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Entrepreneurship and Small Business: Unit No. 3

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As per PTU Syllabus BBA, Unit No. 3: Understanding Entrepreneurship: concept and definitions, entrepreneurial characteristics and skills, importance and significance of growth of entrepreneurial activity, classification and types of entrepreneurs; entrepreneurial competencies, theories of entrepreneurship, factor affecting entrepreneurial growth – economic, non-economic factors; entrepreneurial training; entrepreneurial success and failures, Ethics and Social Responsibility of an Entrepreneur.

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Entrepreneurship and Small Business: Unit No. 3

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  3. 3. • "When you reach an obstacle, turn it into an opportunity. You have the choice. You can overcome and be a winner, or you can allow it to overcome you and be a loser. The choice is yours and yours alone. Refuse to throw in the towel. Go that extra mile that failures refuse to travel. It is far better to be exhausted from success than to be rested from failure. • - Mary Kay Ash, founder of Mary Kay Cosmetics
  4. 4. • Fortunately, right now 'entrepreneurship' is one of the business world's biggest buzz words and so many young people in our country are looking up to this new generation of CEO's as their modern day rock stars. Whenever you have that effect, it makes the job of promoting entrepreneurship much easier. • Daymond John 4
  5. 5. 5 SMALL MEDIUM BUSINESS & ENTREPRENEURSHIP
  6. 6. 1. Instructor: Amit Sethi 2. Go through the course plan and syllabus 2
  7. 7. LEARNING OBJECTIVES 7 • To understand the basics of entrepreneurship
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  9. 9. News Article • Young entrepreneurs quitting corporate jobs to solve real world problems in rural India. (Article from Economic times 16th Aug 2013, Emerging Businesses)
  10. 10. News
  11. 11. Some Facts about new businesses • There are about 4200 venture funded start up in India. • India has jumped 12 places in Ease of business index and currently at 130th position • It takes around 29 days to start a new business in India while in New Zealand it takes only half an day 11
  12. 12. • When it comes to complete filing process it takes around 4.3 years while in Singapore its only 0.8 years • In terms of payment of tax, India ranks a low 157 owning to a complicated tax structure and number of declaration made every year. 12
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  15. 15. Flipkart • A quick glance at Flipkart's timeline shows it was to start as a price comparison platform, but there weren't enough e- commerce sites to compare. So, both the Bansals, who were colleagues at IIT-Delhi, and then at Amazon.com, thought, “why not start an e-commerce site?”  • From a start-up with an investment of just four lakhs rupees, From 2011 to 2014, Flipkart grew its sales from $10 million to an annualized $2 billion, an over 100 times growth in three years.
  16. 16. Entreprendre (derived from French word) which means to initiate or undertake The word entrepreneur is approx. 180 years old, having come into English from French in 1828
  17. 17. ENTREPRENEURSHIP may defined in various ways, but the four key elements involved in it are: i. Innovation. ii.Risk-taking. iii.Vision. iv.Organising skill.
  18. 18. Entrepreneur An entrepreneur is an individual or team that identifies the opportunity, gather the necessary resources, creates and ultimately responsible for the performance of the organization.
  19. 19. LEARNING OBJECTIVES • To get a clarity on characteristics of the entrepreneurs.
  20. 20. "Focus on simplicity, listen to your customers and iterate if you fail.“-Jan Koum
  21. 21. "Focus on simplicity, listen to your customers and iterate if you fail.“-Jan Koum • “Almost five years ago we started WhatsApp with a simple mission: building a cool product used globally by everybody. Nothing else mattered to us.” • The company employs 55 people and sold to Facebook for US$19 billion. As of 22 April 2014, WhatsApp had over 500 million monthly active users, 700 million photos and 100 million videos are shared each day, and the messaging system handles more than 10 billion messages each day
  22. 22. Who is Entrepreneur? At least a Person Who is a Person Any Human Being (but human are unique and critical) Has own i) thinking, ii) working style and iii) reaction after receiving (may be right or wrong in one’s view)
  23. 23. Entrepreneur is a ‘Person’, who is IPS I - Ability to initiate and Innovate P - Can generate Profit and S - Work is dedicated to Society
  24. 24. Organization Skills Urge Enterprise Risk Innovation Management Growth Vision
  25. 25. What is Entrepreneurship? It refers to a process of action an entrepreneur undertakes to establish his enterprise. It is a creative and innovative response to the environment It is a process; how he works?
  26. 26. Characteristics of Entrepreneurship
  27. 27. Entrepreneurship Decision Strong Desire to Reap Benefits Construction Skills Innovative Urge Gap-Filing Function Risk Bearing Leadership Quality Dynamic Process Management skills Economic Activity
  28. 28. Entrepreneurship Traits/ Competencies • Mental Ability • Clear Objectives • Business Secrecy • Human Relation Ability • Effective Communication • Technical Knowledge • Decision Making • Risk-Bearing • Self-Confidence
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  30. 30. Why Entrepreneurship YOU Your Family SOCIETY Country Why to become ‘Entrepreneur’?
  31. 31. For You own organization work for yourself total satisfaction high motivation secured future charm for life family business support to family social attribute For Society employment opportunities in India develop the entrepreneurial culture among the business community augment national GDP and improve BOP migration of qualified people to other country for employment. Prevent people to indulge in anti social activities and thereby lead to crime.
  32. 32. THINK ABOUT YOU Your Family SOCIETY Country MOTIVATION Employee Promotion Increment Facility Entrepreneur Success Charm Self Actualization Reality Dream
  33. 33. http://www.redbus.in - Phanindra Sama & Charan Padamaraju • Our culture - Learn, Implement, Grow - and have fun • Second largest in India, only after IRCTC • 12 million tickets an year • Made to the list of top 50 most innovative companies in the world by business magazine ‘Fast Company’
  34. 34. Poochka Corner 35
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  36. 36. Types of Entrepreneur: Classification on the basis of ownership • Founder or "Pure Entrepreneurs" : Example : Dhirubhai Ambani of the Reliance Group. • Second-generation operators of family-owned business. Example : Like Mukesh Ambani and Anil Ambani sons of Dhirubhai Ambani of the Reliance Group now split into two: Reliance Industries Limited and Reliance-Anil Dhirubhai Ambani Group.
  37. 37. • Franchisees : Example : NIIT has given its franchisee operations to local players after thorough scrutiny and proper training. • Owner-Manager : When a person buys a business from the founder and then invests his time and resources in it he is called the owner-manager. Example : Like Sabeer Bhatia is the founder entrepreneur of Hotmail. 38
  38. 38. Types of Entrepreneur: Classification on the basis of personality traits and style of running the business • The Achiever : These types of entrepreneurs have personal desires to excel. The desire to make a mark in society, the desire to prove their excellence • The Induced Entrepreneur : These types of entrepreneurs are induced by some external factors to start a business.   • The Idea Generator : Creative people who are always in search of innovative ideas for setting up new business ventures.
  39. 39. Types of Entrepreneur: Classification on the basis of personality traits and style of running the business •The Real Manager : The real managers run the business in a systematic manner. They analyse business situation, assess the demands of future, both in terms of opportunities and threats and then take actions based on the above assessments. •The Real Achievers : The real achievers are full of life. They are looking for the achievement of not even their goals but also of people associated with themselves like employees, suppliers and distributors.
  40. 40. Types of Entrepreneur: Classification on the basis of the type of business • Industrial Entrepreneur : Industrial entrepreneur is an entrepreneur who is into manufacturing of a product. E.g:- CK Ranganathan, Chic Shampoo, CavinKare, other products are Nyle and Spinz • Trading entrepreneur is one who undertakes trading activities and is not concerned with the manufacturing of products. E.g .Dhirubhai’s yarn trading
  41. 41. • Corporate Entrepreneur : Corporate entrepreneur is a person who demonstrates his innovative skill in organizing and managing a corporate undertaking which is registered under some act that given it a separate legal entity.e.g. Tata’s • Agricultural Entrepreneur : Agricultural entrepreneurs are those entrepreneurs who undertake business related to agricultural activities. Like farm equipments, fertilizers and other inputs of agriculture. E.g. Anand Mahindra 42
  42. 42. Types of Entrepreneur: Classification on the basis of the Development 1. First Generation Entrepreneur 2. Modern Entrepreneur 3. Classical Entrepreneur
  43. 43. Others 1. Innovative Entrepreneur 2. Imitative Entrepreneur 3. Drone Entrepreneur 4. Copreneur
  44. 44. LEARNING OBJECTIVES • To get clear understanding on the various traits and qualities required to become an entrepreneur and functions performed by entrepreneur.
  45. 45. Qualities & Functions of the Entrepreneurs • Qualities: 1. Planner 2. Technician 3. Risk bearing abilities 4. Decision maker 5. Ability to find and explore opportunities 6. Motivator 7. Future oriented 8. Interpersonal skills 9. Facing uncertainty 10.Coordination
  46. 46. • Functions: 1. Risk taking and uncertainty bearing 2. Taking business decision 3. Managerial functions 4. Innovation 5. Coordination 6. Maintain good-relation 7. Analysis of the environment 8. Planning 9. Utilization of the resources
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  49. 49. Head Held High Sunil Savara, Madan Padaki and Rajesh Bhat, •"From being absolutely illiterate, they acquired the ability to converse in English, work on computers and essentially, work like any other employee in a high-tech industry, in less than eight months," says Rajesh Bhat, co-founder and chief executive of Head Held High Services, which started operations in October 2012. •Padaki terms the rural youth "rubans". They mirror the urban youth in many ways---talent; entrepreneurship and tech- savviness.
  50. 50. LEARNING OBJECTIVES • To know about the importance of entrepreneurs in economic growth and their role in it.
  51. 51. Economic growth • Economic growth is a process in which all efforts are made to increase national income, national output , per capita income , per capita output and standard of living of people by exploiting all the available resources of country.
  52. 52. • The position of the entrepreneur in modern production is like that of the director of a play. Modern economic development is closely linked with production. Modern production is higher complex. The entrepreneur directs production and he must do whatever is necessary for its success.
  53. 53. Role and Importance of Entrepreneur in Economic Growth 1. The entrepreneur coordinates the factors of production. This involves not only assembling the factors, but also to see that the best combination of factors is made available for the production process. 1. The entrepreneur takes risk. This is an important function of the entrepreneur and the quantum of profit he receives is directly proportionate to risk he takes. Risks are generally based on anticipation of demand.
  54. 54. 3. The entrepreneur innovates and he can undertake anyone type of the following five categories of innovation: a. The introduction of a new good or new quality of good. b. The introduction of a new method of production. c. The opening of a new market. d. The conquest of a new source of supply of raw material. e. The carrying out of a new organization of any industry.
  55. 55. Economic Development
  56. 56. • Economic development applies in the context of people's sense of morality (right and wrong, good and bad). • The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice • The economic development of a country to a large extent depends on human resources. But human resource alone will not produce economic development-there must be dynamic entrepreneurs.
  57. 57. Importance of Entrepreneur in Economic Development • Employment Generation • National Income • Dispersal of Economic Power • Balance Regional Development • Economic Independence • Reducing Unrest and Social Tension Amongst Youth. • Improvement in Living Standard • Harnessing Locally Available Resources and Entrepreneurship. • Innovation in Enterprises
  58. 58. ASSESS YOUR SUITABILITY FOR ENTREPRENEURSHIP • Assess your interests • Hobbies and interests • Past experiences • Assess your aptitude • Assess the advantages of entrepreneurship • Assess the disadvantages of entrepreneurshipSli de 67
  59. 59. ADVANTAGES OF ENTREPRENEURSHIP • Entrepreneurs are their own bosses. • Entrepreneurs can choose a business that interests them. • Entrepreneurs can be creative. • Entrepreneurs can make lots of money. Sli de 68
  60. 60. DISADVANTAGES OF ENTREPRENEURSHIP • Entrepreneurship is risky. • Entrepreneurs face uncertain and irregular incomes. • Entrepreneurs work long hours. • Entrepreneurs must make all decisions by themselves. Sli de 69
  61. 61. LEARNING OBJECTIVES • To understand factors affecting Entrepreneurial growth
  62. 62. • Trishneet Arora • Ethical hacker • TAC Security Solution • North India’s first cyber Response team 71
  63. 63. • Clients Including: Reliance, CBI, Punjab Police & 40% of them are aborad • Turnover: 2 Crores • Corporate Office in Ludhiana & Virtual Office in UK and Dubai 72
  64. 64. CHARACTERISTICS OF SUCCESSFUL ENTREPRENEURS Successful entrepreneurs • are independent • are self-confident • have determination and perseverance • are goal-oriented • have a need to achieve and to set high standards for themselves • are creative • are able to act quickly Sli de 73
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  66. 66. Social Factors • Practical Values • Emotional Block • Cultural Barriers • Respect for Entrepreneurs • Traditional Binding • Defective administrative and Compliance System 75
  67. 67. Personal Factors • Lack of Sustained Motivation • Difficulty and Ambiguity • Impatience in solving problems • Inability to dream and use subconscious
  68. 68. Learning Objective • To understand Ethical and Social Responsibility of Entrepreneur 77
  69. 69. “Our concern for good behaviour. We feel an obligation to consider not only our own personal well being but also that of others”. Albert Schweitzer
  70. 70. Main Idea Entrepreneurs must do more than provide jobs and make a profit. They also are expected to run their business responsibly.
  71. 71. An Entrepreneur’s Main Responsibilities • Economic - be profitable • Legal - obey the law • Ethical - do what is right • Discretionary - contribute to community and quality of life
  72. 72. Entrepreneurs and Social Responsibility Being a responsible entrepreneur involves more than philanthropy. philanthropy the act of making charitable donations to improve the welfare of society
  73. 73. Entrepreneurs and Social Responsibility For a business to survive, it must exhibit social responsibility. social responsibility the principle that companies should contribute to the welfare of society and not be solely devoted to maximizing profits
  74. 74. Entrepreneurs and Social Responsibility 83
  75. 75. Your Responsibility to Customers Guidelines for your responsibility to customers include: Do not mislead customers. Give complete information regarding proper use. Label unsafe products as such. Offer the best quality products at the lowest prices.
  76. 76. Your Responsibility to the Environment The Environmental Protection Agency (EPA) enforces environmental laws and regulations. environmental protection agency an independent federal agency established to coordinate programs and enforce regulations aimed at reducing pollution and protecting the environment
  77. 77. Your Responsibility to the Environment To protect the environment: Employ environmental affairs personnel. Eliminate wasteful practices and emissions of pollutants from manufacturing processes. Improve products to increase efficiency.
  78. 78. Contributing to the Community Many small businesses have found ways to be generous to the community, including: donating their products and services involving employees in philanthropy joining with other companies to promote social responsibility
  79. 79. Being a Socially Responsible Employer As a small business owner, you have a responsibility to treat your employees fairly.   You can offer flextime, health care, telecommuting, on-site child care, and assistance to employees with impairments.
  80. 80. Being a Socially Responsible Employee Personal responsibility is the basis of social responsibility.   Responsible employees maintain high ethical standards when dealing with coworkers, management, and customers.
  81. 81. ETHICS • The word ethics is derived from the Greek word “Ethikos” which means character. • Dictionary meaning – “system of moral principles, rules and conduct.” • Ethics is defined as the ability to distinguish between right and wrong and to act accordingly.
  82. 82. Ethical Responsibility Ethics are guidelines for human behavior. They are the moral code by which people live and conduct business. Ethics help people decide how to act in situations where moral issues are involved.
  83. 83. Making Ethical Decisions • Character and integrity strongly influence personal relationships. • Your character is based on internal values. • Character is based on internal values and resulting judgments. • Ethical decisions reflect the strength of your character. 5-93
  84. 84. What Does It Mean to Be Ethical? It is important for an entrepreneur to have clear ethics policies governing ethical behavior, because not everyone has the same standards. ethics guidelines for human behavior; the moral code by which people live and conduct business ethical behavior conduct that adheres to the moral code by which people live and conduct business
  85. 85. Understanding Your Values The benefits of understanding your value system are: You make better decisions because you base them on your values. You are able to persuade others to agree with you when you are confident about your values. You usually do not regret decisions you make based on your values.
  86. 86. What Are Business Ethics? A business owner without good business ethics can not expect his or her employees to act ethically. business ethics the study of behavior and morals in a business situation
  87. 87. Are Everyone’s Ethics the Same? People do not share the same ethical values.   Because not everyone has high ethical standards, entrepreneurs need to create clear ethics policies.
  88. 88. Developing a Code of Ethics Many entrepreneurs develop an explicit code of ethics that spells out appropriate business conduct. code of ethics ethical behavior guidelines that govern the day-to-day activities of a profession or organization
  89. 89. Special Problems for Entrepreneurs Entrepreneurs have some typical ethical problems. Conflicts of interest Bribes Desperate measures Cultural differences Patent of copyright infringement
  90. 90. Conflict of Interest If an entrepreneur faces a conflict of interest, he or she should not put aside ethics to meet a short-term goal. conflict of interest a clash between a person’s private interests and his or her responsibilities in a position of trust
  91. 91. Bribes In some parts of the world, bribes are an accepted part of doing business. bribe a payment made to secure special services for a business or special consideration for its products Bribes are illegal in the United States.
  92. 92. Entrepreneurial Failure • Survival Driven (Seeking Money before Adding Value) • Inadequate Knowledge (Low Business IQ) • Lack of Focus (Jack of all Trade): “genius is the ability to focus on one particular thing for a long time without losing concentration.” • Fear of Failure (Risk-Averse) • Lack of Vision (Shortsightedness) • Poor Money Management (Extravagance) • I Can Do Well All by Myself (Insecurity) 102
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  94. 94. Walt Disney • Walt Disney is the businessman behind the very successful theme park “Walt Disney World“.  Walt Disney was reportedly fired by a newspaper editor for not having good ideas and no imagination.  Disney World is currently valued at  $35 Billion dollars. 104
  95. 95. Thomas Edison • Before becoming successful, Thomas Edison tried more than 10,000 times to invent the light bulb.   When Asked about his failures, Edison stated that he knew “definitively over 9,000 ways that an electric light bulb will not work.” 105
  96. 96. Fred Smith • Founder of hugely successful company “Fed Ex” Smith’s college professor stated that his concept of Federal Express was “interesting, but not feasible”. 106
  97. 97. Steve Jobs • Steve Jobs  was actually fired from Apple Computers,  the very company that he is responsible for making it the success it is today.  When Jobs was fired from Apple, he was quoted stating “I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.” 107
  98. 98. Oprah Winfrey • Hailed as the “ Queen of Daytime Talk TV” Winfrey was fired from her news reporter gig at a Baltimore news station.  Oprah went on to build a successful following from her daytime talk show “The Oprah Winfrey Show”.  Oprah’s net worth is currently valued at 2.7 billion dollars. 108
  99. 99. Steven Spielberg • Steven Spielberg was rejected from film school 3 times before getting his huge break.  Spielberg is known for directing mega hits that include Jurassic Park and Jaws. 109
  100. 100. Bernie Marcus and Arthur Blank • Founders of the home improvement chain “The Home Depot” Marcus and Blank were fired from Corporate America in 1989.  These savvy businessmen went on to turn their Big Box store into a huge success and currently have over 2,200 retail stores in the United States with revenues exceeding 74.8 billion dollars. 110
  101. 101. Colonel Sanders • Colonel Sanders is the entrepreneur who founded KFC “Kentucky Fried Chicken” when he was 56 years old.  His recipe was reportedly rejected over 1,000 times before a restaurant picked it up. 111
  102. 102. Henry Ford • Ford founded two automotive companies that failed before he was able to gain success with the Ford Motor Company. At his time of death,  Ford’s estimated net worth was $188 billion dollars. 112
  103. 103. Lybrate • Founder: Rahul Narang and Saurabh Arora • Mobile App: Online OPD • Service Offered: It offers, among others, free interaction with doctors, paid consultation with specialists, audio and video calling facilities between doctors and patients, and a regular health feed on more than 400 topics. nearly two million apps were downloaded in a year • Fund raising: $11.43 in two rounds from Tiger Global, Nexus Venture Partners and Ratan Tata 113
  104. 104. Learning Objective • To understand different types of Entrepreneurship theories. 114
  105. 105. A Function of Innovation: By Joseph Schumpeter • Entrepreneurship : A Function of Innovation: Joseph A. Schumpeter (1934), for the first time, put the human agent at the centre of the process of economic development and assigned a critical role to the entrepreneurship in his theory of economic development. • He considered economic development as a discrete technological change. The process of development can be generalized by five different types of events:
  106. 106. • Firstly, it can be the outcome of the introduction of a new product in the market. • Secondly, it can be the result of a new production technology. • Thirdly, it may arise on account of a new market. • Fourthly, it may be the consequences of a new source of supply. • Fifthly, it may be due to the new organization of any industry 116
  107. 107. According to Schumpeter • Development is not an automatic process, but it must be deliberately and actively promoted by some agency within the system, Schumpeter called the agent who initiates the above changes as an entrepreneur. • He is the agent who provides economic leadership that changes the initial conditions of the economy and causes discontinuous dynamic changes. • By nature, he is neither technician, nor a financier, but he is considered an innovator and entrepreneurs are not solely motivated by profit.
  108. 108. A Function of Managerial Skill & Leadership: By Bert F. Hoselitz • A Function of Managerial Skill and Leadership: Hoselitz states that a person who is to become an industrial entrepreneur must have additional personality traits. • In addition to being motivated by the expectations of profit he must also have some managerial abilities and more important he must have ability to lead. • Hoselitz maintains that financial skills have only a secondary consideration in entrepreneurship.
  109. 109. An Organization Building Function: By Fredrick Harbison • An Organization Building Function: Fredrick Harbison states that the organization building' ability is the most critical skill needed for the industrial development. According to him entrepreneurship means the skill to build an organization. Harbison spots the crux of the entrepreneurship in his ability to multiply himself by effectively delegating responsibilities to others.
  110. 110. The main features are: • Unlike Schumpeter, Harbison's entrepreneur is not an innovator but an 'organisation builder' who must be able to harness the new ideas of different innovators to the rest of the organization. • Such persons are not always the men with ideas or men who try new combinations of resources but they may simply be good leaders and excellent administrators. • Harbison's definition of entrepreneurship lays more stress on the managerial skills and creativity so far as organization is concerned. 120
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  112. 112. A Function of High Achievement: By David McClelland • A Function of High Achievement: Mc Clelland states that a business man who simply behaves in traditional ways is not an entrepreneur. Moreover, entrepreneurial role appears to call for decision making under uncertainty.
  113. 113. • Mc Clelland identified two characteristics of entrepreneurship firstly • "doing things in a new and better way“ • "decision making under uncertainty". • Persons with high achievement would take moderate risks. They would not behave traditionally (no risk). 123
  114. 114. • The high achievement is associated with better performance at tasks which require some imagination, mental manipulation or new ways of putting things together, and such people do better at non routine task that require some degree of initiative or even inventiveness. 124
  115. 115. • People with high achievement are not influenced by money reward as compared to people with low achievement. • People with low achievement are prepared to work harder for money or such other external incentives. For people with high achievement, profit is a measure of success and competency. 125
  116. 116. ‘Input Completing’ & ‘Gap Filling’ Function: By Liebenstein • 'Input Completing' and 'Gap filling' Function: Liebenstein identified gap filling as an important characteristic of entrepreneurship. • It is the entrepreneurial function to make up the deficiencies or to fill the gaps. • These gaps arise because all the inputs in the production function cannot be marketed because some inputs like motivation, leadership etc. are vague in their nature and whose output is undeterminate.
  117. 117. • This "gap-filling" activity gives rise to a most important entrepreneurial function namely "Input- Completing". He has to marshal all the inputs to realize final products. 127
  118. 118. A Function of Innovation Joseph Schumpeter An Organization Building Function Fredrick Harbison Managerial Skill & Leadership Bert F. Hoselitz A Function of High Achievement David McClelland ‘Input Completing’ & ‘Gap Filling’ Function Liebenstein

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