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Evolution of Entrepreneurship
Entrepreneurship is one of the four mainstream economic factors – land ,
labor , capital, and entrepreneurship.
During 14th century references speak about tax contractors – individuals who
paid a fixed some of money to a government for the license to collect taxes
in their the region known as tax contractors , they used to take risk of
collecting taxes if they collected more than the sum paid for their licenses,
they made profits and kept the excess. The concept of entrepreneurship
was existing in 17th century was a common topic in economic essays for
much of the 18th and 19th century . Let us read about how it has evolved as
one of the factor of production over a period of time.
Joseph Aloysius Schumpeter (1934) - An
entrepreneur is an innovator. Schumpeter considered
economic development as discrete dynamic change.
J.B.Says:- entrepreneur is the most important agent
of production . Simply an entrepreneur is one who
combine the land of one, the labor of another and the
capital of yet another and thus produce a product.
David Ricardo : He didn’t assign any important role to
entrepreneurship for economic development of a
country . Acc to him ,”profit leads to saving of wealth,
which ultimately goes to capital formation and leads to
Concept of Entrepreneurship
Entrepreneurship is the tendency of person to organize the
business of his own and to run it profitably , using all the
qualities of leadership , decisions making and
managerial caliber etc.
Entrepreneurship involves not only the process that leads
to the setting up of a business entity but also the expansion
and development of an on going concern. The study of
entrepreneurship is concerned with the entrepreneurial
behavior, the dynamics of business set up and expansion
The term “entrepreneur” is often used interchangeably
with “entrepreneurship” . But conceptually they are
is a continuous economic process which recognizes the
need to change and an Entrepreneur is a key person to
initiate any change.
Refers to a person
Refers to a process
Acc. to A.H.Cole, “ entrepreneurship is the purposeful
activity of an individual or a group of associated individuals,
undertaken to initiate , maintain or organize a profit-oriented
business unit for the production or distribution of economic
goods and services”.
Acc. to H.N Patak, “entrepreneurship involves a wide
range of area on which series of decisions are required
which can be grouped into three categories :- (i) perception
of an opportunity (ii) organizing an industrial unit and (iii)
running the industrial unit as a profitable , going and
Entrepreneurship has an important role in the context of a
developing nation like India which is confronted with major
Entrepreneurship plays a premium mobile role in promoting
development of economy.
Entrepreneurship is consistently equated with the
establishment and management of small business
Is the solution to the baffling problems like overpopulation ,
poverty , unemployment, underemployment etc.
Entrepreneurship helps in finding solution to the giant problems like
concentration of economic power , regional imbalances , exploitation
The factors which retard the success of entrepreneurship in India are
inadequate infrastructural facilities , shortage of capital, technical
knowledge, and transport , absence of cheap and good quality raw
material and shortage of power etc
Skill of entrepreneurship knows how to turn an ordinary corporation,
managed in a routine manner , into a entrepreneurial organization.
Hence , it is said that an economy is the effect for which
entrepreneurship is the cause .
Entrepreneurship is a set of activities
performed by an entrepreneur . The main
features of entrepreneurship are as follow :-
Economic activity:- entrepreneurship is
primarily becoming an economic function
because it involves creation and operation
of an enterprise. It involves conscious
decision-making about resource
allocations . It also implies seeking the
best opportunities for using resources for
their highest commercial yields.
Innovative activity:- innovation is the process of doing new
things. Entrepreneurship is innovations where new products ,
services, ideas and information is produced, new efficient
production techniques are introduced by the firm, new market
opportunities are indentified and better ways of meeting
existing demands are looked into. Whenever a new idea
occurs, entrepreneurial efforts are essential to convert the idea
into practical application.
A function of high achievement:- people differ not in their
ability to do but also in their will to do, or motivation. McClelland
identified two features of entrepreneurship (a) doing things in
different and better way. (b) decision-making under uncertainty.
Thus people having high need for achievement and power are
more likely to succeed as entrepreneurs and this is a very
critical factor that leads one towards entrepreneurship.
Creative and Purposeful activity:- creativity is
the ability to bring something new into existence.”
Entrepreneurship is virtually a creative and a
purposeful activity. The entrepreneur passes
through the five stages during the process of
entrepreneurship viz idea germination,
preparation, incubation, illumination and
verification. Earning profits is never the sole
objective but to introduce something new and
creative is the purpose of entrepreneurship.
A function of risk-bearing: Entrepreneur
makes decisions about obtaining and using
resources while consequently assuming the
risk of enterprise. Acc. to Cantillion, risk-
bearing forms an unique constitututive
function of entrepreneurship.
• An Organizing function. Acc. to J.B. Say, an
entrepreneur is one who combines the land of one, the
labor of another, and capital of yet another, and thus pro
dukes a product. By selling the product in the market, he
pays interest on capital, rent on land, wages to laborers
and what remains is his profit.
Here is an example of a farmer. The farmer pays out
contractual income which are “certain” to the
landlords and laborers and sells at prices that are
“uncertain”. It is illustrated as follows :-
Enter. Buys farm enter. repacks enter. Sells
product at certain and transports product at
Prices. farm products uncertain
to the market in the city .
n Profit or loss
Invention and innovation:-
Invention implies creating something new not merely any
new product but new technological processes , new
designs, new technical knowledge, etc. for example ,
Edison’s invention of bulb illustrates the point.
Innovation , is the mean by which the entrepreneur either
creates new wealth – producing resources or endows
existing resources or endows existing resources with
enhanced potential for creating wealth.
Invention is conceiving new ideas while
innovation means to put these ideas into
Innovation is process requiring analytical ability to work out
the details in order to carry on the project. An entrepreneur
has to obtain , material , select site, arrange staff, acquire
manufacturing abilities and then establish his organization
in order exploit the idea commercially.
Invention can open up huge markets but the secret lies in
spotting the application. Thus we can say that in order to be
inventive, one has to be creative and in order to become an
innovator , one has to be entrepreneurial. However just to
be innovative is not enough unless that innovation is carried
into production to benefit consumers.
Resulting in new
innovation Transforming an idea
Resulting in new
products, services or
It is more than mere creation of business
Entrepreneurship is a process of innovation and
new venture creation through four major
dimensions – individual, organizational,
environmental and process.
Entrepreneurship is a process involving various
action to be undertaken to set up an enterprise
Acc. to J.B. an entrepreneur is one who
combines the land of one , labor of another and
capital of yet another to set up an enterprise to
produce a product.
contribution to entrepreneurship:-
Joseph A Schumpeter (1883-1950) is the main figure in the
literature of entrepreneurship as it was gave a well rounded
picture of the theory of an entrepreneur.
Acc to Schumpeter ,” entrepreneurship is essentially a
creative activity or it is an innovation function . The process of
innovation may be in the form of
a) introduction of new product
b) use of new methods of production opening of new market
c) opening of a new market
d) the conquest of new source of supplying raw material
e) a new form of organization.
• Entrepreneurship and economic growth take
place when the economic conditions are
• Economic incentives are the main motivators
for entrepreneurial activities.
• Economic incentives include taxation policy,
industrial policy, sources of finance and raw
material, infrastructure availability, investment
and marketing opportunities, access to
about market conditions, technology etc.
• Lack of incentives, unattractive economic
policies and unfavorable market conditions
tend to reduce the vigor of entrepreneurship
a) Schumpeter’s Theory of innovation
Development implies carrying one of new
combinations of entrepreneurship.
‘Entrepreneur’. is an innovator – who carry new
New goods/ services.
New method of production.
New source of supply of raw materials.
b) HBS ( Harvard Business School) consider
entrepreneurship is the outcome of the combination of
internal and external Forces.
Internal forces – Individual’s traits and qualities via :
Exposure & Experience
External forces – Surrounding’s conditions via :
Social & Cultural
Stable Govt. External security, law & order and legal
process are the influencing factors.
Entrepreneurship is likely to get a
boost in a particular social culture
Society’s values, religious beliefs,
customs, taboos influence the
behavior of individuals in a society
The entrepreneur is a role performer
according to the role expectations by
a) Max Weber’s Theory
Salient features of his theory are -
Spirit of Capitalism is highlighted
Adventurous spirit facilitate taking risk
Protestant ethic embodying rebellion is conducive
Inducement of profit is the criterion
b) E.E. Hagen’s Theory
Reveals general model of the social- interrelationship among
physical environment, social structure, personality and culture.
Thinks economic theories are inadequate
Political & social change – catalyst for entrepreneurs.
Rejects follower’s syndrome imitating western technology.
Technology is an integral part of socio- cultural complex .
Historic shift as a factor initiates change
Psychological theory of entrepreneurship has fairly high status
among social scientists who study entrepreneurship because it is
very difficult to single out one or several psychological traits as
typical for the entrepreneurial personality. However ,
•Entrepreneurship gets a boost when society has sufficient supply of
individuals with necessary psychological characteristics.
•The psychological characteristics include need for high achievement,
a vision or foresight, ability to face opposition.
•These characteristics are formed during the individual’s upbringing
which stress on standards of excellence, self reliance and low father
J.Schumpeter ,supports the psychological theory
and not the economic theory. He asserts that
what matters is the behaviour , and not the actor.
Fredrick Barth made his first attempt to develop an
anthropological theory of entrepreneurship. Acc. To
him, entrepreneurship has essentially to do with
connecting two spheres in the society, between
which there exists a difference in value. Barth, one
of the leading anthropologists of the world, states
that entrepreneurial behaviour means to connect
two different spheres in the society , between
which there is a huge discrepancy in value.
Each of these theories are incomplete
and none of them is right or wrong.
Theories of entrepreneurship are inter-
disciplinary and are influenced by a
multitude of factors. It is the integration
of external environment, achievement
motivation, ability and ambition which
largely determines whether an individual
become an entrepreneur or not.
Problems in growth of
Undoubtedly , entrepreneurship growth in India
is slow as compared to other countries. As
far as development of entrepreneurship is
concerned , the factors responsible for its
slow growth are:
Incompetence and poor management
Low level of commitment
Restriction imposed by custom and tradition
Involvement of high risk
socio- cultural rigidities
Lack of motivation
Lack of infrastructural facilities
Low quality products
Law package of salaries to employees
Non – availability of power and raw
Legal formalities involved to set up a unit.
Low status of businessmen.
Problem of getting the loan sanctioned
Lack of technical know -how
Insufficient infrastructural facilities.
Pros and cons
To everything in life there are advantages and disadvantages;
entrepreneurship is no exception. As a matter of fact, entrepreneurship
involves a lot of risk taking. Yet, it can pay off very nicely as well, with
rewards such as profits and the opportunity to be your own boss and make
your own decisions.
Here are some pros and cons to consider:
• Excitement: Due to its high capacity for risk, there is a lot of adventure.
• Rules and regulations: Work in a current job is difficult to do because of
all the "red tape" and consistent administration approval needed.
• Originality: Some people feel that they can offer a new service/product
that no one else has offered before.
• Competition: Employees feel they can offer their current
company's product/service at a lesser expense to the public.
• Independence: Some people wish to be their own boss and make
all the important decisions him/herself.
• Salary potential: Generally, people want to be paid for the amount
of work they do in full; they do not want to be "short-changed.“
• Flexibility: Entrepreneurs can schedule their work hours to spend
quality time with family or any other reason.
• Rational salary: They are not being paid what they're worth and
would rather work on their own and earn the money they should be
earning for their efforts.
• Freedom: Entrepreneurs can work whenever they want, wherever
they want, and however they want.
: Entrepreneurs are exposed to different types of risk
in their pursuit of setting up an enterprise. Risk has
got direct relationship with profits. In the event of of
failure of their venture entrepreneurs are left with
almost nothing to depend upon.
• Salary: Starting your own business means that you
must be willing to give up the security of a regular
• Benefits: There will undoubtedly be fewer benefits,
especially when considering that your business will
be just starting off.
• Work schedule: The work schedule of an
entrepreneur is never predictable; an emergency can
come up in a matter of a second and late hours will
have to be put in
• Administration: All the decisions of the
business must be made on your own; there is
no one ranked higher than you on the chain of
command in YOUR business.
• Incompetent staff: Often times, you will find
yourself working with an employee who
"doesn't know the ropes" as well as you do due
to lack of experience.
• Procedures: Many times during your
entrepreneurial life, you will find that many
policies do not make sense, nor will they ever
Employees of an organisation who have entrepreneurial talent
and are motivated to use their abilities and initiative and do
something on their own, but who may not want to start their own
business are known as entrepreneurs.
Thus, intrapreneurship is the term given to the establishment and
fostering of entrepreneurial activity in large organizations which
either improve the existing products and services or brand new
products. Intrapreneurship implies that entrepreneurial activities
are explicitly supported within established organizations,
provided with organizational resources, and accomplished by
company employees. Pinchot describes the intrapreneur , also
termed as corporate entrepreneur , as who violates policy,
ignores the chain of command, defies established procedures ,
and , perhaps, comes up with a new product for the company in
which he is employed.
Essentials for Intrapreneurship
The strategic and structural environment within the
organization should be ‘right’. Inhibitive internal
‘chimneys’ must be pulled down so that employees can
interact freely with each other and share ideas.
An appropriate work force of enterprising people should
be built in which scientific recruitment is made.
They should be motivated and rewarded from time to
Support system, team working, information sharing and
learning are essentials for invoking the dormant talents
It is not so easy to achieve effective
due to the following factors:
Efficient implementation of facilities and controls,
are difficult to implement without conflicts.
Fair remuneration and reward system is difficult
to establish to ensure justice.
Employees may feel disappointed if they face
failure while trying their new ideas.
In spite of all odds, businesses have to take risks
and allow and encourage to take up
So one can safely conclude that entrepreneurship
implies a commitment to expand and grow which is
also one of the major determinants of industrial
development. James opines that “ some think of
entrepreneurs primarily as innovators , some as
bearers of risks and others place major emphasis
on their function as mobilizes and allocators of the
capital . The suitable definition of an entrepreneur
is a person or a group of persons who are
responsible for the existence of a new business