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Entrepreneurship is one of the four mainstream economic
factors– land, labour , capital and entrepreneurship. During
14th century, references speak about tax contractorsindividuals who paid a fixed sum of money to a government
for the license to collect taxes in their region. Known as tax
contractors they used to take the risk of collecting taxes. If
they collected more than the sum paid for their license , they
made profits and kept the excess. The concept of
entrepreneurship of was existing in 17th century and was a
common topic in economic essays for much of the 18th and
19th centuries.
• Entrepreneurship refers to a process of actions an
entrepreneur undertake to establish his business. It is a
creation and innovative response to the environment and
an ability to recognize, initiate and exploit an economic
opportunity .
• In today’ s world of modernization and development the
term entrepreneurship is a well known term.
Entrepreneurship is the ability to foresee or ascertain the
various opportunities related with investment and then to
evaluate these various opportunities and forming
enterprise, the purpose of which is to give the maximum
contribution in the national’s growth. When we combine
these activities performed by entrepreneurs the resultant
is known as entrepreneurship.
1.
2.
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Innovation is an important function of entrepreneurship .
Innovation means doing something new or doing old things in
new or different way . It is the introduction of new methods and
ways of doing the work. an entrepreneur should be innovative.
According to DRUCKER, INNOVATION IS THE MEANS
BY WHICH ENTREPRENEUREITHER CREATES NEW
WEALTH PRODUCING RESOURCES OR ENDOWS
EXISTING RESOURCES WITH NEW PRODUCTS,
SERVICES, IDEAS, AND INFORMATION”
Risk bearing.
Risk bearing is also an important function of entrepreneurship.
Prof knight in his theory ‘ RISK UNCERTAINTY AND
PROFITS’ DEFINES there are two types of risk;
Foreseeable risk – is the risk which can be insured and capable of
being calculated.
Unforeseeable risk.- is the risk which can’t be insured and it is
tough to calculate it.
RISK
FORESEEABLE RISK
UNFORESEEABLE RISK
EARTHQUAKE
BUSINESS RISK
THEFT
GOVT POLICY RISK
FLOODS
COMPETATIVE RISK
3. Organizing function
entrepreneurship can also be defined as an organizing function.
Organization means organizing all the factors of production and
directing them towards the attainment of the goal of organization.
4. Management skills.
Entrepreneur must posses managerial skills like motivation and
leadership. Motivation is inner urge that emerges the behaviour
towards achievement of goals. It can be positive and negative,
financial and non-financial and leadership is to direct the people to
do what you want your men to do.
5.Economic activity.
Entrepreneurship is an economic activity as it is concerned with
earning more and more profits.
6. Goal oriented.
Entrepreneurship is an goal oriented activity. It is undertaken to
achieve the predetermined goals of the entrepreneur.
• Decision Making: Entrepreneur takes decisions regarding activities of
enterprise. He decides about the type of business to be done and the
ways of doing it. An entrepreneur has to make decisions to take
actions with unknown and unpredictable results.
• Function of High Achievement: People for high need for
achievement are more likely to succeed as entrepreneur.
• Resource Mobilisation: Gap filling is the most significant feature of
entrepreneurship. The job of entrepreneur is to fill the gap or make up
the deficiencies which always exist in the production function. He has
to perform the functions of input completing and gap filling.
OBJECTIVES OF ENTREPRENEURSHIP
Economic
Objectives
Profit
Earning
Production
of Goods
Creating
Market
Technological
Improvement
Human
Objectives
Welfare of
Employees
Satisfaction
of
Consumers
Social
Objectives
Personal
Objective
National
Objectives
Availability
of Goods
Growth
Helping National
efforts
Supply of
Quality goods
Survival
Development of
Small
Entrepreneur
Co-Operation
with
government
Creation of More
Employment
Utilising Natural
Resources Properly
Earning
Prestige
National Self
Sufficiency
Development of
Skilled Personal
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The role of Entrepreneurship in development of an economy in
discussed from the following points;
Entrepreneurship and balanced regional development.
Imbalanced regional development means a few sectors of an
economy are developed and others remained undeveloped. This is
a major problem faced by an under developing country. These
sectors remain backward because entrepreneurs are not willing to
invest in these sectors due to lack of availability of infrastructural
facilities. It is the government who can encourage entrepreneurs
to invest in these sectors by giving then subsidies and
concessions. So the balanced regional development can be
ensured with the help of entrepreneurs.
Increase in per capita income.
due to over population in developing countries per capita income
is low as compared to the other developed nations. Per capita
income can be increased either by reducing population or by
increasing national income. Entrepreneurs play an important role
in the growth of national income by utilizing the resources land,
labour and capital. As they are innovators they can device new
methods and techniques with minimum of cost and maximum
profits which leads to increase in national income , increase in per
capita income.
4.Generation of employment.
Entrepreneurs offer solution of the grave unemployment problem confronting the
economy. Entrepreneurs firstly generate self employment and secondly be employing
others in their enterprise , solve unemployment problem of others. Small scale units
need less investment and absorb a large number of unemployed persons.
5.Raise standards of living.
Entrepreneurship help in rising the standard of living of people of the country. As
entrepreneurs invest in small scale and large scale industries which leads to industrial
growth in the country and industrial growth in turn leads to availability of abundance of
goods for the consumers. As supply of goods increase it will lower the price of
commodities become accessible to every walk of people in order developed countries
and improves their standard of living.
6. Self Sufficiency.
Self sufficiency means a stage where a country is not dependent on world economy for
its needs. Tools of
self sufficiency are export promotion and import substitution. With the help of
developed entrepreneurial structure a nation can increase its production. When the
production of goods in the country is increased, the surplus which will left over after
satisfying the domestic consumption can be exported, and with this we can earn foreign
currency.
THEORIES OF ENTREPRENEURSHIP
Four Categories of Entrepreneurship:
Entrepreneurial history is felt to be
interdisciplinary in approach and thus, it
is difficult to label entrepreneurship as
purely a theory of economics or
sociology or psychology or a
anthropology. The concept of
entrepreneurship is as old as civilization
while theories of entrepreneurship have
been evolved from over a period of more
than two centuries.
The Economist’s
View
The
Psychologist’s
View
The Sociologist’s
View
The
Anthropologist’s
View
1). Economic Theory
Richard Cantillion (1755) was the first person to recognise the role
of entrepreneurs in economic theory. He stated that , “the farmer is an
entrepreneur who promises to pay the land owner for his farm or land, a
fixed sum of money without assurance for the profit he will derive from his
enterprise”. Hence entrepreneur is always at risk of bearing losses if he
would unable to sell the goods at a higher price.
J.Schumpeter (1994) added the concept of innovation to the theory
of entrepreneurship . He visulalised the entrepreneurs as the key figure in the
economic development because of his role in introducing innovations. For
Schumpeter, the ability to identify new opportunities in the market is a
central entrepreneurial activity which creates disequilibrium In the economy.
According to economists, G.F Papanek and J.R. Harris, economic
incentives bring forward a favourable drive for entrepreneurial activities. A
desire to have more economic gain sparks the entrepreneurial instinct. Lack
of incentives , unattractive economic polices and unfavourable market
conditions tend to reduce the vigour of entrepreneurship.
2).Sociological Theory
Sociologists suggests that the entrepreneurship can conceptualized as a
social movements and entrepreneurs exist not only in the economy but in
other spheres of society as well.
S.M Lipset argues that cultural values deeply effects entrepreneurship
and the level of economic development.
Mark Granovetter points that family ties may create an obstacle for a
businessman.
According to Hoselitz, the approach which emphasizes the
theory of deviance assumes that those who introduce changes must be
deviants since they reject the traditional elite’s way of doing things. For
example , in Latin America , recent immigrants , members of minority
groups have formed a considerable section emerging business elite.
A great land mark in entrepreneurial studies is represented by
study conducted at Harvard University (1948-1958). A journal of the centre
Explorations in Entrepreneurial History, states that entrepreneurship should
not be studied by focusing on individual entrepreneur but rather by looking
enterprise . Special attention was often paid to the social relations within the
enterprise and to the relations between the enterprise and its surroundings.
3).Psychological Theory
Joseph Schumpeter states that the entrepreneur is mainly motivated and
driven by three things:
a. “The dream and the will to found a private kingdom.”
b. “The will to conquer.”
c. “The joy of creating.”
J.Schumpeter formulation can be translated as:
a) the desire of power and independence ;
b) The will to succeed;
c) The satisfaction of getting things done.
d)
According to him , money is not what ultimately motivates the
entrepreneur. Thus he supports the psychological theory and not the
economic theory. He asserts that what matters is the behaviour and not the
actors.
4).Anthropological Theory
Barth on of the leading anthropologist of the world ,
states that entrepreneurial behaviour means to connect two
different spheres in the society, between which huge
discrepancy in value. Something which is cheap in one sphere
may be expensive in another.
Each of the above theories is incomplete and none of
them is right or wrong. Theories of entrepreneurship
are inter-disciplinary and are influenced by multitude
of factors. It is the integration of external
environment , achievement motivation, ability and
ambition which largely determines whether an
individual become an entrepreneur.
PROS AND CONS OF ENTREPRENEURSHIP
Pros includes various points of Benefits, advantages or
importance of entrepreneur Whereas cons refers to various adverse
affects or dark side of entrepreneurship.
ADVANTAGES OF ENTREPRENEURSHIP:
1) Generation of Employment.
2) Increasing per Capita Income.
3) Helping in Capital Formation.
4) Balanced Regional development.
5) Optimum Utilisation of Resources.
6) Promoting Self reliance.
7) Helps in raising living standards .
8) Mobilise the Idle savings & formation of capital.
9) Dispersal of economic wealth.
10)Economic independence.
11) Life line of Nation.
CONS OF ENTREPRENEURSHIP
There are various factors responsible for the failure of
entrepreneurship. Karl H Vesper has identified following entrepreneurship:
1) Lack of Viable concept.
2) Lack of market Knowledge.
3) Lack of technical skill.
4) Lack of seed Capital.
5) Lack of Business Knowledge.
6) Complacency-Lack of motivation.
7) Social Stigma.
8) Time pressure and distractions.
9) Legal constraints and regulations.
10)Monopoly and protectionism.
11)Inhibitions due to patents.
12)Low Level of Commitment
13)Shortage of Resources
14)Inferior Communication Network
• INVENTION.
Means creating something new. Creative persons conceives an idea, work on it,
collects the related information. Then test the idea to prove its importance. By
passing through various stages of inventions, the creative persons become
inventors e.g., Edison invented the bulbs.
Invention is creating not only products rather new ways or methods of production,
new technologies, new processes, new designs etc, an invention when made up
open new markets. As consumers tastes and preferences go on changing day by
day, they demand new things every time. They want something different, which is
not in use by others.
• INNOVATION.
is to put the ideas of inventors in action. Innovators transforms the ideas into
useful application and resultant is new products, methods procedures, services
etc. innovation requires analytical ability to work. Entrepreneurs are innovators, to
exploit the ideas entrepreneurs makes the arrangement of materials, staff site etc.
and establish an enterprise. Entrepreneurs are gifted with some competencies
talents and qualities which make them different from others.
• INTRODUCTION
The term ‘entrepreneurship’ emerged in America in late
seventies. In late seventies many big business executives in
America left their jobs and started their own small scale
ventures. The reason behind this was that their innovative
ideas killed because these cannot be put in use by the higher
authorities of the corporations. Such persons achieved
success and their success became a cause rivalry among the
corporation which they left. Such class of people were
recognized as entrepreneurs. An American management
expert, Gifford Pinchot III wrote his famous book resigned
from their well paid executive position to launch their own
ventures .
INTRAPRENEURSHIP
Employees of an organisation who have entrepreneurial talent
and are motivated to use their abilities and initiatives and do something on
their own business are known as intrapreneurs.
Intraprenurship implies that entrepreneurial activities are
explicitly supported within established organizations, provided with
organisational resources and accomplished by company employees.
In the words of Pinchot “Intrapreneur, also termed
as corporate entrepreneur, as someone who violates policy,
ignores the chain of command, defies established procedures,
and perhaps, comes up with a new product for the company in
which he is employed.”
• Employees who give innovative ideas should be rewarded and
they should not be punished if they make some mistake.
• There should be team spirit, cooperation, knowledge, sharing
and spirit of encouragement within an organization.
• Interaction between employees and employers must be free.
It is most essential feature of entrepreneurship.
• It is essential for entrepreneurship to identify skills of
employees and give them proper training to develop their
skills and talents.
• Employees should be motivated by giving them rewards , in
the form of bonus, promotions etc.
Essentials of Intraprenurship :
1. Fradette and Michaud(1998) describe four main elements essential for the
success of intraprenurship:
2. Right strategic and structural environment within the organisation.
3. Talents of employees are recognized and their key skills are trained. They should
be motivated and rewarded from time to time.
4. Support system, team working, information sharing and learning are essentials
for invoking the dormant talents of employees.
5. Successful employees should have be suitably rewarded while they should not be
penalised for their mistakes to such extent that they are dissuaded from further
initiatives.
As intrapreneurial organisation should have a magnetic feeling in which style
of management is more coaching than infrastructure. Employees should fond of
their workplace. The enthusiasm and excitement will start spreading to others if
the work culture encompasses sharing and trust.
JOSEPH A.SCHUMPETER’S CONTRIBUTION
TO ENTREPRENEURSHIP
Joseph A. Schumpeter (1883-1950) is the main figure in the literature of
entrepreneurship as it was him who gave a well-rounded picture of theory of an
entrepreneur.
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His book entitled Theory of Economic Development (1911), argued that all the
important changes in the economy are set off by an entrepreneur and these
changes then slowly work themselves through the economic system, in the form of
business cycle.
 In the second attempt of his book, Schumpeter attempts to develop a number of
economic theories- of interest, capital, credit , profit and the business cycle by
relating them to the theory of entrepreneurship.
 Schumpeter’s work on entrepreneurship is much richer and distinct. His research
inspired people to be innovative. He emphasised more on technological
innovations rather than on organisational innovations.
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Incompetence and poor management
Low level of commitment
Restrictions imposed by custom and tradition
Involvement of high risk
Socio-cultural rigidities
Lack of motivation
Lack of infrastructural facilties
Lack of communication network
Absence of entrepreneurial aptitude
Low status of businessmen
Market imperfections
Legal formalities involved to set up a unit
Low quality products
Low package of salaries to employees.
Difficulties :
Terazano states that it is not so easy to achieve effective intraprenurship, some
of the difficulties are as follows:
1) Efficient implementation of facilties and controls are difficult to implement
without conflicts.
2) Fair remuneration and reward system is difficult to establish to ensure justice.
3) Even employees may feel extremely disappointed if they face difficulties and
failures while trying their new ideas
Inspite of all odds, business have to take risks and allow and encourage their
employees to take up intraprenurship.
CONCLUSION:
To sum it up, it can be said that Intrapreneurs are the
executives who develop commercially viable ideas, new
divisions, new subsidiaries, new products or new business
within existing and established business.
Both entrepreneurs and intrapreneurs are the innovators
and both perform the function of management. But
entrepreneurs set up their own business and give shape to the
ideas of intrapreneurs.