The innovator able reap profits and disturb equilibrium

BBA-12

Convener and Members

Subject Convener:
Dr. Anurodh Godha
Assistant Professor, Department of Commerce,
Vardhaman Mahaveer Open University, Kota

Writers:
Dr. Anurodh Godha (Unit 1, 2, 3, 4, 5)
Assistant Professor, Department of Commerce,
Vardhaman Mahaveer Open University, Kota
Dr. Ashish Pareek (Unit 6, 7)
Assistant Professor/Deputy Director,
Department of Management Studies/Center for ESBM, M.D.S. University, Ajmer
Dr. T.K. Jain (Unit 8)
Principal, Podar College,
Navalgarh, Jhunjhunu (Raj.)
Dr. Deepika Upadhyaya (Unit 9, 10)
Assistant Professor/Assistant Director,
Department of Management Studies/Center for ESBM, M.D.S. University, Ajmer

Co-Editor:
Dr. Anurodh Godha
Assistant Professor, Department of Commerce, Vardhaman Mahaveer Open University, Kota

Course Material Production

Structure of Unit:

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Defining Entrepreneurship:

Defining entrepreneurship might seem simple, but it isn’t! There are about as many definitions of entrepreneurship. Everyone seems to have his or her own views about what it is and in the same way they have defined it. Let’s look at some of the various ways in which entrepreneurship has been defined.

Figure 1.1 : Concept of Entrepreneurship

Entrepreneurship has long been described by researchers and writers with terms such as new, innovative, flexible, dynamic, creative, and risk-taking. Many authors have said that identifying and pursuing opportunities are an important part of entrepreneurship.

According to Franklin Lindsay, “Entrepreneurship is defined as anticipating the future requirements of society and successfully meeting these needs with new, creative and imaginative combinations of resources”.

According to H. Cole, “Entrepreneurship is the purposeful activities of an individuals or a group of associated individuals undertaken to initiate, maintain and aggrandize profit by production or distribution of economic goods and services”. This definition states that entrepreneurship is goal-oriented process involving production or distribution of products and goods. It may be undertaken by person or by group of persons.

According to Rao and Mehta, “Entrepreneurship can be described as creative and innovative response to the environment”.

According to John Kao, “Entrepreneurship is the attempts to create values recognition of business opportunity, the management of risk-taking appropriate to the opportunity and through the communicative and management skills to mobilize human financial and material resources necessarily to bring a project to fruition.” This definition recognizes that entrepreneurship involves the fusion of capital technology and human talent to complete a project successfully and with reasonable degree of risk.

The Person

According Peter Drucker, “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed what constitutes knowledge in practice is largely defined by the ends; that is, by the practice. Let’s look closer at these common themes so we can begin to better understand what entrepreneurship is.

function as mobilisers and allocators of capital.”

or creating change, for example in technology, materials, prices or demographic. Entrepreneurial secret for creating value is creativity and innovation.

Entrepreneurship is the result of a disciplined, systematic process of applying creativity and innovation to needs and opportunities in the marketplace. It involves applying exposed strategies to new ideas and new insights to create a product or a service that satisfies customers’ needs or solves their problems.

Bolton and Thompson (2000) associate invention closely with creativity but link it with entrepreneurship if the invention is to become a commercial opportunity to be exploited. ‘Creativity is the starting point whether it is associated with invention or opportunity spotting. This creativity is turned to practical reality (a product, for example) through innovation. Entrepreneurship then sets that innovation in the context of an enterprise (the actual business), which is something of recognized value.’ Creativity and innovation need the entrepreneurial context to become a business reality - supported by a certain mix of talents and temperaments and based on appropriate knowledge and skills.

High

Entrepreneurship

Figure 1.5 : Creativity and Entrepreneurship

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Earlier, we defined innovation as the process of doing new things. It is important to recognize the innovation more focus on action not conceiving new ideas only. When people have passed through the Realization and Validation stages of creativity process, they may have become inventors, but they are not yet innovators.

The difference between creativity and innovation is shown in Figure 1.6

The main characteristics of entrepreneurship are given below:

1. Economic Activity: Entrepreneurship is primarily an economic activity because it involves the creation and operation of an enterprise. It is basically concerned with the production and distribution of goods and services and optimally utilizes the resource towards productive use.

5. Enterprise Creation: The next characteristic of entrepreneurship is enterprise creation. In order to pursue the perceived opportunities for innovation and to create value, there must be organized efforts and actions. Someone must take the initiative to do something – take action to get the entrepreneurial venture up and running. Entrepreneurship is a creative response to changes in the environment. It involves innovation or introduction of something new or improved. An entrepreneur is an agent to effect change.

6. A Function of Risk Bearing: Risk is an inherent and inseparable element of entrepreneurship. An entrepreneur works under uncertainties and he assumes the uncertainty of future. In the pursuit of profit, there is possibility of loss also.

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services, new methods of production and distribution, new sources of inputs and new market s for this purpose.

Drucker says, “Entrepreneurship is by no means confined solely to economic institutions.”

15. Knowledge-based Practice: Drucker writes, “Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base. He uses his experiences for high achievements. The enterprising quality is generated after a long practice of risk-bearing behaviour.”

(3) It is a means of rapid economic development which is likely to result in creation of gainful employment in society.

(4) It believes in the fact that entrepreneurs are not born, they can be created. In the light of this, large numbers of Entrepreneurship Development Programmes are conducted to promote entrepreneurship in the country.

Entrepreneurship is, and continues to be, important to every sector in India and in other global economies. Entrepreneurship contributes to economic and social development of a country. Operating an enterprise, wealth creation, making innovative decisions or managing an organization, all have the thrill of risk, challenges and profitable opportunities.

Entrepreneurial firms are not just money-making ventures for their promot-ers. The positive impact of entrepreneurial firms is seen throughout the economy and society. A vast majority of this high-impact .firms are fast ­growing companies. David Birch has differentiated these firms by calling them gazelles. He defines a gazelle as a business establishment with at least 20 per cent growth every year.

3. Number of New Start-ups: All businesses whether they fit the definition of entrepreneurial or not – at one point in time were start-ups, the most convenient measure we have of the role that entrepreneurship plays in this economic statistic is to look at the number of new firms over a period of time. The assump­tion that we have to make, then, is that some of these new firms engage in activi­ties that are entrepreneurial in nature.

The next important function of entrepreneurship is starting the venture. In fact, entrepreneurs identify opportunities and possible competitive advantages. They set goals and strategies. Pursuit of entrepreneurship contributed to the overall creation of new firms. Why is the creation of new firms so important? It’s important because these new firms contribute to economic development through

5. Path of Creating Tomorrow: Peter Drucker Says, “Entrepreneur has to seek off yesterday and to render obsolete what already exists and is already known. He has to create tomorrow. Making the business of tomorrow cannot be a flash of genius. It requires systematic analysis and hard, rigorous work today·. The specific job of entrepreneurship is to make today’s business capable of making the future, of making itself into a different business”.

6. Entrepreneurship Provides an Opportunity to Make a Difference and Create Your Own Destiny: Increasingly, entrepreneurs are starting businesses because they see an opportunity to make a difference in a cause that is important to them. Entrepreneurs are finding ways to combine their concerns for social issues ad their desire to earn a good living. Owning a business provides entrepreneurs the independence and the opportunity to achieve what is important to them.

• Entrepreneurship in small businesses helps in distribution of products of large business. They, thus, support the large business houses.

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• Bring socio political change in the society.

• Develop technological know-how.

be and industrialization.

• It arouses the need for achievement in individuals which brings about a change in the economic

The entrepreneurial activity at any time is dependent upon a complex and varying combination of economic,

social, political, psychological and other factors. These factors may have been both positive and negative

suppliers are the factors that stimulate entrepreneurship. Capital is one of the most important

capital formation. Due to this capital supply increase, entrepreneurship also increases.

2. Socio-Economic Factors: The entrepreneurial activity at any time and place is governed by varying

3. Personal Factors: McClelland assumes ‘that achievement motivation is the immediate cause of the origin of entrepreneurship. He explained entrepreneurial growth in terms of need for achievement motivation. Thus, he found high correlation between need for achievement and successful economic activities.

Personality traits such as inner desire for control of their activities, tolerance for risk, high level of tolerance to function in adverse situations and background experiences such as the family environment, level of education, age and work history tolerance for ambiguity are important personal characteristics that affect entrepreneurship. Individuals who are desirous of working independently; willing to work for long hours and assume risk; are self-confident and hard-working are likely to be more successful as entrepreneurs than those who do not posses these qualities.

8. Impact of Ethical Value System: Max Weber was first to point out that the entrepreneurial growth was governed by the ethical value system of the society concerned. He said that the spirit of rapid industrial growth depends upon a rationalized technology, acquisition of money and its rational use for productivity and multiplication of money. These elements depend upon a specific value orientation of individuals.

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11. Work Environment: If the environment that a individual is working in is unsatisfactory, that is, not conducive to his growth needs, it is likely that the individual will quit his job and start his own business as an entrepreneur. Unsatisfied personal needs for growth and achievement in employment conditions results in successful entrepreneurship.

12. Easier Access to Resources Promotes Entrepreneurship: Today, it is easier for an entrepreneur to access debt and equity finance than ever before. Not just capital, most other factors of production are now easily available to entrepreneurs. With greater flow of information, it is easier to contact and to deal with resource providers such as raw material suppliers and dealers of capital goods. Also, many business services are now tailored to suit.

Let’s try to look at what entrepreneurship contributes towards economic development. The role of entrepreneurship in economic development varies from economy to economy depending upon its materials resources, industrial climate and the responsiveness of the political system to the entrepreneurial functions. The entrepreneurs contribute more in favorable opportunity conditions than in the economies with relatively less favorable opportunity conditions.

1. Increasing Income and Per Capita Income: Entrepreneur brings in new products and services and develops new markets for growth of economy thus increasing gross national product as well as per capital incomes of the people in the country. The role of entrepreneurship in economic development involves more than just increasing per capita output and income; it involves initiating and constituting change economic growth depends on the rate of applied technical progress (i.e., innovation) and rate of technical progress in the economic field which in turn depends on the supply of entrepreneurs in the society. Thus the entrepreneur is the agent of change in society.

2. Wealth Creation and Distribution: Entrepreneurial activity leads to value addition and creation of wealth and capital in the structure of business and society. This change is accompanied by growth and increased output which allows more wealth to be divided by the various participants. It provides

• It provides immediate large-scale employment. Thus, it helps reduces the
unemployment problem in the country, i.e. the root of all socio-economic problem.

• It promotes balanced regional development.

• Last but no means the least; it also promotes country’s export trade i.e., an important ingredient to economic development.

Thus, it is clear that entrepreneurship serves as a catalyst of economic development. On the whole, the role of entrepreneurship in economic development of a country can be best be put as “an economy is the effect for which entrepreneurship is the cause.”

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