DEPARTMENT OF

ELECTRONICS AND COMMUNICATION ENGINEERING

TECHNOLOGICAL INNOVATION MANAGEMENT

AND ENTREPRENEURSHIP
BEC501
V SEMESTER
MODULE 3 NOTES
Prepared by,
Mr.Guruprasad A M
Assistant Professor
Dept. of ECE
MIT Thandavapura

A Unit of Maharaja Education Trust®

MAHARAJA INSTITUTE OF TECHNOLOGY

THANDAVAPURA
NH 766, Nanjangud Taluk, Mysuru- 571 302
(An ISO 9001:2015 and ISO 21001:2018 Certified Institution)
(Affiliated to VTU, Belagavi and approved by AICTE, New Delhi)
 DEPARTMENT OF
ELECTRONICS AND COMMUNICATION ENGINEERING

MODULE 3 CONTENTS
CHAPTER 1 - SOCIAL RESPONSIBILITIES O F BUSINESS
 Meaning of Social Responsibility
 Social Responsibilities of Business towards Different Groups
 Social Audit
 Business Ethics and Corporate Governance (Text 1)
Text Book 1: Principles of Management – P.C Tripathi, P.N Reddy, McGraw Hill Education, 6th
Edition, 2017

CHAPTER 2 – ENTREPRENEURSHIP
 Definition of Entrepreneur
 Importance of Entrepreneurship
 Concepts of Entrepreneurship
 Characteristics of successful Entrepreneur
 Classification of Entrepreneurs
 Myths of Entrepreneurship
 Entrepreneurial Development models
 Entrepreneurial development cycle
 Problems faced by Entrepreneurs
 Capacity building for Entrepreneurship

Text Book 2: Entrepreneurship Development Small Business Enterprises- Poornima M Charantimath,

Pearson Education 2008,
 CHAPTER-1
SOCIAL RESPONSIBILITIES OF BUSINESS
1. MEANING OF SOCIAL RESPONSIBILITY
 Adolph Berle: Social responsibility is the manager responsiveness to public consensus
 Keith Davis: Social responsibility refers to 2 types of business obligations:
1. Socio-Economic Obligation: Every business sees the economic consequences of its actions, which
does not focus on public welfare.
Ex: Promote employment, maintains competition
2. Socio-Human Obligation: Every business sees to nurture and develop human values.
Ex: Motivation, coordination, team work

2. SOCIAL RESPONSIBILITY OF BUSINESS TOWARDS DIFFERENT

GROUPS
 Business enterprises have responsibility towards:
1.Towards the Consumer and the Community
2.Towards Employees and Workers
3. Towards Shareholders and Other Businesses
4.Towards the state
1. Towards the Consumer and the Community
 Production of cheap and better-quality goods and services by developing new skills, innovations
and techniques, by locating factories and markets at proper places.
 Levelling out seasonal variations in employment and production.
 Deciding priorities of production in the country's interest and conserving natural resources.
 Providing social audit.
 Making real consumer needs as the criterion for selecting messages to be given by product
advertisements. Example: Toothpaste is bought not to kill bacteria but to create white teeth. This
kind of advertising promotes over-consumption, forces consumers to constantly compare
themselves negatively with others, creates in them dissatisfaction with the old products.
 Preventing creation of monopolies. Monopolies are bad in that they make the community face high
prices, short supply and inferior quality of goods.
 Providing after sale services.
 Ensuring hygienic disposal of wastes after production and voluntarily assisting in making the town
 environment satisfying.
 Achieving better public relations by giving to the community, true, adequate and easily intelligible
information about its working.
 Supporting programmes like supporting education. Slum clearance and similar other programs.

2. Towards Employees and Workers

 Fair wages to employees, which is possible only when the businessman is willing to accept a
voluntary on his own profits.
 Selection, training and promotion irrespective of race, religion.
 Social security measures and good quality of work life.
 Good human relationship i.e., maintaining industrial peace, educating workers to produce their
own leadership.
 Freedom, self-respect and self-realization.
 Recognition of talented workers and provide appreciation through incentives.

3. Towards Shareholders and Other Businesses

 Promoting good governance through internal accountability and transparency.
 Fairness in relations with competitors. Competition with rival businessmen should always be fair
and healthy. Businessmen sometimes treat their rivals as enemies and try to harm each other.

4. Towards the state

 Keeping away active participation in and direct identification with any political party.
 Observing all the laws of land which may have the following objectives:
a. To provide direction to the economic and business life of the community.
b. To bring about harmony between the limited enterprise interest and social interest.
c. To provide safeguard against wrong business practices.
d. To compel business to play fair to all participants
e. To enforce maximum production lines.
f. To allocate limited resources according to social priorities and preferences.
g. To implement rural uplift and secure balanced.
h. To enforce distributive justice.
i. To prevent week partners in business getting exploitation.
3. SOCIAL AUDIT
 A social audit is a systematic study and evaluation of the organization’s social performance as
distinguished from its economic performance. The term "social performance" refers to any
organizational activity that effects the general welfare of society.
 BENEFITS
1. It supplies data for comparison with the organization’s social policies and standards. The
management can determine how well it is living up to its social objectives.
2. It develops a sense of social awareness among all employees. In the process of preparing reports
and responding to evaluations, employees become more aware of the social implications of their
actions.
3. It provides data for comparing the effectiveness of different types of programmes.
4. It provides data about the cost of social programmes, so that the management can relate this data
to budgets, available resources, company objectives, etc.
5. It provides information for effective response to external groups which make demands on the
organization.
 LIMITATIONS
1. They are difficult to measure.
2. Their classification under "good" or "bad" is not universally accepted. In other words, the same
social result may be classed as "good" according to one opinion, and as "bad" according to an-
other.
3. Most of them occur outside the organization, making it difficult for the organization to secure
data from these outside sources.

4. BUSINESS ETHICS
 Business ethics is the application of moral principles to business problems. Ethics extend beyond the
question of legality and involve the goodness or badness of an act.
 An action may be legally right but ethically wrong. For example, a small village community located
twenty miles from the closest urban shopping area has a single grocer's shop. The owner of the shop
can charge extra price for his product though legally but not ethically.
 Discrimination against women in pay and promotion opportunities is also unethical, which continues
to exist despite there being the Equal Remuneration Act, 1976.
 One of the most commonly cited reasons for the lack of promotions of women is the effect a term
used for artificial barriers based on attitudinal or organizational bias that prevent qualified women
 from progressing in the organization into senior management level positions.
 How does a manager decide what is ethical or unethical? There are four important factors which
affect his decision.
 Government legislation.
 Business codes - But being voluntary in nature these codes, though pointed to with pride, are
usually ignored in practice.
 Pressure groups - For example, in recent years’ Indian carpet industry has been facing
consumer boycott from the west for employing child labor.
 Personal values of the manager himself - But a manager with strong personal values mostly
finds himself in a dilemma when an unethical course of action becomes his only choice to
achieve the company's goal.

5. CORPORATE GOVERNANCE
 The term "corporate governance" is used to denote the extent to which companies run in an open and
honest manner in the best interest of all stake-holders.
 The key elements of good corporate governance are transparency and accountability which
incorporates a system of checks and balances between all key players, viz., board of directors,
auditors and stake-holders.
 Major recommendations of this committee are as under:
 Non-executive directors whose most important role is to bring an independent judgement to bear
on issues of strategy, performance, resources, etc. should be picked through a formal selection
process on merits.
 Companies should have remuneration committees consisting wholly or mainly of non-executive
directors which should recommend to the board executive directors' emoluments.
 Companies should have audit committees consisting of minimum 3 non-executive directors to
report on any matter relating to financial management.
 Audit partners should be rotated and there should be fuller disclosure of non-audit work.
 This is a voluntary code and has only some moral requiring companies to mention in their annual
report whether they are following the code, and if not, why.
 Benefits of Good Corporate Governance
1. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.
 5. It limits the liability of top management by carefully articulating the decision-making process.
6. It improves strategic thinking at the top by inducting independent directors who bring a wealth of
experience and a host of new ideas.

6. CORPORATE GOVERNANCE IN INDIA

1. The Securities and Exchange Board of India (SEBI) monitors corporate governance of listed
companies in India which should comply the following rules:
 50% of board should consist of independent directors if the company has an executive
chairman. In case of non-executive chairman, 1/3rd of the board should consist of independent
directors.
 Following persons are not qualified for becoming independent directors:
 Shareholder with more than 2% shareholding in the company
 Former executive who left the company less than 3 years ago
 Partner of current legal, audit, and consulting firm
 Relative of promoter, an executive director or senior executive
2. The companies have introduced several provisions relating to corporate governance such as setting
up of audit committee.
3. The world council for corporate governance has instituted the Golden Peacock Award to foster
competition among companies to improve their quality of cooperate governance.
4. India has several bodies that rate companies for their credit-worthiness. Important amongst them are:
SRISIL (Credit Rating and Information Service of India Ltd.), ICRA (Information and Credit Rating
Agency of India Ltd.) and CARE (Credit Analysis and Research).

*****
 QUESTION BANK
MODULE 3 CHAPTER 1
1. Explain benefits and limitations of social audit. (Aug 2022, Jan 2021, Feb 2023, Mar 2022 – 10M)
*****
2. Discus corporate governance. Explain the benefits of corporate governance. (Jan 2021, Feb 2023 –
7M) *****
3. Explain corporate governance in India. (Aug 2022, Jul 2023 -10M) *****
4. How do u understand business ethics? What are the factors which affects the decision in ethical or
unethical? (Jan 2021 – 6M)
5. What is the meaning of social responsibility? Describe the social responsibilities of business towards
consumer and community. (Feb 2023 – 6M)
6. Describe the social responsibilities of business towards employee and worker. (Jul 2023 – 10M)
7. Describe the social responsibilities of business towards different group. (Mar 2022 -10M) *****

Dept. of ECE, MIT Thandavapura

 CHAPTER2
Entrepreneurship

1. Definition of Entrepreneur

 An individual who bears the risk of operating a business in the face of uncertainty about the future
conditions

Encyclopedia Britannica

 He is the one who innovates and introduces something new in the economy.

-Joseph A. Schumpeter

 He shifts economic resources out of an area of lower and into an area of higher productivity and
greater yield.

-J. B. Say (French economist)

 He searches for change, responds to it and exploits opportunities. Innovation is the specific tool of an
entrepreneur.

Peter F. Drucker

 Entrepreneurs are people who have the ability to see and evaluate business opportunities together with
the necessary resources to take advantage of them and to intimate appropriate action to ensure
success.

International Labour Organisation (ILO)

 He is the one who is endowed with more than average capacities in the task of organising and coordi
nating the various factors of production. He is a pioneer and captain of industry.

-Francis A. Walker

 He is a critical factor in economic development and an integral part of economic transformation.

-William Diamond

 He is a person who is able to look at the environment, identify opportunities to improve the
14

environment. Marshall Resources, and implement action to maximize those opportunities.

Page

-Robert E. Nelson

Dept. of ECE, MIT Thandavapura

  He is the agent who buys means of production at a certain price in order to combine them into a
product that is going to sell at prices that are certain at the moment at which he commits himself to hi
s costs.

-Cantillion

 The word entrepreneur is derived from a Sanskrit word called "Antaraprerana",

-Poornima Charantimath
2. Importance of Entrepreneurship

 Entrepreneurial development today has assumed special significance, since it is a key to economic
development.

 Entrepreneurs are, thus the seeds of industrial development and the fruits of industrial development
are greater employment opportunities to unemployed youth, increase in per capita income.

 Higher standard of living and increased individual saving, revenue to the government in the form of
income tax, sales tax, export duties. Import duties and balanced regional development.

 India needs entrepreneurs. It needs them for two reasons: to capitalize on new Opportunities and to
create wealth and new jobs.

3. Concepts of Entrepreneurship

 "Entrepreneur" is a person who creates an enterprise. The process of creation is called as

"entrepreneurship". The word "entrepreneur" has been taken from French, where it was originally
meant to designate an organiser of musical and other entertainment

 The word "entrepreneur" is derived from the French verb enterprendre, which means 'to undertake '.
This refers to those who "undertook" the risk of new enterprises.

 In the earlier part of the 16th century, the French men who organised and led military expeditions
were referred to as entrepreneurs. French tradition regarded an entrepreneur as a person translating a
profitable idea into a productive activity. During the year 1700. the architects and contractors of
public works were called entrepreneurs. Quensnay recognised a rich farmer as an entrepreneur who
manages and makes his business profitable by his intelligence and wealth.

 In economics and commerce, an entrepreneur is an economic leader who possesses the ability to
recognise opportunities for the successful introduction of new commodities, new techniques, and new
sources of supply, and to assemble the necessary plant and equipment

Dept. of ECE, MIT Thandavapura

  In early 16111 century, the entrepreneur was denoted as a dealer who bought a thing at a certain price
and sold it at uncertain price, making a profit.

4. Characteristics of successful Entrepreneur

 The following are some characteristics that every success full entrepreneur must possess in adequate
measure.

 Creativity

 Innovation

 Dynamism

 Leadership

 Team building

 Achievement motivation

 Problem solving

 Goal orientation

 Risk taking and decision making ability

 Commitment.

 Creativity: The terms creativity and innovation are often used to mean the same thing, but each has a
unique connotation. Creativity is "the ability to bring something new into existence".

 This definition emphasises the "ability", not the "activity." of bringing something new into existence.
A person may therefore conceive of something new and envision how it will be useful, but not
necessarily take the necessary action to make it a reality. Innovation is the process of doing new
things, but creativity is a prerequisite to innovation.

 Ideas usually evolve through a creative process whereby imaginative people bring them into
existence, nurture them, and develop them successfully.

 The creative process for an idea involves five stages

 Germination

 Preparation

 Incubation

Dept. of ECE, MIT Thandavapura

  Illumination

 Verification

A model of the creative process is shown in Figure

 Germination: The germination stage is the seeding process. It is not like planting seed as a farmer
does to grow corn, but more like the natural seeding that occurs when pollinated flower seeds,
scattered by the wind, find fertile ground 10 take root.

 The exact manner in which an idea is geminated is a mystery; it is not something that can be
examined under a microscope. However, most creative ideas can be traced to an individual's interest
in or curiosity about a specific problem or area of study.

 Preparation: Once the seed of curiosity has taken form as a focused idea. Creative people embark on
a conscious search for answers. If it is a problem they are trying to solve-such as Alexander Graham
Bell's determination to help those with impaired hearing-then they begin an intellectual journey.
Seeking information about the problem and how others have tried to resolve it.

 If it is an idea for a new product or service, then market research is the business equivalent. Inventors
will set up laboratory experiments. Designers will begin engineering new product ideas. And
marketers will study consumer-buying habits.

 In rare instances the preparation stage will produce results more often Conscious deliberation will
only overload the mind, but the effort is important to gather information and knowledge vital to an
eventual solution.

 Incubation: Individuals sometimes concentrate intensely on an idea but more often they simply allow
ideas time to grow without intentional effort The idea once seeded and given substance through
preparation is put on a back burner: the subconscious mind is allowed time to assimilate information.

 Incubation is a stage of "mulling it over" while the subconscious intellect assumes control of the
creative process. This is a crucial aspect of creativity because when we consciously focus on a
problem we behave rationally to attempt to find systematic resolutions. When we rely on

Dept. of ECE, MIT Thandavapura

 subconscious processes our minds are untrammeled by the limitations of human logic.

 Therefore when a person has consciously worked to resolve a problem without success. Allowing it to
incubate in the subconscious will often lead to a resolution.

 Illumination: The fourth stage, occurs when the idea resurfaces as a realistic creation. There will be a
moment in time when the individual can say. ··Oh, see!”Illumination may be triggered by an
opportune incident the important point is that most creative people go through many cycles of
preparation and incubation, searching for that catalyst of an incident that can give their idea full
meaning.

 Verification: An idea once illuminated in the mind of an individual continues to have little meaning
until verified as realistic and useful. Entrepreneurial effort is essential to translate an illuminated idea
into a verified, realistic, and useful application.

 Verification is a stage of development that refines knowledge into application, during this stage many
ideas fall by the wayside as they prove to be impossible or have little value. More often, a good idea
has already been developed, or the aspiring entrepreneur finds that competitors already exist.
Inventors quite of come to this harsh conclusion when they seek to patent their products only to
discover similar inventions registered.

(b) Innovation: Entrepreneurs innovate Innovation is the specific instrument of entrepreneurship. It is the
act that endows resources with a new capacity to create wealth. Innovation, indeed, creates resource
Successful entrepreneurs. Whatever their individual motivation- be it money, power, curiosity, or the
desire for fame and recognition-try to create value it and to make a contribution.

 Systematic innovation means monitoring following seven sources for innovative opportunity.

 The unexpected-unexpected success, unexpected failure, unexpected outside event.

 The incongruity-between reality as it actually is and reality as it is assumed to be or as it "ought to be"

 Innovation based on process need

 Changes in industry structure or market structure that catches everyone unawares

 Demographics (population changes)

 Changes in perception, mood, and meaning

 New knowledge-scientific and non-scientific

Dept. of ECE, MIT Thandavapura

 (c) Dynamism: Innovation together with dynamism constitutes a potential combination for
prosperity. Dynamism revises the targets of the enterprise upwards time and again The enterprise may
open up new vistas, better product mix or charismatic product image stimulating steady growth.

 A dynamic entrepreneur is always pragmatic. Given the potentialities of the enterprises, he sets
attainable goals, which are to be accomplished within specific timeframes. An entrepreneur tends to
approach problems to solve them rather than running away from them.

 Being the decision maker, he cannot wish away problems. They have to be analyzed systematically
and solved ill the interest of the enterprise. He must believe in. create, and practice "win-win"
situations. This is a condition where everyone wins and no one looses. A good entrepreneur-manager
trains his staff continuously besides undergoing the same process himself.

(d) Leadership: Leadership is the basic quality of an entrepreneur. This spirit keeps him paces
forward in any field, Leadership qualities will enable a person to stand apart in whatever profession he
might be in.

 The quality of hi s leadership is clear from personal relationships, mode of handling a problem,
generating resources and taking others in to one’s own stride. An enterprise endowed with the
resource of leadership will always be prominent in the market.

e) Teambuilding: An entrepreneur should have an ability to build a team. A team is a group of

individuals with a common purpose that is focused and aligned to achieve a specific task or set of
outcomes.

A good team will be able to share knowledge, core competency, and goals;

The teambuilding skill consists of the following steps.

 Step 1: Wanting to feel better

 Step 2 : Identifying the problem and needs of the enterprise

 Step 3 : Creating a vision

 Step 4 : Setting goals for the group

 Step 5 : Reviewing progress

(f) Achievement motivation: Entrepreneurs have a high need for achievement and arc guided by
their inner self. Motivating their behavior towards accomplishment.

Dept. of ECE, MIT Thandavapura

 (g) Problem solving: It is important that an entrepreneur should be able to solve problems and not
avoid them. A formal problem-solving model helps entrepreneurs solve problems on a logical manner.

The model consists of six steps.

(a) Define the problem

(b) Gather information

(c) Identify various solutions

(d) Evaluate alternatives and select the best option

(e) Take action

(t) Evaluate the action taken

(h) Goal orientation: Goal setting is the achievement of targets and objectives for successful
performance of an entrepreneur, both long run and short run. It helps to measure how well individuals
and groups are meeting the performance standards.

The goal-setting process requires three steps. Which are as follows?

1. Definition of goal

2. Specific goals

3. Feedback about goal achieved

(i) Risk taking and decision-making ability: Entrepreneurs arc persons who take decisions under
conditions of uncertainty and therefore are willing to bear risk, but never gamble with results. This is
evidenced by market studies exploring alternative lines of production or a new product mix, or a new
combination of inputs and so on they set goals that require high level of performance

 Risk bearing and decisions making calls for absolute clarity in thinking and coordinated actions.
Though decision-making can be taught in classrooms and perfected through experience individual
ability always stands supreme.

(j) Commitment: One of the subtle qualities of an entrepreneur is hi s willpower. Strong

determination with sound thinking fortifies will power. It is determination that provides the
entrepreneur energy to work for 15- 18 hours a day 7 days a week and 52 weeks in a year till the unit
reaches a natural stage of take off.

Dept. of ECE, MIT Thandavapura

 5. Classification of Entrepreneurs

a) Based on Functional Characteristics

1. Innovative entrepreneur: Such entrepreneurs introduce new goods or new methods of production or
discover new markets or reorganise their enterprises. Entrepreneurs in this group are characterized by
an aggressive assemblage of information for trying out a novel combination of factors. Such
entrepreneurs can do well only when a certain level of development has already been achieved: they
look forward to improving upon the past.

2. Imitative or adoptive entrepreneur: Such entrepreneurs do not innovate themselves but imitate
techniques and technology innovated by others. Entrepreneurs in this group are characterised by their
readiness to adopt successful innovations by successful entrepreneurs. Such entrepreneurs are
particularly suitable for underdeveloped economies as adoption saves costs of trial and error.

3. Fabian entrepreneur: Such entrepreneurs display great caution and skepticism in experimenting with
any change in their enterprise. They change only when there is an imminent threat to the very existence
of their enterprise.

4. Drone entrepreneur: Such entrepreneurs are characterised by a die-hard conservatism and may even
be prepared to suffer the loss of business.

(b) Based on the Developmental Angle

1. Prime mover: This entrepreneur sets in motion a powerful sequence of development, expansion, and
diversification of business.

2. Manager: Such an entrepreneur does not initiate expansion and is content just staying in business.

3. Minor innovator: This entrepreneur contributes to economic progress by finding better use for existing
resources.

4. Satellite: This entrepreneur assumes a supplier’s role and slowly moves towards a productive enterprise.

5. Local trading: Such an entrepreneur limits his enterprise to the local market.

(c) Based on Types of Entrepreneurial Business

1. Manufacturing: An entrepreneur who runs such a business actually produces the products that can
be sold using resources and supplies. For example, apparel and other textile products, chemical and
related products, electronics and other electrical equipment, fabricated metal products, industrial
machinery and equipment, printing and publishing, rubber and miscellaneous plastic products,
stone, clay etc.

Dept. of ECE, MIT Thandavapura

 2. Wholesaling: An entrepreneur with such a business sells products to the middle man.

3. Retailing: An entrepreneur with such a business sells products directly to the people who use or
consume them.

4. Service: An entrepreneur in this business sells services rather than products

(d) Based on the Nine Personality Types of Entrepreneurs

1. The Improver: If you operate your business predominately in the improver mode you are focused
on using your company as a means to improve the world your overarching motto is: morally correct
companies will be rewarded working on a noble cause. Improvers have an unwavering ability to run
their business with high integrity and ethics. Personality Alert: Be aware of your tendency to be a
perfectionist and over-critical of employees and customers.

2. The Advisor: This business personality type will provide an extremely high level of assistance and
advice to customers. The advisor's motto is: the customer is right and we must do everything 10
please them. Companies built by advisors become customer focused. Personality Alert: Advisors
can become totally focused o n the needs of their business and customers that they may ignore their
own needs and ultimately bum out.

3. The Superstar: Here the business is centered on the charisma and high energy of the Superstar
CEO. This personality often will cause you to build your business around your own personal brand.
Personality Alert: Superstars Can be too competitive and workaholics

4. The Artist: This business personality is the reserved but a highly creative type. Often found in
businesses demanding creativity such as web design and ad agencies. As an artist type you'll tend to
build your business around the unique talents and creativities that you have. Personality Alert: You
may be overly sensitive to your customer's responses even if the feedback is constructive. Let go the
negative self-image.

5. The Visionary: A business built by a Visionary will often be based on the future vision and
thoughts of the founder. You will have a high degree of curiosity to understand the world around
you and will set-up plan to avoid the landmines. Personality Alert: Visionaries can be too focused
on the dream with little focus on reality. Action must precede vision.

6. The Analyst: If you run a business as an Analyst, your company focus is on fixing problems in a
systematic way often the basis for science, engineering or computer firms. Analyst companies excel
at problem solving. Personality Alert: Be aware of analysis paralysis. Work on trusting others.

Dept. of ECE, MIT Thandavapura

 7. The Fireball: A business owned and operated by a Fireball is full of life. energy and optimism.
Your company is life energizing and makes customers feel the company has a get it done attitude in
a fun playful manner. Personality Alert: You may over commit your teams and act impulsively.
Balance your impulsiveness with business planning.

8. The Hero: You have an incredible will and ability to lead the world and your business through any
challenge. You are the essence of entrepreneurship and can assemble great companies Personality
Alert: Over promising and using forceful tactics to get your way will not work long term. To be
successful, trust your leadership skills to help others find their way.

9. The Healer: If you are a Healer, you provide nurturing and harmony to your business. You have an
uncanny ability to survive and persist with an inner calm. Personality Alert: Because of your
caring, healing attitude toward your business, you may avoid outside realities and use wishful
thinking. Use scenario planning to prepare for turmoil.

(e) Based on schools of Thought on Entrepreneurship

These are six schools of thought on entrepreneurship each with its own underlying set of beliefs. Each of
these schools can be categorized according to its interest in studying personal characteristics,
opportunities, management or the need for adapting an existing venture.

Assessing personal qualities

1. The Great Person school of entrepreneurship
2. The Psychological Characteristics school of entrepreneurship
Recognising opportunities
3. The Classical school of entrepreneurship
Acting and managing
4. The Management school of entrepreneurship
5. The Leadership school of entrepreneurship
Reassessing and adopting
6. The Intrapreneurship school of entrepreneurship

 The Great Person school of entrepreneurship: This school believes that an entrepreneur is born
with an intuitive ability, sixth sense, traits, and instincts. The successful entrepreneur is described as
having a strong drive for independence and success, with high levels of vigour. Persistence and self-
esteem.

 This "great person" has an exceptional belief in himself and his abilities. Attention is paid to such
traits as energy, perseverance, vision and single mindedness, or abilities such as being inspirational or

Dept. of ECE, MIT Thandavapura

 motivational. Other traits frequently mentioned include physical attractiveness, popularity and
sociability, intelligence, knowledge, judgment and fluency of speech as also tact, diplomacy, and
decisiveness.

 The Psychological Characteristics school of entrepreneurship: This school of thought focuses on

personality factors and believes that entrepreneurs have unique values and attitudes towards work and
life. These, along with certain dominant needs, propel the individual to behave in certain ways.
Entrepreneurs can be differentiated from non-entrepreneurs by personality characteristics.

 Three personality characteristics have received considerable attention in research: (1) personal values
such as honesty, duty responsibility, and ethical behavior; (2) risk-taking propensity; and (3) the need
for achievement.

 The Classical school of entrepreneurship: Innovation Creativity or discovery is the key factors
underlying the classical body of thought and research on entrepreneurship. In this view
entrepreneurship refers to the process of creating an opportunity or the opportunity-seeking style of
management that sparks innovation. The critical aspect of entrepreneurship is in the process of doing
rather than owning.

 The Management school of entrepreneurship: As in most fields of organizational study.

Entrepreneurship draws heavily from management theory. The management school suggests that an
entrepreneur is "a person who organises or manages a business undertaking assuming the risk for the
sake of profit". This school deals with the technical aspects of management and seems to be based on
the belief that entrepreneurs can be developed or trained in the classroom.

 Since many entrepreneurial ventures fail each year. A significant proportion of these failures might be
traced to poor management and decision making. as well as to financing and marketing weaknesses
according 10 this school. Entrepreneurship is a series of learned activities which focus on the central
functions of managing a firm.

 The Leadership school of entrepreneurship: An entrepreneur is often a leader who relies on people
to accomplish hi s purposes and objectives. The Leadership school of entrepreneurship is a non-
technical side of the management school which suggests that entrepreneurs need to be skilled in
appealing to others 10 joins the cause.

 A successful entrepreneur must also be a people manager or an effective leader/mentor that plays a
major role in motivating directing and leading people. Thus the entrepreneur must be a leader able to
define a vision of what is possible and attract people to rally around that vision and transform it into
reality.

Dept. of ECE, MIT Thandavapura

  The Intrapnmeurship school of entrepreneurship: The Intrapreneurship school evolved in
response to the lack of innovativeness within organisations. Intrapreneurs. to the limited extent that
they possess discretionary freedom of action are able to act as entrepreneurs and implement 'their
ideas without themselves becoming owners. Alertness to opportunities is one dimension of
intrapreneurial activity.

Myths of Entrepreneurship

Some of the major myths are discussed below.

(a) Entrepreneurs are born, not made

According to this long-prevalent myth the characteristics of entrepreneurs cannot be taught or learned
they are innate traits with which a person must be born. 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 topic to be studied and the traits acquired by
training and development.
(b) Entrepreneurs are academic and social misfits

The belief that entrepreneur’s arc academically and socially ineffective is born of some business
owners having started successful enterprises after dropping out of school or quitting a job in fact.
Educational and social organisations did not recognise the entrepreneur they abandoned him or her as a
misfit in a world of corporate giants. Business education.
(c) Entrepreneurs fir an ideal profile

These lists were neither validated nor complete; they were based on case studies and on research
findings among achievement-oriented people. Today we realise that a standard entrepreneurial profile
is hard to compile. Contemporary studies being conducted at universities across the world will, in the
future, provide more accurate insights into the various profiles of successful entrepreneurs.

(d) 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 is often an indicator of other problems: managerial
incompetence, lack of financial understanding, poor investments, and poor planning, and so on.

(e) All you need is luck to be an entrepreneur

Being in "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 an opportunity
when it arises often appear to be "lucky". They are, in fact, simply better prepared to deal with

Dept. of ECE, MIT Thandavapura

 situations and turn them into successes. What appears to be luck is really a combination of preparation,
determination, desire, knowledge, and innovativeness.
(f) A great idea is the only ingredient in a recipe for success

A great idea may stay just that if it is not backed by adequate finance, demand for the product and,
most importantly, good management Venture capitalists say bad management is the main cause of
failures among small businesses. "The quality of management will determine the success/failure of the
venture."
(g) My best friend will be a great business partner

Teaming up with your best friend just because you share an idea and a drink every weekend may not
be a good idea. Sure, you may agree on most issues but misunderstandings can erupt over insignificant
aspects like who should be in the office first, who's in charge of supervising the office staff and so on.
(h) Having no boss is great fun

If you thought your boss was way too demanding, watch out for your vendors, bankers, investors,
suppliers and customers. The owner of a restaurant delivery service we met complains that a client
refused to pay for the order because the restaurant did not put in pickles. Since customers can make or
break you, their wish often ends up being your command.
(i) I can make lots of money

When Sumit Roy, a training consultant quit his job at Lintas and set up his own outfit called
Univbrands in 1992, he had to make quite a few sacrifices. "For the first three months I gave up my car
and traveled by bus," he says. For most people it is years, not months, before the money starts coming
in. Till that happens, you'll have to miss the security of your monthly pay cheque are you ready for
that'?
(j) I'll definitely become successful

Put it down to plain optimism, egoism or a survival strategy. but most business owners or even those
starting off on their own refuse to accept the possibility of failure. Do not believe those clichés about
winners never quitting and quitters never winning: the number of people who fail are legion and it can
happen to you as well.
(k) Life will be much simpler if f work for myself

Don’t believe it for one moment. Working for yourself is definitely more strenuous than working for
others, at least when starting off. Take for instance Dincsh Gupta. He set up Green Investors'
Grievances Services two years ago to take care of individuals' stock-related problems and has a
punishing schedule even now. His typical day starts at 5 a.m. and ends at 7 p.m.

Dept. of ECE, MIT Thandavapura

 6. Entrepreneurial Development Models
The models suggested for the development of entrepreneurship fall in the following categories.

(a) Psychological models

(b) Sociological models

(c) Integrated models

(a) Psychological Models

McClelland (1961) has given a significant lead in identification of determinants of entrepreneurship. In

his model, he ascribes more importance to achievement motives, which earlier related to child-rearing
practices. But in his recent book with D.G. Winter. he has altered his earlier proposition on the
importance of child rearing as the intrinsic determinant of the achievement motive.
(b) Sociological Models

Frank W. Young's theory of entrepreneurship is a theory of change based upon society incorporation
of relative such-groups. The relativeness of sub-group which has a low status in a larger society will
lead to entrepreneurial behavior if the group has better institutional resources than others in the society
at the same level. Young's model of entrepreneurship suggests the creation of supporting institutions in
society as the determinant of entrepreneurship.
(e) Integrated Models

T. V. Rao (1975) in "entrepreneurial disposition" has included the following factors.

(i) Need for motive is the dynamic which for the prospective entrepreneur has the greatest possibility
of achieving the goals if one performs those activities.
(ii) Long- term involvement is the goal either at thinking level or at activity level in entrepreneurial
activity that is viewed as a target to be fulfilled.
(iii) Personal, social and material resources which, he thinks are related to entry and success in the area
of entrepreneurial activity.
(iv) Social-political system to be perceived as suitable for establishment and development of his
enterprise.
B. S. Venkata Rao (1975) described the following five stages for promoting small entrepreneurship.
(1) Stimulation
(2) Identification
(3) Development
(4) Promotion
(5) Follow up

Dept. of ECE, MIT Thandavapura

 (1) Stimulation: This stage includes the creation of an industrial atmosphere, policy statement
emphasizing the role of small industry wide publicity of industrial development programmes and
formation of special schemes and creation of support institutions. This stage is necessary to
stimulate interest of the backward regions in industrial activity and to create awareness.
(2) Identification: This stage is necessary to identify prospective entrepreneurs the prospective
entrepreneurial force can be identified in rural artisan factory workers, persons with formal
training in engineering and technology, and graduates in business administration and management.
(3) Development: This stage would include organisation of motivation and managerial training
programmes along with advice on technology formulation of bankable project location and so on.
(4) Promotion: This stage would include government policy initiatives for promoting small
entrepreneurship.
(5) Follow up: This stage includes reviewing the policies and programmes of the government and
seeking follow up with a view to making them more effective.
7. Entrepreneurial development cycle

The entrepreneurial development cycle consisting of the following components for the promotion
and development of entrepreneurship.

1. Stimulatory activities: These activities ensure the emergence of entrepreneurs in the society.
They prepare the background for the entrepreneurship to sprout and for people to start looking
for entrepreneurial pursuits. They generate initial motivation and offer opportunity to acquire
skill. These can be achieved by the following activities.
 Entrepreneurial education
 Planned publicity for entrepreneurial opport-unities
 Identification of potential entrepreneurs through scientific methods
 Motivational training to new entrepreneurs
 Help and guidance in selecting products and preparing project reports
 Making available techno-economic information and product profiles
 Evolving locally suitable new products and processes
 Availability of local agencies with trained personnel for entrepreneurial counselling and
promotions

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  Creating entrepreneurial forums
 Recognition of entrepreneurs
2. Support activities: These activities help a person to develop into an entrepreneur. They
nurture and help Entrepreneurial Development Cycle entrepreneurship to grow. This can be
done by providing the necessary infrastructure in the form of computers, Internet connectivity,
offering consultancy and training, and providing all required information as to how a person
should groom himself as an entrepreneur. Financial assistance for projects and seminars could
also promote entrepreneurship. These activities can be promoted in the incubation centre to
groom a person to become an entrepreneur. The various support activities are given below.
 Registration of unit
 Arranging finance
 Providing land, shed, power, water, and so on.
 Guidance for selecting and obtaining machinery
 Supply of scarce raw materials
 Getting licences/import licences
 Providing common facilities
 Granting tax relief or other subsidy
 Offering management consultancy services
 Help marketing the product
 Providing information
3. Sustaining activities: These activities are all those that help in the continuous and efficient
functioning of entrepreneurship. These include modernization of infrastructure, encouraging
diversification providing opportunities and supporting industry-institute interaction through
consultancy, promoting quality, and organizing need-based common facilities centres. The
various sustaining activities are as follows.
 Help modernization
 Help diversification/expansion/substitute production
 Additional financing for full capacity utilization
 Deferring repayment/interest
 Diagnostic industrial extension/consultancy services
 Production unit’s legislation/policy change
 Product reservation/creating new avenues for marketing
 Quality testing and approving services
 Need-based common facilities centres

Dept. of ECE, MIT Thandavapura

 8. Problems Faced By Entrepreneurs and Capacity Building for
Entrepreneurship

The problems of entrepreneurs may be divided into two groups-external and internal. External
problems are those which result from factors beyond the control of the entrcpreneurs while internal
problems are those which are not influenced by external factors.
Internal Problems of Entrepreneurs
1. Planning
(a) Technical feasibility
 Inadequate technical know-how
 Locational disadvantage
 Outdated production process
(b) Economic viability
 High cost of inputs
 Break-even point too high
 Uneconomic size of project
 Choice of idea
 Feeble structure
 Faulty planning
 Poor project implementation
 Lack of strategies
 Lack of vision
 Inadequate connections
 Lack of motivation
 Underestimation of financial requirement
 Unduly large investment in fixed assets
 Overestimation of demand
2. Implementation
Cost over-runs resulting from delays in getting licences Sanctions and so on and inadequate
mobilization of finance
3. Production
(a) Production management
 Inappropriate product mix
 Poor quality control
 Poor capacity utilisation
 High cost of production
 Poor inventory maintenance and ,eplacement

Dept. of ECE, MIT Thandavapura

  Lack of timely and adequate modernisation and so on
 High wastage
 Poor production
(b) Labour management
 Excising high wage structure
 Inefficient handling of labour problems
 Excessive manpower
 Poor labour productivity
 Poor labour relations
 Lack of trained skilled labour or technically competent personnel
(c) Marketing management
 Dependence on a single customer or a limited number of customers/single or a limited number
of products
 Poor sales realisation
 Defective pricing policy
 Booking of large orders at fixed prices in an inflationary market
 Weak market organisation
 Lack of market feedback and market research
 Unscrupulous sale purchase practices
(d) Financial management
 Poor resource management and financial planning
 Faulty costing
 Dividend policy
 General financial indiscipline and application of funds for unauthorised purposes
 Deficiency of funds
 Over trading
 Unfavourable gearing or keeping adverse debt equity ratio
 Inadequate working capital
 Absence of cost consciousness
 Lack of effective collection machinery
(e) Administrative management
 Over centralisation
 Lack of professionalism
 Lack of feedback to management (Management Information System)
 Lack of timely diversification

Dept. of ECE, MIT Thandavapura

  Excessive expenditure on R and D

External Problems of Entrepreneurs

(a) Infrastructural
 Location
 Power
 Water
 Post Office and soon
 Communication
 Non-availability or irregular supply of critical raw materials or other inputs
 Transport bottleneck
(b) Financial
 Capital
 Working capital
 Long-term funds
 Recovery
(c) Marketing
(d) Taxation
(e) Raw material
(f) Industrial and financial regulations
(g) Inspections
(h) Technology
(i) Government policy
(j) Administrative hurdles
(k) Rampant corruption
(l) Lack of direction
(m) Competitive and volatile environment
9. Capacity Building for Entrepreneurship
India has an extraordinary talent pool with virtually limitless potential for entrepreneurship. India
must, however, commit to creating the right environment to develop successful business builders.To
do this, India must focus on four areas.
1. Create the right environment for success:

 Entrepreneurs should find it easy to start a business to do so most Indians would start slow with
capital borrow from family and friends: the CEO playing the role of salesman and strategies. a
professional team assembled months or perhaps years after the business was created.

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  The first challenge for India is to create a handful of such areas of excellence-the breeding
ground for ideas 10 grow into businesses. Some already exist in a very preliminary way (the
businesses are there). For example. Gurgaon and Hyderabad for remote services or Bangalore
for IT services. However these areas of excellence need strengthening before they can claim to
be India’s own "valley".
 One way of strengthening these areas is to consider the role of universities and educational
institutions-places where excellence typically thrives. Creating such educational institutions by
strengthening the Indian Institutes of Technology (IITs) and starting new ones is going to be
very important.
2. Ensure that entrepreneurs have access to the right skills:

 A survey conducted by Mc Kinsey & Company revealed that most Indian start up businesses
face two skill gaps: entrepreneurial (how to manage business risks. build a team. identify and
get funding) and functional (product development know-how. marketing skills. and soon).
 In other countries entrepreneurs either gain these skills by hiring managers or have access 10
"support systems" such as universities or other institutions that may nurture many regional
businesses. In addition business schools give young graduates the skill s and knowledge
required for business today.
 India can move towards ensuring that the curriculum in universities is modified to address
today's changing business landscape, particularly in emerging markets, and build "centres of
entrepreneurial excellence" in institutes that will actively assist entrepreneurs.
3. Ensure that entrepreneurs have access to "smart" capital:

 For a long time, Indian entrepreneurs have had little access to capital. It is true that in the last
few years, several venture funds have entered the Indian market. And, while the sector is still in
its infancy in India, VCs are providing capital as well as critical knowledge and access to
potential partners, suppliers, and clients across the globe. However, India has only a few angel
investors who support an idea in the early stages before VCs become involved.
 India Venture 2000 showed this to be a critical. gap. While associations such as TIE are
seeking to bridge the gap (by working at creating a TIE India Angel Forum), this is India's third
challenge: creating a global support network of "angels" willing to support young businesses.
4. Enable networking and exchange:

 Entrepreneurs learn from experience-theirs and that of others. Much of the success of Indians
in Silicon Valley is attributed to the experience, sharing, and support TIE members have
extended to young entrepreneurs. During India Venture 2000. Established entrepreneurs who
still remembered the challenges they faced, offered 10 support startups clearly.

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  India would benefit from creating a strong network of established entrepreneurs and managers
that entrepreneurs could draw on for advice and support.
 The rapid pace of globalisalion and the fast growth of Asian economics present tremendous
opportunities and challenges for India through planning and focus, India can aspire to create
the pool of entrepreneurs who will be the regions'-and the worlds ' -leaders of tomorrow.

Dept. of ECE, MIT Thandavapura