ENTREPRENEURSHIP

LECTURE NOTES 1

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Introduction
DEFINITIONS
Entrepreneur (Oxford Dictionary) – Person who undertakes an enterprise
with chances of profit or loss. (As I have understood, Entrepreneur is a
person who undertakes a business activity of which he has no
background and faces considerable risks in the process. If either of the
two elements, i.e., “no background” or “considerable risk” is missing in
the venture, it is no entrepreneurship).

Entrepreneur – (New Encyclopedia Britannica) – An individual who bears

the risk of operating business in the face of uncertainty about the future
conditions. Common Meaning – one who starts his own, new and small
business

Entrepreneurship – It is a philosophy or process through which an

entrepreneur seeks innovation and employment.

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Historical Evolution & Definition of Entrepreneurship
Entrepreneur Entrepreneurship Enterprise
Person Process or Philosophy Object
Entrepreneurship can also be described as a creative and
innovative response to the environment.
History of Entrepreneurship (Entrepreneurship Theories)
1600 – French verb – Entreprendre – to undertake.
1700 – Person bearing Risk or Profit in a fixed price contract
(Risk)
1725 – Richard Cantillon – Person bearing risks is different from
Capital Supplier (Risk)
1803 – J. B. Say – Shifts economic resources out from an area of
lower to higher productivity & greater yields (Value Addition)
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1934 – Joseph Schumpeter – Innovator and develops untried technology
(Productivity & Innovation)

1961 – David McClelland – Highly motivated, energetic, moderate risk

taker (Need for achievement)

1964 – Peter Drucker – Searches for change, responds to it & exploits as

opportunity (Opportunity Focused)

1980 – Karl Vesper – Behaviour Perceptions– Economists, Psychologists,

Businessmen, Politicians (Environment)

1983 – Gifford Pinchot – Intrapreneur

1985 – Robert Hisrich – Creating something different with value, devoting

time & effort, assuming risks (FPS); results– rewards and satisfaction
(Leadership & Vision)
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History of Entrepreneurship Cont…
However, the most substantial research into entrepreneurial
theory was achieved in the 20th century, under the tutelage of
Joseph Schumpeter, who claims that the entrepreneur has a
creative destruction innovation by replacing destroying an
existing economy by a better, advance one.

Where some of the entrepreneurships emerged as a result of

innovation based on new products, others were merely an
expansion of existing businesses in markets that now showed
areas of growth.

For instance, railroads and shipping, cargo, transport; factors

that became intertwined with growth in commerce during the
late 18th century and early 19th century.

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Note Well:
Please note that key word in Entrepreneurship is RISK. Any
venture where risk is mitigated due to any reason does not qualify
to be called entrepreneurship. Entrepreneurs are people who
create new business activity in the economy and bear considerable
business risk in the process. This is often done by starting new
companies. But they can also create new business activity by
introducing a new product or creating a new market

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How do you define an entrepreneur in the 21s t Century?
An entrepreneur of 21st century is a customer focused innovator.
He uses e– knowledge. Advantage is speed. He is a global thinker
even though he may not necessarily be a global player.

Standard (New) Definition

Entrepreneurship is the process of creating something different
with value by devoting the necessary time and effort, assuming
the accompanying financial, psychic, social risks and receiving the
resulting rewards of monetary and personal satisfaction and
independence. Word “Entrepreneur” stems from French Verb
Entreprendre – means between; taker or go between.

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New Definition involves four aspects –
(a) The creation process
(b) Devotion of time and efforts
(c) Assumption of risks
(d) Rewards of independence, satisfaction, money.

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Definition of Entrepreneurship
Entrepreneurship is a dynamic activity which helps the
entrepreneur to bring changes in the process of production,
innovation in production, new usage of materials, creator of
market etc. it is a mental attitude to foresee risk and
uncertainty and do something new in an effective manner
to achieve certain goals.

An entrepreneur is an economic change agent with

knowledge, skills, initiative, drive and spirit of innovation
to achieve goals. He identifies and seizes opportunities for
economic benefits. He is a risk bearer, an organizer and an
innovator.

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Definition of Entrepreneurship Cont…

Who Are Entrepreneurs?

The word „Entrepreneur‟ has been taken from the French word. It
means Between Takers. Entrepreneur is another name of Risk
Taker.
An entrepreneur is an individual who takes moderate risks and
brings innovation. Entrepreneur is a person who organises/
manages the risks in his/her enterprise. “Entrepreneur is a
individual who takes risks and starts something new”

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Definition of Entrepreneurship
According to J.B.say, “Entrepreneur is an Economic agent to unites all the
means of production”
An entrepreneur is an individual who takes moderate risks and brings
innovation.

An entrepreneur is a person who has possession of a new enterprise,

venture or idea and assumes significant accountability for the inherent risks
and the outcome.
An entrepreneur is "one who undertakes an enterprise, especially a
contractor, acting as intermediately between capital and labour."
Some facts about entrepreneurs and entrepreneurship:

E:xamine needs, wants, and problems to see how they can improve the
way needs and wants are met and problems overcome.

N: arrow the possible opportunities to one specific "best" opportunity.

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Definition of Entrepreneurship
T:hink of innovative ideas and narrow them to the "best" idea.
R:esearch the opportunity and idea thoroughly.
E:nlist the best sources of advice and assistance that they can find.
P:lan their ventures and look for possible problems that might arise.
R:ank the risks and the possible rewards.
E:valuate the risks and possible rewards and make their decision to
act or not to act.
N:ever hang on to an idea, no matter how much they may love it, if
research shows it won't work.
E:mploy the resources necessary for the venture to succeed.
U:nderstand that they will have to work long and hard to make their
venture succeed.
R:ealize a sense of accomplishment from their successful ventures
and learn from their failures to help them achieve success in the
future.

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Successful Characteristics of Entrepreneurs
ENTREPRENEURIAL CHARACTERISTICS
Being an entrepreneur requires specific characteristics and skills that are often
achieved through education, hard work, and planning.
Risk Taker
Businesses face risk. Entrepreneurs minimize risk through research, planning, and
skill development.
Perceptive
Entrepreneurs view problems as opportunities and challenges.
Curious
Entrepreneurs like to know how things work. They take the time and initiative to
pursue the unknown.
Imaginative
Entrepreneurs are creative. They imagine solutions to problems that encourage them
to create new products and generate ideas.
Persistent
True entrepreneurs face bureaucracy, make mistakes, receive criticism, and deal
with money, family, or stress problems. But they still stick to their dreams of seeing
the venture succeed.
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Successful Characteristics Cont…
Goal-setting
Entrepreneurs are motivated by the excitement of staring a new business.
Once achieved, they seek out new goals or ventures to try.
Hardworking
Entrepreneurs need a great deal of energy to see a venture start and
succeed. Yet they are not deterred by the long hours to achieve their goal.
Self-confident
Entrepreneurs believe in themselves. Their self-confidence takes care of
any doubts they may have.
Flexible
Entrepreneurs must be flexible in order to adapt to changing trends,
markets, technologies, rules, and economic environments.
Independent
An entrepreneur’s desire for control and the ability to make decisions often
makes it difficult for them to work in a controlled environment.

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Types of Entrepreneurs

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Types of Entrepreneurs Cont…

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Types of Entrepreneurs Cont…

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Nature and Scope of Entrepreneurship

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Nature and Scope of Entrepreneurship
Scope of Entrepreneurship
Individuals are opting for entrepreneurship as a career due to reasons such
as –
Desire of control over one’s future
More profits
Lack of employment opportunity
Government measures to promote entrepreneurship
Entrepreneurship provides employment and source of earning to
people. It helps in reducing the monopoly of the rich businessman and
achieving a balance regional development and growth in the economy.
Governments should conduct development programs to identify
entrepreneurial potential and assistance from financial and non-
financial institutions are being provided to entrepreneur.
Entrepreneurship training institutes should be establishes and financial
and operational support be provided to young entrepreneurs.

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Process of Entrepreneurs

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Process of Entrepreneurs Cont…

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Process of Entrepreneurs Cont…

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Process of Entrepreneurs Cont…

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Barriers of Entrepreneurs

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Barriers of Entrepreneurs Cont…

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Barriers of Entrepreneurs Cont…

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Barriers of Entrepreneurs Cont…

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 FACTORS FAVOURING ENTREPRENEURSHIP
1. Developed Infrastructure Facilities – Availability of
infrastructure reduces the cost & efforts and improves
viability of projects through higher profit margins.

2. Financial Assistance – Easy availability of cheap funds is vital for

promoting entrepreneurship.

3. Protective and Promotional Policies – Most of the

entrepreneurship projects start very small and have no resilience.
They are extremely vulnerable to competitors, market, money
markets, etc, for considerable time. Favourable Govt policies
shelter them from such vagaries.
4. Growth of Education – Science, Technology &
Management – Growth of education is believed to be
promoting entrepreneurship. However, there are enough
examples to suggest otherwise. A very large proportion of
first generation entrepreneurs are low educated. Take the
case of Microsoft Chairman Mr Bill Gates or Reliance
Founder Mr Dhirubhai Ambani. (We also have Mr
Narayan Murthy and Mr Ajim Premji to balance this scale).
On a wider spectrum, Kerala, the most literate state and
West Bengal, another state high on literacy front, are least
entrepreneurial states where as Punjab, with 5 rank from
bottom was top on entrepreneurial charts.
5. Risk Taking Abilities – Risk taking ability is one of the pillars of
entrepreneurial spirits.

6. Hunger for Success (Capitalistic View) – Fire in the belly and

dreams of riches is what drives most entrepreneurs on this risky
path. Any person content with what he has would take the easier
route of salaries job.

7. Environment/Culture Impact – Entrepreneurship is contagious.

Communities like Punjabies and Marwaries are historically
entrepreneurial. They are known for seeking and exploiting
business opportunities in most remote areas. It is a culture that
propels them.
8. Social Security – Social security acts as a safety net against
failure of enterprise. Social security guarantees basic ‘roti, kapada
aur makan’ in case of failure. Entrepreneurial spirit of United
States is born partly out of this security.
9. Technical/Industrial Training Facilities – Industrial Training
facilities on one hand generate skilled manpower so vitally
required for setting up enterprises while on the other hand they
are also nursery for future entrepreneurs. Among the educated
entrepreneurs, a majority is product of technical institutes from
IIT to ITI (Tier I to Tier III institutes).
10. Globalization – Globalization has provided another
avenue for business. Many dare devils have taken a head–
along plunge into this uncharted water and have written new
success stories
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Risks associated with entrepreneurship activities
The following are risks that every entrepreneur must take, from
ideation to ongoing development:
Financial risk versus profit (return) motive varies in
entrepreneurs’ desire for wealth.
Abandoning the steady paycheck.
Sacrificing personal capital
Relying on cash flow.
Career risk—loss of employment security
Family and social risk—competing commitments of
work and family
Psychic risk—psychological impact of failure on the
well-being of entrepreneurs

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Risks Cont…
Estimating popular interest.
Trusting a key employee.
Betting on a crucial deadline.
Donating personal time (and health).

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The End

Thank you
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