Entrepreneurship development

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Entrepreneurship development

  1. 1. Entrepreneurship Development: Concept and ContextMany developing countries including India are in a state of transition. They are striving to move from a subsistence-oriented, tightly integrated, inward looking local economy to a surplus seeking, market led, outward looking economy. Such a move is possible only with theemergences of a multitude of a small-scale and rural enterprise in all works of life. This requires building up of a wider base of population capable of entrepreneurial behaviour. If we take India as an example in the context of development, we find that the initial build up of entrepreneurial activity took place in urban center. This was followed by a trickle down effect in rural communities over time. Development strategy today, however, seeks a more proactive andimmediate change in India. While much of policy making in this regard treats enterprise creation as a function of appropriate economic conditions(made possible through institutional and economic interventions), others have emphasized training and attitude change as vital elements in the process. But it needs systematic observations and research into the process through which entrepreneurship emerges and sustains itself. Enterprises and entrepreneurs have been in the center stage of modernization since the days ofIndustrial Revolution. Economists, sociologists, psychologists and anthropologists have studied this concept, usually within the frontiers of their respective disciplines. Models of entrepreneurship and research associated with them have identified several major issues such vagueness in definition, conceptualizing entrepreneurship as a trait, significance of innovation in entrepreneurship, meaning of activities in the post-enterprise creation stage, validity of measures of entrepreneurial propensity and significance of demographic factors. Evolution, Frontiers, divergence & Stagnation For a long time there was no equivalent for the term „entrepreneur‟ in the English language. Three words were commonly used to connote the sense the French term carried: adventurer, undertaker and projector; these were used interchangeably and lacked the precision and characteristics of a scientific expression (Gopakumar, 1995). Richard Cantillon (1680-1734), gave the concept some analytical treatment and assigned theentrepreneur an economic role by emphasizing on „risk‟ as a prominent entrepreneurial function (Gopakumar, 1995). J.B say and J.H. von Thunen. Jean Baptiste say (1767-1832), the French political economist assigned the entrepreneur with a crucial role-„coordination‟ and made a distinction between the entrepreneur and capitalist (Say,1967).A dynamic theory of entrepreneurship was first advocated by Schumpeter (1949) who considered entrepreneurship as the catalyst that disrupts the stationary circular flow of the economy and thereby initiates and sustains the process of development. Embarking upon „new combinations‟of the factors of production-which he succinctly terms innovation-the entrepreneur activates the
  2. 2. economy to a new level of development. The concept of innovation and its corollary development embraces five functions: 1) introduction of a new good, 2) introduction of a newmethod of production, 3) opening of a new market, 4) conquest of a new source of supply of raw materials and 5) carrying out of a new organization of any industry. Schumpeter represents a synthesis of different notions of entrepreneurship. His concept of innovation included the elements of risk taking, superintendence and coordination. However, Schumpeter stressed the fact that these attributes unaccompanied by the ability to innovate would not be sufficient to account for entrepreneurship (Gopakumar, 1995).According to the Havard School (Cole,1949) entrepreneurship comprises any purposeful activitythat initiate, maintain or develop a profit-oriented business in interaction with internal situation of the business or with the economic, political and social circumstances surrounding the business. This approach emphasized two types of activities: the organization or coordination activity, and the sensitivity to the environmental characteristics that effect decision making. Despite its stress on the human factor in the production system, the Havard tradition neverexplicitly challenged the equilibrium – obsessed orthodox economic theory. This was challenged by the neo-Austrian School who argued that disequilibrium, rather than equilibrium, was the likely scenario and as such, entrepreneurs operate under fairly uncertain circumstances. The essence of entrepreneurship consists in the alertness of market participants to profit opportunities. A typical entrepreneur, according to Kirzner (1979) is the arbitrageur, the person who discovers opportunity at low prices and sells the same items at high prices because of intertemporal and interspatial demands. To sum up, major theories and expositions from Cantillon to Kirzner view the entrepreneur as performing various functional roles as risk taker, decision maker, organizer or coordinator, innovator, employer of factors of production, gap seeker and input completer, arbitrageur, etc. The most appropriate definition of entrepreneurship that would fit into the rural developmentcontext, argued here, is the broader one, the one which defines entrepreneurship as: “a force that mobilizes other resources to meet unmet market demands”, “the ability to create and buildsomething from practically nothing”, “the process of creating value by pulling together a unique package of resources to exploit an opportunity”. Alternative Approaches Socio-Cultural Approaches Some scholars have stressed the importance of socio-cultural milieu in entrepreneurship development. They suggested that the socio-cultural history accounts for the performance of entrepreneurial functions by a considerable number of individuals. Several writers have used a comparative framework to highlight the ways in which different societies, with differing interests, attitudes, systems of stratification and the like, operate to produce different kinds of businessmen and different patterns of entrepreneurial behaviour (Swayer,1952).
  3. 3. Psychological Approaches The focus in entrepreneurship shifted from the act to the actors (Shacer & Scott,1991) in the work of McClelland(1961). According to McClelland and Winter(1969) need for achievement (n-Ach) is responsible for economic development. Greater the development of n-Ach, during early socialization of people, the more likely the economic development will be achieved. A society with a generally high level of n-Ach will produce more rapid economic growth. Achievement motivation could be included through training in self reliance, rewarding hard work and persistence in goal achievement, and creating interest in excellence. In spite of beingcriticized (Schatz,1971; Smelser,1976), McClelland‟s(1987) analysis has triggered off the „traits approach‟ to comprehended entrepreneurial behaviour.In another psycho-social theory Hagen(1962) relegates economic variables to a relatively minor role and has put an emphasis on certain aspects of the personality. More recently, several other psychological approaches to entrepreneurship have been suggested. Hisrich(1990) identifies several characteristics of entrepreneurs in terms of (a) conditions that make entrepreneurship desirable and possible,(b) the childhood family background, (c) the education level, personalvalues and motivations and (d) role modeling effects and other support systems. Bird(1989) has also examined entrepreneurial behaviour by focusing on work and the family background, personal values and motivations. Contemporary FocusThe two most common approaches used in researching the characteristics of entrepreneurs have been the trait approach and the demographic approach (Robinson et al.,1991). In the traitapproach, the entrepreneur is assumed to be a particular personality type whose characteristics are key to explaining entrepreneurship as a phenomenon (Gartner,1988;1989). Following McClelland(1961,1987), many other researchers have explored areas such as achievement motive, locus of control, risk taking, innovation etc. In demographic approach, demographic information is used to arrive at a profile of a typical entrepreneur assuming that people with similar background posses similar underlying stablecharacteristics. The approach presumes that by identifying demographic characteristics of known entrepreneurs it will be possible to predict entrepreneurship in unknown populations (Robinson et al.,1991). The demographic variables found most examined are family background, birthorder, role model, marital status, age, education level of parents and self, socio-economic status, previous work experience and work habits. First, the approach assumes that human behaviour is strongly influenced by demographic characteristics such as sex, race, or birth order. Second, the practice of using demographic characteristics as surrogates for personality characteristics is not appropriate. There is also a lack of adequate empirical evidence in this regard.
  4. 4. Third, the approach does not help predict who will or will not be an entrepreneur on the basis of knowledge of one‟s birth order, level of education or parental heritage. Besides, demographic characteristics being static in nature cannot explain a dynamic multifaceted phenomenon like entrepreneurship. Hannan and Freeman(1977) have used the population-ecology model (PEM), to analyze the concept of entrepreneurship. The PEM seeks to predict the probability of births and deaths within a population of firms within a given industry niche, conferring the environment rather than the person with the status of the key entity in determining organizational survival. Recent research following this approach are focused on the presence, characteristics and change in a population or organization in an ecological context provided by the host society (Reynolds, 1991). Deficiencies of this model have been pointed out by Bygrave and Hoffer(1991). These models, while making statistical predictions at the population level, fail to predict the fate of specific firms. Entrepreneurship: An Integrative Behavioural Framework The key elements identified are Personal Resourcefulness, Achievement Orientation, Strategic Vision, Opportunity Seeking and Innovativeness. Personal Resourcefulness The root of the entrepreneurial process can be traced to the initiative taken by some individualsto go beyond the existing way of life. The emphasis is on initiative rather than reaction, althoughevents in the environment may have provided the trigger for the person to express initiative. This aspect seems to have been subsumed within „innovation‟ which has been studied more as the „change‟ or „newness‟ associated with the term rather „proactiveness‟. „Personal resourcefulness‟ in the belief in one‟s own capability for initiating actions directedtowards creation and growth of enterprises. Such initiating process requires cognitively mediatedself regulations of internal feelings and emotions, thoughts and actions as suggested by Kanungo and Misra(1992). Achievement-Orientation While personal initiative and purposeful behaviour can be view as a good starting point of an entrepreneurial effort, many such initiatives fail. The archetype successful entrepreneur issupposed to epitomize achievement motivation (McClelland,1961) which facilitates the creation and development of enterprises in competitive environments. While critics have raised serious
  5. 5. questions regarding the unique or overarching significance of n-Ach in the emergence ofentrepreneurship (Smelser,1976), this element of personality has continued in the mainstream of entrepreneurship theory (Shaver & Scott,1991). People with high n-Ach are known to seek and assume high degree of personal responsibility, set challenging but realistic goals, work with concrete feedback, research their environment and choose partners with expertise in their work (Kanungo & Bhatnagar, 1978). Such characteristics of high n-Ach people contribute to successful completion of tasks that they venture to take up. Hence, we see achievement orientation as a set of cognitive and behavioural tendencies that are oriented towards ensuring that outcomes such as enterprise creation, survival and growth are realized. Opportunity-SeekingThe context in which an individual brings to bear his/her initiative, achievement orientation and visioning have a strong bearing on what it produces; when these forces are directed towardsrealizing surplus or value in a market environment, over a period of time, we see the creation of enterprises. This perspective of the entrepreneur as a merchant adventurer, who in Cantillon‟s view balances out imperfections in the market (Gopakumar,1995) in pursuit of what Benthamterms wealth, provided the historical basis for the development of entrepreneurship. The wealth is seen as the reward the entrepreneurial individual gains for the risk taken or exercise of judgment where there is greater possibility for error; this distinguishes between certain returnfrom wage labour, and return from risk-oriented production for the market. Hence „opportunity seeking‟ would include one‟s ability to see situations in terms of unmet needs, identifying markets or gaps for which product concepts are to be evolved, and the search for creating and maintaining a competitive advantage to derive benefits on a sustained basis. Innovativeness Schumpeter(1949) went on to conceptualize entrepreneurs as persons who are not necessarilycapitalists or those having command over resources, but as ones who create new combinations ofthe factors of production and the market to derive profit. Innovativeness refers to creation of new products, markets, product-market combinations, methods of production and organization, and the like that enable the enterprise to gain competitive advantage in the market. It is evident that each of the dispositions referred to may be found in all types of individuals (entrepreneurs and non- entrepreneurs). Then how can we relate these dispositions toentrepreneurship? We propose that when these five elements converge at high intensities, in non-restrictive environments, it is likely to give rise to enterprise formation. Therefore, one may find individuals who had created enterprises in the past now turning weak because they may nolonger be proactive enterprise creators; instead they may be content to play the role of managers in their stable business, or turn to community leadership, and the like. Hence, this perspective lends to a process view of entrepreneurship.
  6. 6. Problems of Women Entrepreneurs in IndiaIntroductionWomen Entrepreneurs may be defined as the women or a group of women who initiate,organize and operate a business enterprise. Government of India has defined womenentrepreneurs as an enterprise owned and controlled by a women having a minimumfinancial interest of 51% of the capital and giving at least 51% of employment generated inthe enterprise to women. Like a male entrepreneurs a women entrepreneur has manyfunctions. They should explore the prospects of starting new enterprise; undertake risks,introduction of new innovations, coordination administration and control of business andproviding effective leadership in all aspects of business.Push-Pull factors and Women in businessWomen in business are a recent phenomenon in India. By and large they had confidethemselves to petty business and tiny cottage industries. Women entrepreneurs engaged inbusiness due to push and pull factors. Which encourage women to have an independentoccupation and stands on their on legs. A sense towards independent decision-making ontheir life and career is the motivational factor behind this urge. Saddled with householdchores and domestic responsibilities women want to get independence Under the influenceof these factors the women entrepreneurs choose a profession as a challenge and as anurge to do some thing new. Such situation is described as pull factors. While in push factorswomen engaged in business activities due to family compulsion and the responsibility isthrust upon them.Problems of Women Entrepreneurs in IndiaWomen in India are faced many problems to get ahead their life in business. A fewproblems cane be detailed as;1. The greatest deterrent to women entrepreneurs is that they are women. A kind ofpatriarchal – male dominant social order is the building block to them in their way towardsbusiness success. Male members think it a big risk financing the ventures run by women.2. The financial institutions are skeptical about the entrepreneurial abilities of women. Thebankers consider women loonies as higher risk than men loonies. The bankers putunrealistic and unreasonable securities to get loan to women entrepreneurs. According to areport by the United Nations Industrial Development Organization (UNIDO), "despiteevidence that womens loan repayment rates are higher than mens, women still face moredifficulties in obtaining credit," often due to discriminatory attitudes of banks and informallending groups (UNIDO, 1995b).3. Entrepreneurs usually require financial assistance of some kind to launch their ventures -be it a formal bank loan or money from a savings account. Women in developing nationshave little access to funds, due to the fact that they are concentrated in poor ruralcommunities with few opportunities to borrow money (Starcher, 1996; UNIDO, 1995a). Thewomen entrepreneurs are suffering from inadequate financial resources and workingcapital. The women entrepreneurs lack access to external funds due to their inability toprovide tangible security. Very few women have the tangible property in hand.4. Womens family obligations also bar them from becoming successful entrepreneurs in
  7. 7. both developed and developing nations. "Having primary responsibility for children, homeand older dependent family members, few women can devote all their time and energies totheir business" (Starcher, 1996, p. 8).The financial institutions discourage womenentrepreneurs on the belief that they can at any time leave their business and becomehousewives again. The result is that they are forced to rely on their own savings, and loanfrom relatives and family friends.5. Indian women give more emphasis to family ties and relationships. Married women haveto make a fine balance between business and home. More over the business success isdepends on the support the family members extended to women in the business processand management. The interest of the family members is a determinant factor in therealization of women folk business aspirations.6. Another argument is that women entrepreneurs have low-level management skills. Theyhave to depend on office staffs and intermediaries, to get things done, especially, themarketing and sales side of business. Here there is more probability for business fallacieslike the intermediaries take major part of the surplus or profit. Marketing means mobilityand confidence in dealing with the external world, both of which women have beendiscouraged from developing by social conditioning. Even when they are otherwise in controlof an enterprise, they often depend on males of the family in this area.7. The male - female competition is another factor, which develop hurdles to womenentrepreneurs in the business management process. Despite the fact that womenentrepreneurs are good in keeping their service prompt and delivery in time, due to lack oforganisational skills compared to male entrepreneurs women have to face constraints fromcompetition. The confidence to travel across day and night and even different regions andstates are less found in women compared to male entrepreneurs. This shows the low levelfreedom of expression and freedom of mobility of the women entrepreneurs.8. Knowledge of alternative source of raw materials availability and high negotiation skillsare the basic requirement to run a business. Getting the raw materials from different sousewith discount prices is the factor that determines the profit margin. Lack of knowledge ofavailability of the raw materials and low-level negotiation and bargaining skills are thefactors, which affect women entrepreneurs business adventures.9. Knowledge of latest technological changes, know how, and education level of the personare significant factor that affect business. The literacy rate of women in India is found at lowlevel compared to male population. Many women in developing nations lack the educationneeded to spur successful entrepreneurship. They are ignorant of new technologies orunskilled in their use, and often unable to do research and gain the necessary training(UNIDO, 1995b, p.1). Although great advances are being made in technology, manywomens illiteracy, strucutural difficulties, and lack of access to technical training preventthe technology from being beneficial or even available to females ("Women Entrepreneurs inPoorest Countries," 2001). According to The Economist, this lack of knowledge and thecontinuing treatment of women as second-class citizens keeps them in a pervasive cycle ofpoverty ("The Female Poverty Trap," 2001). The studies indicates that uneducated womendonot have the knowledge of measurement and basic accounting.10. Low-level risk taking attitude is another factor affecting women folk decision to get intobusiness. Low-level education provides low-level self-confidence and self-reliance to thewomen folk to engage in business, which is continuous risk taking and strategic cessionmaking profession. Investing money, maintaining the operations and ploughing back moneyfor surplus generation requires high risk taking attitude, courage and confidence. Though
  8. 8. the risk tolerance ability of the women folk in day-to-day life is high compared to malemembers, while in business it is found opposite to that.11. Achievement motivation of the women folk found less compared to male members.The low level of education and confidence leads to low level achievement and advancementmotivation among women folk to engage in business operations and running a businessconcern.12. Finally high production cost of some business operations adversely affects thedevelopment of women entrepreneurs. The installation of new machineries during expansionof the productive capacity and like similar factors dissuades the women entrepreneurs fromventuring into new areas.How to Develop Women Entrepreneurs?Right efforts on from all areas are required in the development of women entrepreneurs andtheir greater participation in the entrepreneurial activities. Following efforts can be takeninto account for effective development of women entrepreneurs.1. Consider women as specific target group for all developmental programmes.2. Better educational facilities and schemes should be extended to women folk fromgovernment part.3. Adequate training programme on management skills to be provided to womencommunity.4. Encourage womens participation in decision-making.5. Vocational training to be extended to women community that enables them tounderstand the production process and production management.6. Skill development to be done in womens polytechnics and industrial training institutes.Skills are put to work in training-cum-production workshops.7. Training on professional competence and leadership skill to be extended to womenentrepreneurs.8. Training and counselling on a large scale of existing women entrepreneurs to removepsychological causes like lack of self-confidence and fear of success.9. Counselling through the aid of committed NGOs, psychologists, managerial experts andtechnical personnel should be provided to existing and emerging women entrepreneurs.10. Continuous monitoring and improvement of training programmes.11. Activities in which women are trained should focus on their marketability andprofitability.12. Making provision of marketing and sales assistance from government part.13. To encourage more passive women entrepreneurs the Women training programmeshould be organised that taught to recognize her own psychological needs and express
  9. 9. them.14. State finance corporations and financing institutions should permit by statute to extendpurely trade related finance to women entrepreneurs.15. Womens development corporations have to gain access to open-ended financing.16. The financial institutions should provide more working capital assistance both for smallscale venture and large scale ventures.17. Making provision of micro credit system and enterprise credit system to the womenentrepreneurs at local level.18. Repeated gender sensitisation programmes should be held to train financiers to treatwomen with dignity and respect as persons in their own right.19. Infrastructure, in the form of industrial plots and sheds, to set up industries is to beprovided by state run agencies.20. Industrial estates could also provide marketing outlets for the display and sale ofproducts made by women.21. A Women Entrepreneurs Guidance Cell set up to handle the various problems of womenentrepreneurs all over the state.22. District Industries Centres and Single Window Agencies should make use of assistingwomen in their trade and business guidance.23. Programmes for encouraging entrepreneurship among women are to be extended atlocal level.24. Training in entrepreneurial attitudes should start at the high school level through well-designed courses, which build confidence through behavioral games.25. More governmental schemes to motivate women entrepreneurs to engage in small scaleand large-scale business ventures.26. Involvement of Non Governmental Organisations in women entrepreneurial trainingprogrammes and counselling.ConclusionIndependence brought promise of equality of opportunity in all sphere to the Indian womenand laws guaranteeing for their equal rights of participation in political process and equalopportunities and rights in education and employment were enacted. But unfortunately, thegovernment sponsored development activities have benefited only a small section ofwomen. The large majority of them are still unaffected by change and developmentactivities have benefited only a small section of women i.e. the urban middle class women.The large majority of them are still unaffected by change and development. The reasons arewell sighted in the discussion part of this article. It is hoped that the suggestions forwardedin the article will help the entrepreneurs in particular and policy-planners in general to lookinto this problem and develop better schemes, developmental programmes andopportunities to the women folk to enter into more entrepreneurial ventures. This article
  10. 10. here tries to recollect some of the successful women entrepreneurs like Ekta Kapoor,Creative Director, Balaji Telefilms, Kiran Mazumdar Shaw, CEO, Biocon, Shahnaz Husain andVimalben M Pawale, Ex President, Sri Mahila Griha Udyog Lijjat Papad (SMGULP).

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