Paper 2.3: ENTREPRENEURSHIP DEVELOPMENTUNIT 1Entrepreneurship:  Meaning,  importance,  Types  of entrepreneurs  -Innovation: Concepts and types - Innovation as the essence of entrepreneurship -Sources of innovation.UNIT 2Entrepreneurial  Environment:  Significance  -  Internal and  external environment  forces  -  Psychological,  social, cultural,  political,  legal  and economic forces.UNIT 3Entrepreneurial Development: Importance - Phases in the development of entrepreneurship - Stimulation: Entrepreneurial awareness, exposure, motivation and attitude  -  Support:  Entrepreneurial  education,  training, assistance  -Sustenance Entrepreneurial commitment.UNIT 4Programmes  for  Developing  Entrepreneurship.: Entrepreneurship development programmes - Seed Capital assistance - Capital subsidy – Backward area development schemes - Sales tax concessions - Energy concessions -Recent trends.UNIT 5Entrepreneurial Culture - Entrepreneurial Society - Entrepreneurship.UNIT 6Special Programmes of assistance to Entrepreneurship - IRDP - PMRY -development needs of women,. rural and small entrepreneurs.

UNIT – I

ENTREPRENEURSHIP IntroductionAn entrepreneur is one of the important segments of economic growth. Basically, an entrepreneur is a person who is responsible for setting up a business or an enterprise. In fact, he is one who has the initiative, skill for innovation and looks for high achievements. He is a catalytic agent of change and works for the good of people. The entrepreneur is a critical factor is the socio-economic change. He is the key man who envisage new opportunities, new techniques, new lines of production, new products and coordinates all other activities. The term 'entrepreneur' is defined in a variety of ways. Yet no consensesh as been arrived at on the precise skills and abilities that make a person a successful entrepreneur.Definition1.According to Joseph, A. Schumpeter, entrepreneur is one who innovates, raises money, assembles inputs, chooses managers and sets the organization going with his ability to identify them and opportunities which others are notable to identify and is able to fulfill such economic opportunities. Innovation occurs through

i) Introduction of a new quality in a product ofii) new product

3.discovery of fresh demand and fresh sources of supply and iv) by change in the organisation and management.2. Adam smith described entrepreneur as a person who only provides capital without taking active

part in the leading role in enterprise.3. Frank young describes entrepreneur as a change agent.4. Marx regarded entrepreneur as a social Parasite. 5.

Peter F. Drucker defines an entrepreneur as one, who always searches for change, responds to it and exploits as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means 0 an end. In deed, what contributes knowledge in practice is largely defined by the ends, that is, by practice.

Concept of EntrepreneurshipEntrepreneurship refers to all those activities which are to be carried out by an entrepreneur to establish and run the business enterprises in accordance with the changing socio, political and economic environments. Entrepreneurship includes activities relating to the anticipation of the consumers likes and dislikes, feelings and behaviours , tastes and fashions and the introduction of business ventures to meet out all these expectations of the consumers. Entrepreneurship is considered as a new’ product’ that would enable businessmen to develop new form to business organization and new business activities catering to the changing needs of the society. The liberalization of cultural rigidities are mainly due to this new product ‘entrepreneurship’. Entrepreneurship is the ability

of entrepreneurs to asses the risks and establish businesses which are risky but at the same time suits perfectly to the changing scenarios of the economy .The two major factors determine the entrepreneurship development are:1. Risk taking ability of entrepreneurs and2. Power of achievement of entrepreneurs.The other factors are :1. The performance of speculative functions.2. Combination of new factors of production.3. Availing new sources of capital.4. Performing functions of employer, master, merchant and undertaker.5. Supply goods which are hitherto unknown to consumers.6. Find a new market which is hitherto unexploited.7. Seizing new opportunities for exploitation.8. Developing the under-developing nations and9. Decision making under uncertainty.

Essential Elements of Entrepreneurship Development

5Entrepreneur-shipDevelopment

1.Risk taking2.Innovations3.Science and Technology4.Consumers’ expectations

5.Coordination of production resources6.Provision of new capital7.Crisis management8.Decision making under uncertainty.

Entrepreneurship development is not only due to the qualified individuals but also due to the entrepreneurial role played by the Government and other agencies.  They strive for betterment and provide infrastructure including the technology that is unheard and unthought so far.

Prevailing Concepts:The three prevailing concepts of entrepreneurship are:1. Psychological Traits:Entrepreneurship development is due to the ability of the individuals' urge to achieve something in their life. This concept was developed by Mc Clelland .According to him individuals have psychological urge to achieve something new. Of course the degree of urge varies from one individual to the another. Those  who  have  high  degree of  urge  to  achieve  in  their  life  become entrepreneurs and all their activities enabling them to fulfill their urges are called entrepreneurship.

Mc Clelland's research results revealed that the entrepreneurship and its development are the results of a combination of three needs of individuals viz.,a. low need for achievement.b. high need for power andc. low need for affiliation.

2. Sociological Traits:

Entrepreneurship development is also due to the sociological traits of the individuals living in a particular place. Certain individuals would like to attain status in the society by means of setting up of a new business or industry. However they are allowed to act within the rigidities of the cultural norms and religious moves that are prevailing in the society.

3. Economic Factors:Entrepreneurship development is not only due to the psychological and sociological factors but also due to the existing economic activities of the state where the entrepreneurs live. Individuals learn from the existing economic activities as how best to equip themselves for meeting the future challenges. They collect adequate economic and technical information and decide as how best to introduce new business that suits to the expectations of the Government and its revised economic policies. Thus, the  concept  of  entrepreneurship  is  very  far  and  wide and entrepreneurship and its development is said to be in existence so long as the humankind are in existence and the spheres of entrepreneurship activities are getting multi pied every now and then due to the changes that have been taken place in the field of communication and technology.

Definition of Entrepreneurship

As days are changing, the entrepreneurship development activities are getting multiplied. From the day of industrial revolution to till date, we encountered with drastic changes in the economic activities. Thus, it is not an easy task to give a

comprehensive definition for the world 'entrepreneurship'. New technologies are employed in the manufacturing process and the existing natural resources are exploited at a faster rate. The existing screw driver technology has been replaced by the 'computer technology'. Even manpower is replaced by the robotic power. People gather information from all comers of the world  and  try to  equip  and  specialise in the fields of their own interest. Specialisation becomes the order of the day. Their outlook is global now. They try to settle their life in other planets and see how best to substitute the resources which are getting depleted every now and then in the earth. They gave up their pessimistic outlook and inculcate optimism not only in their mind but also in the minds of younger generation. All these factors compelled the economists to change the definition of entrepreneurship over a period of time.

1. Higgins:

Higgins defined entrepreneurship as the 'function of seeking investment and production  opportunity, organising an enterprise  to undertake  a new production process,  rising capital,  hiring  labour,  arranging the supply  of materials,  finding  site,  introducing  new techniques  and  commodities, discovering new sources of raw materials and selec1ing top managers of day today operations of the enterprise'. According  to  Higgins,  entrepreneurship  development  is due  to  the identification of two opportunities viz., 1. Production opportunities and

2. Investment opportunities.

Any attempt to aim for one without the other would not give the desired results. The aim of investment must be to introduce new. production process, new method of raising capital, utilise the existing labour in such a way thatwould ensure complete usage of the other factors of production includingtechnology and the choice of selection of business site is such that the existingliving conditions of the people should not be affected. He was of the opinion thatentrepreneurial activities are different from that of the managerial activities.Managerial activities can be acquired whereas entrepreneurial activities cannotbe acquired but should be developed.

Higgins has given an exhaustive definition and it covers the variousfunctions of entrepreneurs. Entrepreneurship according to him beginswith identifying investment opportunities.Entrepreneurship includes the sharing of entrepreneurial thoughts withthe other likeminded people who would come forward to manage theproposed business.John Kao and Howard Stevensons (editors) defined! entrepreneurshipas  'the  attempt to create  value through recognition of  businessopportunity,  the management  of  risk  taking  appropriate  to theopportunity and through the communicative and

management skills tomobilise human, financial and material resources necessary to bring aproject to fruition' .According to them, entrepreneurship development is due to theentrepreneurial  role  played  by  the  entrepreneurs.  The businessopportunities are subject to risks since they are untested with theexisting business environment.

2.  William Diamond:

1-'Entrepreneurship  involves  the  willingness  to  assume risks  inundertaking an economic activities particularly a new one...

2-It may involve an innovation but not necessarily so. It always involvesrisk taking and decision making, although neither risk nor decisionmaking may be of great significance'.

3-William Diamond found that the entrepreneurship development was due to entrepreneur's risk taking capacity. Risk is the first and the 'most important factor that distinguishes ordinary businessmen from entrepreneurs. The entrepreneur would like to assume more risks by means of undertaking hitherto new to the world business ventures. Though innovation is not their prime motive, undertaking any line of business which is hitherto unknown shall amount to 'innovation'.

From  the  above  definition,  it  is  found  that  the entrepreneurship development is due to certain inherent qualities of entrepreneurs viz.i. ability to foresee the changes.ii. perceive opportunities.iii. introduce innovations.iv. face the unexpected and unforeseen challenges andv. bear or share the risks with the investors.

3.  Arthur H. Cole:Arthur H.Cole defined entrepreneurship 'as the purposeful activity of anindividual or a group of associated individuals undertaken to initiate, maintain or aggrandise profit by production or distribution of economic goods and services'.Cole found that entrepreneurship and its development was not only due tothe  entrepreneurial  activities  of individuals  but  also  due  to  a  group  of individuals. Multinational business corporations emerge mainly due to the roleplayed by the group entrepreneurs. In those days the Government has comeforward to set up new business ventures and thereby tried its' level best toaccelerate the growth of entrepreneurship development. Cole was of the opinionthat the ultimate aim of entrepreneurship is to aggrandise profit.

4. Joseph A Schumpeter:Joseph A Schumpeter propounded that "entrepreneurship is essentially acreative activity or it is an innovation function." The process of innovation maybe in the form of:a. introduction of new product.b. introduce new method of production process.

c. find new market.d. make use of hitherto unused natural resources ande. introduce a new form of organisation.His  view  was  supported  by  Frederick  Harbinson.  He says entrepreneurship means the skill to build an organisation. Entrepreneurship involves harnessing the innovative ideas of: different investors to the rest of the organisation.

5. Gaikwad:According to Gaikwad, 'entrepreneurship connotes innovativeness, an urge to take risk in face of uncertainties and an intuition ie., capacity of seeing things in a way which afterwards proves to be true'. He was of the opinion that

i. entrepreneurship development is nothing but the ability of entrepreneurs to innovate.

ii. entrepreneurship development is nothing but the capacity of entrepreneurs to foresee uncertainty and take risks.

iii. entrepreneurship development activities are affected by theprevailing environment in which the entrepreneurs behave.

iv. entrepreneurship development activities are the professional behaviours of the entrepreneurs.

Functions of an Entrepreneur:-

An entrepreneur is expected to perform the following functions.1. Assumption Risk 2. Business Decision3. Managerial functions

4. Function of Innovation

1. Assumption Risk :-The entrepreneur assumes all possible risks of business. A business risk also involves the risk due to the possibility of changes n the tastes of consumers, techniques of consumers, techniques of production and new inventions. Such risks are not insurable. If they materialise, the entrepreneur has to bear the loss himself.  Thus,  Risk-bearing  or  uncertainty-bearing  still  remains  the  most function of an entrepreneur. An entrepreneur tries to reduce the uncertainties by his initiative, skill and good judgment.

2. Business Decisions:The entrepreneur has to decide the nature and type of goods to be produced. He enters the particular industry which offers from he best prospects and produces whatever commodities he thinks will pay him the most employs those methods of production which seem to him the most profitable. He effects suitable changes in the size of the business, its location techniques of production and does everything that is needed for the development of his business.

3. Managerial Functions:The  entrepreneur  performs  the  managerial  functions though  the managerial functions are different from

entrepreneurial functions.  He formulates production  plans, arranges  finance,  purchased,  raw  material,  provides, production  facilities,  organises  sales  an  assumes  the task  of  personnel management. In a large establishment these management functions are delegated to the paid managerial personnel.

4. Function of Innovation:An important function of an entrepreneur is "Innovation". He conceives the idea for the improvement in the quality of production line. He considers the economic inability and technological feasibility in bringing about improve quality. The introduction of different kinds of Electronic gadgets is an example of such an innovation of a new products. Innovation is an ongoing function rather than once for all, or possibly intermittent activity.

CHARACTERISTICS OF ENTREPRENEUR:1. Motivator:An entrepreneur must build a team, keep it motivated, and provide anenvironment for individual growth and career development.

2. Self-confidence:Entrepreneurs must have belief in themselves and the ability to achievetheir goals.3. Long-term Involvement:

An entrepreneur, must be committed to the project with a time horizon of five to seven years. No ninety-day wonders are allowed.

4. High energy level:Success of an entrepreneur demands the ability to work long hours for sustained period of time.

5. Persistent problem-solver:An entrepreneur must have an intense desire to complete task or solve aproblem.  Creativity is an essential ingredient.

6. Initiative:An entrepreneur must have initiative, accepting personal responsibility for actions, and above all make good use of resources.

7. Goal setter:An entrepreneur must be able to set challenging but realistic goals.

8. Moderate risk-taker:An entrepreneur must be a moderate risk-taker and learn from any failures.

Entrepreneur VS Entrepreneurship Their differences are as follows.

Entrepreneur EntrepreneurshipEntrepreneur  is  one  who  combines capital and labour for the purpose of production. Entrepreneurship  is  the function  of seeking  investment  and  production opportunity organising an enterprise to undertake a new production process ,raising capital, arranging labour and raw  materials,  finding  a  site introducing  a new  technique  and commodities, discounting new sources for the enterprise.Entrepreneur Refers to person Entrepreneurship Refers to process1. Administrator 1. Administration2. Creator 2. Creation3. Communicator 3. Communication4. Decision-maker 4. Decision5. Initiator 5. Initiation6. Innovator 6. Innovation7. Leader 7. Leadership8. Motivator 8. Motivation9. Organiser 9. Organisation10.Planner 10.Planning11.Programmer 11.Action12.Risk-taker 12.Risk-taking13.Technician 13.Technology14.Visualiser 14.Vision

Qualities of an Entrepreneur:-The personal qualities that contribute to the success of an entrepreneur areas follows.

1. Motivation towards Achievement:A successful entrepreneur should be a good administrator. He should know the art of getting things done by other people without hurting their feelings or self-respect.  He should have as strong motivation towards the achievement of a task and must be able to exert considerable effortsin getting things done by others.

2. Creativity:Mental ability consists of intelligence, an analytical approach and creative thing.  An entrepreneur must be reasonably intelligent, and should have creative thinking, and must be able to engage in analysis of various problems and situations in order to deal with them. The entrepreneur should anticipate changes and must be able to study various situations in which decisions may have to be made.

3. Clarity:An entrepreneur should have clear objectives as to the exact nature of the business, the nature of the goods to be produced and the subsidiary activities to be undertaken. A successful entrepreneur must have the objective to establish the product, to make profit or render social service.4. Secrecy:An entrepreneur must be able to guard business secrets. Leakage of business secrets to trade competitors will be self-defeating, hence, he should be very careful in this regard. An entrepreneur should select his assistants properly and carefully.

5. Tactfulness:The most important personality factors contributing to the success of anentrepreneur are emotional stability, personal relations, considerations andtactfulness.

6. Ability:Communication ability is the ability to communicate efficiently. Goodcommunication means that both the sender and the receiver understand eachother perfectly and totally.

7. Technical knowledge:An entrepreneur must have a reasonable level of technical knowledge.Technical knowledge is easy to acquire if he tries hard enough.

Types of Entrepreneurs:-

The various types of entrepreneurs are classified hereunder:

I. According to the type of business-1. Business entrepreneur 2. Trading entrepreneur

3. Industrial entrepreneur (i) Large(ii) Medium(iii) Small, and (iv) Tiny 4. Corporate entrepreneur 5. Agricultural entrepreneur (i) Plantation(ii) Horticulture(iii) Dairy(iv) Forestry

6. Retail entrepreneur 7. Service entrepreneur

II. According to the use of technology 1. Technical entrepreneur 2. Non-Technical entrepreneur 3. Professional entrepreneur 4. High-tech entrepreneur 5. Low-tech entrepreneur

III. According to Motivation1. Pure entrepreneur 2. Induced entrepreneur 3. Motivated entrepreneur 4. Spontaneous entrepreneur

IV. According to the growth1. Growth entrepreneur 2. Super-growth entrepreneur

V. According to the stages of development:1. First generation entrepreneur 2. Modern entrepreneur 3. Classical entrepreneur

VI. According to area:1. Urban entrepreneur2. Rural entrepreneur 3.

VII. According to gender and age:1. Men entrepreneurs2. Women entrepreneurs(i) Young entrepreneurs(ii) Old entrepreneurs(iii) Middle-aged entrepreneurs

VIII. Others or unclassified:1. Professional entrepreneurs2. Non-Professional entrepreneurs3. Modern entrepreneurs4. Traditional entrepreneurs5. Skiled entrepreneurs6. Non-skilled entrepreneurs7.Mitating entrepreneurs8. Inherited entrepreneurs9. Forced entrepreneurs10.National entrepreneurs11.International entrepreneurs12.Bureacratic entrepreneurs13.Intrapreneur entrepreneurs14.Immigrant entrepreneurs

According to the Type of Business:-

Entrepreneurs are found in various types of business occupations of varying size.  We may broadly classify them as follows:

1-Business Entrepreneur:Business entrepreneurs are individuals who conceive an idea for a new product or service and then create a business to materialize their idea into reality. They tap both production and marketing resources in their search to develop anew business opportunity. They may set up a big establishment or a small business unit.  Trading entrepreneur is one who undertakes trading activities and is not concerned with the manufacturing work.  He identifies potential markets, stimulates demand for his product line and creates a desire and interest among buyers to go in for his product.  He is engaged in both domestic and overseas trade.

2-Industrial Entrepreneur:Industrial entrepreneur is essentially a manufacturer who identifies the potential needs of customers and tailors product or service to meet the marketing needs.  He is a product oriented man who starts in an industrial unit because of the possibility of making some new product.

3-Corporate EntrepreneurCorporate entrepreneur is essentially a manufacturer who identifies the potential needs of customers and tailors product or service to meet the marketing needs.  He is a product oriented man who starts in an industrial unit because of the possibility of making some new product.

4-Corporate EntrepreneurCorporate entrepreneur is a person who demonstrates his innovative skill in organising and managing a corporate undertaking.  A corporate undertaking isa form of business organisation which is registered under some statute or Act which gives it a separate legal entity.

5-Agricultural Entrepreneur:Agricultural entrepreneurs are those entrepreneurs who undertake such agricultural activities as raising and marketing of crops, fertilizers and other inputs of agriculture. According to the use of Technology.

6-Technical Entrepreneur:A technical entrepreneur is essentially an entrepreneur of “Craftsmantype”. He develops a new and improved quality of goods because of his craftsmanship. He concentrates more on production than marketing. He doesnot care much to generate sales by applying various sales promotional techniques. He demonstrates his innovative capabilities in matters of production of goods and rendering services.

7-Non-technical Entrepreneur:Non-technical entrepreneurs are those who are not concerned with the technical aspects of the product in which they deal. They are concerned only with developing alternative marketing and distribution strategies to promote their business.

8-Professional Entrepreneur:Professional entrepreneur is a person who is interested in establishing a business but does not have interest in managing or operating it once it is established.According to MotivationMotivation is the force that influences the efforts of the entrepreneur to achieve his objectives. An entrepreneur is motivated to achieve or prove his excellence in job performance. He is also motivated to influence others by demonstrating his power thus satisfying his ego.

Pure entrepreneur:-

A pure entrepreneur is an individual who is motivated by psychologicaland economic rewards. He undertakes an entrepreneurial activity for hispersonal satisfaction in work ego or status.

Induced Entrepreneur:-

Induced entrepreneur is one who is induced to take up an entrepreneurialtask due to the policy measures of the government that provides assistance,incentives, concessions and necessary overhead facilities to start a venture.Most of the entrepreneurs are induced entrepreneurs who enter business due tofinancial, technical and several other facilities provided to them by the stateagencies to promote entrepreneurship. Motivated Entrepreneur: Newentrepreneurs are motivated by the desire for self-fulfilment. They come tintobeing because of

the possibility of making and marketing some new product for the use of consumers. If the product is developed to a saleable stage, theentrepreneur is further motivated by reward in terms of profit.

Spontaneous Entrepreneur:-These entrepreneurs start their business out of their natural talents. Theyare persons with initiative, boldness and confidence in their ability whichmotivate them to undertake entrepreneurial activity.

Growth Entrepreneur:-Growth entrepreneurs are those who necessarily take up a high growthindustry. These entrepreneurs choose an industry which has substantial growthprospects.

Super-Growth Entrepreneur:-Super-growth entrepreneur are those who have shown enomous growth of performance in their venture. The growth performance is identified by theliquidity of funds, profitability and gearing .

 

According to Stages of Development

First-Generation Entrepreneur:-

A first generation entrepreneur is one who starts an industrial unit bymeans of an innovative skill.  He is essentially an innovator, combining differenttechnologies to produce a marketable product or service.

Modern Entrepreneur:-A modern entrepreneur is one who undertakes those ventures which gowell along with the changing demand in the market.  They undertake thoseventures which suit the current marketing needs.

Classical Entrepreneur:-A classical entrepreneur is one who is concerned with the customers andmarketing needs through the development of a self supporting venture.  He is astereotype entrepreneur whose aim is to maximise his economic returns at a levelconsistent with the survival of the firm with or without an element of growth.

Other

Innovating Entrepreneurs:Innovating entrepreneurship is characterized by aggressive assemblage of information and analysis of results, deriving from a novel combination of factors.  Men/women in this group are generally aggressive in experimentationwho exhibit cleverness in putting attractive possibilities into practice. One neednot invent but convert even old established products or services, by changingtheir utility, their value, their economic characteristics, into something new,attractive and utilitarian.  Therein lies the key to their

phenomenal success. Suchan entrepreneur is one who sees the opportunity for introducing a new techniqueof production process or a new commodity or a new market or a new service or even reorganization of an existing enterprise. Initiative Entrepreneurs: Imitativeentrepreneurship is characterized by readiness to adopt successful innovations byinnovating  entrepreneurs. They  first  imitate  techniques  and  technologyinnovated by others.

Entrepreneurship Motivationa)An increasing focus on capital formation. Availability of capital is astimulant to an entrepreneur to start a new firm and or give birth to a newidea.b)

The ability to transform scientific and technical developments through newinstitutional development is a second stimulant.c) A third stimulant is the supportive government programmes.d) Availability of required training and inputs is the fourth stimulant.e) A collaborative relationship between business and research and their directattempts to transfer technology to the market place may provide stimulus to anumber of entrepreneurs who seek the opportunity to commercialise their ideas.f)Finally, an endeavour to create an environment conducive to innovation willprovide a much - needed stimulant to entrepreneurial activities.Entrepreneur and EnterpriseEnterprise may be defined as an undertaking or adventure involvinguncertainty and risk and requiring innovation. It also refers to the ability to think out and start new business. Just as family is the basic unit for social organisation,enterprise is the basic unit for economic organisation.Enterprise serves as the framework within which decisions concerningwhat to produce, how much to produce, when to produce and how to produce aretaken by the owner and/or manager. Development is' the aggregate result of theefforts made in individual enterprises.The essential features of an enterprise are as follows:b) An enterprise consists of people who work together primarily for the purpose of making and/or selling a product or service. Production for self consumption and non business organisations, e.g., trade associationsproviding economically valuable

services are not enterprises inspite of being important activities in an economy. An enterprise, whether public or private,l a rge o r sma l l ex i s t s i n o rde r t o p roduce a p roduc t o r s e rv i ce t ha t o the r s consume and pay for it.c)An enterprise utilises raw materials, machinery, energy, space andother inputs to produce and/or sell. It has to incur costs on the procurement of these inputsd )   E v e r y   e n t e r p r i s e   m a k e s   a   c o m p a r i s o n   b e t w e e n   i t s  c o s t s   ( i n p u t s ) and  gains  (outputs)  Therefore,  its  management  must  have sufficientautonomy to take appropriate actions to maintain and improve the success of the enterprise.e )   A n   e n t e r p r i s e   i s   a   c o n t i n u i n g   e n t i t y . I t   i s   n o t   a n   a d h o c   e f f o r t   t o p roduce a s i ng l e p roduc t bu t r a t he r a r e cu r r i ng e f fo r t t o p roduce a s i ng l e product but rather a recurring effort to produce a stream of products.  Somefirms may go out of business after a single transaction.  But this is due tofailure of management or unforeseen conditions and not a planned or desiredoutcome

UNIT - IIENTREPRENEURIAL ENVIRONMENT“Suitable Environment and intuition in grasping the essential facts promotes entrepreneurship”-Schumpter.Commercial venture of any sort/nature is being influenced by complex and varying mixture of financial, institutional, cultural and personality factors. Economic system and other conditions in the environment determine the success of commercial venture.  Environment refers to the totality of all factors which are external and beyond the control of the business enterprise.  It determines how entrepreneurship control and manage the unit.  The entrepreneurial performance of an enterprise is influenced by the value system of the society, the rules and regulations made by the government, the monetary policies of the capital market, foreign investments etc.  If environment changes there will be a change in thee intrepreneurial performance also. Thus, the healthy environment promotes theentrepreneurship in a larger scale by facilitating the business operations therebycontributing to the growth of the unit. Environmental factors are mostlydynamic in nature except few factors which are of static nature.  Mostly thesefactors can be conceptualized and quantified.

Sometimes they could bementioned only in qualitative terms.Classification of EnvironmentOn the basis of it’s variability character with reference to point of time,environment may be past, present and future.On the basis of decision making situation it may be classified into Marketand Non-Market environment.  If the business decisions of a business unit areinfluenced by the market factors such as, demand, supply, competition, price etc.the environment is said to be market environment. On the other hand, when theGovernment,  Law  and  Social customs  and  Conventions  dominateentrepreneurial decisions it is said to be Non-market environment .Environment may be grouped in to two, viz, Economic and Non-Economic environment.  Environment formed by the economic factors like fiscalpolicy, industrial policy, physical control of price-income, the economic systemthat operates,  the  stage  of  economic  development  refers  to economicenvironment.  Then the non-economic environment refers to social, political,legal, educational and cultural factors pertaining to business operations.Thus, the different facets of entrepreneurial environment on the basis of factors which form that situation is depicted in the following diagram.DiagramFacets of Entrepreneurial EnvironmentSignificance of EnvironmentThe different facets of entrepreneurial environment have great social andeconomic significance to the growth of entrepreneurship.  An entrepreneurialplan cannot be framed and finalized for its implementation without its relevance to the political, social, economical and technological

requirement.  It is clear that, the environment is the only agent which regulates entrepreneurial activities.Entrepreneurial qualities are born of an environment activities.  Entrepreneurialqualities are born of an environment through individuals’ creative response topotential opportunities.  Entrepreneurial environment is the one in which there isa high awareness of potentials and enough source of capital and other facilitiesare valuable from number of institutions and agencies.  An ideal environmentprovides the following benefits by creating a congenial atmosphere.•It helps the individuals to understand the concept from the situation inwhich they find themselves through the media of social roles, groupnorms and cultures, past experience and future expectations.•Environment  instigates  /  induces  the  individuals  to assumeentrepreneurial venture willingly with their new ideals.  Here it acts as astimulating force for promoting entrepreneurship.•An ideal environment may also be a supporting factor for promoting thegrowth of the business units by properly nurturing them.•The dynamism in the environment makes the entrepreneurs to acquirenew skills, to accustom with new and changing situations etc.Environmental factors:

It is true that the entrepreneurs must have come from diverse economic,social and geographical backgrounds which interlace influence entrepreneurialspirits.  This will enhance the entrepreneurial performance.  The various factorswhich influences the entrepreneurship may be categorized into two, viz, Internaland External environment factors.Internal factors:Internal  factors  are  those  which  will  ultimately influence  theentrepreneurs to take up entrepreneurial venture. Some of them are:

1. Strong desire of entrepreneurs to do something independently in life.2. Technical know-how or manufacturing experiences acquired by them.3. Business experience in the same or related line.4. Family background including size, type and economic status of family.5. Occupational origins of the entrepreneurs. .The internal environmental factors are mainly the environment in whichentrepreneurs are born and brought up and work. The internal factors are themain springs of action in entrepreneurs. In order to satisfy their strong desire todo something independently in life, highly motivated persons take a plunge in toindustrial activity' regardless of any other considerations. But, many a time it isthe: compulsion rather than the ambition that leads the man to success.  Thereasons that might have compelled the entrepreneurs in putting them on the roadto industry are:i) Unemploymentii) Dissatisfaction with the job so far held/occupation so far pursued.iii) To make use of idle funds.iv) Diversification of 

economic interestsv) Other compelling reasons such as maintenance of large family, revivalof sick unit started by parents etc.Possession of technical knowledge and manufacturing experience acquirethe same place as strong desire to do something independent in life. Variousother internal  environmental  factors  that  facilitate  the emergence  of entrepreneurship are:

Success stories of entrepreneursPrevious experience in manufacturingPrevious employment in industryProperty inheritedProperty acquiredEncouragement of family membersEncouragement of friends and relativesAcquire or inherited technical and professional skill

External Environment

The success of entrepreneurship in a region at any point of time dependson the very many external environmental factors. These factors influence theentrepreneurial operations  and  ultimately  determine  the  effectiveness

of entrepreneurial performance also. These environmental factors can be groupedinto:

Economic Environment

The different economic environmental factors which influence/inhibit theentrepreneurship are: Structure of the economy, Industrial Policy, Agricultural"Policy,  Growth pattern  of  National  income,  G.D.P.,  Savings  and capitalformation in the country. Besides that, Balance of trade and balance of payments, trade and tariff policy etc.

Legal Environment

Entrepreneur should know what is the prevailing legal environment byknowing the latest position in legal enactments relating to various aspects of entrepreneurial venture. Such as formation of the unit, collaboration, foreignexchange,  industrial  dispute,  labour  management, social  security  benefits,consumer protection etc.

Political Environment

The working political system in a country influences the entrepreneurialgrowth by designing and implementing various policy matters pertaining topromotion of entrepreneurship. Hence entrepreneurs and industrialists shouldhave representatives on various government bodies at all levels of policyformulation and planning.

Socio-cultural Environment

In the modem days a suitable entrepreneurial culture must be created bydeveloping healthy work environment and modem attitudes towards work givingsocial recognition etc. These factors will give psychological stimulus whichinturn promote innovation, inspiration, ethics and values which are very essentialfor a successful entrepreneurs.External environment determine the entrepreneurship in many occasions.Hence presence of conducive business environmental climate is imperative for entrepreneurship growth. External environment facilitates various functionalareas of business enterprise thereby promote entrepreneurship.The external environmental factors are:Financial assistance from institutional sources.Accommodation in industrial estates.Provision of consultancy to services on technicalMarket and financial aspects.Provision of subsides of different kinds.Arranging  the  institutional  support  for  marketing theproducts/services.Attitude of the Government to help new units.Encouraging the co-ordination between larger and smaller firms.

Providing necessary infrastructural facilities continuously.The various factors that impede the growth entrepreneurship arose mainlydue to external environment. Some of them are:Changes in governmental policyPolitical instability or hostile government attitudeImproper coordination among different government agencies. Unduedelay and corruption in giving concurrences for various purposes :

Poor-infrastructural facilities such as supply of power, materials, financeetc.Rise in cost of inputs.Unfavourable market fluctuations etc.

During post independence period the environment has so totally changed.Rights to social and economic justice have been enshrined in the constitution.Measures have been designed to promote the growth of small scale industry andcurbs have been placed on large scale units. The instances are establishment of separate policy for small scale sector, curtailing of monopoly practices of MRTPcompanies  etc.  Apart  from  that,  Specialised financial  and  developmentalinstitutions  such  as  SIDBI, Infrastructural  organisation.  Growth

centre,encouragement of foreign institutional investment, NRI investments etc. Exportpromotions and import substitution are being stressed upon. Thus, developing ahealthy environment is a pre-requisite for growth of entrepreneurship.