This document provides an overview of entrepreneurship and micro, small and medium enterprises (MSMEs). It defines an entrepreneur as an individual who creates a new business bearing most risks and rewards. Entrepreneurs play a key role in economies by anticipating needs and bringing new ideas to market. Theories of entrepreneurship discussed include innovation theory, need for achievement theory, and social behavior theory. Reasons people become entrepreneurs include wanting flexibility, not fitting into corporate environments, and being risk-takers. The document also discusses entrepreneur quotes and characteristics of successful entrepreneurs.
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Msme unit 1
1. Entrepreneurial Development and
Micro, Small and Medium
Enterprises (MSME)
Mr. Sathish V
Assistant Professor
PES Institute of Advanced Management Studies
NH- 206, Sagar Road Shivamogga
2. What Is an Entrepreneur?
An entrepreneur is an individual who creates a
new business, bearing most of the risks and
enjoying most of the rewards. The
entrepreneur is commonly seen as an
innovator, a source of new ideas, goods,
services, and business/or procedures.
3. Entrepreneurs play a key role in any economy,
using the skills and initiative necessary to
anticipate needs and bring good new ideas to
market. Entrepreneurs who prove to be
successful in taking on the risks of
a startup are rewarded with profits, fame, and
continued growth opportunities. Those who
fail, suffer losses and become less prevalent in
the markets.
4. How Entrepreneurs Work
Entrepreneurship is one of the resources
economists categorize as integral to
production, the other three being
land/natural resources, labor and capital. An
entrepreneur combines the first three of these
to manufacture goods or provide services.
They typically create a business plan, hire
labor, acquire resources and financing, and
provide leadership and management for the
business.
5. Entrepreneurship Definitions
the word "entrepreneur" comes from the French
verb entreprendre, meaning "to undertake".
An entrepreneur is a person who sets up a
business with the aim to make a profit.
6. BASIS FOR COMPARISON ENTREPRENEUR ENTREPRENEURSHIP
Meaning An entrepreneur is an
individual or a team
thereof, having an
innovative idea, and takes
every step to turn the idea
into reality, while bearing
the risks.
Entrepreneurship is a risky
activity of commencing a
business usually a start up
company, offering distinct
products and services to
the target customers,
which may or may not get
success.
What is it? Person who has an idea
and gives shape to it.
Process which gives shape
to the idea.
Represents An innovator, who chased
the dream, till it becomes
true.
A procedure through which
an innovation is done.
Business Venture He / She is the one who
sets up the business
venture, to turn a concept
into reality.
It is the activity, which an
entrepreneur undertakes
to set up the business
venture.
7. Why People become Entrepreneurs
To change the world
They don’t want a boss
They want flexible hours
They want to work from anywhere
They’re risk-takers
They can’t get a job
They don’t fit into the corporate environment
They’re curious
They’re ambitious
8. To change the world
Many entrepreneurs strive to make the world
better. Whether entrepreneurs believe in
space exploration, eliminating poverty or
creating a practical but game-changing
product, they ultimately build a brand in
service of others. Some entrepreneurs use
their business as a way to raise capital quickly
to funnel into their noble causes. To social
entrepreneurs, building an empire is about
creating a better world for everyone.
9. They don’t want a boss
Entrepreneurs often struggle with having a
boss. They often feel suffocated, restricted
and held back. Some entrepreneurs may feel
that they have a more effective way of doing
things. Others may dislike the lack of creative
freedom. Ultimately, they become attracted to
entrepreneurship to succeed on their own
terms. Being the boss can be more fulfilling
than having one
10. They want flexible hours
Entrepreneurship is often popular around those
who need flexible hours. Many people with
disabilities often enjoy entrepreneurship as it
allows them to work when they’re able to.
Parents with young children might also prefer
entrepreneurship as it allows them to raise young
children at home or pick them up from school
without having to feel guilty about it. Students
may also like the flexibility of entrepreneurship as
their course workload might not allow them to
work standard office hours.
11. They want to work from anywhere
Along with flexibility in working hours,
entrepreneurship is popular among those who
don’t want to be tied down to a specific
location. Entrepreneurs might not want to
work from the same place every single day, as
it might get boring for them. So, if you’re
looking for the freedom to work from
anywhere in the world, maybe the
entrepreneur lifestyle is the right one for you.
12. They’re risk-takers
Calculated risk taking and entrepreneurship go
hand in hand. Entrepreneurs don’t apply to jobs,
they create them. With that comes risk.
Whether it’s the financial risk of starting your
first brand or the risk from not knowing what to
expect, business is risky. Entrepreneurs are
often taking risks by trying things the average
person won’t, to do things the average person
can’t.
13. They can’t get a job
Many stumble into entrepreneurship when they
can’t get a job. Getting fired, a lack of
experience or a criminal record can prevent
the average person from getting a job when
they’re desperate. Instead of being defeated
by their situation, they create new
opportunities for themselves
14. They don’t fit into the corporate
environment
Entrepreneurs don’t often thrive in corporate
environments. It’s often very restricting for
their growth. They may dislike the lack of
control they have in their role or the office
politics. In general, you can spot an
entrepreneur in a corporate environment as
they’re usually trying to gain more control in
their role and learning their coworkers
responsibilities to better understand how
everything fits together.
15. They’re curious
Entrepreneurs love finding out the answer to
the question, ‘what will happen if…’ They’re
experimental. Entrepreneurs love learning.
They regularly read business books to advance
their knowledge. So naturally,
entrepreneurship appeals to them
because doing allows them to learn the most
in the shortest amount of time. Their curiosity
allows their continued growth.
16. They’re ambitious
Those who love reaching difficult goals and
milestones are made to be entrepreneurs. There’s
no limit to how much an entrepreneur can make
and so they can always work to achieve higher
levels of greatness. Since there’s no limit to what
they can achieve, entrepreneurs constantly find
themselves growing and achieving more than
they ever imagined. When obstacles get
presented in front of them, they find the
workaround to their goal. Entrepreneurs are
unstoppable.
22. Theories of Entrepreneurship
Everything you need to know about the
theories of entrepreneurship is, It is a universal
fact that entrepreneurship is an important
factor in economic development.
An Entrepreneur is the risk bearer and works
under uncertainty. But no attempts were
made by economists for formulating
systematic theory of entrepreneurship.
23. Theories of Entrepreneurship
Innovation Theory
Need for Achievement Theory
Status Withdrawal Theory
Theory of Social Change
Theory of Social Behaviour
Theory of Leadership
Theory of Model Personality
Theory of Systematic Innovation
24. Innovation Theory
This theory was propounded by J.A. Schumpeter.
According to Schumpeter, entrepreneur is basically
an innovator and innovator is one who introduces
new combinations.
In Schumpeterian theory, the main theme is the
innovation. He makes a distinction between an
innovator and an inventor. According to him, an
inventor discovers new methods and new materials.
But, an innovator is one who applies inventions and
discoveries in order to make now combinations.
With the help of these new combinations, he
produces newer and better goods which yield
satisfaction as well as profits.
25. In practice, theory covers five cases which are given
below
The introduction of a new good which consumers,
are not yet familiar or of a new quality of a good.
The introduction of a new method of production,
that one not yet tested by experience in the
branch of manufacture concerned.
The opening of a new market i.e. a market into
which the particular branch of manufacture of the
country in question has not previously entered,
whether or not this market has existed before.
26. The conquest (gaining) of a new source of
supply of raw materials or half manufactured
goods, irrespective of whether this source
already exists or whether it has first to be
created.
The carrying out of the new organisation of any
industry like the creation of a monopoly position
or the breaking up of a monopoly position.
27. However, Schumpeter’s theory suffers from
following limitations
It excludes individuals who merely operate an
established business without performing
innovative functions.
Innovating entrepreneur represents the most
vigorous (strong) type of enterprise. However,
this type of entrepreneur is rarely available in
developing countries like India.
28. It laid too much emphasis on innovative
functions. But it ignores the risk taking and
organizing aspects of entrepreneurship.
It assumes an entrepreneur as a large scale
business man. He is a person who creates
something new. But in practice, an entrepreneur
cannot have large scale operations from the very
beginning.
It fails to provide a suitable answer to question
like— why some countries had more
entrepreneurial talent than others?
29. According to Schumpeter, entrepreneurs are not a
class in themselves like capitalists and workers.
An individual is an entrepreneur only when he
actually carries out new combinations and
ceases to be an entrepreneur the moment he
settles down to running the established
business.
According to Schumpeter, an entrepreneur
exists only if the factors of production are
combined for the first time. Maintenance of a
combination is not an entrepreneurial activity.
Thus, this theory fails to provide suitable
solutions to the problems.
30. Need for Achievement Theory
This theory was developed by David. C. McClelland.
McClelland concerned himself with economic
growth and the factors that influence it.
In this context, he tries to find the internal
factors i.e. “human values and motives that lead
man to exploit opportunities, to take advantage of
favorable trade conditions.” That is why he gives
importance to the innovative characteristics of
entrepreneurial role.
31. The entrepreneur is concerned with need for
achievement (n-achievement).
The n-achievement is called as “a desire to do
well, not so much for the sake of social recognition
or prestige, but for the sake of an inner feeling of
personal accomplishment.”
McClelland identified two characteristics
of entrepreneurship. First doing things in a new and
better way. Secondly, decision making under
uncertainty.
32. This motive is called as the tendency to
strive for success in situations involving an
evaluation of one’s performance in
relation to some standard of excellence.
People having high need for achievement
are more likely to succeed as
entrepreneurs.
33. According to McClelland, individuals with high
need achievement will not be motivated by
monetary incentives but that monetary
rewards will constitute a symbol of
achievement for them. Similarly, they are also
not interested much for social recognition or
prestige but their ultimate goal is personal
accomplishment. That is why McClelland
suggests that in order to raise the level of
achievement motivation, parents should set
high standards for their children.
34. Status Withdrawal Theory
E. Hagen attempted to formulate a theory of social
change. The theory of social change explains that
when members of some social groups feel that their
values and status are not respected by the society,
they turn to innovation to get the respect of the
society. According to Hagen, entrepreneurship is a
function of status withdrawal. This theory provides
that a class which lost its previous prestige or a
minority group tends to show aggressive
entrepreneurial drive.
35. Hagen postulates types of events which can produce
status withdrawal
Displacement of a traditional elite group from its
previous status by another traditional group by
physical force.
Denigration ( unfair criticism) of values,
symbols through some change in the attitude
of superior group.
Non-acceptance of expected status on
migration to a new society.
36. In traditional societies, positions of authority are
granted on the basis of status, rather than
individual ability. That is why, Hagen visualized
an innovative personality.
There are four responses which assess the
personality-
(i) Retreatist – One who combines to work in the
society but remains indifferent to his work and
position.
37. Ritualist – One who adopts a kind of defensive
behaviour and acts in the ways accepted and
approved in his society but with no hopes of
improving his position.
Reformist- One who foments (encourages) a
rebellion ( resistance to leader or government)
and attempts to establish a new society?
Innovator- A creative individual who is likely to be
an entrepreneur.
38. The theory only suggests that the people, who
had enjoyed social standing at some stage in
their histories fall into a retreatist phase and
with an urge to regain that lost status emerge
as entrepreneurial personality.
39. Theory of Social Change
It was Max Weber who first of all took the stand that
entrepreneurial growth was dependent upon ethical
value system of the society concerned
Max Weber opined that the spirit of rapid
industrial growth depends upon a rationalized
technology(healthy), acquisition of money and its
rational use for productivity and multiplication of
money. These elements of industrial growth depend
upon a specific value orientation of individuals i.e.
the tendency of acquisition and rational attitude
towards action which are generated by ethical
values.
40. According to this theory, driving entrepreneurial
energies are generated by the adoption of
exogenously(outside) supplied religious beliefs.
It is these beliefs which produce intensive
exertion (efforts) in occupational persecutes.(ill
treatment)
41. Theory of Social Behaviour
Kunkel presents a behavioral model of
entrepreneurship. Supply of entrepreneurs is
a function of social, political and economic
structure. Behavioral model concerned with
the overtly(openly) expressed activities of
individuals and their relations to the previous
and present surroundings, social structures
and physical conditions.
42. According to Kunkel, Individuals perform various
activities of which some are accepted by the
society while others are not. The accepted are
rewarded. The rewards act as reinforcing
stimulus increasing the probability of repeating
that behaviour pattern. This pattern of social
behaviour is entrepreneurial behaviour.
The supply of entrepreneurship
depends upon four structures found in a society
43. • (i) Limitation Structure – The society limits
specific activities and this limitation structure
affects all the members (including
entrepreneurs) of a society.
• (ii) Demand Structure- Material rewards are
necessary to lay the foundation for future social
gains. Moreover, behaviour of people can be
made entrepreneurial by manipulating certain
selected components of the demand structure.
44. • (iii) Opportunity Structure – It consists of the
availability of capital, management and
technological skills, information concerning
production methods, labour and markets.
• (iv) Labour Structure – It is concerned with the
supply of competent and willing labour. The
supply of labour is governed by several factors
such as available alternative means of
livelihood, traditionalism and expectations of
life.
45. Theory of Leadership
According to Hoselitz, entrepreneurship is a
function of managerial skills and leadership.
Business also requires finance but that is of
secondary importance. He further explains
that a person who is to become an industrial
entrepreneur must have more than the drive
to earn profits and amass(accumulate) wealth.
46. In this process, he has to show his ability to lead
and manage. In business, there are generally
three types of leadership—merchant money
lenders, managers and entrepreneurs. In
practice, money lenders are market oriented
and managers are authority oriented. But
entrepreneurs have in addition to these a
production orientation.
47. The merchant money lenders deal in goods/services
which is generally acceptable to everyone. However,
an entrepreneur creates his own commodity and its
acceptability is uncertain. Therefore, the
entrepreneur assumes more risk as compared to a
trader or a money lender.
In this context, it is important to note that making
profit is not enough to succeed in entrepreneurship.
Hoselitz opined that, entrepreneurship can develop
in a society where its culture permits a variety of
choices and where social processes are not rigid.
The social conditions should ensure the
development of enterprise-oriented personalities.
48. It is quite true that marginal men or groups
enjoying an ambiguous culture and social
position having no bondage of tradition to
inhibit(prevent) them from entrepreneurship
development. But there are certain economic
and political factors also which encourage the
people to initiate entrepreneurial behaviour.
49. Theory of Model Personality
Cocharn emphasises cultural values, role
expectations and social sanctions as the key
elements that determine the supply of
entrepreneurs. According to him, an
entrepreneur is neither a super normal
individual nor a deviant(different) person but
represents a society’s model personality.
50. His performance is influenced by factors:
(i) His own attitudes towards his occupation.
(iii) The operational requirements of the job. In
this context, society’s values are the most
important determinant of the attitudes and role
expectations.
51. The theory deals with only social factors. Profit is
the most important factor for encouraging
entrepreneur to assume risky behaviour. Even
need for achievement starts from profit making
process. It is implied in need for achievement
process. Besides, entrepreneur is also expected
to assume managerial functions. But theory
fails to incorporate all these requirements.
52. Theory of Systematic Innovation
Prof. Drucker has developed the theory of
systematic innovation. According to him
“Systematic innovation consists in the
purposeful and organized search for changes
and in the systematic analysis of the
opportunities such changes might offer for
economic or social innovation.” Specifically,
systematic innovation means seven sources
for innovative opportunity.
53. The first four sources lie within the enterprise,
whether business or public service institution, or
within an industry or service sector. They are
therefore visible primarily to people within that
industry or service sector. They are basically
symptoms. But they are highly reliable indicators
of changes that have already happened or can be
made to happen with little effort.
54. Thus, on the basis of above theories, we can say
that entrepreneurship is a multidisciplinary
area. Actually, entrepreneurship is governed
by human factor living in an ever-changing
society pursuing simultaneously economic,
social and psychological objectives