VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

Module-01: ENTREPRENEUR & ENTREPRENEURSHIP

INTRODUCTION

Do you know that there are millions of unemployed youth in the country and by the time you
graduate, this number would have increased substantially? Do you want to be part of that group which
keeps knocking from pillar to post, checking with employment exchanges, relatives, friends, and
neighbours and still not able to get a job to their liking and then settle for a second or third rate job?
You can also choose to be like Mr. Patel of Nirma who was a chemist’s assistance and has a Rs. 2500
crore company today. Did you know that the original Mr. Bata was a cobbler? And now has stores in
more than 30 countries all over the world. Or you could be like Dhiru bhai Ambani who started life as
a clerk in a French company in Aden. He was not born into a business family nor did he possess an
MBA degree and yet, he is a household name in India and figures in the Forbes list of the richest
Asians. Lakshmi Mittal, the steel giant, Satbir Bhatia of Hotmail fame and Narayan Murthy of Infosys
are some other names in the endless list you could choose from. If your answer is yes then you can
definitely opt for a career in entrepreneurship. This book will help you to understand the process of
setting up a small business, running it successfully and seeing it grow. And let us remind you that this
career opportunity is not only for boys but also for girls - all those girls who think smart, are ready to
act and script the story of their own life - like Shehnaz Hussain or Ritu Kumar or Kiran Majumdar
Shaw.

EVOLUTION OF CONCEPT AND DEFINITIONS: ENTREPRENEUR

So let us see- is setting up one’s business that simple and easy or is there more to it. In order to know
what being enterprising is all about we need to understand the following terms- Entrepreneur

ENTREPRENEUR
An entrepreneur is a person who starts an enterprise. He searches for change and responds to it. A
number of definitions have been given of an entrepreneur- The economists view him as a fourth factor
of production along with land labour and capital. The sociologists feel that certain communities and
cultures promote entrepreneurship like for example in India we say that Gujaratis and Sindhis are very
enterprising. Still others feel that entrepreneurs are innovators who come up with new ideas for
products, markets or techniques. To put it very simply an entrepreneur is someone who perceives
opportunity, organizes resources needed for exploiting that opportunity and exploits it. Computers,
mobile phones, washing machines, ATMs, Credit Cards, Courier Service, and Ready to eat Foods are
all examples of entrepreneurial ideas that got converted into products or services. Some definitions of
an entrepreneur are listed below: Definitions of an entrepreneur Stems: from the French word
‘entrependre’ meaning one who undertakes or one who is a ‘go between’

1725: Richard Cantillon: An entrepreneur is a person who pays a certain price for a product to resell it
at an uncertain price, thereby making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise.

1803: J.B. Say: An entrepreneur is an economic agent who unites all means of production- land of
one, the labour of another and the capital of yet another and thus produces a product. By selling the
product in the market he pays rent of land, wages to labour, interest on capital and what remains is his
profit. He shifts economic resources out of an area of lower and into an area of higher productivity
and greater yield.

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

1934: Schumpeter: According to him entrepreneurs are innovators who use a process of shattering the
status quo of the existing products and services, to set up new products, new services.

1961: David Mc Clleland: An entrepreneur is a person with a high need for achievement [N-Ach]. He
is energetic and a moderate risk taker.

1964: Peter Drucker: An entrepreneur searches for change, responds to it and exploits opportunities.
Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into
a resource.

1971: Kilby: Emphasizes the role of an imitator entrepreneur who does not innovate but imitates
technologies innovated by others. Are very important in developing economies.

1975: Albert Shapero: Entrepreneurs take initiative, accept risk of failure and have an internal locus of
control.

1983: G. Pinchot: intrapreneur is an entrepreneur within an already established organization.

CHARECTERSTICS OF ENTREPRENUER:

If we go through the business history of India, we come across the names of persons who have
emerged as successful entrepreneurs.eg: Tata, Birla, Modi, Dalmia, Kirlosker and other are well
known names successful entrepreneur in the country who started their business enterprise is, to great
extent, attributes to the success or otherwise of the entrepreneur himself / herself.

1. Hard work : willingness to work hard distinguish a successful entrepreneur from unsuccessful
one
2. Desire for high achievement: the achievement desire or motive strengthens them to surmount
the obstacles, suppress anxieties, repair misfortunes and devise expedients and only set up and
run successful business.
3. Independence: entrepreneurs don’t like be guided by others and to follow the routine. They
resist being a pigeonholded. They like to be independent in their business matters
4. Highly optimistic: the entrepreneurs are not disturbed by the present problems faced by them.
They are optimistic of future that the situation will become favourable to the business in
future.
5. Foresight: the entrepreneur will visualise the future changes that may happen and act
accordingly to run the show successfully.
6. Good organiser : entrepreneur pools all the different resources which are divorce , and
organize it to work towards the goal of the firm
7. Innovative: production is meant to meet customer's requirement and satisfaction. In view of
the changing taste of the customers from time to time, the entrepreneurs initiate research and
innovative activities to produce goods and satisfy the customer's changing demand for the
product.
8. Team building: An entrepreneur should have an ability to build a team. A team is a group of
people working with a common purpose that is focused and aligned to achieve a specific task
or set of outcomes.
9. Problem solving: An entrepreneur should be able to solve problem and avoid them some steps
in problem solving are I) Define the problem II) Gather information III) Identify various
solution IV) Evaluate the various solution and select the best V) Take action VI) Evaluate the
action taken.

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

FUNCTIONS OF AN ENTREPRENEUR:

An entrepreneur frequently has to wear many hats. He has to perceive opportunity, plan, organize
resources, and oversee production, marketing, and liaison with officials. Most importantly he has to
innovate and bear risk. The main functions of an entrepreneur are as follows:

1. Innovation: Innovation is one of the most important functions of an entrepreneur according to

Schumpeter. An entrepreneur uses information, knowledge and intuition to come up with new
products, new methods of reducing costs of a product, improvement in design or function of a
product, discovering new markets or new ways of organization of industry. Through innovation, an
entrepreneur converts a material into a resource or combines existing resources into new and more
productive configurations. It is the creativity of an entrepreneur that results in invention [creation of
new knowledge] and innovation [application of knowledge to create new products, services or
processes.] Systematic innovation means monitoring the following for innovative opportunity:

i. The unexpected success or failure or any unexpected outside event, (e.g. when the IT bubble burst
the ITES sector started growing.)

ii. Innovation based on process need [e.g. plate based cameras, film based cameras, digital cameras]

iii. Changes in industry and market structure [e.g. video cassette VCD, DVD, Blue ray disc]

iv. Demographics changes (e.g. increasing number of working women and nuclear families in most
metropolitan cities)

v. New knowledge (e.g. Pentium chip)

2. Risk and uncertainty bearing: According to Hozelist an entrepreneur performs the function of
risk and uncertainty bearing. Every decision pertaining to development of new products, adapting new
technologies, opening up new markets involves risk. Decision-making in an environment of
uncertainty requires anticipation of risk. Profit is said to be the reward for anticipating and taking such
risks. However it is pertinent to mention that the entrepreneur is not a gambler, he only takes
calculated risks. An entrepreneur develops the art of decision-making under conditions of uncertainty
as a matter of survival.

3. Organization building: An entrepreneur has to organize men, material and other resources. He has
to perform the functions of planning, co-ordination and control. He has to use his leadership qualities
to build a team, generate resources and solve problems. With his organizational skills an entrepreneur
builds an enterprise from scratch, nurtures it and makes it grow. His vision sows the seeds for a sound
and vibrant organization and synergies are built in the enterprise. According to Kilby in a developing
country even the imitator entrepreneurs are very important and the entrepreneurial role encompasses
the following:

i. Perception of market opportunities

ii. Gaining command over scarce resources

iii. Purchasing inputs

iv. Marketing the products

v. Dealing with bureaucrats

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

vi. Managing human relations within the firm

vii. Managing customer and supplier relations

viii. Managing finance

ix. Managing production

x. Acquiring and overseeing assembly of the factory

xi. Industrial engineering

xii. Upgrading process and product

xiii. Introducing new production techniques and products.

TYPES OF ENTREPRENEURS:

The different types of business entrepreneurs are discussed below:

In the initial stages of economic development, entrepreneurs tend to be shy and humble but as the
development process picks up speed, they tend to become more enthusiastic and confident. They help
make the business environment healthy and development oriented. Highly enthusiastic and innovative
entrepreneurs exist only in developed countries as level of their -economic and technological
development has reached a certain level whereas in developing and under-developed countries,
imitative entrepreneurs are more successful.

However, the various types or entrepreneur are classified as under:

 According to the Type of Business :

1. Business entrepreneur: Business entrepreneurs are those entrepreneurs who conceive the idea of a
new product or service and then translate their ideas into reality. Entrepreneur examines the various
possibilities of sources of finance, supply of labour, raw-materials or finished product as the case may
be.

Business entrepreneur may be undertaking the trading business or manufacturing business but initially
the size of the business is very small. As the entrepreneur flourishes, he tends to expand his business.

2. Trading entrepreneur: As the very name indicates trading entrepreneur is concerned with trading
activities and not manufacturing. Trading means buying the finished product from the producer and
selling off to the customer directly or through a retailer.

A trading entrepreneur has to be creative enough as he has to identify the market. He has to identify
potential market, create demand through extensive advertisement of his product and thus inspire
people to buy his product. For this is inevitable for him to find out the desires, tastes and choices of
his customer in domestic as well as international market.

3. Industrial entrepreneur: As the very name indicates, an industrial entrepreneur is one who sets up
an industrial unit. He perceives the opportunity to set up his unit, complies with necessary formalities
of getting license, power connection, pollution control clearance (if the need be) arrange initial
capital, providing securities and guarantees to the financial institutions, making payment of wages and
supply necessary technical know-how. An industrial entrepreneur has the ability to convert economic

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

resources and technology into a considerably profitable venture. Manufacturer of leather products,
textiles, electronics, food items and the like are industrial entrepreneurs.

4. Corporate entrepreneur: Corporate entrepreneur is the one who plans, develops and manages a
corporate body. He is a promoter, an essential part of board of directors, an owner as well as an
entrepreneur. He gets his corporate body registered under the requisite Act which gives his company
the status of separate legal entity.

5. Agricultural entrepreneur: Agricultural entrepreneur is the one who is engaged in the agricultural
activities. He uses latest technology to increase the productivity of agriculture and also adopts
mechanisation.

 According to Motivation :

1. Pure entrepreneur: Pure entrepreneur is one who may or may not possess an aptitude for
entrepreneurship but is tempted by the monetary rewards or profits to be earned from the business
venture. He is status-conscious and wants recognition.

2. Induced entrepreneur: Induced entrepreneur is attracted by the various incentives, subsidies and
facilities offered by the government. 'An entrepreneur is not born' —this is no doubt true as every
person can be trained to become a good entrepreneur. Most of the entrepreneurs who enter into
business are induced entrepreneur as various kinds of financial, technical and managerial facilities are
provided by the government to promote entrepreneurship. An entrepreneur can develop himself much
more by attending EDPs and they can make a stand in the market. Import restrictions, allocation of
production quotas to SSIs, reservation of products for small industry etc. have forced many young
people to set up a small industry.

Non-Resident Indians (NRIs) and educated unemployed seeking self-employment or newly married
bridegrooms by taking financial support of their in-laws may be described as induced entrepreneur.
This class of entrepreneur accounts for maximum number of failures because there is no proper
screening of misfits.

 According to the Use of Technology :

1. Technical entrepreneur: The strength of a technical entrepreneur is in his skill in production

techniques. He concentrates more on production than on marketing. He possesses craftsman skill in
himself which he applies to develop and to improve the technical aspect of the product.

2. Non-technical entrepreneur: Unlike technical entrepreneur, non-technical entrepreneur is not

concerned with the technical aspect of the product rather he spends more time in developing
alternative strategies of the marketing and distribution to promote his business. His target is not to
change the production technique but how to increase the demand of the product in which he is
dealing.

3. Professional entrepreneur: Professional entrepreneur means an entrepreneur who is interested in

floating a business but does not want to manage or operate it . Once the business is established, he
sells it out and catches on to float a new business.

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

 According to Stages of Development :

1. First generation entrepreneur: First generation entrepreneur are those entrepreneurs who do not
possess any entrepreneurial background. They start an industrial unit by means of their own
innovative skills.

2. Second generation entrepreneur: Second generation entrepreneur are those entrepreneurs who
inherit the family business firms and pass it from one generation to another.

3. Classical entrepreneur: A classical entrepreneur is a stereotype entrepreneur whose aim is to

maximize his economic returns at a level consistent with the survival of the unit but with or without
an element of growth.

 Classification Given by Danhof :

1. Innovating entrepreneur: Innovative entrepreneurs are generally aggressive and possess the art of
cleverly putting the attractive possibilities into practice. An innovating entrepreneur is one who
introduces new goods, inaugurates new methods of production, discovers new market and re-
organises the enterprise. He arranges money, launches an enterprise, assembles the various factors,
chooses the competent managers and sets his enterprise go.

Schumpeter's entrepreneur is of this type. His entrepreneur belongs to that nation which has wide
industrial base, modern banking facilities, rich infrastructure, up to date technology and the like.
Innovative entrepreneurs do not exist in developing economies where lack of capital, technological
know-how blocks the path of innovativeness.

In developed countries, people are highly developed and consistently look forward for change. They
want to consume such products which do not commonly exist in the world. They want progress as
they have achieved high level of development. Innovating entrepreneur played a key role in the rise of
modern capitalism, through their enterprising spirit, hope of making money, and ability to recognise
and exploit opportunities.

2. Imitative entrepreneurs: Imitative entrepreneurs are characterised by readiness to adopt

successful innovations inaugurated by successful innovating entrepreneurs. Imitative entrepreneurs do
not imitate the changes themselves, they only imitate techniques and technologies innovated by
others. Such entrepreneurs are significant for under-developed economies because they put such
economies on high rate of economic development. Entrepreneurs prefer to imitate the technology
already existing somewhere in the world.

However, the talent of imitative entrepreneurs should not be under-estimated. Even imitative
entrepreneurs are revolutionary and agents of change. They have ability to do things which have not
been done before even though, unknown to them, the problem may have been solved in the same way
by others. Innovative entrepreneur is creative, while imitative entrepreneur is adoptive.

3. Fabian entrepreneur : Fabian entrepreneurs are cautious and sceptical in experimenting change in
their enterprises. Such entrepreneurs are shy, lazy and lethargic. They are imitative by nature but are
not determined and also lack power. They imitate only when it becomes perfectly clear that failure to
do so would result in a loss of the relative position of the enterprise.

4. Drone entrepreneur: Drone entrepreneurs are characterised by a refusal to adopt opportunities to

make changes in production formulae even at the cost of severely reduced returns. They can suffer

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

loss but are not ready to make changes in their existing production methods. When competition
increases, they are pushed out of the market as it becomes uneconomical for them to exist and operate
in a competitive market.

 According to Capital Ownership :

1. Private entrepreneur: When an individual or a group of individuals set up an enterprise, arrange

finance, bear the risk and adopt the latest techniques in the business with the intention to earn profits,
he or the group is called us private entrepreneur/entrepreneurs.

2. State entrepreneur: As the name indicates, state entrepreneur means the trading or industrial
venture undertaken by the state or the government itself.

3. Joint entrepreneur: Joint entrepreneur means the combination of private entrepreneur and state
entrepreneur who join hands.

 Based on development angle

1. Prime mover: this entrepreneur set in motion a powerful sequence of development, expansion, and
diversification of business.

2. Manager: Such entrepreneur does not initiate expansion and is content just staying in business.

3. Minor innovator: this entrepreneur contributes to economic progress by finding better use for
existing recourse.

4. Satellite: this entrepreneur assumes a supplier's role and slowly moves towards a productive
enterprise.

5. Local trading: Such entrepreneur limits his business to the local market.

 Based on entrepreneurial business

1. Manufacturing: An entrepreneur who runs such a business actually produces the product that can
be sold using the resources and supplies. For examples apparels and textile products, chemical
products. Etc.

2. Wholesaling: An entrepreneur with such a business sells product to the middle man

3. Retailing: An entrepreneur with such a business sells product directly to the customers / people
consumes them.

4. Service: An entrepreneur with such a business sells services rather than the products.

According to Gender and Age:

(i) Man entrepreneur

(ii) Woman entrepreneur

(iii) Young entrepreneur

(iv) Old entrepreneur

(v) Middle-aged entrepreneur

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

According to Area:

(i) Urban entrepreneur

(ii) Rural entrepreneur

According to Scale:

(i) Large scale industry entrepreneur

(ii) Medium scale industry entrepreneur

(i) Small scale industry entrepreneur

(ii) Tiny industry entrepreneur.

Entrepreneurial leaders and Manager:

Differences between Entrepreneurial Leaders and Managers

Areas of Differentiation Entrepreneurial Leaders Managers
1.Position They are their own bosses They are salaried employees
2.Risk Bearer They are the owner of They are the employees of the
enterprises; therefore, bear all organization and need not bear
the risks and the uncertainties any risk
involved in the business
3.Objectives Their objective is to introduce Their objective is to supervise
innovations and act as change and create routines as well as
agents implement entrepreneur’s plans
and ideas
4.Pays and Rewards Their income is not fixed and They get fixed salaries and
depends on the performance of rewards for performing well
the enterprise
5.Faults and Failures They believe in experimenting They put efforts to avoid
new ideas; therefore, may mistakes
experience faults and failure.
They also believe to learn from
their failures.
6.Decision Making They take own decisions They execute the decision of
the owner

Intrapreneur – an emerging class

Of late, a new breed of entrepreneur is coming to the forge in large industrial organisations. They are
called “intrapreneurs”. They emerge from within the confines of an existing enterprise. In big
operations, the top executives are encouraged to catch hold of new ideas and then convert these into
products through research and development activities within the frame work of the organisation. The
concept of intrapreneurship has become very popular in developed countries like America. It is found
that an increasing number of intrapreneurs is leaving their jobs in big organisations and is starting
own enterprise. Many of such have become successful in their new enterprise.

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

intrapreneurship refers to employee initiatives in organizations to undertake something new, without

being asked to do so." Hence, the intrapreneur focuses on innovation and creativity, and transforms
an idea into a profitable venture, while operating within the organizational environment. Thus,
intrapreneurs are inside entrepreneurs who follow the goal of the organization. intrapreneur ship is an
example of motivation through job design, either formally or informally. Employees, such as
marketing executives or perhaps those engaged in a special project within a larger firm, are
encouraged to behave as entrepreneurs, even though they have the resources, capabilities and security
of the larger firm to draw upon. Capturing a little of the dynamic nature of entrepreneurial
management (trying things until successful, learning from failures, attempting to conserve resources,
etc.) adds to the potential of an otherwise static organization, without exposing those employees to the
risks or accountability normally associated with entrepreneurial failure.

Having understood the meaning of intrapreneur , now we can distinguish with entreprenuer as
follows.

Point of Difference Entrepreneur Intrapreneur

1. Dependency Independent in his operations Dependent on the entrepreneur

2.Raising of funds Himself raises the funds Funds are not raised by the
required for the enterprise intrapreneur

3.Risk Bears high risk Doesn't bears the risk of

enterprise

4.Operations Entrepreneur operates from Intrapreneur operates from

outside inside the organisation

5.Guarantee An entrepreneur raises the whereas an intrapreneur does not

finance from various sources own responsibility to raise the
and also guarantees their return capital or to return it

6.Relationship with organisation An entrepreneur has no relation Whereas an intrapreneur

with any organisation operates within the organisation
where he is working.

7.Idea An entrepreneur generates ideas An intrapreneur adopts the idea

generated by an entrepreneur
and makes it better
8.Employment An entrepreneur employs An intrapreneur are paid for
intrapreneur and pays them in using their creative thinking and
exchange of their services implementing the ideas
9.Sense of Responsibility An entrepreneur works overtime An intrapreneur works overtime
to run his/her own business helping to run someone’s else
business for the

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

ENTREPRENEURSHIP
Entrepreneurship can be described as a process of action an entrepreneur undertakes to
establish his enterprise. Entrepreneurship is a creative activity. It is the ability to create and
build something from practically nothing. It is a knack of sensing opportunity where others
see chaos, contradiction and confusion. Entrepreneurship is the attitude of mind to seek
opportunities, take calculated risks and derive benefits by setting up a venture. It comprises of
numerous activities involved in conception, creation and running an enterprise. According to
Peter Drucker Entrepreneurship is defined as ‘a systematic innovation, which consists in the
purposeful and organized search for changes, and it is the systematic analysis of the
opportunities such changes might offer for economic and social innovation.’ Entrepreneurship
is a discipline with a knowledge base theory. It is an outcome of complex socio-economic,
psychological, technological, legal and other factors. It is a dynamic and risky process. It
involves a fusion of capital, technology and human talent. Entrepreneurship is equally
applicable to big and small businesses, to economic and non-economic activities. Different
entrepreneurs might have some common traits but all of them will have some different and
unique features. If we just concentrate on the entrepreneurs then there will be as many models
as there are ventures and we will not be able to predict or plan, how and where, and when
these entrepreneurs will start their ventures. Entrepreneurship is a process. It is not a
combination of some stray incidents. It is the purposeful and organized search for change,
conducted after systematic analysis of opportunities in the environment. Entrepreneurship is a
philosophy- it is the way one thinks, one acts and therefore it can exist in any situation be it
business or government or in the field of education, science and technology or poverty
alleviation or any others.

ENTERPRISE

Entrepreneur is a person who starts an enterprise. The process of creation is called entrepreneurship.
The entrepreneur is the actor and entrepreneurship is the act. The outcome of the actor and the act is
called the enterprise. An enterprise is the business organization that is formed and which provides
goods and services, creates jobs, contributes to national income, exports and overall economic
development.

ENTREPRENEURSHIP AND EDUCATION:

Towards the end of the sixties, two significant contributions were made in the field of
entrepreneurship .One was that there is a positive linkage between entrepreneurship and economic
development and the other was regarding the emergence of a strong hypothesis that entrepreneurship
can be developed through planned efforts 1. Consequently planners realized that absence of a strong
entrepreneurial base acts as a serious handicap in the industrial development of a region. The
identification and development of first generation entrepreneurs through Entrepreneurial Development
Programmes is an important strategy. There is a growing realization that presence of resources and
favourable government policies cannot automatically manufacture economic development. It is the
entrepreneurial spirit of the people, which can transform the economy of that region. Both the quantity
and quality of entrepreneurs are of utmost significance for achieving the goal of economic
development. The myth that entrepreneurs are born with some innate traits is fortunately no longer
held. You will learn more about this in the lesson on motivation. Many research studies have brought
out that entrepreneurship can be taught and learned. Entrepreneurship is a discipline and like all

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

disciplines it has models, processes and case studies, which can help an individual to study this
subject. The necessary competencies required of a successful entrepreneur can be acquired through
training and development.

Numerous courses in entrepreneurship are being taught all over the world in schools and colleges,
seminars and conferences are being organized and EDPs are being conducted. The thinking today is
why just create managers why not create people who can absorb managers. One can acquire the traits
and learn the skills for becoming an entrepreneur e.g. a person can learn to be achievement oriented,
self- confident, perseverant etc. which are all part of the characteristics of a successful entrepreneur.
Usually the model used for entrepreneurial education has three phases: Stimulatory Phase- This phase
involves planned publicity for opportunities, motivation training and help and guidance in selection of
product or service. Support Phase- This provides help in registration of units, arrangement of finance
as well as land, sheds, power, water, common facility centres etc. Help is also provided in marketing
of products. Sustenance Phase- Once the enterprise is set up then help is provided for modernization,
diversification, additional finance etc.

Evolution of Entrepreneurship:

“Entrepreneur” was first used in 1723, today the term entrepreneur implies qualities of leadership,
initiative and innovation in business. Economist Robert Reich has called team-building, leadership,
and management ability essential qualities for the entrepreneur.

An entrepreneur is a factor in microeconomics, and the study of entrepreneurship reaches back to the
work in the late 17th and early 18th centuries of Richard Cantillon and Adam Smith, which was
foundational to classical economics.

In the 20th century, entrepreneurship was studied by Joseph Schumpeter in the 1930s and other
Australian economists such as Carl Menger , Ludwig Von Mises and Friedrich Von Hayek. The term
"entrepreneurship" was coined around the 1920s, while the loan from French of the word
entrepreneur dates to the 1850s.

Initially, economists made the first attempt to study the entrepreneurship concept in depth Richard
Cantillon (1680-1734) considered the entrepreneur to be a risk taker who deliberately allocates
resources to exploit opportunities in order to maximize the financial return. Cantillon emphasized the
willingness of the entrepreneur to assume risk and to deal with uncertainty. Thus, he draws attention
to the function of the entrepreneur, and distinguishes clearly between the function of the entrepreneur
and the owner who provides the money. Alfred Marshall viewed the entrepreneur as a multi-tasking
capitalist. He observed that in the equilibrium of a completely competitive market, there was no spot
for “entrepreneurs” as an economic activity creator.

Joseph Schumpeter
According to Schumpeter, an entrepreneur is willing and able to convert a new idea or invention into a
successful innovation. Entrepreneurship employs what Schumpeter called "the gale of creative
destruction" to replace in whole or in part inferior offerings across markets and industries,
simultaneously creating new products and new business models. Thus, creative destruction is largely
responsible for long-term economic growth.

According to Frank H Knight and Peter Drucker, entrepreneurship is about taking risk. The
entrepreneur is willing to put his or her career and financial security on the line and take risks in the

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

name of an idea, spending time as well as capital on an uncertain venture. Knight classified three
types of uncertainty:

 Risk, which is measurable statistically (such as the probability of drawing a red color ball
from a jar containing 5 red balls and 5 white balls).
 Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball
from a jar containing 5 red balls but with an unknown number of white balls).
 True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict
statistically, such as the probability of drawing a red ball from a jar whose number of red balls
is unknown as well as the number of other colored balls.

Entrepreneurship is often associated with true uncertainty, particularly when it involves something
really novel, whose market did not already exist. However, even if a related market already exists,
nothing guarantees that room exists for a particular new entry.

Development of entrepreneurship:

In India Entrepreneurial development program (EDP) is primarily designed to induce motivation and
competence among young prospective entrepreneurs. So the cause and curriculum of
Entrepreneurship Development programme will be so designed that it will induce motivation and
competency. The course curriculum of EDP should be designed to cover the following aspects:

 It will give general introduction to entrepreneurship.

 It will afford motivational training.
 It will increase managerial skill of the entrepreneur,
 It makes entrepreneur to have expert knowledge on various support systems and procedure.
 It will give fundamental idea on project feasibility study.

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.

VTU – MBA 2nd semester -14MBA26 - ENTREPRENEURIAL DEVELOPMENT

 It will encourage plant visit to afford practical knowledge to entrepreneurs.

Stages in entrepreneurial process:

According to Encyclopaedia Americana (1988), “An entrepreneur is a businessman who assumes the
risk of bringing together the means of production including capital, labour and material and receives
his reward in profit from the market value of his product”.
An entrepreneur takes the risk and organizes resources to establish and operate his/her enterprise.
He/she identifies and traps the existing opportunities in the market, converts idea into action, bears the
risk and uncertainties involved, and takes promotional activities to launch the enterprise. In addition,
they strive for excellence in their field. Some of the functions of an entrepreneur are described as
follows:

 Idea Generation: Implies that an entrepreneur identifies business opportunities, selects the
most suitable business opportunity, and converts that opportunity/idea into a successful
business venture.
 Promotion: Indicates that in today’s time the activities of entrepreneurs are not only limited
to establish an enterprise. Nowadays, entrepreneurs are also involved in various other
activities, such as promoting for setting up a new enterprise, attracting the investors,
expanding the existing enterprise, and combining two or more enterprises. As a promoter, an
entrepreneur conducts feasibility studies, decides the form of organization, assembles the
required resources, such as capital and human resource, and shapes up the enterprise.
 Risk and Uncertainty Bearing: Implies that an enterprise needs to bear risks involved in
establishing a new enterprise or starting a new business venture. He/she should be ready to
bear the losses that may arise because of unforeseen situations in future. He/she does not
hesitate in doing new things and adopting new methods of production.
 Arranging Finance: Indicates that entrepreneurs arrange finance for setting up the enterprise.
An entrepreneur is an individual, who provides initial capital to start the venture and arranges
additional funds required to carry on activities and expand the business.
 Staffing: Signifies that an entrepreneur needs to employ individuals with the required skill-
sets for operating in the different functions of the organizations

-----END-----

For case study students can Refer ;

1. Entrepreneurship Development & Small Business Enterprises by POORNIMA M

CHARANTHIMATH,Pearson eduction

2. Entrepreneurial Development by,S S KHANKA,S.Chand publication

Refer Question bank .

Mr. CHANDAN D N, Assistant Professor, Department of MBA, VVIET, Mysore.