CHAPTER-1

INTRODUCTION

The word “entrepreneur” has its origin in the French word Enterpendre, which means “to
undertake”. The early Frenchmen who led military expeditions were called entrepreneurs; It was
Cantillon, the French Economist, who first applied the term in the eighteenth century to a
merchant who purchased the means of production to combine them effectively into saleable
products.

J.B. Say, another French Economist, projected the entrepreneur as a person who organised the
business activity consisting of production and distribution. John Schumpeter gave considerable
importance to entrepreneurship in the process of economic development of a country.
Accordingly, innovation and entrepreneurship in the initial stages of the development of a
business activity is very crucial to the economic development of a country. In fact,
entrepreneurship, as such is evident only in the initial stages: not in the later stages of the life of a
business venture.

Modern Concept of Entrepreneur

An entrepreneur may be defined as an individual who intends to add value to the economy by
creating a new business venture through effective use of his knowledge, passion, dreams and
desires. An entrepreneur is a person who evaluates the new situation in the environment and
directs the making of such adjustments or alternations in the economic or manufacturing systems
as he thinks necessary for achieving desired results.

1.1Entrepreneurship and the entrepreneurial process

(Article: An entrepreneurial-directed approach to entrepreneurship education: Mission

impossible? Jarna Heinonen)
There is no single theory of entrepreneurship and the research conducted in the field has touched
on several themes: the theory, types of entrepreneurs, the entrepreneurial process, organisational
forms, the external environment, and outcomes (Ucbasaran et al., 2001).

Researchers have recently shifted their attention away from identifying people with certain
characteristics and personality traits who prefer to become entrepreneurs, towards understanding
the nexus of enterprising individuals and valuable opportunities (Venkataraman, 1997).

This focus demands a deeper understanding of opportunity in the entrepreneurial process

(Eckhardt and Shane, 2002) on which the entire concept is assumed to be based (Shane and
Venkataraman, 2000).

Entrepreneurship is a process of becoming, and the change involved usually takes place in
quantum leaps in a holistic process in which existing stability disappears (Bygrave, 1989b).
According to Schumpeter (1934), who gave us the modern version of the entrepreneur as the
person destroying the economic order (Bygrave, 1989a), entrepreneurship is about identifying
opportunities, creatively breaking patterns, taking and managing risk, and organising and co-
ordinating resources (Landstro¨m, 1998; Gibb, 2002).

Schumpeter referred to a process – one of acting in an entrepreneurial way – not to a person.

The process is also emphasised in definitions of an entrepreneur as a person who perceives an
opportunity and creates an organisation through which to pursue it (Bygrave and Hofer, 1991).
Entrepreneurship is about entrepreneurial individuals interacting with their environment, thus
discovering, evaluating and exploiting opportunities (Shook et al., 2003).

Definitions of Entrepreneur :

Different authors have given different definitions of entrepreneur. Some of the main definitions
are given below :

(1) American Heritage Dictionary, defines entrepreneur as a person who organises, operates and
assumes the risk for a business venture.”

(2) Richard Cantillon, described the entrepreneur an agent buying and selling goods at uncertain
prices.”
(3) J.B. Say, defined an entrepreneur as the economic agent who unites all means of production,
the labour, the capital or land and earns profit. He has compared entrepreneur with a farmer.

Who is an Intrapreneur

An entrepreneur starts an organisation and in due course of time hundreds of talented engineers,
technocrats, financial and other areas experts work. These employees get involved in
organisation work and they too will have entrepreneurial skills and talent to display in third man
of work. If they are allowed to work with entrepreneurial skill (rather than routine way) then
their innovative efforts will help them to grow better with rewards. This process is called
intrepreneurship and the word “Intra” means within the organisation.

Definition of Intrepreneurship : “Developing a spirit of entrepreneurship within the existing

organisation is called intrapreneurship”. Intrapreneurship is necessitated due to pressure of
competition of business, socio-cultural necessities. Marketing competition calls for extra market
share, business leadership, price supporting quality-reliability and brand image. For achieving
these creativity and innovation are key factors and to develop these factors intrapreneurship
plays a vital role.

1.2 Teaching entrepreneurship and entrepreneurial skills and behaviour

The domain of entrepreneurship education

The growing number of courses and seminars offered by practitioners and universities, as well
as the variety of academic literature and articles that have appeared, are indicative of the current
interest in entrepreneurship and related education (Vesper and Gartner, 1997; Klofsten, 2000;
Solomon et al., 2002; Katz, 2003; Henry et al., 2003).

However, the extent to which entrepreneurship is teachable, or even worth teaching, is a matter
of debate among scholars (Fiet, 2000a; Hynes, 1996).

The teaching involves both arts (e.g. creative and innovative thinking) and sciences (e.g.
business and management competencies) (Rae, 2004; Jack and Anderson, 1999).
This suggests the need for a shift from teaching to learning in an environment as close to real life
as possible. Concrete experience gained through the active participation of students should be
part of the curriculum (Solomon and Fernald, 1991; Gorman et al., 1997).

Given agreement about and understanding of the essence of entrepreneurship, and the belief
that it is possible, at least to some extent, to teach students to become entrepreneurial, the next
step is to recognise the opportunities that open up and the aims that might be achieved
through relevant education (Gorman et al., 1997). The following objectives have been
identified:

 Learn to understand entrepreneurship; .

 Learn to become entrepreneurial; and .
 Learn to become an entrepreneur.

In the long term, this kind of education may influence the process of becoming an entrepreneur,
but this has not been an explicitly stated objective in our courses. Shane and Venkataraman
(2000) emphasise the role of opportunity – discovering, evaluating and exploiting it – at the core
of entrepreneurship.

Subsequently Shook et al. (2003) focused on the individual’s role in the entrepreneurial
process.

According to Gibb (1993), on the other hand, defines entrepreneurship as a set of

behaviours, skills and attributes that someone may exhibit.

The aim of our entrepreneurship education is to integrate the skills and attributes of an
entrepreneurial individual with the entrepreneurial process and related behaviour (Figure 1).
Our entrepreneurial-directed approach

The special challenge of entrepreneurship education is in the facilitation of learning to support

the entrepreneurial process. A typical university setting is unlikely to include many
entrepreneurial elements.

Traditional teaching methods, lectures, literature reviews, examinations and so on do not activate
entrepreneurship (see Gibb, 2002; Sogunro, 2004). Education is often focused on supporting the
development of knowledge and the intellect, whereas entrepreneurship education concentrates on
the human being as a whole (including his or her feelings, values and interests), even in terms of
taking irrational decisions and as part of society at large (Kyro,2003b). The budding entrepreneur
needs not only knowledge (science), but also new ways of thinking, new kinds of skills and new
modes of behaviour (arts).

Traditional teaching methods have to be complemented with entrepreneurial approaches (Gibb,

1993, 1996, 2002), which essentially include learning by doing and providing opportunities for
students to actively participate in as well as control and mould the learning situation (Gorman et
al., 1997; Fiet, 2000a).

The traditional lecture format with all its predictability may not be the most effective method as
it ignores the essence of the phenomenon, i.e. the entrepreneurial process. Traditional approaches
to teaching may, in fact, inhibit the development of the requisite entrepreneurial attitudes and
skills (Kirby, 2002).

The teaching of entrepreneurship in the university context is based on theoretical and practical
knowledge. Teaching of entrepreneurship as a process that includes different phases as shown in
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1. Risk-bearing capacity: The entrepreneur starts facing uncertainties and several types of risk
right from inception of business. The business environment is dynamic and ever changing. The
entrepreneur risks his capital when he invests in the business. So, the entrepreneur have the
capacity to bear risks and face uncertainties as it is unknown what is hidden in the pistil of the
future.

2. “Entrepreneurship Trait: Entrepreneurship is not a trait. The success of the enterprise

depends on the decision-making and other capabilities of the entrepreneur. so, a person develop
these capability in himself. It is often said that entrepreneurs are not born. They can be made by
training and development.

3. Creative Activity: Entrepreneurship is basically a creative activity. Entrepreneur searches for

new opportunities, new ideas, new techniques etc., think creatively and execute new ideas in his
enterprise. It is entrepreneurship which encourages creativity and changes in the society.

4. Result of Changes: Entrepreneurship is the result of social, political, scientific and technical
changes occurring in the environment. It is not merely an economic event or activity. The
changes in social values, traditions, education, science, techniques, population and government
policies are forcing people in the society to change their approaches, thinking and opinion, which
is again inspiring people to adopt entrepreneurship.

5. Creation of a Resource: Entrepreneurship transforms materials into ‘resource’. Therefore, the

entrepreneurship is the process of developing ‘utility’, ‘economic value’ and ‘capacity of wealth
creation’.

6. Essential in all Businesses and Economies: Entrepreneurship is essential in all businesses

and all economies, whether big or small, developed or developing, since, the basic functions of
the entrepreneurship, innovation risk bearing, adaptation to changes etc are there. It should be
borne in mind that entrepreneurship exists in every society and economy. Without
entrepreneurship there will be no growth of the economy.

7. Essential in Every Activity: Entrepreneur is needed in every area of life. A person can
succeed in every field by adventurous nature and entrepreneurial behaviour. Education, research,
8 medical, politics, military or games, all needs bearing risks, innovation or leadership to succeed
in Drucker has said, “Entrepreneurship is by no means confined solely to economic institutions.”

8. Low Risk: Entrepreneurship carries a greater level of risk. But technogical and socio
economic environment have made entrepreneurship less risky than ever. Entrepreneurship does
not carry a very high level of risk. Infact, if the enterprise is well managed and well planned,
then the entrepreneurship becomes a low risk game.

9. Ability to Innovate: Entrepreneurship is an innovative activity. It enables application of

creative ideas. The entrepreneur adopts new ideas, new techniques, new production system, new
management concepts, new markets, new products and new procedures for more satisfaction and
better services to the customers and more profits to the enterprise.

10. Knowledge-based: Peter F. Drucker says, “Entrepreneurship is neither a service nor an art.
it is a practice based on knowledge.” The entrepreneur achieves a high place by his knowledge
and understanding of thing. The quality of enterprise comes in a person after long experience and
practice.

11. Result-Oriented Behaviour : Enterprise can’t get success unless the results are favorable.
The entrepreneurship stresses on results and not the fate. Entrepreneurs believes in getting good
results through their efforts and hard work They achieve their goals by their ability of making
sound decisions, solid planning and goals oriented behaviour.

12. Environment-Oriented Activity: Entrepreneurship is an external and open environment-

linked system. Entrepreneurs produce and take risks keeping social, economic, political and
material factors of environment in view. Joseph Schumpeter said in this context, “It is a creative
response to every external situation.”

13. Process of Identify Transformation: Entrepreneurship is the process of identity formation

and role transformation. A person can’t be an entrepreneur by merely adopting innovation,
unless he involves in that activity and his identity is established as an innovator. In other words,
the activity should be recurring or continuous in nature. Doing one transaction does not come
under the purview of entrepreneurship.

14. Business-Oriented Tendency: Entrepreneurs by their nature are business oriented and so is
entrepreneurship. Entrepreneurship encourages and inspires the people to be an entrepreneur and
establish a new business enterprise. Entrepreneurship motivates people to search for new
business opportunity, establish new business enterprises and makes profit by taking risk and
putting his monetary and non-monetary assets on stake. This tendency makes the establishment
of new business and industries possible in the country.

15. Professional Activity: Entrepreneurship is emerging as a profession in developed countries

like medical, law and engineering. Entrepreneurial skills are being developed by training and
education like management skills. The governments of developing countries have started
programmers and schemes to encourage entrepreneurial aptitude in people. Many entrepreneurial
development institutions and centers are being established in these countries.

16. Management is the basis of Entrepreneurship: Management is the basis of all the
entrepreneurial decisions, Entrepreneur brings improvement and changes in the enterprise
through management. Ducker writes, “Entrepreneur manager has become an essential part of the
functions of the management today.”

17. Based on Principles, not on Intuition: Entrepreneurship is based on certain principles,

concepts and particular fields of knowledge. It is not intuition based on knowledge and
principles, since this is the age of ‘scientific management’. An entrepreneur needs to have the
knowledge of subject like economics, statistics, law sociology and psychology etc. in order to
achieve success.

18. Entrepreneurial Skills: It is often stressed that entrepreneurship naturally exists in every
organisation, but this is not correct. Every person and organisation has to put efforts very
carefully. They have to bring entrepreneurial skills in themselves to get success. Drucker has
opined, “Entrepreneurs assumes business as a duty. They are disciplined towards their enterprise
and put all their efforts for its success.

Entrepreneurship Skills Required to Overcome Barriers to Growth

Entrepreneurship Skills Personal Maturity Skills –

•Inner Discipline •Ability to Self-awareness, accountability,

Take Risk •Innovative emotional skills, and creative skills

•Change-Orientated
•Persistence
 Technical Skills •Operations Management Skills •Planning •Decision-
Specific to Industry Making •Motivating •Marketing •Finance
•Communications •Design •Selling
•Research and Development
•Environmental Observation

Kutzhanova et al (2009) examined an Entrepreneurial Development System located in the

Appalachian region of USA and identified four main dimensions of skill:
• Technical Skills - which are those skills necessary to produce the business’s product or
service;
• Managerial Skills, which are essential to the day-to-day management and administration of the
company;
• Entrepreneurial Skills - which involve recognizing economic opportunities and acting
effectively on them;
• Personal Maturity Skills - which include self-awareness, accountability, emotional skills, and
creative skills?
In examining the key skills required of entrepreneurs, O’Hara (2011) identified a number of key
elements which he believed featured prominently in entrepreneurship:
• The ability to identify and exploit a business opportunity;
• The human creative effort of developing a business or building something of value;
• A willingness to undertake risk;
• Competence to organise the necessary resources to respond to the opportunity.

Entrepreneurial Structures
When looking at the subject of organizational structures entrepreneurial structures are probably
the simplest and often how many organisations start.

What is an Entrepreneurial structure?

 This type of structure is built around the owner manager and is typical of small
companies in the early stages of their development.
 The entrepreneur often has specialist knowledge of the product or service
 Example owner/managed business

Advantages & disadvantages of entrepreneurial structures

Advantages

o There are only one person taking decisions - this should lead to decisions being made
quickly.
o As soon as an element of the market alters, the entrepreneur should recognise it and act
quickly.
o A lack of a chain of command and the small size of the organisation should mean that the
entrepreneur has control over the workforce and all decisions within the organisation
leading to better goal congruence.

Disadvantages

 This type of structure is usually suited to small companies where due to the size; there is
no career path for the employees.
 If the organisation grows, one person will not be able to cope with the increased volume
of decisions etc.
1.3 Need and contribution of entrepreneurship in India 
Entrepreneurship types,

Need for entrepreneurs in an economy

a. Entrepreneurs promote capital formation by mobilising the idle saving of the people.

b. They create immediate and large-scale employment by establishing small- scale enterprises.
Thus, they reduce the unemployment problem in the country, i.e., the root cause of all socio-
economic problems

c. They promote balanced regional development by establishing small-scale enterprises in

rural, remote and less developed regions.

d. They help reduce the concentration of economic power.

e. They promote the equitable redistribution of wealth, income and even political power in
the interest of the country.

f. They encourage effective resource mobilization of capital and skill which might otherwise
remain unutilized and idle.

g. They, by establishing industries, induce backward and forward linkages which stimulate
the process of economic development in the country.

h. They also promote country’s export business, i.e. an important ingredient to economic
development.

Mr. Rahul Bajaj, Chairman & Managing Director of Bajaj Auto extols the need for and
significance of entrepreneurs in India in these words: “If we could have an entrepreneur in
every family, India’s economy would sky rocket. We would then be able to take our rightful
place as an economic super power in the community of nations. Entrepreneurs create jobs.
They create wealth. They create products and services.”

i. Entrepreneurs Contribute to the National Profit

Entrepreneurial projects help create fresh wealth. Established companies can remain restricted to
existing markets and can, in terms of profits, reach a limit. Improved goods, services, or
technology from businesses enable the growth of new markets and the creation of new wealth.
Also, increased jobs and higher incomes, in the form of higher tax revenue and expense, lead to
better national income.

j. Social change by entrepreneurs

This importance of entrepreneurship breaks from tradition and reduces dependence on outdated
systems by providing unique products and services. This will lead to an improved quality of life,
improved behaviour, and greater independence of the economy. Ex: Smartphones and apps
have changed working and playing around the world for a more modern case. As more than 5
billion people have mobile devices around the world. Smartphones are not limited to rich
countries or people. Technological entrepreneurship will have an extreme, long-lasting effect on
the planet as the development of the smartphone industry continues.

k. Creation of societies
Entrepreneurs often help grow other like-minded people’s projects. They also participate to
begin something new in the city and provide local organizations that help needy people.

Types of Entrepreneurs:

Based on their working relationship with the business environment they are functioning in,
various types of entrepreneurs can be found. The chief categories are these four types of
entrepreneurs, i.e.

 Innovative entrepreneurs,

 Imitating Entrepreneurs,

 Fabian Entrepreneurs, and

 Drone Entrepreneurs.

 Innovative Entrepreneurs: This type of an entrepreneur is more interested in

introducing some new ideas into the market, organization or in the nation. They are
drawn towards innovations and invest a lot of time and wealth in doing research and
development.
 Imitating Entrepreneurs: These are often disparagingly referred to as copy cats. They
observe an existing successful system and replicate it in a manner where all the
deficiencies of the original business model are addressed and all its efficiencies are
retained. These entrepreneurs help to improve an existing product or production process
and can offer suggestions to enhance the use of better technology.
 Fabian Entrepreneurs: These are entrepreneurs that are very careful in their approaches
and cautious in adopting any changes. They are not prone to sudden decisions and try to
shy away from any innovations or change that doesn‘t fit their narrative.
 Drone Entrepreneurs: These are entrepreneurs who do not like a change. They are
considered as old school”. They want to do business in their own traditional or orthodox
methods of production and systems. Such people attach pride and tradition to even
outdated methods of doing business.

Other type of classification of entrepreneur

Types of Entrepreneurs : (other text books)

1. The Trader : The early entrepreneurs were traders, buying a commodity where it was
available in plenty and reaching it to consumers in places where it was not available. This often
took the trader to faroff lands across the seas, exposing him to a variety of skills and also
creating in him a number of skills he did not possess before.

2. The Industrialist : These are entrepreneurs who started producing themselves the products
they dealt in. For example, when imports became difficult, many traders set up manufacturing
units to produce the items they used to deal in. They used their wellestablished distribution
network to sell these products.
3. Agricultural Entrepreneurs : In a predominantly agricultural country like ours, we would
expect a lot of things to happen on the agricultural front. In fact a lot of innovations have
happened in the rural sector. Harnessing the new technology to increase agricultural production
has helped us see the Green Revolution. Such activities include dairy products, poultry farming,
making of domestic items like papads and pickles, gathering and selling honey, handicrafts and
handlooms.

4. Entrepreneurs Providing Services : We are living in an age where a number of services are
being provided literally to pamper us and to make our lives comfortable. The boy who brings the
morning newspaper or the milk from the distributor each morning in the sprawing housing
complex is an entrepreneur. He provides a service a few more winks of sleep for you while he
earns to make his keep.

5. The Technocrat Entrepreneur : It is not unusual to find technically trained people starting
manufacturing nits of their own. This is true of many IIT Graduates. Very often frustration on the
existing job and sometimes the golden handshake helps such technocratfs to breakaway and start
something afresh.

6. The Professional Entrepreneur : The Lawyer, the Accountant, the Engineer, the Doctor or
the Management Consultant who sets up shop to use his knowledge and skills to help others for a
fee is an entrepreneur.

7. The Nontechnocrat Entrepreneur : It is not necessary that an entrepreneur should be either a

professional or a technocrat. Any person with a bright idea, who is willing to work hard and face
moderate risks in the process of translating the idea into a reality could he an entrepreneur.

8. The Classical Entrepreneur : He is an old time, stereotype, generally a trader. He is skillful

in perceiving opportunities and works hard to grab those opportunities, making a profit in the
process for himself.

9. The Modern Entrepreneur : He has a modern outlook. He prefers hitech ventures, uses
modern marketing techniques and wishes to do something different from the rest, if the typical
Udupi Restaurant owner can be called the classical entrepreneur, his counterpart who diversifies
into Punjabi and Chinese Dishes, opens fast food counters or sets up branded chain restaurants is
the modern entrepreneur :

10. The First Generation Entrepreneur : It was generally believed that the entrepreneurial
spirit is acquired by birth in a business family or by belonging to a particular community.
Surprisingly, this belief no longer holds true. Many of today’s new breed of entrepreneurs do not
have a business background they are the first generation entrepreneurs.

11. Spontaneous Entrepreneurs : Empirical studies have shown that there are several
entrepreneurs who have gone into entrepreneurship spontaneously. Such entrepreneurs are
motivated immediately by a desire for achievement and self-punishment.

12. Induced Entrepreneurs : Quite a few of the entrepreneurs who were met and interrogated
explained that they got into entrepreneurship as a change or a breakaway from what they were
then doing. An accountant in a steel rolling mill started a ventures as a scrap merchant and
eventually set up a steel rolling mill himself.

13. Motivated Entrepreneurs : A large number of entrepreneurs have come up in recent times
thanks to the efforts put in by the national Institute for Entrepreneurship and Small Business
Development, SIET of Hyderabad. The Entrepreneurship Development Institute of Ahmedabad,
The Small Industries Services Institutes located in different parts of the country and
organisations like the MSSIDC, the National Productivity Council and the All India
Management Association.

14. The Starters : They are on the threshold of an entrepreneurial career. They have been
caught by the entrepreneurial bug and they are busy trying to bring their ideas to fruition. They
keep knocking at the carious doors financial institutions, government agencies etc. Despite the
problems facing them, they do not get frustrated.

15. The Problem Solvers : These are entrepreneurs who have started the business enterprise and
have started managing them. They have shed their purely entrepreneurial role and have taken on
the managerial mantle. Some are successful in getting over these problems and are able to solve
the problems facing the business in a practical, determined fashion.
16. The Successful Entrepreneur : He has overcome all the teething troubles of his business
ventures. He is master of his venture. His venture is fairly stable. He now looks for new pastures
for growth and diversification. He finds time to be associated with industry groups since he
wants recognition among his peers.

17. The Philanthrophist : He is the businessman who has tasted the fruits of business success.
He now wants to give to society something of what society gave him. His approach to
employees, suppliers and customers undergoes a radical change. May be on the verge of
retirement he emerges with a transformed soul.

1.4 Characteristics and traits of an entrepreneur, Stages of

entrepreneur.
CHARACTERISTICS OF AN ENTREPRENEUR

(1) An Individual or Group Individuals: Entrepreneur may be an individual or a group of

many individuals. Present age belongs to large business houses and mass level of production. To
commerce an enterprise on a very large basic, the capital or skills of a single individual is not
sufficient. A group of individuals gathers contributes their share of capital and resources and
starts a business enterprise.

(2) Need for achievement: It is the prime psychological drive that motivates the entrepreneur.
His desire to excel in his venture and to achieve desired goal. As a high achiever, he competes
with his rivals in the venture field as well as with his own previous performance.

(3) Independence or autonomy: Although there are various motivations for venturing out
alone, the most frequent reason for becoming an entrepreneur is the desire for independence or
autonomy—not wanting to work for anyone else. This desire to be one’s own loss ignites a fire
in the heart of an entrepreneur to accept all social, psychological, financial, and technological
risks and to work hard.

(4) Risk Bearer : Entrepreneur has the risk bearing capacity. In fact it is the characteristics of
risk bearing that distinguishes an entrepreneur from a manager. An entrepreneur is a manager but
he has the distinction of performing risk bearing function. A manager also does more or less the
same thing but he does not take risks.

(5) Innovation : An entrepreneur is basically an innovator by nature. He is always in search of

new ideas and new opportunities. He tries to outshine others by taking initiative in doing new
things i.e., exploring new products, new markets, new raw materials, new methods of production,
etc.

(6) Goal Oriented : Entrepreneur is goal oriented. He gets happiness by setting and striving for
goals one by one. Reaching one goal set by entrepreneur will lead to setting up of another goal.

(7) Decision-making : An entrepreneur is a rational decisionmaker. He has to take several

decisions to put his business idea into a reality. He recognises an idea i.e., a product, service or
market. He has several alternatives before him. He has to make a choice between them. This
involves decision-making as to choose the best alternative which may suit him and give
maximum profit. For example, he has to decide what is to be produced, how is to be produced,
where to be produced and when to be produced etc.

(8) Self-confidence: An entrepreneur has high degree of self-confidence in achieving his goals.
He has the capacity to face extraordinary and unforeseen circumstances as and when they arise.

(9) Initiative: An entrepreneur always takes initiative. He spend a large portion of their time in
thinking over finding out new or novel ways of doing things differently—finding out a new raw
material, a new product, a new method of production, a new style of advertisement, a new style
of packaging, and so forth.

(10) Motivator: An entrepreneur is a motivator. He motivates his workers by giving them

incentives, and creation of team work in order to get their whole-hearted cooperation. He is able
to influence people in the new business unit in the way that they will strive willingly and
enthusiastically toward the achievement of unit’s goals.

(11) Human Relations Ability: An entrepreneur possesses sound human relations ability to
deal with his employees, customers, suppliers, creditors etc.
(12) Economic Planning: Planning is an activity of a highly ubiquitous character. Every action
of an entrepreneur is well planned as it evident from the fact where there are production plans,
sales plans, financial plans, purchase plans, research and development plans and so on. Without
proper business planning the affairs of any business enterprise are likely to be haphazard.

Stages of entrepreneur

Stage 1: The Birth of Your Start-Up: Finding Business Idea:

This is the beginning of the entrepreneurship cycle of an entrepreneur. It is filled with mixed
emotions of excitement, thrill and fear all at the same time. It is time for seeking independence in
the business world and ready to create the name in the market.

Stage 2: Surviving and Growing Your Business: (Building a Team) This is the stage where
the firm have successfully launched the new company, and now are looking for strategies to
survive in the industry. Some entrepreneurs look for investors who could fund their start-ups
while some others chose to stay independent. Both have their pros and cons. While choosing to
stay independent will give more power and control over the start-up, it will put in a tricky
financial situation. The main aim of this stage is survival.

Stage 3: Creating a Business Plan

This step is crucial for any entrepreneur. A business plan will help be map out the goals and
objectives of the new business, as well as the strategies used to achieve them. Without a solid
business plan, it will be very difficult to make the business successful

Stage 4: Raising Capital

To get your business off the ground, the firm will need to raise money. This can be done through
investment from friends, family, or venture capitalists.

Stage 5: Launching a Business

Once the team in place and a business plan created, it’s time to launch the business. This is when
all of the hard work will finally complete.

Stage 6: Growing the business

After the business is launched, it’s important to continue growing it. This can be done by
expanding the product line, entering new markets, and acquiring other businesses

Stage 7: Exiting the business

There are times when no matter how hard we work to make a start-up work, it just fails.
Sometimes the firm are in so deep into the trouble that has been created due to bankruptcy or
restrained cash flow, that there is no way to survive. At times like these, the best option is to shut
the business down because it is leading nowhere. Take it down before the firm comes down
completely. Eventually, it can be taken to public. This is the final step of entrepreneurship
development, and it can be a very lucrative one if done correctly

1.5 Innovation in entrepreneurship means of developing innovation,

innovation process.

What is innovation?

Innovation is the process and outcome of creating something new, which is also of value.
Innovation involves the whole process from opportunity identification, ideation or invention to
development, prototyping, production marketing and sales, while entrepreneurship only needs to
involve commercialization (Schumpeter).

Today it is said to involve the capacity to quickly adapt by adopting new innovations (products,
processes, strategies, organization, etc). Also, traditionally the focus has been on new products or
processes, but recently new business models have come into focus, i.e. the way a firm delivers
value and secures profits.

Entrepreneur and Innovation:

Innovation is the process of doing new things. Creativity is the prerequisite of innovation. It is
the innovation which transfers creative ideas into useful applications. Innovations may be in the
areas of new product, new methods of production, opening of new markets, adoption of new
technology; creation of new ideas, new source of raw-materials and creation of new type of
industry and enterprises. Innovation is the process of putting new ideas into action.

Innovation includes the following:

(i) Adoption of new methods and new technology in the field of production.

(ii) Presenting new product in the market,

(iii) To find out new source of raw-material which has not yet been exploited?

(iv) Doing things that are not generally done in the ordinary course of business.

(v) New combination of new sources of production,

(vi) Creation of new type of industry and enterprises,

(vii) Creation and develop new ideas,

(viii) Integrating several usage into our product,

(ix) Opening of new markets,

(x) Optimum utilization of resources.

Relationship between Entrepreneur and Innovation

There is close relationship between entrepreneur and innovation. Entrepreneurship essentially

means innovation. Without innovation entrepreneurship is worthless and similarly without
entrepreneurship innovation has no value.

According to Peter F. Drucker, “An entrepreneur is one who always search for change, responds
to it and exploits it as an opportunity. Entrepreneur innvoate and innovation is a specific
instrument of entrepreneurship. It creates resource because there is no such thing as a resource
until man (entrepreneur) finds a use for something and endows it with economic value.
Peter F. Drucker further defines entrepreneurship as increasing value and satisfaction obtained
from resources. Successful entrepreneurs create new values or increase the values of what
already exists. They convert a material into a resource or combine existing resources into a new
or more productive configuration.

According to Joseph A. Schumpeter, “Entrepreneurship is an innovative function. Schumpeter’s

concept of entrepreneurship is totally based on innovation. He further added that in a developed
26 economy entrepreneur is that person who produces something new in the economy.
Entrepreneurship is doing things that are generally not done in the ordinary course of business.

An entrepreneur, through innovation

(i) gives birth to new ideas,

(ii) New manufacturing process

(iii) New product,

(iv) Locate new source of raw material,

(v) Develop new combination of means production,

(vi) Open new market, which has not yet been exploited etc.

According to Howard W. Johnson, “Entrepreneurship is a composition of three basic elements :

(i) Invention,

(ii) Innovation, and

(iii) Adaptation.

Among these three, innovation plays a dominating role. The existence of entrepreneur is on
account of innovation. An entrepreneur does things in a new and better way by means of
innovation. A traditional businessman working in a routine manner is not entrepreneurship.
Entrepreneurship is based on purposeful and systematic innovation.
Systematic innovation consists in the purposeful and organised search and in the systematic
analysis of the opportunities and such changes might offer for social and economic innovation.
From the above discussions, it is evident that there is a close relationship between entrepreneur
and innovation.

It is not possible to separate them from one-another as one is neither complete nor useful without
the other.

Psychological Theories of Entrepreneurship is a psychological

process.

According to psychological concept, psychological factors are the primary source of

entrepreneurship development. The activities of the entrepreneur are the result of his mental
background. The personality of the entrepreneur affects his behaviour, decisions, plans, thinking
and activities. The personality of the entrepreneur plays a dominating role in the development of
his activities. Psychological part of personality of an entrepreneur motivates, controls and directs
his perception, thinking, outlook, style, nature, learning, attitude, ethics, belief, opinion,
expectation, action, disposition and internal needs etc.

The Two main psychological theories are as follows:

(1) Joseph A. Schumpeter’s Theory:( Shaum-peter)

Schumpeter introduced a concept of innovation as key factor in entrepreneurship in addition to

assuming risks and organising factor of production. Schumpeter defines entrepreneurship as “a
creative activity”.

An innovator who brings new products or services into economy is given the status of an
entrepreneur. He regards innovation as a tool of entrepreneur, The entrepreneur is viewed
as the ‘engine of growth’, He sees the opportunity for introducing new products, new
markets, new sources of supply, new forms of industrial organization or for the
development of newly discovered resources.

 The concept of innovation and its corollary development embraces five functions:
  The introduction of a new product with which consumers are not yet familiar or
introduction of a new quality of an existing product,
 The introduction of new method of production that is not yet tested by experience in the
branch of manufacture concerned, which need by no means be founded upon a discovery
scientifically new and can also exist in a new way of handling a commodity
commercially,
 The opening of new market that is a market on to which the particular branch of
manufacturer of the country in question has not previously entered, whether or not this
market has existed before, Conquest of a new source of supply of raw material and
 The carrying out of the new organisation of any industry

Other Theories of Entrepreneurship:

The various theories of entrepreneurship may be discussed as follows:

1. Trait Theory of Entrepreneurship: This theory holds that entrepreneurship developed

because the individuals called entrepreneur possessed certain specific traits or
characteristics or competencies which made them capable of generating new ideas and
creating a new venture. The major traits responsible for the emergence of entrepreneurship are
said to be: creative and innovative skills, propensity to take risks, ability of building on
organisation and managing it effectively, perseverance, and foreseeability. Different studies have
emphasised different traits.

2. Economic Theory: According to this theory, entrepreneurship and economic growth will
take in those situations when particular economic conditions and opportunities are most
favourable for them. G.E. Pataneck and J.R. Harris are the main advocates of this theory.
According to them, economic incentives are the main drive for entrepreneurial activities.
Entrepreneurs emerge due to incentives and economic gain. When an entrepreneur realises that
he can make gain by purchasing or producing goods at a particular time and selling them at
higher prices at a later stage, he will tend to act. When an entrepreneur recognises that the market
for a product or service is out equilibrium, he may purchase or produce them at the prevailing
price and sell to those who are prepared to buy at the highest price.
EX: Agriculture processing, commercial crops etc

3. Sociological Theory: According to sociologists, the emergence of entrepreneurship is under

specific social culture. According to sociological concept, social sanctions, cultural values,
traditions, group dynamics and role expectations are responsible for the emerge of
entrepreneurship. For example, according to Thomas Cochran’s Theory, “Cultural values role
expectations, ambitious and social sanctions occupy important place in the entrepreneurship
development.” In India, Marwaries and Parsees are considered to be the dominant social classes
as source of entrepreneurship.

4. Phychological Theory: According to McClelland the characteristics of entrepreneur has two

features – first doing things in a new and better way and second decision making under
uncertainty. McClelland emphasizes achievement orientation as most important factor for
entrepreneurs. Individuals with high achievement orientation are not influenced by
considerations of money or any other external incentives. The individuals with high achievement
orientation take calculated risks and can make decisions where there are incomplete information
or have tolerances for ambiguity. Psychologists call this behaviour as Type-A behaviour. In
this theory, psychological factors are the primary source of entrepreneurship development.
Entrepreneurship is most likely to emerge when a society has sufficient supply of individuals
possessing particular psychological characteristics, such as high need for achievement, will to
conquer etc. Schumpeter believed that entrepreneurs are primarily motivated by an atavistic will
to power, will to found a private kingdom or will to conquer.

5. Integrated Theory: Integrated theory of development of entrepreneurship is based on several

economic, social, cultural, political and psychological factors.

The main contributors of integrated theories are: According to TV. Rao, entrepreneurial
disposition plays an important role in the development of entrepreneurship. The fundamental of
entrepreneurship is entrepreneurial disposition. If entrepreneurial disposition is withdrawn from
the entrepreneur then his whole existence will come to an end. It is the entrepreneurial
disposition which motivates an extrepreneur to take risk, to move forward and establish new
enterprises. According to Mr. Rao, the following factors are included in entrepreneurial
disposition:

(a) Dynamic Incentive,

(b) Long-term Devotion,

(c) Individual, Social and Physical Resources,

(d) Social and Political System.

6. Innovative Theory: Innovate theory of entrepreneur-ship was advocated by Joseph

Schumpeter. According to him entrepreneurship is essentially a creative activity. It consists in
doing such things which are not generally done in the ordinary course of business. An
entrepreneur is one who innovates, i.e., carries out new combinations. He takes the economy to
new height of development. They foresee the potentially profitable opportunity and try to exploit
it.

Innovations involve problem solving and entrepreneur is a problem solver. Innovation may
occur in the following forms :

(i) Introduction of a new product with which consumers are not familiar or introduction of a new
quality of an existing product.

(ii) Introduction of a new method of production.

(iii) Opening of a new market.

(iv) Discovery of a new source of raw-materials.

(v) Carrying out a new organisation of any industry, like the creation of a monopoly position or
the breaking up of a monopoly position.

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