Unit 1( e.d)

Entrepreneurship Development-
Emergence of entrepreneurial class- we know very well
that an entrepreneur self-motivated and talented who
are engaged in the development of new enterprises. In
19th
century an entrepreneurs included those person
who bore (whole) risk for future uncertainty of profits
in new ventures.
Differences between the entrepreneurs and capital
suppliers is that, an entrepreneur earned profits from
taking risk of forming new venture called
entrepreneurs, and capital suppliers those people who
earned profits by supplying capital. During 20th
century, those people who not only take risk of
creating a new venture but also innovate new useful
products, technology, markets,etc .

Causes of slow growth of entrepreneurship-
1)In India traditional attitude.
2)Discourages full utilisation of human capital.
3)Individualistic spirit is absent.
4)Lack of infrastructural facilities.
Some of the major problems of small entrepreneurs-
1) Shortage of raw-material and power- in India the
small scale industries suffered from accurate
shortage of basic raw materials. For exp-
handloom industries totally depend up on the
supply of yarn which is generally in short supply,
and also lack of reliability in the quality of raw
material in the market.

And shortage of power is the another factors. We
know very well that all the small firms can not
afford their own generator set to continue
production during the period of non- supply of
power.
2) In adequate financial resources- each and every
business needs sufficient funds to finance the
purchase of plant & machinery, building,
materials etc.and also day to day expenses
including- wages, rent, power, water charges,
administrative & selling expenses. some times
small firms can not able to raise sufficient money
for all expenses. In this condition shortage of
funds must create shut-down the business.

The step taken by the central/state govt. to
provide short-term and long term credit to
small –scale sectors have not proved to be
adequate.
3) Lack of technology- most of small firms are
using old techniques of production. Reason
behind that they do not afford new techniques.
Which are necessary for production, they are
not in position to use latest technology for
production. so the cost of production of small
units is higher than large scale units. Profit
margin of small units is usually low due to
they can not compete with large scale units.

4) Lack of trained personnel- small industrial
units get the personnel rejected by the large
scale units. There is a lack of entrepreneurs
with the knowledge and vision who can see
development. Need the personnel with
adequate managerial skills and qualities, if
such type personnel available then they look
for better opportunities in the large scale
industries.
5) Difficulties in marketing- in this case small
firm can face different types of difficulties
like- their cost of production is higher so they
can not have their marketing dept.

Some times small firms manufacture goods
which are not uniform quality. They are not
follow the standard because they are not
producing quality products.
6) Imperfect management- in most of the small
enterprises, ownership, and mgt. function are
not separated. It is generally happens that the
person who finance the business but does not
have skills- planning, organising, and
controlling of various operations. no proper
division of work in small units. Managing is
no more a simple job, its requires a lot of
knowledge and training which are not happen
in case of small business.

Factors favouring entrepreneurship-
1)Independent way of life- the entrepreneur has
choice/desire to create more money in business
than in fixed salary job. He can earn/create good
status/livelihood independently instead of
working any where as a employee either govt. or
private enterprise. He want to own boss and does
not want to carry out the orders of others.
2)Achievement orientation- a person should
ambitious and hard-working and he
observe/analysis that his skills/quality/talents can
not be fully utilised in his present job. The higher
achiever go for independent business.

3) Implementation of ideas- a person
create/implement his ideas in product and
become an entrepreneur. He may find out that
existing product/services is in short-supply and
he can supply better products or services than
those offered by the existing business. Start a
business unit of his own.
4) Insecurity of job- a person might be an
entrepreneur because he does not feel secure in
his present job or he may believe that his
employer is likely to wind up his business.

5) Family business- if a graduate or diploma
holder has the background of a business
family, he may think of setting up his own
business after some training and experience.
6) Risk-taking- one who is avoiding the risk, can
never become an entrepreneur. The major
characteristic of a businessman is willingness
to take risk. The nature of risk would be vary
business to business. And it should be
calculated in advance. The risk taking spirit
influences him to become an entrepreneur.

7) Govt. economic policy- govt. policies also
influences a person to start a new
entrepreneurs if he understand that the
infrastructural facilities/ financial assistance
provided by the state/ central govt. are than
well paid white collar jobs. it is influences
availability of finance, land, accessibility of
customers, suppliers, transport and economic
and political stability of a country are the
factors that stimulate entrepreneurship.

Entrepreneurship & social factors in India-
1)Family background- family background create
impact the entrepreneurial environment. Joint
family or nuclear family have their own
advantages and disadvantages. More sentimental
attachment in between joint family member as
compare to nuclear family but nuclear family has
more sentiment as compare to western countries.
The environment of the family also influences the
entrepreneurship. If the father is the professional
or businessman, then the son is more likely to
adopt the same occupation because of certain
inherent advantages by his father being in the
same line.

2)Social status- every human being aspires (hope,
dream) for a high social status and once he
achieves, then aspirations and desires for it start
getting multiplied. People protecting &
developing their status .people work hard to
maintain their status as it also contributes to their
entrepreneurial growth.
3) Caste & religion- it is a contributory factors of
entrepreneurial growth. Entrepreneurial traits do
not belong to specify caste rather than
entrepreneurs emerge from varied communities.
But sociologist still claim that caste and religions
do have an impact on the environment. Exp-
parsis of Maharashtra, jain of Rajasthan & Gujarat
involve in entrepreneurial activity.

4) Social mobility- it is depend up on the degree
of social & geographical mobility and the
nature of mobility channels with in a system.
McLennan's define that high degree of social
mobility would help in the emergence of
entrepreneurship. But Hagen’s belief that lack
of mobility possibilities promote
entrepreneurship. Brozen’s define that the
system should be neither be too flexible nor
too rigid. Social mobility does not work in the
system in isolation but these are many other
factors which influence the entrepreneurial
environment.

Entrepreneurship and economic factors in India-
1)Govt. policy towards entrepreneurs- the central
govt. has taken the different decision for the
growth and development of entrepreneurship-
a)Maintain proper distribution of economic
power between both player ( private & public
sectors).
b)To encourage entrepreneurship by different
promotional program me.
The govt. has taken the no. of measure to solve
the problems of small entrepreneurs in
industrial policies-

a) Reservation in production for the small scale
sector. The large scale could not produce these
items.
b) Giving concession to the small scale industries.
c) Purchase by govt. dept. produced product by
the small industries.
d) Proper supply of raw material.
e) Establish common testing facilities at the
centre's point for the group of small scale units.
f) Preference in land location and power
connection to small scale units & producing
power at concessional rates.

2)Institutional finance- financial assistance boosts
the self-confidence of young entrepreneurs, to
set up their units. The institutions and banks also
provide facilities in the form of finance,
consultancy, purchase of land, fixed assets, etc.
the govt. of various states have defined various
scheme which grant finance to the entrepreneurs
at the low rate of interest (SIDBI).
3)Availability of raw material- shortage of raw
material create bad impact on the small scale
units, shortage of raw material, inferior quality,
with raw material would come up. The more
favorable condition of raw materials are better, it
would be influence entrepreneurial emergence.

4)Availability of machinery- the entrepreneurs do
not have huge money to invest in machinery. In
this condition govt. assist to the entrepreneurs.
NSIC (the national small industries corporation
ltd.) supplies machinery & equipment to small
enterprise on hire basis. And also guide them in
procuring govt. orders for various items of stores.
5)Marketing facilities- if the entrepreneur does not
know about the marketing technique then he
could not survive in the market. In this condition
the govt. has taken steps to solve the marketing
problems of small entrepreneurs. The govt.
establish quality control centre for the small units
and govt. also introduced to all dept. to given
preference to small scale units while making
procurement of goods. And govt. also supporting
small units to export their products.

6)Industrial estates- it is defined as an area
developed systematically for setting industrial
units by the entrepreneurs in accordance with
the industrial policy of the govt.
The objective of industrial estates-
a)Promotion MSME size industrial units in
undeveloped and less developed areas.
b)Achievement of balanced regional
development .
c)Removal of concentration of industries in big
idea of industrial estate comes from u.k. and
some other developed countries.

It is known by different name like- industrial
parks, industrial tracts, organised industrial
districts.
In India developing industrial estate in different
place in country.

Theories of entrepreneurship-
1)Max Weber's theory- max Weber's defined that
entrepreneurial growth dependent upon ethical
value system of the society concerned. This
theory is also provides an analysis of religion and
its impact on entrepreneurial culture.
Its define rapid industrial growth depends upon
rational use of technology, acquition of money
and its rational use for productivity and
multiplication of money.
Max Weber, analysed religion and its impact on
entrepreneurial culture, according to him the
spirit of capitalism type/shapes attitude towards

Involved in it. This spirit of capitalism can be
generated only when mental attitude in the
society is favorable to acquisition of wealth in
India. But it has been critised by subsequent
researcher on the ground that it was based on
the following assumption which are invalid-
a)There is a single system of Hindu values.
b)The Indian community internalised those values
and translated them to day to day behavior.

2)McClelland’s psychological theory- according to
this theory entrepreneurship is most likely to
generate when a society has sufficient supply
of individuals possessing particular
psychological feature. This theory is develop
psychological roots of entrepreneurship, basic
human motive drive individual towards
entrepreneurial activities-
He identify the following types of needs-
a)Need for achievement- a drive to excel,
advance, growth.
b)Need for power- a drive to influence others
and situations.

c)Need for affiliation-a drive for friendly and close
interpersonal relationship.
Need for achievement- some people have a desire
to do something better or more efficiently than it
has done before. McClelland found that higher
achiever differentiate them self from others.
Higher achievers prefer the challenges of working
at a problem and accepting the personal
responsibilities for success or failure, rather than
leaving the outcome to chance.
Need for power-in this condition to be influential
and control others. Individual high in need for
power enjoy being “in charge” power motivated
people to wish to create an impact on their -

Organisation and are willing to take risk to do so.
Need for affiliation- it is derived as the desires to be
liked and and accepted by others. it is the need for
human association, individual with a high affiliation
motive strive for friendship, prefer cooperative
situation rather than competitive. A desire
relationship involving a high degree of mutual
understanding.
McClelland found that combination of moderate to
high need for power and a lower need for affiliation
enables people to be effective entrepreneurs. they
can use power to influence and control others
behavior and make crucial decision.
According to this theory entrepreneurs are actuated-

(activated) by a high need for achievement. They
like to take risk. They are highly motivated by
challenging and competitive work situations.
3)Theory of social behavior- Kunkel, presented a
behavioral model of entrepreneurship. This
model is concerned with the activities of
individuals and their relation to the previous and
present surrounding.
According to this theory an individual perform
various activities of which some are accepted by
the society, which other are not. And who are
accepting its create self-motivation to repeating-

It again. This pattern of social behavior is
entrepreneurial behavior.
The supply of entrepreneurship depend upon four
structure in the society-
a)Limitation structure- the society limits specific
activities and this limitation structure affects all
the members including entrepreneurs of a
society.
b)Demand structure- material rewards are
necessary to lay the foundation of future social
gains. Behavior of people can be made
entrepreneurial by manipulating certain selected
components of the demand structure.

c)Opportunity structure- it is define availability of
capital management and technological skills,
information concerning production methods,
labour and markets. This structure is required to
increase the probability of entrepreneurial
activity.
d) Labour structure- it is concerned with the supply
of competent and willing labour. The supply of
labour is governed by several factors such as
available alternative.
The major drawback of this theory is its assumes
ideal structure for supply of entrepreneurs.
Entrepreneurship is governed by the specific
combination of situational factors which are -

Generally not available in the environment.
4) X-Efficiency theory- many firms face the
problem of inefficient utilisation of various inputs
or resources. An entrepreneurs come forward
and identify inefficiencies in the utilisation of
various resources according to “Liebenstein, the
most significant feature of entrepreneurship is
GAP filling. It is job of the entrepreneurs to fill the
gap or make up deficiencies which always exist in
the knowledge about the production function,
utilisation of various resources.

The gap or deficiencies comes in production
because all the inputs in the production can not
be marketed. Exp-(motivation and leadership)
5)Hoselitz sociological theory- it is define that an
entrepreneurship is most likely to emerge under
a specific social culture. They feel that culture
values and role, expectation are responsible for
the emerge of entrepreneurship.
Hoselitz (1964) formulated his socio-cultural theory
on the assumption that certain persons are
creative power in any cultural or social group and
they develop different attitudes.

Entrepreneurship can be developed in a society in
which cultural norms.
Hoseletz define that the entrepreneurship can
develop in society when its culture permits a
variety of choice and where social process are
not rigid, encourage the development of
personalities interested in enterprise & the
suggested marginal groups promote
entrepreneurship and economic development.
6)Trait theory of entrepreneurship-according to
F.A. Walker an entrepreneur is one who is
participates more than average capacities in the
task of organising and coordinating factors of
production

An entrepreneur is a leader, and a captain of the
firm. For the success of an enterprises/ business/
profits. It is totally depend upon the
entrepreneur efficiency and superior talents. As
on entrepreneur, an individual must have certain
feature of personality like- creativity, self-
confidence, risk taking, imagination, etc. the
major feature responsible for the emergence of
entrepreneurs include- creative and innovative
skills, ability to building an organisation.
7)Schumpter’s innovation theory- Joseph
scumpter’s described “one who seeks to reform
the pattern of production by exploiting an
innovation. Possibilities for production of new -

Commodity or producing an old in a new way, by
opening up a new source of supply of material or
a new outlet of products.
According to schumpeter, an entrepreneur is one
who innovates, raises money, organise talent,
provides leadership, and sets the organisation.
Schumpters also define the difference between
inventors and innovator.
Inventor- discover new methods and raw material .
Innovator- utilises discovers in order to make new
combination.
This theory based on following assumption-
a) Existence of sufficient availability of capital.

b)Existence of developed banking system to avoid
scarcity of capital.
c) Existence of a high level developed technology.

Unit 1( e.d)

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Unit 1( e.d)