Role of entrepreneurship in EconomicDevelopment


Published on

Entrepreneurship-India & China

Published in: Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Role of entrepreneurship in EconomicDevelopment

  1. 1. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at OF ENTREPRENEURSHIP IN NATIONAL ECONOMIC GROWTH A COMPARATIVE ANALYSIS OF INDIA & CHINA PROF. AMIT GUPTA* *Doctoral Student, National School of Leadership, Pune, India.ABSTRACTBoth India and China have made rapid strides in economic development in terms of GDP and percapita income ever since their respective liberalization era in 1978 (China) and 1991 (India), thisimpressive growth in manufacturing (China) and services (India) is inextricably linked to thelevel and type of entrepreneurial activity as seen from the reports of GEM (GlobalEntrepreneurship monitor). Countries with similar per capita GDP tend to exhibit similar levelsof entrepreneurial activity, while significant differences exist across countries with different percapita GDP levels.While political systems and history of independence and social revolutions have left aneverlasting mark on development of entrepreneurship in both India and China, the ability ofinstitutions in the political, financial, educational and social framework to learn and unlearn fromthe lessons of free market developed economies is of great significance in the constantlychanging business landscape fuelled by global imbalances, trade liberalization, financial marketsintegration and of course the information explosion unleashed by the internet and wirelessconnectivity.It is significant that China has evolved from the clutches of centralized government economy torelative market economy culminating in their joining the WTO in 2001. India with its pluralisticdemocracy has always had a history of entrepreneurship limited to certain communities like theMarwaris and Parsis who more recently have been upstaged post 1991 liberalization byentrepreneurs of all hues who have capitalized on the opportunities thrown open byglobalization, like the first generation Bhartis, Ambanis, Ranbaxy, not to forget more modernprofessional entrepreneurs like N.R.Narayana Murthy, Azeem Premji et al who have takenadvantage of the knowledge economy and labour arbitrage opportunities thrown up by discrepancies and made India a force to reckon with in the software servicesoutsourcing space. The issue now is can they really scale it up and move up the value chain bybreaking the nexus between revenue/profitability growth and manpower growth to addresschallenges of talent shortage and employability of significantly large numbers in relatively shortspan of time.______________________________________________________________________________ 86
  2. 2. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at OF THE STUDY1. This study primarily tries to analyze the basic contribution of entrepreneurship to nationaleconomic growth and development, with particular reference to the two emerging powers Indiaand China who have followed somewhat different paths towards similar objectives of reconcilinggrowth with sustainability and equity.2. Other issues examined are the impact of cultural and demographic factors on theentrepreneurial spirit and the business/government policies and intellectual environmentfacilitating or creating barriers to unleashing the full potential of private individuals andinstitutions in both countries.METHODOLOGY OF THE STUDYThis research has been based entirely on secondary data sources, which were subject related. Thesources used were books, journals, newspapers, reports and websites.LIMITATIONS OF THE STUDYLike any other research paper, time was a constraint. More literature review could have beendone with a broader time span. Also more recent data, in certain areas would have helped toanalyze better.SCOPE FOR FURTHER RESEARCHEntrepreneurship and its effect on growth as well as the environment, socio-cultural factors andthe effects on social entrepreneurship can be studied in detail across a diverse country like Indiaas also the various provinces of China.Further research is also possible in finding the changes in levels of entrepreneurial activity whichcan impact the per capita GDP. Another off-shoot would be researching on the time lag forimproving the entrepreneurial activity and whether this has any impact/correlation to increasingper capita GDP.INDIA & CHINA COMPARED is a matter of continuous debate that China has basically grown based on accumulation ofresources whereas India has shown significantly better returns on capital and efficiency inmanaging its resources. While this may be true, what is of significance is that post independenceof India (1947) and China (1949), both started as economically backward, centrally plannedagrarian economy and then went on to open up significantly in 1978 ( China) and 1991 ( India).Both had issues of corruption and bureaucratic red tapism which continue to hamper generalbusiness and trade. While China has basically been FDI led with little local entrepreneurialactivity (at least till 2001-02), the Chinese save and invest more in their economy (almost twicethat of India). The share of gross domestic investment in GDP is 41 % in China compared to 87
  3. 3. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at in India. The Chinese are more open to international trade and export share of GDP istwice that of India. (See Table 1 for details). TABLE 1: SHARE OF GDI IN GDPChina 1982 1992 2001 2002GDP (US$ billions) 221.5 454.6 1,167.1 1,232.7Gross domestic investment/GDP (%) 33.2 36.2 38.5 41.0Exports of goods & services/GDP (%) 8.9 19.5 25.5 29.5Gross domestic savings/GDP (%) 34.8 37.7 40.9 44.0IndiaGDP (US$ billions) 194.8 244.2 478.5 510.2Gross domestic investment/GDP (%) 21.7 23.8 22.3 22.8Exports of goods & services/GDP (%) 6.1 9.0 13.5 15.2Gross domestic savings/GDP (%) 18.3 21.8 23.5 24.2Source : Paper titled ―China’s Political economy‖, Lynette Ong, Australian national UniversityA more compelling reason to account for Indias slower growth is the flows of foreign directinvestment (FDI). As shown in the diagram below, the amount of FDI into India is only a smallfraction of that into China. Of course, any statistics, especially those reported by communistcadres who are rewarded for economic performance of their localities, should be taken with agrain of salt. As frequently pointed out, Chinas FDI figures are likely to be exaggerated by"round-tripping" - domestic capital disguised as foreign investment (passed through Hong Kong) qualify for special investment incentives reserved for foreigners. Indias FDI figures, however,may be understated because they exclude foreigners reinvested profits, the proceeds of foreignstock market listings, intra-company loans, and so forth. This may not be a simple issue ofwhether India is able to attract foreign investment but more connected with Government policyin a multi party democracy with its pressures of push and pull from different constituencies as wehave seen in the recent SEZ development, a policy which has been so successfully implementedby China quite some time back on a far larger scale and size to become ― factories to the world‖. 88
  4. 4. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at : Paper titled ―China’s Political economy‖, Lynette Ong, Australian national UniversityIndia’s growth has been far more organic and home grown ( hence sustainable?) than the FDI ledChinese growth story ( substitute for domestic entrepreneurship), further backed by the width,depth and increasing sophistication of India’s financial markets, functioning judiciary ( nevermind the pile up of cases!), protection of property, intellectual property rights, English lededucation system, institutions of excellence like IIT’s, IIM’s, IISc,etc who given the rightsupport and ecosystem can churn out the best of talent as can be seen from the history of SiliconValley where Indians are a mainstay in technology led innovations and contributed a great dealto India software revolution.Last but not the least, the attitude towards failure has changed significantly across the globe,more so in closed societies like India and China where the ―fear of failure‖ and lowering ofsocial status was a major hindrance and barrier to entrepreneurship. Stories abound about fathersnot giving the hand of their daughters to prospective grooms who are businessmen and hence notvery reliable or socially mobile. Much of this has changed in the last decade or so, primarily on of more global exposure and integration, and more importantly due toinstitutionalization of the entrepreneurial process in form of venture capitalists, angel investors,business incubators to make the survival process more sustainable and add credibility to thewealth and job creation activity in developing countries, to pull them out of the poverty trap andmarch towards a economic powerhouse status as predicted by Goldman Sachs BRIC report.The picture would be incomplete without touching the latest developments in socialentrepreneurship, made popular by the progenitor of microfinance, Mr Mohammed Yunus ofGrameen Bank, Bangladesh starting from the first few dollars given to Sufia Begum in 1974.The debatable issue is of course whether this is leading to creation of productive enterprises oronly distribution of largesse on behalf of the super rich of the globe. 89
  5. 5. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at IS ENTREPRENEURSHIP?Entrepreneurship is the practice of starting new organization, particularly new businessesgenerally in response to identified opportunities. Entrepreneurship is often a difficultundertaking, as a majority of new businesses fail. Entrepreneurial activities are substantiallydifferent depending on the type of organization that is being started. Entrepreneurship ranges inscale from solo projects (even involving the entrepreneur only part-time) to major undertakingscreating many job opportunities. Many "high-profile"entrepreneurial ventures seek venturecapital or angel funding in order to raise capital to build the business. Many kinds oforganizations now exist to support would-be entrepreneurs, including specialized governmentagencies, business incubators, science parks, and some NGOs.LITERATURE SURVEYDavid McClelland (1961) described the entrepreneur as primarily motivated by an overwhelmingneed for achievement and strong urge to build.Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough,pragmatic people driven by needs of independence and achievement. they seldom are willing tosubmit to authority.Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights, brainstorms, deceptions,ingeniousness and resourcefulness. they are cunning, opportunistic, creative, and unsentimental.Busenitz and Barney (1997) claim entrepreneurs are prone to overconfidence and overgeneralisations.Cole (1959) found there are four types of entrepreneur: the innovator, the calculating inventor,the over-optimistic promoter, and the organisation builder. These types are not related to thepersonality but to the type of opportunity the entrepreneur faces.Burton W. Folsom distinguishes between what he calls a political entrepreneur and a marketentrepreneur. The political entrepreneur uses political influences to gain income throughsubsidies, protectionism, government-granted monopoly, government contracts, or other suchfavorable arrangements with government(s) (crony capitalism and corporate welfare). The entrepreneur operates without special favors from government.CHARACTERISTICS OF ENTREPRENEURSHIP The entrepreneur has an enthusiastic vision, the driving force of an enterprise. The entrepreneurs vision is usually supported by an interlocked collection of specific ideas not available to the marketplace. The overall blueprint to realize the vision is clear; however details may be incomplete, flexible, and evolving. 90
  6. 6. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at The entrepreneur promotes the vision with enthusiastic passion. With persistence and determination, the entrepreneur develops strategies to change the vision into reality. The entrepreneur takes the initial responsibility to cause a vision to become a success. Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help. An entrepreneur is usually a positive thinker and a decision maker.Types of entrepreneurship:Basically two types of entrepreneurship are defined as follows: A. OPPORTUNITY ENTREPRENEURSHIP: Those motivated by identified business opportunities in an evolving economic landscape and exploit the perceived opportunity. B. NECESSITY ENTREPRENEURSHIP: They are pushed into this because all other options of work are absent or unsatisfactory. Table 2 (Refer to Annexure) from GEM 2006 report show global trends which are quite self explanatory.MORE LITERATURE REVIEWA World Bank report on ―Doing Business‖ (2005-06) states that: Entrepreneurs in South Asia face large regulatory obstacles to doing business. A standard company in India pays 81% of commercial profits in taxes In India only 8 million workers have formal jobs in the private sector in a country of over 1 billion people and a workforce of 458 million.In another study of World Bank on ―Entrepreneurship‖, Klapper (2006) two indicators have beenanalyzed. One is Business density which is defined as the number of registered firms as a % of active population within the age group of 15-64 years. Another is the Entry rate which hasbeen defined as the number of new firms registered in a particular year as a percentage of thetotal registered firms.The entry rate can be considered as one of the key indicators of entrepreneurship. In the surveyconducted during the period 1990-2003 across 95 countries across the globe, entry rate wasfound to be less than 5% in India as compared to 20% in Germany, New Zealand and U.K.However, the average entry rate is 7-8% across developing countries. 91
  7. 7. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at density was found to vary across country income groups and range from less than 1%in low-income countries to 10% in high income countries.Barriers to starting a business are negatively correlated with business density and entry rate. Thelesser the procedures required to start a business, greater the number of registered firms andhigher the entry rate. (Refer to Table 16 of Annexure for further details)There is also a relationship with total firm registrations being higher in countries with a smallinformal sector.In connection to the last finding we have concluded that SMEs are being increasingly recognizedas an essential driving force for economic growth in developing countries. These SMEs areflexible to respond quickly to market changes and opportunities to develop specialized productniches and absorb rapid technological innovations provided they get the right guidance, training,are made aware with right policy environment and greater access to financial services. So SMEsin turn can create substantial capital and jobs at a local level thereby raining the local standardsof living.Women have been playing an increasing role in this sector especially in developing countries.One of the reasons being the socio-cultural environment as in India, where women (especially inthe rural areas) tend to take charge of the income-generation modes and turn out to be betterplanners and decision makers than the men folk. In India, we should not forget to mentionDhirubhai Ambani filling tanks at a petrol station in Aden, going from loan officer to loanofficer, himself carrying bolts of textile, for loans of a few lakhs, eventually constructs a giant,the Reliance we see today. Mammen Mappillai who, together with his wife, begins by sellingballoons, and then creates MRF. Seven housewives begin Lijjat Papad with 80 borrowed Rupees— today 40,000 women out of their homes have taken its turnover to Rs 300 crores. Thedabbawallahs of Mumbai reach two lakh tiffin carriers from homes to offices and back using justpublic transport and pavements; the convenience that the roadside thelawallah brings to thecustomer — they are also entrepreneurs all the way. After all, they have become case studies inforeign B-schools.China has been successful in lifting millions of people out of poverty in less than 3 decades as aresult of governmental reforms and private sector development. DFID (U.K.) has been workingin China since 1999 for reducing poverty. One of its projects ―Start & Improve your business‖project started in 2004 aimed at providing entrepreneurial training to the Chinese. The ―Private Partnership for China‖ project was launched in 2001. This aimed at reducing theproblems faced by SMEs like limited access to financial services, underdeveloped policies, lackof knowledge and risk management techniques. The ―SME Support System‖ project started in2005 is promoting private sector development through China’s law on promoting SME andclosing the gaps in this policy. This is an institutionalized form of the TVE (Town & VillageEnterprises) revolution that contributed to the growth of China in 1980s and 1990s that haveoutrun both state-owned and foreign invested companies. 92
  8. 8. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at Unleashing Entrepreneurship: Making Business work for the Poor AND IMPACT OF ENTREPRENEURIAL ACTIVITIES ON NATIONALECONOMIC GROWTHA study of the conceptual model as developed by Global Entrepreneurship Monitor clearlybrings into focus the systematic relationship between per capita GDP levels, entrepreneurialactivity levels ( TEA-Total entrepreneurial activity) by various kinds of businesses like earlystage entrepreneurs and established business owners as also differences and similarities betweenhigh income and middle income countries along with framework conditions necessary tofacilitate and support entrepreneurship among various kinds of enterprises as shown below. 93
  9. 9. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at GEM CONCEPTUAL MODEL Entrepreneurial Level of National framework entrepreneurial economic conditions in activity in the growth of the country country the countryA detailed framework of the Total Process (Table 3), elaboration of General National Frameworkconditions (Table 4) and elaboration of Entrepreneurial framework conditions (Table 5) may bereferred to from the Annexure.Comparing the two economic powers India and China based on the above general frameworkconditions, the competitiveness of China lies in greater openness to external trade and excellentinfrastructure. The stranglehold of the centralized command in form of Communist party is ofcourse a double edged sword resulting in short term implementation with single mindeddetermination, possibly a the cost of long term strategies which is a subject of much largerdebate.The Indian economy scores on the depth, sophistication, liquidity of financial institutions, higherlevels of technology/ R&D absorption especially in IT, software services, pharmaceuticals andbiotechnology led by excellent higher educational institutions like IIT’s / IISc, etc, globalmanagement skills and a good regulatory and legal system with fair rule of law (by and large atleast compared to China) especially on the fronts of intellectual property and property rights.Physical infrastructure is a sore point with all kinds of entrepreneurs and so is the levels ofreliability with social infrastructure and utilities like power, water which lead to excessive usageof capital for similar scale of operations compared to western counterparts thus erodingcompetitiveness on global stage. However this showing dramatic improvements in most urbanareas and needs to be in sync with economic growth rates projected over the 11 th five year planand beyond.Compared to developed western world of course, both the Asian giants have a long way to go respect to labour policies flexibility, growth of financial institutions so as to allocate capitalmore efficiently ( instead of distorted subsidies and vested interests), foreign exchange controlsand convertibility regime, marketing and accounting services of global quality, consumersophistication, widespread communication facilities and overall institutionalization of allfacilitating government support factors besides breaking down the corruption and bureaucraticbottlenecks existing across the spectrum of formal and informal institutions.One other aspect of the analysis of economic sectoral activities clearly shows the followingtrends: 94
  10. 10. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at In both ―early stage‖ and ―established business ownership‖ the ―business services‖ sector is predominant in high income countries. The middle income countries lead in ―consumer oriented‖ industries in both types of entrepreneurial activity, mainly due to demographic reasons and growing market opportunities based on rising disposal incomes and low base of consumption in value added products and services. As far as ―transformation‖ (construction/manufacturing/transportation/distribution) and ―extractive‖ (extraction of products from natural environment) sectors are concerned both groups of countries are somewhat similar in trends.(Please refer to Table 6 of Annexure)CULTURAL/ DEMOGRAPHIC FACTORS IMPACTING ENTREPRENEURIALACTIVITIESThe entrepreneurial demographics of age, gender, work status, education, income andperceptions are all significant socio-economic factors in a person’s decision to start a business.Both India and China have been subjected to social behaviour systems that condemn profitseeking and advocates group orientation, conformity and respect for authority.However the East Asian economic miracles driven largely by diasporas of overseas Chineseentrepreneurs focused on values of persistence, diligence, thrift and family as strong supportingfactors for entrepreneurial development.Some important entrepreneurial values like creativity, innovation and flexibility were lacking inChinese value systems and thus cultural barriers to entrepreneurship. There has been ahistorically low social status of entrepreneurs in China, influenced also by political ideology anddegree of openness to foreign values. This value system incidentally is very similar to Indianvalue systems and leads to the most important characteristic barrier which is the ―fear of failure”and not being resilient enough to take on challenges and changing with the dynamic businessenvironment.In China, quitting one’s job at an SOE means sacrificing not only a stable income, but also fringe benefits such as housing and hence one needs to be more risk-loving thancounterparts elsewhere to overcome environmental barriers. Situation is very similar in Indiawith respect to the public sector vis-à-vis private sector which has of late broken down to a largeextent due to MNC influence and less stranglehold of political ideology as compared to Chineseregulated economy and also due to other business environment factors that we will discuss in thenext section.Some unique characteristics to entrepreneurs in China are political nimbleness and interpersonalharmony. Historically, China has been unpredictable. For example, Deng opened the doors toeconomic freedom, but also ruthlessness cracked down on demonstrators in Tiananmen Square. 95
  11. 11. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at is a valued intangible asset of Chinese entrepreneurs and back-up plans, dualcitizenship, low capital-requirement start ups allow for desired liquidity for overseas Chineseentrepreneurs in countries like Indonesia, Malaysia and Singapore.Hard work and liquidity are factors Chinese entrepreneurs use to hedge for unpredictableenvironment. Additionally, interpersonal harmony and guanxi are important factors for reducingrisk. Roughly translated ― guanxi‖ means connections and affiliations and implicit in this iscorruption, bribery and ― under the table‖ activities for licenses and Government approvals, verysimilar to the license-permit Raj prevailing in India till a few years back and to some extent eventoday in regulated sectors.The management structure of entrepreneurships in India and China were largely familycontrolled till the knowledge economy dawned and professionalized the environment with freeaccess to capital based on merit and innovation.With accelerating reform and increased exposure to the West, values in these countries are alsochanging. Perceptions of entrepreneurs are improving, and people are rushing to ―xiahai‖ (Thisphrase literally means go into the sea. Figuratively it means get rich by working in the private orforeign sectors).ATTITUDES TOWARD FAILURE/SUCCESSAs everyone knows, many individuals in China have been successful in developing businessesbecause the government cannot offer enough job opportunities. Their primary goal is to earnmoney and sustain their basic living conditions. But from the middle of the 1990s, with the risingstandard of living, increasing numbers of people set up new ventures not only to sustain theirlives or to make more money but also for self-development. According to a survey of 201 privateentrepreneurs in Hunan province, conducted by the Hunan Association of Business andCommerce and the Department of Hunan Unification, 41.79 percent of entrepreneurs there set upan enterprise to improve their living conditions, 16.91 percent to sustain their basic livingstandards, 18.41 percent to realize their self-value, 15.9 percent to contribute to society, 4.48percent to apply their specialties and 2.49 percent for other purposes. With more people engagedin business for purposes besides earning money, the criteria for judging whether an entrepreneuris successful or not depends not only on the money he/she has made, although money is the most item. Employees hired by private enterprises are seeking not only a higher income butalso to realize their self-value and have a free and fair working atmosphere, which is morecommon in high-tech private firms. But private enterprises cannot offer the same social securitybenefits as state-owned enterprises, including medical care, retirement pensions and evenunemployment benefits (for the government denied the phenomenon of unemployment for a longtime). Employees in private enterprises have higher mobility and a greater awareness of risk thanemployees in the state-owned units (including in the collective-owned units). Layoffs,resignations and a different kind of relationship between employers and employees are widelyaccepted. If dismissed, the employee is able to accept this result quietly and willing to try andfind other opportunities by him/herself. On the other hand, the entrepreneur also realizes that hisfirm, if poorly managed or if the product is rejected by the marketplace will become bankrupt,and he is also able to accept the fact and to try to find another new way to salvage his business. 96
  12. 12. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at the attitudes of the people toward entrepreneurial failure, Chinese believe that it isnatural and unavoidable since there are a great many storms in the ―market ocean‖ and it isimpossible to avoid drinking ocean water occasionally. So even when someone is a failure in themarket ocean, while he/she does ―go up the seaboard,‖ people look up to him/her, like to talkwith him/her and hope that he/she will be able to re-launch the enterprise in the near future.Similar attitudinal shifts have taken place in India since the mid nineties with more educatedprofessionals willing to take calculated risks and backed by better access to capital from venturecapitalists and private equity , besides improved institutional support from Government andothers like Wadhwani Foundation’s NEN ( National Entrepreneurship Network), NSRCEL (N.S.Raghavan Centre for Entrepreneurial learning), Entrepreneurship centres at IIT’s/IISc/IIM’sand various other Government schemes mainly targeting small and micro enterprises to boostemployment and take the load off public and Government sectors who have an increasinglylesser role to play in a market economy, other than improving the ecosystem and facilitatingentrepreneurship.The proliferation of domestic and foreign media and returning of non resident Indians fromSilicon Valley to establish their own ventures as well as fund start ups have highlightedentrepreneurship and given a much needed respectability which hitherto was not there amongmiddle class educated India, since profit seeking was considered to be anathema and only meantfor the uneducated or political class with no other options. Thus there has been a gradual shiftfrom necessity entrepreneurship to opportunity entrepreneurship and far less fear of failure sincede-risking is a strategic imperative which is taken care of by more educated and awareentrepreneurial classes.Adequacy of social and cultural norms for entrepreneurship in India is below the global averageas an integrated measure of various parameters. (Refer to Table 7 of Annexure)BUSINESS ENVIRONMENT FOR ENTREPRENEURIAL ACTIVITIESCHINAAfter the Cultural Revolution, with China’s economy in ruins and facing a crisis of legitimacy,Deng launched the ―Four Modernizations‖ reform in 1978 to stimulate economic growth. Thefirst step was de-collectivisation of agriculture creating the ―township and village enterprises‖(TVEs). By 1990 TVEs accounted for 20% of China’s gross output. These enterprises were not owned unlike SOE but collectively owned under local governments. Managers of TVEsdemonstrated many entrepreneurial characteristics, choosing the product line, funding, labour,raw materials and distribution channels and reacted to prices and costs in pursuit of profits. ThusTVEs can be seen as the beginnings of modern Chinese entrepreneurship.By late 1980’s there was a change of policy and surge towards the private sector. The centralgovernment’s recognition of waste and inefficiency generated by SOEs motivated individuals tomove into entrepreneurship and SOEs have been forcefully shrunk in late 90’s. The state runsector was contracting at least 3 million workers a year while fifty million join the work forceper year. SOEs are also encouraging employees to pursue advanced degrees. While this issocially uplifting, a problem exists with employing these students after they graduate, hence it 97
  13. 13. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at obvious that the Chinese system of ― iron rice bowl‖ ( lifetime employment with housingetc) was no longer a reliable method of survival and growth.Private entrepreneurship started with very small scale activities in retail and services, businessesknown as getihu, referred to as self-employed with low social status that were excluded from thestate system.The next wave was from the MNC/FDI dominated growth drivers and the foreign educatedChinese returning to China, especially in Internet sector, backed by venture capitalists fromUSA.All these entrepreneurial activities are subject to unpublished regulations ( neibu) and thecaprices of courts who often have retired military persons as judges. Access to resources likefunding, labour, technology has to be overcome since bank loans remain rare. Though venturecapital is in early growth phase, entrepreneurs in China are not accustomed to idea of writingbusiness plans and approaching VC’s, especially since it might mean giving up equity control.INDIAThe ecosystem in India has undergone a radical change since the days of Nehruvian socialismand theory of public sector occupying ―commanding heights of the economy‖. Much water hasflowed since the 1991 liberalization on issues of privatization, foreign investments both in termsof equity and portfolio investments and venture capital seeking good business plans to fund aftertheir successes in Europe, USA and Israel and partly in China. Of course this has been limited tosectors like clean technologies and communication start ups in Web 2.0 space, as is the trendglobally. VC’s seem to be more concerned with the health of the planet and how better tocommunicate for business and personal reasons, nanotechnology and medical devices as the nextfrontier for returns on investment.However some of the basic factors of financial support to new firms (state funding), governmentprograms and policies, education systems and infrastructure, R&D/technology transfer, taxationand accounting/professional services have played a stellar role in facilitating and encouragingentrepreneurship at all levels of society across regional disparities and without discrimination ongrounds of gender, caste, sex, etc. Refer to Table 8, 9,10,11,12,13,14,15, & 16 of Annexurewhich give a good indication of the status of these parameters with respect to global averagesand show the way forward. FINDINGS & CONCLUSIONSWhile the study has limitations in terms of more concrete quantitative and qualitative dataregarding the Chinese entrepreneurial dynamics and more recent advances taking place in theIndian economy could be incorporated in a more exhaustive paper, what is clearly evident issummarized below: a. Both the economies are growing at an increasing speed with an immense contribution from the entrepreneurial class who are being supported and facilitated with dynamic improvements taking place in the ecosystem for entrepreneurial activity. 98
  14. 14. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at b. There is a conclusive and systematic relationship between per capita GDP and entrepreneurial activity as measured by TEA (total entrepreneurial activity) as per Global Entrepreneurship Monitor reports which compare the differences in entrepreneurial activity between different sets of countries and their correlation with GDP levels. c. What needs to be further analyzed is what changes in levels of entrepreneurial activity can impact the per capita GDP and also what would be the time lag between improving the entrepreneurial activity and resulting increase in per capita GDP. This kind of detailed analysis would give more accurate quantitative tools for policy makers to support and facilitate entrepreneurship and allocate financial resources with more certainty of cause and effect relationship. d. Social and cultural value systems undoubtedly play a critical role in catalyzing entrepreneurship activities and more university/ institutions of excellence should initiate entrepreneurship cells, business incubators and entrepreneur-in-residence programs to drive growth and employment through faster technology transfer and robust R&D activities. e. The Government and financial / legal systems have a major role in deepening the access to capital, providing subsidies to emerging clean technologies which are globally imperative to improve the health of the citizens and communication/networking across borders and ensuring the rule of law to reconcile the twin objectives of growth with equity along-with sustainability as the cornerstone of development in the global market economy.REFERENCESStanford Journal of East Asian Affairs, Spring 2001,Vol 1., The Development of ModernEntrepreneurship in China by Debbie Liao and Philip SohmenKnowledge @ Wharton; http://www. knowledge.wharton.upenn.eduhttp://www.edcorner.stanford.edu of Private Entrepreneurship in China-Process, Problems and Countermeasures byYinqiu Liu, Senior Research Fellow and Professor of Economics at the Chinese Academy ofSocial Sciences.http://www.worldbank.orgGlobal Entrepreneurship Monitor Report: India Report 2001 and Global Report 2006, BabsonCollege US and London Business School; http://www.gemconsortium.orgThe Indus Entrepreneurs ( TiE); 99
  15. 15. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at Society,New York; http://www.asiasociety.com; International Finance CorporationVentureOne ; http://www.ventureone.comPWC; http://www.pwcglobal.com; Indian Venture Capital AssociationTSJ MediaKPMG Reports, Oneline Magazine, http://www.yaleglobal.yale.edu; Mckinsey Global InstituteNishith Desai Associates; http://www.nishithdesai.comMira Kamdar: Praise for Planet India: How the Fastest-Growing Democracy isTransforming America and the World AT Kearney;― Everyday Entrepreneurs‖ by Aruna BhargavaThe High Performance Entrepreneur by Subroto Bagchi ; Founder of MindtreeConsulting,BangaloreNSRCEL, N.S.Raghavan Centre for Entrepreneurship learning.IIM,Bangalore;http://www.iimb.ernet.inIIT, Delhi,Mumbai, Chennai;; Sachs, Venture Capital Journal; & Young,; 2006 VC Insights ReportBoston Consulting Group,; 2006 Global VC ReportPlanning Commission of India; http://www.planningcommissionindia.nic.inNCAER,, National Centre of Applied Economic Research 100
  16. 16. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at,, Centre for Monitoring of Indian EconomyWadhwani Foundation, NEN, http://www.nenonline.orgHarvard Business School,; HBS Working Knowledge2006 Global Venture Capital Report; Economic Outlook: IMF; http://www.imf.orgBank for International Settlements: http://www.bis.orgInternational Labour Organization; http://www.ilo.orgUnited Nations: 101
  17. 17. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at TABLE 2 : Global Entrepreneurship Monitor Report 2006 102
  18. 18. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at TABLE 3: GEM CONCEPTUAL MODEL: THE TOTAL PROCESS Major established General National Firms Framework conditions National Micro, Economic Small & Growth Social, cultural, medium GDP political context Firms Jobs Entrepreneurial Entrepreneurial Framework Opportunities Business conditions Churning Entrepreneurial capacitySource : Global Entrepreneurship Monitor Report 2006 TABLE 4: GEM CONCEPTUAL MODEL : ELABORATION OF GENERAL FRAMEWORK CONDITIONS Major General National Framework established Conditions Firms Openness (external Trade) Social, Government (extent, Role) cultural, National political Financial Markets (efficiency) Economic context Technology, R&D (level, Growth intensity) GDP Infrastructure (efficiency) Jobs Management (Skills) Labor Markets (Flexibility) Micro, Institutions (unbiased rule of Small & Law) medium Firms 103
  19. 19. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at : Global Entrepreneurship Monitor Report 2006 TABLE 5: GEM CONCEPTUAL MODEL : ELABORATION OF ENTREPRENEURIAL FRAMEWORK CONDITIONS Entrepreneurial Entrepreneurial Framework Opportunities Conditions Financial Support Social, National Government Policies cultural, Business Economic political Government programs Growth Education and Training Churning context GDP R&D transfer Jobs Commercial Infrastructure Internal market openness Physical Infrastructure Entrepreneurial Cultural, Social Norms capacitySource : Source : Global Entrepreneurship Monitor Report 2006 104
  20. 20. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at TABLE 6 : Source : Global Entrepreneurship Monitor Report 2006 105
  21. 21. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 7: Adequacy of Social and Cultural Norms (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Entrepreneurship is arespected way to get rich 3.44 3.33 2.27 4.68 3.4 Japan USAEntrepreneurship is a goodcareer choice for most 2.81 2.24 2.17 4.31 2.99 Finland IsraelRespect / status for successfulentrepreneurs 4.14 3.69 2.56 4.61 3.54 Australia USAMedia reports many stories ofsuccessful entrepreneurs N.A. 3.79 2.77 4.2 3.55 Norway IsraelPeople think that only theunemployed start new firms 2.92 3.24 2.58 4.44 3.45 Brazil IsraelAVERAGE 3.43 3.26 2.87 4.45 3.38 Sweden USASource : Global Entrepreneurship Monitor Report , India Report 2001Table 8: Financial Support to New Firms (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Equity funds for new/growingfirms available 1.69 3.14 2.18 4.17 3.17 Argentine USADebt funds for new/growing firmsavailable 2.03 3.54 1.82 4.19 3.05 Argentine USAPublic subsidies promotestartups 3.23 3.14 1.39 4.16 3.13 Argentina GermanyPrivate individuals are an source of funds 3.36 3.23 1.93 4.62 3.26 Brazil USAVCs are an important source offunds 2.89 3.22 1.87 4.57 3.21 Italy USAIPOs are an important source offunds 3.38 N.A. 1.21 4.19 3.22 Argentina GermanyAVERAGE 3.19 3.18 1.99 4.3 3.08 Argentina USASource : Global Entrepreneurship Monitor Report , India Report 2001 106
  22. 22. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 9: Government Policy on New Firms (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Government Policy favoursnew firms 2.34 2.06 1.38 3.04 2.26 Argentina USANew firms receive support fromthe national government 2.78 2.58 1.26 3.78 2.93 Argentina UKNew firms receive support fromthe local government 2.91 2.75 1.45 3.58 2.94 Argentina FinlandNew firms get permits/licensesin about a week 1.17 1.36 1.12 3.24 1.90 Argentina SingaporeAmount of taxes not a burdenfor new/growth firm 2.55 2.47 1.35 3.70 2.36 Argentina IrelandGovernment regulations arepredictable/consistent 2.66 2.56 1.24 4.11 2.59 Argentina SingaporeAVERAGE 2.40 2.30 1.30 3.45 2.50 Argentina IrelandSource : Global Entrepreneurship Monitor Report , India Report 2001Table 10: Government Programs for New Firms (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Government provides one stopservice to new firm 1.80 2.20 1.21 3.42 2.33 Argentina SingaporeScience parks / incubators helpstart up of firm 2.57 2.67 1.79 3.97 3.09 Argentina FranceNew firm programs of thegovernment are adequate 2.86 2.47 1.35 4.31 3.01 Argentina Germany personnel arecompetent/effective 2.14 2.19 1.48 3.43 2.54 Argentina IrelandAnybody needing new firmassistance can find it 2.03 1.83 1.33 3.53 2.40 Argentina GermanyAVERAGE 2.28 2.27 1.43 3.57 2.67 Argentina GermanySource : Global Entrepreneurship Monitor Report , India Report 2001 107
  23. 23. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 11: Entreprenuerial capacity and the Education System (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Education system encouragesself reliance 1.69 1.92 1.56 2.94 2.21 Portugal USAEducation system,/economicmarket infrastructure adequate 1.58 1.72 1.47 2.59 1.99 Portugal IrelandEducation system gives attentionto entrepreneurship 1.36 1.64 1.28 2.32 1.76 Portugal IrelandCollege/universityentrepreneurship course areadequate 2.22 2.06 1.64 3.24 2.52 Portugal SingaporeBusiness/managementeducation is world-class 3.44 3.33 2.03 3.97 2.98 Japan SpainAVERAGE 2.06 2.13 1.65 2.84 2.29 Portugal SingaporeSource : Global Entrepreneurship Monitor Report , India Report 2001Table 12: Research & Development Transfer (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Technology transfer betweenuniversities and firms iseffective 2.14 2.00 1.73 3.24 2.43 Italy USANew firms have good accessto R&D 2.03 2.24 1.67 3.00 2.20 S. Africa BelgiumNew firms cannot afford newtechnologies 4.06 2.31 1.72 3.18 2.33 Mexico Belgium governmentsubsidies for new firm R&D 2.58 2.33 1.44 3.28 2.50 Argentina FranceWorld class R&D technologyavailable in at least one sector 2.78 3.11 1.73 4.16 3.15 Argentina FranceAVERAGE 2.72 2.40 1.87 3.26 2.52 Argentina BelgiumSource : Global Entrepreneurship Monitor Report , India Report 2001 108
  24. 24. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 13: Commercial, Legal & professional Infrastructure (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Adequacy of suppliers / subcontractors for new firms 3.80 3.14 2.08 4.42 3.38 Japan USASuppliers / sub contractorscost is affordable by new firms 2.11 2.97 3.51 2.88 2.84 Japan SpainEasy for new firms to getquality suppliers/subcontractors 1.80 3.03 1.84 3.77 3.01 Japan BelgiumNew firms get goodlegal/accountancy services 3.36 2.64 2.22 3.36 2.59 Japan USANew firms get good bankingservice 3.03 3.65 1.43 4.11 3.19 Japan USAAVERAGE 3.26 3.27 1.94 3.91 3.16 Japan USASource : Global Entrepreneurship Monitor Report , India Report 2001Table 14: Market Openness and Ease of entry(2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Dynamism of consumer market 2.80 3.46 2.02 4.11 2.88 Norway S. KoreaDynamism of business market 2.52 2.97 2.21 3.71 2.84 Norway S. KoreaBarriers to market entry are toohigh 3.20 2.68 2.13 3.64 2.78 S. Africa USANew firms can afford to enternew markets 1.69 2.64 2.10 3.36 2.59 S. Africa USA firms don’t blockmarket entry 1.49 2.62 1.97 3.80 2.77 Japan ItalyAnti-trust regulation is wellenforced 1.49 1.97 1.67 3.58 2.82 New Argentina ZealandAVERAGE 3.14 2.72 2.38 3.33 2.78 S. Africa USASource : Global Entrepreneurship Monitor Report , India Report 2001 109
  25. 25. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 15 : Adequacy of Physical Infrastructure (2001)Scale : 1- Completely false INDIA INDIA LOWEST HIGHEST AVERAGE 5 - Completely true 2000 2001 GEM 2001Physical Infrastructure good fornew/growing firms 2.28 2.20 2.20 4.58 3.35 India SingaporeCheap communication accessfor new/growing firms 3.31 3.49 2.67 4.47 3.62 Hungary GermanyNew/growing firms getcommunication access inabout a week 2.25 2.74 2.00 4.50 3.55 Spain SingaporeNew/growing firms can affordthe utility costs 3.31 2.64 2.22 2.69 2.59 Japan SingaporeNew/growing firms get utilityaccess in about a month 2.51 2.64 2.64 4.63 3.75 India SingaporeAVERAGE 2.73 2.90 2.90 4.46 3.66 India SingaporeSource : Global Entrepreneurship Monitor Report , India Report 2001 110
  26. 26. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at 16 : Ease of starting businessEconomy CHINA INDIAYear 2003 2004 2005 2006 2003 2004 2005 2006 .. .. 108 93 .. .. 138 134Ease of Doing Business Rank Starting a BusinessRank .. .. 141 128 .. .. 102 88 13 13 13 13 11 11 11 11Procedures (number)Time (days) 48 48 48 35 89 89 71 35 17.8 15.9 13.6 9.3 53.4 49.5 62 73.7Cost (% of income per capita) 1,236.50 1,104.20 946.7 213.1 0 0 0 0Min. capital (% of income percapita) Dealing with LicensesRank .. .. 151 153 .. .. 154 155Procedures (number) .. .. 28 29 .. .. 20 20Time (days) .. .. 359 367 .. .. 270 270 .. .. 101.1 84 .. .. 678.5 606Cost (% of income per capita) Employing WorkersRank .. .. 77 78 .. .. 113 112 11 11 11 11 33 33 33 33Difficulty of Hiring Index 20 20 20 20 20 20 20 20Rigidity of Hours IndexDifficulty of Firing Index 40 40 40 40 70 70 70 70 23 23 24 24 41 41 41 41Rigidity of Employment Index .. .. 44.5 44 .. .. 16.8 16.8Nonwage labor cost (% of 91 91 91 91 55.9 55.9 55.9 55.9Firing costs (weeks of wages) Registering PropertyRank .. .. 21 21 .. .. 108 110 .. 3 3 3 .. 6 6 6Procedures (number)Time (days) .. 32 32 32 .. 62 62 62 .. 3.1 3.1 3.1 .. 13.1 7.9 7.8Cost (% of property value) 111
  27. 27. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at CHINA INDIAYear 2003 2004 2005 2006 2003 2004 2005 2006 Getting CreditRank .. .. 117 101 .. .. 96 65Legal Rights Index .. 2 2 2 .. 4 4 5 .. .. 3 4 .. .. 2 3Credit Information IndexPublic registry coverage .. .. 0.4 10.2 .. .. 0 0(% adults)Private bureau coverage .. .. 0 0 .. .. 1.7 6.1(% adults) Protecting InvestorsRank .. .. 114 83 .. .. 33 33Disclosure Index .. .. 10 10 .. .. 7 7 .. .. 1 1 .. .. 4 4Director Liability Index .. .. 2 4 .. .. 7 7Shareholder Suits IndexInvestor Protection .. .. 4.3 5 .. .. 6 6Index Paying TaxesRank .. .. 169 168 .. .. 159 158Payments (number) .. .. 48 48 .. .. 59 59Time (hours) .. .. 872 872 .. .. 264 264Profit tax (%) .. .. .. 17.7 .. .. .. 14.3Labor tax and .. .. .. 51 .. .. .. 19.4contributions (%)Other taxes (%) .. .. .. 8.3 .. .. .. 47.4 .. .. 77.4 77.1 .. .. 95.2 81.1Total tax rate (% profit) Trading Across BordersRank .. .. 35 38 .. .. 139 139Documents for export .. .. 6 6 .. .. 10 10(number) .. .. 20 18 .. .. 36 27Time for export (days)Cost to export (US$ per .. .. 335 335 .. .. 863 864container)Documents for import .. .. 11 12 .. .. 15 15(number) .. .. 24 22 .. .. 43 41Time for import (days)Cost to import (US$ per .. .. 375 375 .. .. 1,244 1,244container) 112
  28. 28. EXCEL International Journal of Multidisciplinary Management StudiesVol.2 Issue 4, April 2012, ISSN 2249 8834Online available at CHINA INDIAYear 2003 2004 2005 2006 2003 2004 2005 2006 Enforcing ContractsRank .. .. 59 63 .. .. 173 173Procedures 31 31 31 31 56 56 56 56(number)Time (days) 292 292 292 292 1,440 1,420 1,420 1,420 26.8 26.8 26.8 26.8 35.7 35.7 35.7 35.7Cost (% of debt) Closing a BusinessRank .. .. 69 75 .. .. 128 133Time (years) 2.4 2.4 2.4 2.4 11.3 10 10 10Cost (% of 22 22 22 22 9 9 9 9estate)Recovery rate 31.7 31.7 31.5 31.5 10.6 12.2 12.8 13(cents on thedollar) Economy CharacteristicsGNI per capita .. .. 1,290 1,740 .. .. 620 720(US$) .. .. 13.1 .. .. .. 23.1 ..Informal economyestimate (% GNP)Population .. .. 1,290,000,000 1,304,500,000 .. .. 1,060,000,000 1,094,583,000Source : Doing Business – The World Bank Group Report 113