to be an entrepreneur. Phases of Entrepreneurship Development
Broadly, entrepreneurship development consists of these following phases:- 1) Initial phase: – In these phase covered by creation of awareness about the entrepreneurial opportunities basing on survey. For instance here entrepreneur forecast demand and seeking opportunity. 2) Development phase: – Implementation of training programs to develop motivation and management skills. Suppose –for a poultry or diary firm establishing needs training to those persons who will be an entrepreneur through this firm. 3) Support phase:-Infrastructural support of counseling, assisting to establish a new enterprise and to develop existing units.
For example, Government has to provide counseling how finance, and other infrastructural support say youth development program, poly technique institute etc. National benefits of entrepreneurship/importance of entrepreneurship in the economic development of a country. Entrepreneurship plays an important roe inn the economic development of a country. Entrepreneurs are surely benefits to the nation at least 4 national benefits are:- 1) Entrepreneurship fosters economic growth. 2) Entrepreneurship creates new technologies products and services. 3) Entrepreneurship changes and rejuvenates market competition.
Entrepreneurs stir up the waters of competition in the market place. 4) Entrepreneurship increases productivity –Entrepreneurship has been recognized for its dynamic role in rising productivity. The two to higher productivity are R&D and investment in new plant and machinery. So there is closer relationship of these two and entrepreneurship. The importances of economic development through entrepreneurship are highlited below: 1)Proper utilization of resource – economic development of a country depends on the proper utilization of human and non- human resources.
Entrepreneurs extend help in this regard by accumulating the scattered resources and make them productive by establishing new venture. 2)Industrialization-initiative is very much important for industrialization. Entrepreneurship is the process by which entrepreneur take initiatives by establishing new ventures. 3)Creation of employment opportunities: Entrepreneurship contributes substantially by crating employment opportunity for economic development. They establish new organizations that employment labor force. )Other contributions:- There are some other fields where entrepreneurship contribute, such as to increase national income, rate environment for innovation, change personal consumption, development infrastructure ad above all change the standard of living of people. …………………………………………………………………………… Sheet1 Chapter1 Entrepreneurship Development Chapter2 Definitions and Framework Entrepreneur: Definition The word “entrepreneur” is derived form the French verb entreprendre. It means “to undertake”. In the early 15th century, the Frenchmen who organized and led military expeditions were referred to as “entrepreneurs”.
Around 1700 A. D. the term was used for architects and contractors of public work. The term “entrepreneur” was applied to business initially by the French economist, Cantillion, I the 18th century, to designate a dealer who purchases the means of production for combining them into marketable products. The Entrepreneur: Other Definition Adam Smith described entrepreneur as a person who only provides capital without taking active part in the leading role in enterprise. Richard Cantillion considered all persons engaged in economic activity as entrepreneurs.
Marx regarded entrepreneur as asocial parasite. Joseph A. Schumpter recognized a person one who introduces innovative changes is an entrepreneur. He treated entrepreneur as an integral part of economic growth. The fundamental resources source of disequilibrium was the entrepreneur. Noah Webster thinks entrepreneur is one who assumes he risk and management of business. Robert D. Hisrich says, The person who is going to establish a successful new business venture must also be a visionary leader- a person who dreams great dreams.
Although there are many definitions of leadership, the one that best describes the needed entrepreneurial leadership is: A leader is like a gardener. When you want a tomato, you take a seed, put it in a fertile soil, ad carefully water under care. You don’t manufacture tomatoes, you grow them. Martin Luther King said, “I have a dream, and thousands followed in spite of overwhelming obstacles. In order to establish a successful new business venture the entrepreneurial leader must have a dream and work against all obstacles to achieve it. Entrepreneur is one who distinguishes as a person who undertakes to organize, mange and assume the risk of running factory and /or a business or a enterprise. Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in practice s largely defined by the ends, that is, by practice. V. V. I definations ?The New Encyclopedia Britannica considers an entrepreneur as “an individual who bears the risk of operating a business In the face of uncertainty about future conditions. Leading economists of all schools, including Karl Marx, have emphasized the contribution of the entrepreneurs to the development of economics. ?Schumpter’s definition of entrepreneur: Joseph A. Scumpter thus writes: “The entrepreneur is an advanced economy is an individual who introduces something new in the economy-a method of production not yet tested y experience in the branch of manufacturing concerned, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like” ?
In the case of developing economy like ours, the concept is being understood differently. Entrepreneur in a developing is one who stars an industry (old or new), undertake risk, bear uncertainties and also performs the managerial functions of decision –making and co—ordination. Concept of entrepreneurship In the words of 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 of distribution of economic goods and services.
McClelland describes the innovative characteristics of entrepreneurial role. Entrepreneurial role, bye definition, involves doing things in a new and better way. A businessman who simply behaves in a traditional way is not an entrepreneur. Moreover, entrepreneurial role calls for decision making under uncertainty. McClelland, like others, identified two characteristics of entrepreneurship. First, doing things “in a new and better way”. This is synonymous with the innovative characteristics given by Schumpter and secondly, decision making under uncertainty.
Higgins defines the terms as, “Entrepreneurship is meant the function of seeing investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labor, arranging for supply of raw materials and selecting top managers for the day- to- day operation on the enterprise. ” According to Peter Ducker, “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to the end. Indeed, what constitutes knowledge in practice is largely defined by the ends, that is, by the practice. ”
The Myths of Entrepreneurship Throughout the years many myths have arisen about entrepreneurship. These myths are the result of a lack of research in entrepreneurship. Ten of the most notable myths with an explanation to dispel each myth appear below. Myth1: Entrepreneurs are doers, not thinkers While it is true that entrepreneurs have a tendency toward action, they are also thinkers. Indeed they are often very methodical people who plan their moves carefully. The emphasis today on creation of clear and complete business plans is an introduction that “thinking” entrepreneurs are as important as doing” entrepreneurs.
Myth2:Entrepreneures are born, not made The idea that the characteristics of entrepreneurs cannot be taught or learned, that they are innate traits which one must be born, has long been prevalent these traits include aggressiveness, initiative, drive, a willingness to take risks, analytical ability, and skill in human relations. Today, however, the recognition of entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines, entrepreneurship has models, processes, and case studies that allow the topics to be studied and the traits acquired.
Myth3: Entrepreneurs are always Inventors The idea that entrepreneurs are inventors is a result of misunderstanding and tunnel vision. While many inventors are also entrepreneurs, there are numerous entrepreneurs who encompass all sorts of innovative activity. For example, Ray Kroc did not invent the first food franchise, but his innovative ideas made McDonalds the largest fast food enterprise in the world. A contemporary understanding of entrepreneurship covers more than just invention. There must be a compel understanding of innovative behavior of all forms.
Myth4:Entrepreneurs are Academic and Social Misfits The belief that entrepreneurs are academically and socially ineffective is a result of some business owners having started successful enterprises after dropping out of school or quitting a job. In many cases such as event has been blown out of proportion in an attempt to profile the typical entrepreneur. Business education, for example, was aimed primarily at the study of corporate activity. Today the entrepreneur is considered a hero- socially, economically, and academically.
No longer a misfit, the entrepreneur, the entrepreneur is now viewed as a professional. Myth5:Entrepreneur Must Fit the “ Profile” Many books and articles have presented checklists of characteristics of the successful entrepreneur. These lists were neither validated nor complete; they were based on case studies and on research findings among achievement- oriented people. Today we realize that a standard entrepreneurial profile is hard to compile. The environment, the venture itself, and the entrepreneur have interactive effects, which result in many different types of profiles.
Myth6: All you need is money to be an entrepreneur It is true that a venture needs capital to survive; it is also true that a large number of business failures occur because of lack of adequate financing. Yet having money is not the only bulwark against failure. Failure due to a lack of proper financing often is an indicator of other problems: managerial incompetence, lack of financial understanding, poor investments, poor planning, and the like. Myth7:Allyou need is luck to be an Entrepreneur Being at the right place at the right time is always an advantage.
But “luck happens when preparation meets opportunity” is an equally appropriate adage. Prepared entrepreneurs who seize the opportunity when it arises often appear to be “lucky”. They are, in face, simply better prepared to deal with solutions and turn them into success. Myth8: Ignorance is bliss for an entrepreneur The myth that too much planning and evaluation lead to constant problems, that overanalyzes leas to paralysis, does not hold up in today’s competitive markets, which demand detailed planning ad preparation.
Identifying the strengths and weakness of a venture, setting up clear timetables with contingencies for handling problems, and minimizing these problems through careful strategy formulation- all are factors in successful entrepreneurship. Myth9: Entrepreneurs seek success but experience high failure rates It is true that many entrepreneurs suffer a number of failures before they are successful. They follow the adage “If at first you do not succeed, try, and try again. ” In fact, failure can teach many lessons to those willing to learn and often leads to future success.
This is clearly seen through the corridor principle, which states that with every venture lunched, new and unintended opportunities often arise. The 3M Company invented “Post it” notes using glue that had not been string enough for its intended use. Rather then through away the glue, the company focused on finding anther use of it and, in the process, developed a multimillion – dollar product. Yet the statistics of entrepreneurial failure rates have been misleading over the years. In fact, one researcher, Bruce A Kirchofff, has reported that the high failure rate most commonly accepted may be misleading.
Myth10: Entrepreneurs are Extreme Risk Takers( Gamblers) The public perception of the risk assumed by most entrepreneurs is distorted. While it mat appears that an entrepreneur is “gambling” or wild chance, the fact is that the entrepreneur is usually working on a moderate or “calculated” risk. Most successful entrepreneurs are work hard through planning and preparation or minimize the risk involved in order to better control the destiny of their vision. Importance of Entrepreneurship in The Economic Development of a Country Entrepreneurship plays an important role in the economic development of a country.
An entrepreneur introduces new ideas, technology and methodology for performing works and jobs in the country. As a result, total production increases and, as a whole, economic development is achieved. The importance of entrepreneurship in economic development is highlighted below. Proper Utilization of Resources Economic development of a country depends on the proper utilization of human and non- human resources. Entrepreneurs extend help in this regard by accumulating the scattered resources and make them productive by establishing new ventures hey produce new goods and services by using their creativity and innovation.
Industrialization A country may have a plenty of raw materials, labor facilities, capital etc. but it may still not be an industry developed country. So the question of initiative is very important for industrialization. Entrepreneurs take initiative by establishing new ventures. As a result, new utilities are created and ultimately it changes the income and consumption patterns of consumers and raises the standard of life of the people. Creation of employment opportunities
Creation of employment is another important aspect of economic development. Entrepreneurship contributes substantially by creating employment opportunities. They establish new organizations that employ labor force. Thus, entrepreneurs create opportunity for employment. With employment generation entrepreneurs also help create a better skilled workforce through training. Use of technological possibilities The economic advancement mostly depends on technological development and the use of technology in production.
Schumpeter (1979) remarked that an entrepreneur is a central figure in the development process that undertakes the responsibility for carrying out new combination for factors of production by continuous adjustments in the short- run and breaking existing equilibrium of the total economy in the long run. These include supply and performance of entrepreneurship availability of tangible hardware facilities, infrastructure condition, supply of appropriate machinery, favorable poltico-climatic structure, software packages (e. g. knowledge, skills, and training and education facilities).
Changes the traditional outlook and values Economic development is to some extent hindered by traditional outlooks, attitudes, values and thinking of people. People of a country should welcome and accept changes and cope with the changing environment. Entrepreneur’s help in this regard by generating and introducing new method and technologies in the society. They come forward to remove narrow outlooks and attitudes of people. “A fisherman’s son will be a fisherman” such a trend could only be removed by developing entrepreneurship in society. Other contributions
There are some other fields where entrepreneurship can contribute, such as , to increase national income, create environment for innovation, changes personal consumption, develop infrastructure increasing savings propensity and above all change the standard of living of the people. Functions of an entrepreneur An entrepreneur does perform all the functions necessary right from the genesis of an idea up to the establishment of an enterprise. This can be listed in the following sequential manner: ? Ida generation and scanning of the best suitable area. ?Determination of the business objectives. Product analysis and Market research ?Determination of form of ownership/organization. ?Completion of promotional formalities ?Raising necessary funds ?Procuring machine and material ?Recruitment of men. ?Undertaking the business operations. Characteristics of entrepreneurs In the simplest of the theoretical forms of studying entrepreneurship, entrepreneurs cause entrepreneurship. That is, entrepreneurship is a function of the entrepreneur. Thus the continuous examination of entrepreneurial characteristics does help in the evolving understanding of entrepreneurship.
One study can conclude the following advice. One study concludes the following advice: “Be aggressive, be competitive, be goal oriented, be confident, be egocentric, make decisions, be an achiever in very early in life, be a loner in your final decision, put family an friend second to business, be an opportunist, do not be security oriented, be persistent, have determination, be an optimist, have desire to achieve, be hyperactive mentally, be a dreamer, be a calculated risk taker, want power, learn from previous mistakes, be a perfectionist,, and be intuitive. New characteristics are continually being added to this ever growing list. At this point, however, let us examine some of the most often cited entrepreneurial characteristics. While this list admittedly is incomplete, it does provide important insights into the entrepreneurial perspective. Commitment, Determinations, and Perseverance More than any other factor, total dedication to the success as an entrepreneur can overcomes obstacles and setbacks. Sheer determination and an unweaving commitment to succeed often win out against odds that many people would consider insurmountable.
It can also compensate for personal shortcomings. Often a high potential venture whose plan includes venture capital financing can expect investors to measure the founder’s commitment in several ways. Drive o achieve Entrepreneurs are self starters who appears to others to be internally driven by strong desire to compete, to excel against self-imposed standards, and to pursue and attain challenging goals. This need to achieve has been well documented in the entrepreneurial literature beginning with Davis McClelland’s pioneering work on motivation in the 1950s and 1960s.
High achievers tend to be moderate risk takers. Opportunity Orientation One clear pattern among successful growth minded entrepreneurs is their focus on opportunity rather than on resources, structure or strategy. Initiative and Responsibility Historically the entrepreneur has been viewed as an independepent and highly self-reliant innovator. Persistent Problem Solving Entrepreneurs are not intimidated difficult situations. In fact, their self-confidence and general optimism seem to translate into a view that impossible just takes little longer.
Yet they are neither aimless nor foolhardy in their relentless attack on a problem or an obstacle that is impeding business operations. Seeking feedback Effective entrepreneurs re often described as quick learners. In attempting to make these determinations they actively seek out and use feedback. Feedback is also central to their learning from their mistakes and obstacles. Internal locus of control Successful entrepreneurs believe in themselves. They do not believe that their success and failure of their venture will be governed by fate, luck or similar forces .
They believe that their accomplishments and set backs are within their own control and influence and they can affect the outcome of their actions. Tolerance for ambiguity Startup entrepreneurs face uncertainty that is compounded y constant changes that introduces ambiguity and stress into every aspect of the enterprise. Setbacks and surprise are inevitable; lack of organization, structure and order is a way of life. Calculated risk taking Successful entrepreneurs are not gamblers. When they decide to participate in venture, they do so in a very calculated, carefully ought-out manner.
Integrity and reliability Integrity and reliability are the glue and fiber that bind successful personal and business relationships and make them endure. Integrity ad reliability helps build and sustain trust and confidence. Tolerance for failure Entrepreneurs use failure as a learning experience. The iterative, trial and error nature of becoming a successful entrepreneur makes serious setbacks and disappointments an integral part of the learning process. High energy level He extraordinary work loads and the stressful demands faced by entrepreneurs place a premium on energy.
Many entrepreneurs fine tune heir energy levels by carefully monitoring what they eat and drink, establishing exercise routines, and knowing when to get away for relaxation. Creativity and innovativeness Creativity was once regarded as an exclusively inherited trait. Judging by the level of creativity and innovation in the United States compared with that of equally sophisticated but less creative and innovative cultures it appears unlikely that this trait is solely genetic. Vision Entrepreneurs know where they want to go. They have a vision and concept of what heir firm can be.
For example, Steve Jobs, of Apple Computer fame, wanted his firm to provide microcomputers that could be used by every one from school children to businesspeople. The computer would be ore than a machine. It would be an integral part of the person’s life in terms of learning and communicating. This vision helped Apple a major competitor in the microcomputer industry. Self confidence and Optimism Although entrepreneurs often face major obstacles, their belief in their ability seldom wavers. Independence The desire for independence is a driving force behind contemporary entrepreneurs.
Their frustration with rigid bureaucratic systems coupled with sincere commitment to “make a difference” adds up to an independent personality trying to accomplish things his or her own way. Team Building The desire for independence and autonomy does not preclude the entrepreneur’s desires to build a strong entrepreneurial team. Most successful entrepreneurs have highly qualified; well motivated teams that help handle the growth and development of the venture. 1. 15 Variables determining Growth of Entrepreneurship Entrepreneurship is the outcome of the interactions between several social, demographic, economic and political variables.
These variables maybe classified as follows: 1. Family background and other economic factors 2. Personality Characteristics 3. Economic factors 4. Socio- cultural factors 5. Political support 6. Psychological factors 1. Family background: People become to mercantile families and communities can more easily enter industry foe example, children in Marwari families are brought up in an environment which develops in the entrepreneurial qualities at an early age. 2. Personality characteristics: Personality and personal skills developing economy.
It cats as a critical factor in self development and growth of the organization. 3. Economic factors: Since entrepreneurship is essentially the promotion of economic change. The same factors that promote economic growth and development for the emergence of entrepreneurship. Market incentives, available capital, financial institutions that provide capital to entrepreneurial projects etc. to promote entrepreneurship. 4. Socio- cultural factors: In countries like the United States, entrepreneurs and entrepreneurial behavior enjoy a legitimacy they do not have in the Soviet Union.
Political and economic ideologies and legal structure in some countries encourage fee enterprise and protect the rights of individuals. 5. Polittical Support: In order to build up such contracts it is necessary to work with prestigious groups individually or through relatives, friends and associations. Political affiliation, social participation and such other linkages serve as an important factor contributing to entrepreneurship. Favorable Government Policy and social recognition influence a person to become an entrepreneur. 6.
Psychological factors: Need for achievement is acting an impotratnt psychological factor in determining the supply of entrepreneurs in country. 11. 16. Entrepreneurial Environment Entrepreneurship does not emerge and growth spontaneously. Rather it is dependent upon several economic, social, political and psychological factors. These environmental factors many have both positive and negative influence on the growth of entrepreneurship. Positive influences imply facilitating and conductive conditions whereas negative influences refer to factors inhibiting the emergence of entrepreneurship.
Various environmental factors influencing the emergence of entrepreneurship are given below: (1)Economic Conditions: Economic environment exercises perhaps the most direct ad immediate influence on entrepreneurship Markets, Capital, Labor, and Raw Materials are the main economic factors. Markets: The size and composition of market both influence entrepreneurship n their own ways practically. Capital: Availability of capital facilities the entrepreneur to bring together the labor of one, machine of another and raw material of yet another to combine them to produce goods.
Labor: Division of labor as an important element in economic development. According to him, division of labor which itself depends upon the size of the markets to the improvement in the productive capacities of labor due to an increase in the dexterity of labor. Raw Materials: In the absence of raw materials, neither an enterprise can be established nor an entrepreneur can emerge. Of course, in some cases, technological innovations can compensate for raw materials inadequacies. (2)Social Factors:
Social environment in a country exercises a significant impact on the emergence of entrepreneurship. The main components of the social environment are as follows: Social Mobility: Social mobility is crucial for entrepreneurial emergence is not unanimous. Some hold the view that a high degree of mobility is conductive to entrepreneurship. Security: Entrepreneurial security is an important facilitator of entrepreneurial behavior. Insecurity does not hinder entrepreneurship, but rather that different kinds of insecurity will result in different kinds of entrepreneurship.
Legitimacy of Entrepreneurship: In professional vocabulary, such system is referred to as the legitimacy of entrepreneurship in which the degree of approval or disapproval granted entrepreneurial behavior influences its emergence and its characteristics if it does emergence. (3) Psychological Factors: many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate specifically upon psychological factors. We consider these theories separately for that reason. Withdrawal of Status Respect: Hagan believes that the initial condition leading to eventual entrepreneurial behavior is the loss of statutes b a group.
He postulates that hour types of events can produce status withdrawal: (a)It may drift into situation of status inconsistency; and (b) it may not be accepted into expected status on migration in a new society (c)The group may be displaced by force (d)It may have its valued symbols denigrated; Need achievement: If the average level of need achievement in a society is relatively high, one would expect a relatively high amount of entrreprebeurship in the society. (4)Government Influence: Any interested government in economic development cab help through its clearly expressed industrial policy, promote entrepreneurship in one way or other.
BY creating basic facilities, utilities and services and by providing incentives and concessions, the government can provide the prospective entrepreneurs a facilitative socio- economic setting. 1. 21 Comparative Characteristics of Entrepreneur, Intrapreneur and Traditional manager There are differences among them according to their characteristics. This may be gauged as under: characteristicEntrepreneurIntrapreneurTraditional manager Primary MotivesWants freedom: goals oriented, self reliant, and self- motivated.
Wants freedom and access to corporate resources; goal-oriented and self –motivated, but also responds to corporate rewards and recognitionWants promotion and other traditional corporate rewards; power motivated Skills Knows business intimately more business acumen the managerial or political skill; of ten technically trained if in technical business; many have had formal profit-and loss responsibilityVery much like the entrepreneur, but thee situation demands grater ability to prosper within the organization.
Professional management; often business school trained; uses abstract analytical tools, people management and political skills. Attitude towards courage and destinySelf confident, optimistic, and courageousSelf- confident and courageous; many are cynical about the system but optimistic bout their ability to outperform it. Sees others being in charge of his or her destiny; can be forceful and ambitious but may be fearful of others ability to do him or her in.
Focus of attentionPrimarily on technology and market placeBoth inside and outside; sells insiders or needs of venture and marketplace but also focuses on customersPrimarily on events inside corporation Attitude towards riskLikes moderate risk; invests heavily buy expects to succeedLikes moderate risk; generally not afraid of being fired, so sees little personal riskcautious Use of market researchCreates needs; creates products that often can not be tested with market research; potential customers and forms own opinions.
Does own market research and intuitive market evaluation, like the entrepreneur. Has market students done to discover needs and guide product conceptualization. Attitude towards statusHappy sitting on an orange crate if the job is getting doneConsiders traditional stats symbol a joke, reassures symbols of freedomCares about status symbols (corner office etc. ) Attitude toward failure and mistakesDeals with mistakes and failures as learning experience.
Sensitive to need to appear orderly: attempts to hide risky projects from view mistakes with our political cost of public or failureStrives to avoid mistakes and surprises; postpones recognizing failure Decision making styleFollows private decision, decisive , action orientedAdept at getting others to agree with private vision, somewhat more patient and willing to compromise than the entrepreneur but still a doer.
Agrees with those in power, delays making decision until a feel of what losses is obtained Who servesPleases self and customerPleases self, customers and sponsorsPlease others Attitude toward the systemMay replay advance in a system; then when frustrated, may reject the system and form his or her own company. Dislikes the system but learns to manipulate itSees system as nurturing and protective; seeks position within it.
Problem solving styleEscapes problems in large and formal structures by leaving and starting over aloneWorks out problem within the system or bypasses them without leavingWorks out problems within the system Relationship with parentsAbsent father or poor relation with fatherBetter relation with father but still stormyIndependent of mother, good relations with father but slightly dependent Socioeconomic backgroundLower class in some early studies; middle class in more recent onesMiddle classMiddle class Educational level Less well educated in earlier studies; some graduate works but Ph D in later ones.
Often highly educated, particularly in technical fields, but sometimes not. Highly educated Relationship with othersPerceives transactions and deal making as basic relationshipPerceives transactions within hierarchy as basic relationshipPerceives hierarchy as basic relationship Family historyEntrepreneurial small business, professional, or farm backgroundEntrepreneurial small business, professional , or farm backgroundFamily members worked large organizations 1. 19 Encouragements for innovative atmosphere and intrapreneurship development The steps usually taken by them for the purpose include the ollowing: 1. Encourage action 2. early identification of potential intrapreneures 3. development of collaboration between intrapreneurial participants and the organization at a large 4. Recognize innovation for innovations sake. 5. Expect over bootlegging of ideas-secretly working on new ideas on company times as well as on personal time. 6. Encourage personnel to circumvent rigid procedures and bureaucratic red tape. 7. reward and promote innovative personnel 8. put people o small teams for future oriented projects 9. Top management sponsorship of entrepreneurship projects. 10. reation of both diversity and order in strategic activities, and 11. Promotion of intrapreneurship through experimentation. 12. use informal meetings whenever possible 13. Tolerate failure and use it as a learning experience. 14. persist in getting an idea to market, 15. plan physical layout of the enterprise to encourage informal communication Chapter2 (sheet n-2) Chapter one Theories of Entrepreneurship There are four different theories that assess how much potential a person requires becoming a successful entrepreneur. These theories that follow will be discussed in details in this along with an entrepreneur’s profile. Psychological or personal theory ?Sociological –anthropological -cultural theory ?General theory or background factors theory ?Social –psychological theory (1) Psychological or Personal Theory The essence of this theory in the difference in individual’s attitude. According to this theory, he difference in attitude, i. e. , the internal attitude and ability to judge and forecast the situation lead a man to become a successful entrepreneur. Another group of famous psychologists based on their studies stated that some special types of attitude, personality and conceptual ability create entrepreneur and entrepreneurship.
Personal or psychological theory can again be broken down into several theories: ?Achievement motivation theory ?Motivation –Acquisition Theory ?Risk- taking theory ?Internal- External Locus of Control ?Autonomy or Independence Motivation theory ?Power motivation theory (1)Achievement Motivation theory The analysis of the economic advancement of different nations shows that the nations, which posses a great extent of achievement motivation made a significant economic progress. It is inner drive of individuals that propels them to work more and to achieve something for their own interest.
The view of David C. McClelland is that, the high extent of achievement motivation activated entrepreneurs. The life histories of Rock Feller, Henry Ford, etc support this statement. He also viewed the people who devote themselves to attain success or to engage in creative activities are also entrepreneurs in the light of McClellands view; entrepreneurs can be divided into two types: 1. Owner entrepreneur 2. employed entrepreneur The entrepreneurs of first category are quite independent because they are owners of their own businesses. So hey bear a high extent of each motivation.
While entrepreneurs of the second category possess the need for achievement but less than those of the first category. McClelland further stated that a desire to do well, not so much for the sake of social recognition or prestige, but for an inner feeling of personal accomplishment, induces people to be an entrepreneur. Individuals with string motivation for achievement are entrepreneurs having the following distinct characteristics. Take personal Responsibility Those who possess a strong degree of ankh, tend to take personal responsibility. They want to be successful by their own intelligence.
Moderate Risk People possessing high degree of ankh always set moderate goals, which are attainable. They always take moderate or calculated risk, usually having 50% certainly and 50% uncertainty. They don’t take any risk with emotions. Seek Feedback High ach people always like to get feedback or reaction of what they do. This feedback propels them towards future actions. Sacrifice Small Interest for the Sake of Big One McClelland expressed in another study conducted in 40 countries that the nation’s with high degree of ankh made or reached economic progress.
Thus, analyzing the result of the study of McClelland it can be concluded that the people who are successful entrepreneurs possess a high degree of achievement motivation. Motive – Acquisition Theory This theory is nothing but a revised version of McCalland’s Achievement Motivation Theory. This theory expresses that the mentality and personality of people are not I born, but they age flexible and changes the situation. An individual can be influenced and activated towards a goal by changing his / her talking, mentality, attitude, etc. such changes could be made possible by frequent training and development programs.
This theory is termed is motivation acquisition theory. McClelland conducted a study in India to test the hypothesis. He arranged a training program for some owners of the grocery shops and found that all these owners went on to become successful businessmen. Thus, it can be concluded that training and extending other motivational supports can create entrepreneurs. Risk Taking Theory Richard Cantillion and John Sturt Mill, introduced risk taking theory. The essence of this theory is that the entrepreneurs should have the inclination to take moderate risk and ability to bear that risk. Economists explained hat the entrepreneurs must have the ability to take risk. On the other hand, psychologists viewed hat entrepreneurs should bear the mentality to take risk. The first one is denoted as the results of being as entrepreneur and second one is termed as cause. Economists do not find any boundary of taking risk while, psychologists thought there should be a limit which the entrepreneurs would take risk. They said that entrepreneurs will always take moderate or calculated risk. Those who are likely to take a high risk are not entrepreneurs rather than are gamblers. Real entrepreneurs take medium type of risk. Internal External Locus of Control
Prof. J. D. Rotter of Ohio University is the originator of this theory. Locus of control is of two types 🙁 i) Internal and (ii) External. Human being is the product of the society, and social situation determines whether a person will be externally or internally oriented or not. Internal Locus of Control Internal Locus of Control could be defined as self- confidence extreme belief over ones ability and power. Foe example, if a person invests money in a business undertaking believing and thinking that he/she will be able to yield an expected return, we can call him/her an internal locus of control oriented person.
Their own confidence and belief propel these people. External Locus of Control If an individual thinks that everything is out of his/ her control, then the person’s locus of control is external. Values, beliefs, traditions fall under locus of control. This is exactly opposite of internal locus of control orientation. Internal –External locus of control theory highlights the self confidence of a person, the dependency of fortune, and external environment. People have different mentalities. Entrepreneurs who have a high quality of self-confidence want to be controlled by him/her.
Autonomy of Independence Motivation Theory This theory is some extent similar to the theory of internal-external locus of control theory. This theory tends to emphasize on the independent thinking of entrepreneurs. Self confidence, self-controlling ability and ability to think independently are said to be the psychological characteristics of entrepreneurs. People, who have this characteristic, are able to adapt themselves with the changing situations and can avoid social condemnation can be successful entrepreneurs. These traits help them to express their creative and innovative power of practice.
Creativity or Innovation Theory Creativity is concerned with the origin of new and fundamental ideas or views. Creative individuals use their talents, thinking ability, etc. to create something new and with the help of various techniques they bring new ideas into practice. A person who has creativity and innovation capacity must do something new which is meaningful not only for him/her but for the society as well. Creativity may be of two types: i) Creating something new which was never done invented by others: and ii) Presentation an old idea in a new form. That is, to invent some new use of an old thing or idea.
Creativity is a quality related to idea orientation and innovation. It is concerned with idea implementation as well. Power motivation Theory Power generally refers to the authority to do certain task properly. David C McClelland explained that the desire of one to have control over others is power. He also added that power influences people and that influences make a man powerful. Power can be two types: i)personal power ii)social power Personal power is related to self –interest while, social power is related to social interest. Entrepreneurs usually seek personal power.
Leadership power id democratic while the power of entrepreneurs is always autocratic in nature. Sociological- Anthropogical –Cultural theory Sociological theory is concerned with the social condition, while anthropological theory is concerned with culture. Anthropology deals with the culture of people. The socio-cultural factors have a substantial influence in creating entrepreneurs as well as entrepreneurship. Many psychologists disagree as they view that only intention and mentality act in creating entrepreneurs. But the influence of socio- cultural factors cannot be totally discarded.
Because there are instances where people have become entrepreneurs due to social reasons. If society creates some facilities available other than business, people will have a tendency to involve in professions other than commerce. There are socio-cultural motives or factors that act in creating entrepreneurs. These factors of variables are described below. Traditional Values and Modern Values Traditional values refer to traditional and cultural flows that are practiced in traditional society. Traditionally people like to be happy which they have.
They do not like something new where risk is evolved. This is also inherent characteristics of human beings. For example, Bangladesh was under colonial rule for a long time. Due to the rule, colonial mentality and attributed have taken root within the people, which is influencing us to be bureaucrats rather than entrepreneurs. As a result of these traditional values, people are motivated to be bureaucrats. On the other hand modern values are absolutely opposite to the traditional ones. Modern values discard all these traditional values and energize people to be entrepreneurs.
Modern values explain that business is the only way to earn independently and the entrepreneurs can dominate economic development of a country by doing business. Religious Values Famous germen social scientist Max Weber (1930) mentioned in his famous book ‘the protestant ethic and spirit of capitalism” that religious values are great hindrances for creating entrepreneurs. Infact religious values recommend the practice of feudalism. But after an era of feudalism, when capitalistic system was introduces d a positive relation comes into existence between capitalistic system and religious values.
Some mentioned that religious values could not create entrepreneurs rather create problem in the process of entrepreneur creation. Another prominent scholar Duisenery did not support the total view of Max Waber. He said that only in some selected cases, religious values facilitate the creation of entrepreneurs. Because of anthropological influence, people shoe the tendency to be entrepreneurs. Due to social and cultural change and various situations, people found them in business to maintain their livelihood, e. g. , a large number of entrepreneurs engaged in a migrant community.
There are three different theories of entrepreneurship in anthropology. They are (i)Urban orientation theory (ii)Marginal and tension theory (iii)Social cohesion theory Urban Orientation Theory Great differences are found between culture and people. In his famous book “The theory of social change” Prof. Hagen said that family tradition is the key determinant of the status of rural people, while, financial condition is the element to evaluate the status of the urban people. Due to this attitude and mentality of urban people, a number of entrepreneurs are found in urban areas.
But as rural people do not bear such attitude the number of entrepreneurs is much lower in rural areas compared o urban areas. it is found that most of the entrepreneurs are city based. So it is concluded that urban environment and urban-centered mentality can create more entrepreneurs than rural areas. Marginal and Tension Theory Robert Park published this famous theory in 1928in this famous book” Marginal man”. He stared that a marginal man is one whose fate has condemned him to live in two societies . Golvanasy described that a person is a marginal man who keeps himself/herself aloof from his/her culture.
The culture could be categorized into two basic categories :(i) occidental culture (ii) oriental culture those who are living in between these basic cultures are also called marginal man. Other studies show that a marginal man cannot be accepted widely in any society. Sometimes, they engage themselves in business for their existence. So, from the group of marginal man there is a likelihood of creating more experience. Social Cohesion Theory Froyed introduced social cohesion theory first in 1948. He found high extent of social cohesion prevails in those people who are living outside the society and culture.
These type of cohesion also prevails in those people who are living outside there country. They maintain such social cohesion for their existence in the culture where they are living. When a person of that community undertakes a business and he/she tries to involve other members of that community in that business. So social cohesion theory bears a great significance in creating entrepreneurs in the society. Background Factors theory or General theory Studies show that personal traits or background factors determine entrepreneurs (Lee and Jo).
These factors are age, education, family background, community, peer group relationships, honesty, birth order, child rearing practice, work experience etc. Age Age is an important factor for entrepreneurs. Usually, people exceeding 50 years are not willing to take risk and the number of entrepreneurs is also lower in that age group. Education Education is one of the most important factors for creating entrepreneurs. The higher the educated person, the higher the number of entrepreneurs in the nation and vice versa. Studies show that more entrepreneurs are created among the technical specialists. Family background
Family background influences the creation of entrepreneurs greatly. if enough support and assistance is available from the family, a person can more easily be an entrepreneur. Community If a close association is maintained in a particular community it increases self confidence and creates an attitude and mentality to take risk. This ultimately leads towards becoming an entrepreneur. Peer group help of reference group If any reference group is available, undertaking of business concern becomes easier. Close network of people easily and cordially communicate with others, which facilitates the development of entrepreneurs.
Ethics and Honesty If anyone becomes ethical and honest to the society, he/she has a chance to be an entrepreneur. Birth Order Saying goes that because of unlimited love and affection received from parents and other relatives, the eldest child of the family likes to at as senior and wants to control everyone. She/he dislikes working under anyone, i. e. , she/he does not like to be controlled by others. Because of nature first born may have a higher tendency to be entrepreneur. The responsibility to look after younger ones goes to the elder. She / he has to earn money and for the matter she/he engages her/himself in business.
But others viewed that due to unlimited affection, he/she lacks the capacity to face critical situation of business and thus losses everything in running business. Child rearing practice Whether a child will be an entrepreneur or not depends sometimes child rearing practices. How a child will act in future depends a lot on how she/he is being brought up. The seed of an entrepreneur can be sowed in child from early age by proper child rearing practice. A person can become an entrepreneur from the experience in business activities and positive performance. Social –Psychological theory
These theories combine already discussed social and psychological theories together. The Schools of Entrepreneurial Thought In this section we shall highlight the ideas emanating from macro and micro views of entrepreneurial thought. The external View The macro view of entrepreneurship presents a broad array of factors that relate to success of failure in contemporary entrepreneurial ventures. This array includes external processes that are sometimes beyond the control of the individual entrepreneur, for they exhibit a strong external locus of control point of view.
Three schools of entrepreneurial thought represent a breakdown of the macro view 🙁 1) the environmental school of thought, (2) The financial/capital school of thought, (3) and the displacement school of thought of thought. The first of these is the broadcast and the most pervasive school. The Environmental School of thought This school of thought deals with the external factors tat affect a potential entrepreneur’s lifestyle. These can be either a positive or a negative force in the molding of entrepreneurial desires.
The focus is on institutions, values, and more that, grouped together, from a socio-political environmental framework that strongly influences the development of entrepreneurs. For example, if a middle manger experiences the freedom and support to develop ideas, initiate contracts, of create and institute new methods, the environment will serve to promote that persons desire to pursue an entrepreneurial career. The financial or Capital school of thought This school of thought is based on the capital seeking process. The search for seed capital and growth capital is the entire focus of this entrepreneurial emphasis.
In any cases, the venture capital process is vital to the development of an entrepreneur. This school of thought views the entire entrepreneurial venture from a financial management standpoint. The displacement school of thought This school of thought focuses on group phenomena. It holds that the group affects or eliminates certain factors that build the individual is an entrepreneur venture. As Ronstadt has noted individuals will not pursue a venture unless they are prevented or displaced from doing other. Three major types of displacement illustrate this school of thought. 1.
Political Displacement: This type of displacement is caused by factors ranging from an entire political regime that rejects the free enterprise to government regulations and policies that limit or redirect certain industries. 2. Cultural displacement: This type of displacement deals with social groups precluded from professional fields. Ethnic background, religion, race, and sex are examples of factors that figure I the minority experience. Increasingly, the experience will turn various individuals from standard business professionals towards individual entrepreneurial ventures. 3.
Economic displacement: This type of displacement is concerned with the economic variations of recession and depression, job loss, capital shrinkage, or just simply” bad times” can create the foundation for entrepreneurial pursuits, jut as it can affect venture development and reduction. Exp. Airline Business The Micro View The micro view of entrepreneurship examines the factors that are specific to entrepreneurship and are part of the internal focus of control. The potential entrepreneur has the ability, or control, to direct of adjust the outcome of each major influence. The Entrepreneurial School of Thought
May researchers and writers have been interested in identifying those traits that are common to successful entrepreneurs. For example, achievement creativity, determination, and technical knowledge are four factors that usually are exhibited by successful entrepreneurs. Family development and educational incubation re also examined. The venture opportunity School of thought This school of thought focuses o the opportunity aspect of venture development. The search for sources of ideas, the development of concepts, and the implementation of venture opportunities are the important areas of interest for this school.
Creativity and market awareness are viewed as essential. Additionally, according to this school of thought, developing the right idea at the right time for the right market niche is the key to entrepreneurial success. The strategic formulation school of thought The strategic formulation approach in entrepreneurial theory emphasizes the planning process in successful venture and development. Ronstad views the strategic formulation s a leveraging of unique elements. Unique markets, unique people, unique products, or unique resources are identified, used, or constructed into effective venture formations.
The inter-disciplinary aspects of strategic adaptation become apparent in the characteristics elements listed below: Unique markets: Mountain versus mountain gap strategies, which refers to identifying major market segments as well as interstice markets that arise from larger markets. Unique People: Great chef strategies, which refers to the skills or special talents of one or more individuals around whom the venture is built. Unique products: Better widgets stratifies, which refers to innovations that encompass new or existing markets.
Unique resources: Water well strategies, which refers to the ability to gather or harness special resources (land, labor, capital, raw materials) over the ling run. Sheet 4 Chapter2Understandig the entrepreneurial Perspective Challenges for Entrepreneurs:-the entrepreneurs Confrontation With risk Starting or buying a new business involves risk, and the higher the rewards, the greater he risk entrepreneurs usually face. This s why entrepreneurs tend to evaluate the risk very carefully. In an attempt to describe the risk taking activity of entrepreneurs, researchers Thomas Monoy and Robbrt Folger developed a typology of entrepreneurial styles.
In these model financial risks is measure against the level of profit motive, with the characteristics or risk being coupled with the type of activity. Profit seeking activity is associated with the