Entrepreneurial Development Syllabus

SYLLABUS
ENTREPRENEURIAL DEVELOPMENT
MBA–4th SEMESTER, M.D.U., ROHTAK
External Marks : 70 Internal Marks : 30
Time : 3 hrs.

UNIT - I
Entrepreneurial traits, types and significance; definitions, characteristics of
entrepreneurial types, qualities and functions of entrepreneurs, role and importance of
entrepreneurs in economic growth.

UNIT - II
Competing theories of entrepreneurship; entrepreneurial development programme in
India - history, support, objectives, stages of performances; planning and EDP -
objectives. target group, selection of centre, pre-training work; govt. policy towards
SSI’s; entrepreneurial input.

UNIT - III
Entrepreneurial behaviour and entrepreneurial motivation; n-achievement and
management success, entrepreneurial success in rural areas; innovation and
entrepreneur; establishing entrepreneurs system.

UNIT - IV
Search for business idea, sources of ideas, idea processing, input requirments : sources
and criteria of financing, fixed and working capital assessment; technical assistance;
marketing assistance; sickness of units and remedial assistance; preparation of
feasibility reports and legal formalities and documentation.

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MBA 4th Semester (DDE)

UNIT – I
Q. Define Entrepreneur. Explain the Characteristics of An Entrepreneur.
Ans. Meaning of Entrepreneur : An Entrepreneur is a person who perceives a need and
then brings together manpower, material and capital required to meet that need. In other
words an entrepreneur is an individual or team that identifies the opportunity, gathers the
necessary resources, creates and ultimately responsible for the performance of the
organization.
An entrepreneur is a person who is able to express and execute the urge, skill,
motivation and innovative ability to establish a business or industry of his own, either alone
or in collaboration with his friends. His motive is to earn profit through the production or
distribution of goods or services. Adventurism, willingness to face risks, innovative urge and
creative power are the inborn qualities of entrepreneurship. Entrepreneurship can also be
explained as a process of executing a work in a new and better way.
Organisation

Urge Inovation

Skill Risk

Vision Enterprise

Growth

Management

Diagram : Basics of An Entrepreneur

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Definition of Entrepreneur :
According to Harbison
"An entrepreneur is not an innovation but an organization builder or one who has the
skill to build an organization and who must be able to harness the new ideas of different
innovators to the best of the organization."
Peter F. Drucker defines an entrepreneur as one who always searches for change,
responds to it and exploits it as an opportunity. Innovation is the specific tool of
entrepreneurs, the means by which they exploit change as an opportunity for a different
business or service.
Characteristics of an Entrepreneur :
(1) Vision : An entrepreneur has a dream and he visualizes the ways and means to
achieve dream. In doing so he visualizes :
Ø Market Demands
Ø Soicio-Economic
Ø Technological Environment
And then based on these dynamic, he visualizes a future for his business venture.
(2) Knowledge : An entrepreneur has full knowledge about all the technicalities of his
business- be it technological, operational, financial or matket dynamic.
(3) Desire to succeed : An entrepreneur has a strong desire to succeed in life. Their
dreams are not just limited to achieving one single goal but they constantly work to
achieve higher goals.
(4) Independence : An entrepreneur needs independence in work and decision-making.
They don't follow the rules of thumb but make their own rules and destiny.
(5) Optimism : Entrepreneurs are highly optimistic about achieving their vision.
(6) Value Addition : Entrepreneurs do not follow the conventional rules of thumb. They
have a constant desire to introduce something new to the existing business. They
create, innovate or even add value to the existing products/services.
(7) Leadership : An entrepreneur exhibits the qualities of leader. They are good planner,
organizers, have good communication skill, good decision0makers, take initiative to
implement plans and are result-oriented.
(8) Hardworking : At times they are called workaholics. Work is worship for then. They
put in continuous efforts to achieve success and know that there is no substitute for
hark work.
(9) Risk-Taking Ability : Risk is an inherent and inseparable element of
entrepreneurship. He assumes the uncertainty of future. An entrepreneur guarantees
rent to the landlord, wages to employees and interest to the investor in the hope of
earning more than the expenses.

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Q. Define Entrepreneurship. Discuss the main Entrepreneurship Traits.
Ans. Meaning of Entrepreneurship : Entrepreneurship refers to a process of action an
entrepreneur undertakes to establish his enterprise. It is a creative and innovative response
to the environment. In other words entrepreneurship can be defined as an ability to discover,
create or invent opportunities and exploit them to the benefit of the society, which in turn
brings prosperity to the innovator and his organization.
Definition :
B. Higgins, in his book "The economic Development" has said. "Entrepreneurship is meant
the function of seeking investment and production opportunity, organizing an enterprise to
undertake a new production process, raising capital, hiring labour, arranging the supply of
raw materials, finding site, introducing a new technique and commodities, discovering new
sources of raw materials and selecting top managers of day to day operations of the
enterprise."
Concept of Entrepreneurship : Concept of entrepreneurship can be explained with the
help of following diagram

Entrepreneur Entrepreneurship Enterprise

Person Process of Action Object

Concept of Entrepreneurship
Characteristics of Entrepreneurship : The characteristics of entrepreneurship are:

Decision Strong desire to
Construction
reap benefits
Skill

Innovative Economic
Urge Activity
Entrepreneurship

Management
Gap-Filing Skill
Function

Leadership Dynamic
Risk-Bearing Quality Process

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Entrepreneurship Traits : A successful entrepreneur must possess the following traits:
(1) Mental Ability : Mental ability consists of intelligence and creative thinking. An
entrepreneur should be intelligent and must have an analytical mine. He should have
the capacity to analyse the problem and able to study the various situation under
which decision have to be made.
(2) Clear Objectives : An entrepreneur should have a clear objective. Without objective
an entrepreneur cannot success. So a successful entrepreneur must have the
objective to establish his product in the market, make profit and also render social
service.
(3) Business Secrecy : An entrepreneur must be able to guard business secrets.
Leakage of business secrets to trade competitors is a serious matter. So the
entrepreneur should be able to make a proper selection of his subordinates.
(4) Human Relations Ability : An entrepreneur must have good relations with his
customers to earn profit and win their confidence in his product. He must also maintain
good relation with his employees.
(5) Effective Communication : Good communication also means that the entrepreneur
has the ability to put his point effectively and with clarity. Communication ability is the
secret of the success of most entrepreneurs.
(6) Technical Knowledge : The entrepreneurs are dealing with situations where
sophisticated technology is involved. The entrepreneur must have a reasonable level
of technical knowledge.
(7) Decision-Making : Running a business requires taking a number of decision. Hence
an entrepreneur should have the capacity to analyse the various aspects of the
business for arriving at a decision.
(8) Risk-Bearing : 'No risk, no business' or 'no risk, no gains'. Risk is an inherent and
inseparable element of entrepreneurship. He assumes the uncertainty of future.
(9) Self-Confidence : Entrepreneurs must have the mental capacity to face any situation.
They should also have the ability to inspire other. They must have the confidence in
themselves and the determination to achieve their goals.
Entrepreneurial Traits can be explained with the help of following diagram:

Technical Self Human
Knowledge Confidence Relation Abilitv

Business
Clear Enterpreneurial Secrecy
Objectives Traits

Effective
Decision Risk Mental Communication
Making Bearing Ability

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Q. Explain the Types of Entrepreneur.
organization.
Types of Entrepreneur : Types of entrepreneur are:
(A) Classification on the Basis of Ownership :
(1) Founder or "Pure Entrepreneurs" : Those individuals who are the founder of the
business. They are the ones who conceptualize a business plan and then put in efforts
to make the plan a success.
Example : Dhirubhai Ambani of the Reliance Group.
(2) Second-generation operators of family-owned business : They are individuals
who have inherited the business from their fathers and forefathers.
Example : Like Mukesh Ambani and Anil Ambani sons of Dhirubhai Ambani of the
Reliance Group now split into two: Reliance Industries Limited and Reliance-Anil
Dhirubhai Ambani Group.
(3) Franchisees : It is a method of doing business wherein the parent owner licenses his
trademarks and tried and proves methods of doing business to a franchisee in
exchange for a recurring payment.
Example : NIIT has given its franchisee operations to local players after thorough
scrutiny and proper training.
(4) Owner-Manager : When a person buys a business from the founder and then invests
his time and resources in it he is called the owner-manager.
Example : Like Sabeer Bhatia is the founder entrepreneur of Hotmail.
(B) Classification on the basis of Personality Traits and their style of running the
business :
(1) The Achiever : These types of entrepreneurs have personal desires to excel. The
only drive that pushes them is the desire to achieve something in life, the desire to
make a mark in society, the desire to prove their excellence. They do not need any
external stimulus but are self-driven.
(2) The Induced Entrepreneur : These types of entrepreneurs are induced by some
external factors to start a business. The external factors could be like:
Ø Government Policies
Ø Unemployment
Ø Family Support
Ø Facilitating Institutional Support etc.

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(3) The Idea Generator : These kinds of entrepreneurs are highly creative people who
are always in search of innovative ideas for setting up new business ventures. They
enjoy the First Movers' Advantage and are able to skim higher profits from the market.
(4) The Real Manager : The real managers run the business in a systematic manner.
They analyse business situation, assess the demands of future, both in terms of
opportunities and threats and then take actions based on the above assessments.
(5) The Real Achievers : The real achievers are full of life. They are looking for the
achievement of not even their goals but also of people associated with themselves like
employees, suppliers and distributors.
(C) Classification based on the type of Business :
(1) Industrial Entrepreneur : Industrial entrepreneur is an entrepreneur who is into
manufacturing of a product. He identifies the needs and wants of customers and
accordingly manufactures products to satisfy these needs and wants.
(2) Trading Entrepreneurs : Trading entrepreneur is one who undertakes trading
activities and is not concerned with the manufacturing of products. He identifies
potential markets, stimulates demands and generates interest among buyers to
purchase a product.
(3) Corporate Entrepreneur : Corporate entrepreneur is a person who demonstrates his
innovative skill in organizing and managing a corporate undertaking which is
registered under some act that given it a separate legal entity.
(4) Agricultural Entrepreneur : Agricultural entrepreneurs are those entrepreneurs who
undertake business related to agricultural activities. Like farm equipments, fertilizers
and other inputs of agriculture.
(D) Classification on the Stages of Development :
(1) First Generation Entrepreneur : A first-generation entrepreneur is one who starts an
industrial unit by means of an innovative skill. He is essentially an innovator combining
different technologies to produce a marketable product or service.
(2) Modern Entrepreneur : A modern entrepreneur is one who undertakes business to
satisfy the contemporary demands of the market. They undertake those ventures
which suit the current socio-cultural trends.
(3) Classical Entrepreneur : A classical entrepreneur a stereo-type entrepreneur is one
whose aim is to maximize the economic returns at a level consistent with the survival
of the firm, with or without element of growth.
(E) Other :
(1) Innovative Entrepreneur : Innovative entrepreneurs are full of creative ideas and
offer innovate products to the society. It is because of these innovative entrepreneurs
that many important changes occur in our society.

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(2) Imitative Entrepreneurs : Imitative entrepreneur adapt a successful innovation.
They are risk-aversive and so they do not try out new ideas or products.
(3) Drone Entrepreneurs : Drone entrepreneurs are not open to creativity and change.
They do not like changing the working of organizations with the changing times.
(4) Copreneurs : When both husband and wife together start and run a business venture
then they are called copreneurs.
Q. Explain the qualities and functions of the entrepreneurs
organization.
Qualities of An Entrepreneur : An entrepreneur is a person who takes risk of setting up his
own venture for perceived reward. He is a person who initiates the idea, formulates the plan,
organizes resources and puts the plan into action to achieve his goals. The entrepreneur
must have following qualities:-
1. Planner : Entrepreneur has a strong desire to achieve a higher goal and make their
dreams come true. So the entrepreneur must have these quality to achieve the target
an entrepreneur cannot achieve the target.
2. Technician : An entrepreneur must have the technical knowledge. He should know
that how to use the resources and achieve the target.
3. Risk Bearing Ability : Risk is very important element. An entrepreneur must have
capacity to bearing risk an entrepreneur cannot success.
4. Decision Maker : Decision making is the process of choosing best alternative among
various alternatives. An entrepreneur must have these qualities because decision
making affect the profitability and reputation of the enterprise.
5. Ability to Find and Explore Opportunities : Entrepreneurial persons are quick to
see and seize opportunities. They show an innovative turn of mind and convert
difficulties into opportunities.
6. Motivator : An entrepreneur must have a motivator. He inspires the employees to
achieving the target. Without motivation an entrepreneur cannot achieve the target.
So motivation is very necessary for achieving the target.
7. Future Oriented : Entrepreneur shows a high level of future orientation. They do not
allow the past to obsess them. They are oriented towards present and future.
8. Interpersonal Skills : An entrepreneur is a person who during the course of his
activities he should be a person who likes working with people and who has skills of
dealing with people.

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9. Facing Uncertainty : An entrepreneur is a person who faces uncertainty. The future is
uncertain. So the decision of entrepreneur affects the profitability and reputation of the
enterprise.
10. Coordination : An entrepreneur must have a coordinator. He allocates the resources
and utilizes the resources for achieving the target. Without coordination an
entrepreneur cannot achieve the target.
Functions of Entrepreneur : An entrepreneur has to perform the following function:
1. Risk taking and Uncertainty Bearing : The future is unpredictable. The
entrepreneur has to take risks in these circumstances. If the venture succeeds, the
entrepreneur profits; if it doe not, losses occur. Thus, taking risks forms an important
entrepreneurial function.
2. Taking Business Decisions : All decision concerning business are taken by the
entrepreneur. He has to formulate an action plan regarding the product and quality of
the product to be produced. He has to evolve the best possible method of production
which would earn him a sizeable profit.
3. Managerial Functions : The entrepreneur performs various managerial functions.
The entrepreneur arranges finance, purchase raw materials, provides the necessary
infrastructure for production. The entrepreneur has a multifaced personality when he
undertakes managerial functions.
4. Innovation : The most important function of an entrepreneur is innovation. He
introduces far-reaching improvements in the quantity and quality of production line.
He considers the economic viability and technical feasibility of an invention.
5. Coordination : The entrepreneur coordinates the other factors of production.
Coordination involves selection of the right type of factors, employment of each factor
in the right quantity, use of the best technical devices, division of labour, reduction of
waste etc.
6. Maintain Good-Relations : An entrepreneur must have good relations with his
customer to earn profit and win their confidence in his product. He must also maintain
good relations with his employees.
7. Analysis the Environment : An entrepreneur analysis the environment. Environment
are those factor which affect the business. There are two type of environment:
Ø Internal Environment : Internal environment are controllable
Ø External Environment : External environment are beyond the control of the
business.
8. Planning : Planning is the first function of the management. Planning is deciding in
advance what is to be done, how is to be done, which is to be done, by whom is to be
done. It is very necessary function of entrepreneur. Without planning an entrepreneur
cannot achieve the target.

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9. Utilizes the Resources : An entrepreneur allocates the resources and utilizes the
resources. An entrepreneur must utilize the resources for the achievement of the
objectives. If the entrepreneur doe not utilizes the resources he cannot become a
successful entrepreneur.
Q. Explain the Role and Importance of Entrepreneur in Economic Growth.
organization.
Role of Entrepreneur in Economic Growth : The position of the entrepreneur in modern
production is like that of the director of a play. Modern economic development is closely
linked with production. Modern production is higher complex. The entrepreneur directs
production and he must do whatever is necessary for its success. His role in modern
economic development has at least three aspects:
(1) The entrepreneur co-ordinates the other factors of production. This involves not only
assembling the factors, but also to see that the best combination of factors is made
available for the production process.
(2) The entrepreneur takes risks. This is the important function of the entrepreneur and
the quantum of profit he receives is directly proportionate to the risks he takes. Risks
are generally based on the anticipation of demand.
(3) Finally the entrepreneur innovates. Innovation is different from invention. Invention is
the work of scientists. Innovation implies the commercial application of an invention.
As an innovator the entrepreneur assumes the role of a pioneer and an industrial
leader. The entrepreneur can undertake anyone type of the following five categories of
innovation:
(i) The introduction of a new good or a new quality of a good
(ii) The introduction of a new method of production
(iii) The opening of a new market
(iv) The conquest of a new source of supply of raw materials
(v) The carrying out of a new organization of any industry.
Importance of Entrepreneur in Economic Development : Every country tries to achieve
maximum economic development. The economic development of a country to a large extent
depends on human resources. But human resource alone will not produce economic
development-there must be dynamic entrepreneurs. Importances of entrepreneurs in
economic development are:

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(1) Employment Generation : Growing unemployment particularly educated
unemployment is an acute problem of the nation. If a hundred persons become
entrepreneur they not only create a hundred jobs for themselves but also provide
employment to many more. These enterprises grow providing direct and indirect
employment to many more. Thus entrepreneurship is the best way to fight the evil of
unemployment.
(2) National Income : National Income consists of goods & services produced in the
country and those imported. The goods & services produced are for consumption
within the country as well as to meet the demand of exports. The domestic demand
increases with ever increasing population and standard of living. The export demand
also increases to meet the needs of growing import due to various reasons. An
increasing number of entrepreneurs are required to meet this increasing demand for
goods and services. Thus entrepreneurship increases the national income.
(3) Dispersal of Economic Power : When a society produces a small number of
entrepreneurs the enterprise due to lack of competition grow into a few big business
houses. This results in concentration of wealth in a few families. This can have a
serious social and national implication. When the number of entrepreneurs increases,
a large amount of national wealth is also shared by a large number of entrepreneurs,
thus dispersing wealth. This dispersal of wealth promotes the real socialism and
makes the economy healthy.
(4) Balance Regional Development : The growth of industry and business leads to a
large number of public benefits like road, transport, health, education, entertainment
etc. A rapid development of entrepreneurship ensures a balanced regional
development. When the new entrepreneurs grow at a faster pace, in view of the
increasing competition in and around the cities, they are forced to set up their
enterprise in the smaller towns away from big cities. This helps in the development of
the backward regions.
(5) Economic Independence : Entrepreneurship is essential for national self-reliance.
Businessman export goods and services on a large scale and earn the scarce foreign
exchange for the country. Such import substitution and export promotion help to
ensure the economic independence of the country.
(6) Reducing Unrest and Social Tension Amongst Youth : Many problems associated
with youth and social tensions are rightly considered to be due to youth not being
engaged in productive work. In the changing environment where we are faced with the
problem of recession in wage employment opportunities, alternative to wage career is
the only viable option. The country is required to divert the youth with latent
entrepreneurial traits from wage career to self employment career. Such alternate
path through entrepreneurship could help the country in defusing social tension and
unrest amongst youth.

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(7) Improvement in Living Standards : Entrepreneurs set up industries which remove
scarcity of essential commodities and introduce new products. Production of goods on
mass scale and manufacture handicrafts etc. in the small scale sector help to improve
the standard of life of a common man. These offer goods at lower costs and increase
variety in consumption.
(8) Harnessing Locally Available Resources and Entrepreneurship : India is
considered to be very rich in natural resources. A few large scale industries started by
entrepreneurs from outside the state in economically backward areas may help as
models of pioneering efforts, but ultimately the real strength of industrialization in
backward areas depends upon the involvement of local entrepreneurship in such
activities. Increased activities of local entrepreneurs will also result in making use of
abundantly available local resources.
(9) Innovations in Enterprises : Business enterprises need to be innovative for their
survival and better performance. Entrepreneurship development programmes are
aimed at accelerating the pace of small firms' growth in India. Increased number of
small firms is expected to result in more innovations and make the Indian industry
compete in international market.

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ENTREPRENEUR DEVELOPMENT
MBA 1st Semester (DDE)

UNIT – II
Q. Explain the Theories of An Entrepreneurship.
Ans. Meaning of Entrepreneurship : Entrepreneurship refers to a process of action an
entrepreneur undertakes to establish his enterprise. It is a creative and innovative response
to the environment. In other words entrepreneurship can be defined as an ability to discover,
create or invent opportunities and exploit them to the benefit of the society, which in turn
brings prosperity to the innovator and his organization.
Theory of Entrepreneurship : Main theories of entrepreneurship are summarized as
follows:
(1) Entrepreneurship : A Function of Innovation: Joseph A. Schumpeter (1934), for the
first time, put the human agent at the centre of the process of economic development
and assigned a critical role to the entrepreneurship in his theory of economic
development. He considered economic development as a discrete technological
change. The process of development can be generalized by five different types of
events:
(i) Firstly, it can be the outcome of the introduction of a new product in the market.
(ii) Secondly, it can be the result of a new production technology.
(iii) Thirdly, it may arise on account of a new market.
(iv) Fourthly, it may be the consequences of a new source of supply.
(v) Fifthly, it may be due to the new organization of any industry.
According to Schumpeter
(i) Development is not an automatic process, but it must be deliberately and actively
promoted by some agency within the system, Schumpeter called the agent who
initiates the above changes as an entrepreneur.
(ii) He is the agent who provides economic leadership that changes the initial conditions
of the economy and causes discontinuous dynamic changes.
(iii) By nature, he is neither technician, nor a financier, but he is considered an innovator.
(iv) Entrepreneurship is not a profession or a permanent occupation and therefore, it
cannot formulate a social class like capitalists.
(v) Psychological, entrepreneurs are not solely motivated by profit.

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(2) Entrepreneurship : An Organisation Building Function: Fredrick Harbison states that
the 'organisation building' ability is the most critical skill needed for the industrial
development. According to him entrepreneurship means the skill to build an
organization. Harbison spots the crux of the entrepreneurship in his ability to multiply
himself by effectively delegating responsibilities to others. The main features are:
(i) Unlike Schumpeter, Harbison's entrepreneur is not an innovator but an
'organisation builder' who must be able to harness the new ideas of different
innovators to the rest of the organization.
(ii) Such persons are not always the men with ideas or men who try new
combinations of resources but they may simply be good leaders and excellent
administrators.
(iii) Harbison's definition of entrepreneurship lays more stress on the managerial
skills and creativity so far as organisation is concerned.
(3) Entrepreneurship : A Function of Managerial Skill and Leadership: Hoselitz states
that a person who is to become an industrial entrepreneur must have additional
personality traits. In addition to being motivated by the expectations of profit he must
also have some managerial abilities and more important he must have ability to lead.
Hoselitz maintains that financial skills have only a secondary consideration in
entrepreneurship. According to him managerial skills and leadership are the important
facts of entrepreneurship. He identifies three types of business leadership in the
analysis of economic development of under-developed countries:
Ø The merchant money lender type
Ø The managerial type
Ø The entrepreneur type.
(4) Entrepreneurship : A Function of High Achievement: Mc Clelland states that a
business man who simply behaves in traditional ways is not an entrepreneur.
Moreover, entrepreneurial role appears to call for decision making under uncertainty.
Mc Clelland identified two characteristics of entrepreneurship firstly "doing things in a
new and better way" and secondly "decision making under uncertainty". Persons with
high achievement would take moderate risks. They would not behave traditionally (no
risk). The high achievement is associated with better performance at tasks which
require some imagination, mental manipulation or new ways of putting things together,
and such people do better at non routine task that require some degree of initiative or
even inventiveness. People with high achievement are not influenced by money
reward as compared to people with low achievement. People with low achievement
are prepared to work harder for money or such other external incentives. For people
with high achievement, profit is a measure of success and competency.
(5) Entrepreneurship : A Function of Social, Political and Economic structure: John
Kunkel states that the industrial entrepreneurship depends upon four structures which
are found within a society or community.

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(i) Limitation Structure: The society limits specific activities to members of
particular subcultures. This limitation structure affects all the members of a
society.
(ii) Demand Structure: The limitation structure is basically social and cultural but the
demand structure is mainly economic. The demand structure is not static, and
changes with economic progress and government policies. Demand structure
can be improved by providing material rewards.
(iii) Opportunities Structure: This structure is necessary to increase the probability
of entrepreneurial activity. The opportunity structure constitutes the availability
of capital, management and technological skills, information concerning
production methods, labours and markets. All the activities associated with the
effective planning and successful operation of industrial enterprises.
(iv) Labours Structure: Kunkel argues that the labours supply cannot be viewed on
par with the supply of other material conditions like capital. He states that
labours means 'men' and is a function of several variables. The supply of factory
labours is governed by available alternative means of livelihood, traditionalism
and expectations of life.
(6) Entrepreneurship : 'Input Completing' and 'Gap filling' Function: Liebenstein
identified gap filling as an important characteristic of entrepreneurship. In economic
theory the production function is considered to be well defined and completely known.
But the theory is silent about the keeper of the knowledge of production function.
Where and to whom in the firm this knowledge is supposed to be available is never
stated. It is the entrepreneurial function to make up the deficiencies or to fill the gaps.
These gaps arise because all the inputs in the production function cannot be marketed
because some inputs like motivation, leadership etc. are vague in their nature and
whose output is underminate. This "gap-filling" activity gives rise to a most important
entrepreneurial function namely "Input-Completing". He has to marshal all the inputs
to realize final products.
(7) Entrepreneurship : A Function of Group Level Pattern: Frank W. Young was reluctant
to accept the entrepreneurial characteristics at the individual level. According to him,
instead of individual, one must find clusters which may qualify itself as entrepreneurial
groups, as the groups with higher differentiation have the capacity to react. He defined
'reactiveness' or 'solidarity' as the degree to which the members of the group create,
maintain and project a coherent definition of their situation; and 'differentiation' is
defined as the diversity, as opposed to coherence, of the social meanings maintained
by the group, when a group has a higher degree of institutional and occupational
diversity, relative to its acceptance, it tends to intensify its internal communication
which gives rise to a unified definition of the situation.
Q. What are the objectives and Phases of Entrepreneurial Development
Programme.

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Ans. Meaning of Entrepreneurial Development Programme (EDPs) : Entrepreneurial
development programme means a programme designed to help a person in strengthing his
entrepreneurial motive and in acquiring skills and capabilities necessary for playing his
entrepreneurial role effectively. It is very necessary to promote his understanding to motives,
motivation pattern, their impact on behaviour and entrepreneurial value. A programme
which seeks to do this can qualify to be called as EDP.
In other words A EDP is primarily concerned with developing and motivating
entrepreneurial talent and growing him to be an effective entrepreneur. An entrepreneur
make use of the factors of production to the fullest advantage of the society, create
innovations, generate employment, improve the standard of living of people, develop
backward areas etc. EDP has an important role to play in solving the unemployment
problem.
Objectives or Need of EDPs :
(1) To formulate Project
(2) To select Project/Product
(3) To analysis the Environment
(4) To acquire the basic Managerial Skills
(5) To understand the process and procedure of setting up of enterprise
(6) Enable to communicate clearly and effectively
(7) Develop a broad vision about the business
(8) Enable to take decisions.
Phases of Entrepreneurial Developement Programme: An entrepreneurial development
programme consists of three broad phases:
(A) Initial or Pre-Training Phase : This phase includes the activities and the preparations
required to launch the training programme. The main activities are:
(i) Creation of Infrastructure for training
(ii) Preparation of training syllabus
(iii) Tie up of guest faculty
(iv) Arrangement for inauguration of the programme
(v) Designing tools and techniques for selecting the trainees
(vi) Formation of selection committee
(vii) Publicity campaign for the programme
(viii) Development of application form
(ix) Pre-potential survey of environmental opportunities.
Thus, pre-training stage involves the identification and selection of potential entrepreneurs
and providing initial motivation to them.

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Selection of potential entrepreneurs has two essential components :
1. Identifying Entrepreneurial Traits : Every participant must have a minimum level of
eligibility for developing into an entrepreneur. Entrepreneurial traits include socio-
personal and human re-sources characteristics:
(a) Socio-Personal Characteristics : The most common socio-personal
characteristics are:
(i) Caste and Family Background : Caste and family background help create
entrepreneurial environment and occupational awareness for the
entrepreneurs.
(ii) Age : Studies have revealed that younger people are more successful
entrepreneur.
(iii) Education : A minimum level of education is essential to perform functions like
meeting officials etc.
(iv) Size and Type of Family : The size of the family and the entrepreneur's status in
the family are important.
(v) Working Hands : A small entrepreneur has generally to depend upon family
members as he cannot afford to hire workers.
(b) Human Resource Factors : These are:
(i) Achievement Motivation : It is the urge to improve one-self in relation to a goal.
(ii) Risk Taking Willingness : It refers to seeking challenge in one's activity.
(iii) Influence Motivation : It has been defined as the desire for influencing other
people and surrounding environment.
(iv) Personal Efficacy : It has been defined as the general sense of adequacy in a
person.
2. Identification of Enterprise : Once an entrepreneur having necessary socio-
personal and human resources characteristics is identified, it is necessary to identify s
suitable enterprise or project for him. The enterprise must be matched with the
potential entrepreneur. All the background information like his skills, experience in the
field, etc. should taken into consideration. The raw materials availability, the marketing
avenues and profitability of the enterprise have to be explored.
(B) Training or Development Phase : During this phase the training programme is
implemented to develop motivation and skills among the participants. The objective of
this phase is to bring desirable changes in the behaviours of the trainees. The trainers
have to judge how much, and how far the trainees have moved in their entrepreneurial
pursuit's. A trainer should see the following changes in the behaviour of participants:
(i) Is he attitudinally tuned very strongly towards his proposed project ideas?
(ii) Is he motivated to plunge for entrepreneurial venture and risk that is expected of
an entrepreneur?

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(iii) Is there any change in his entrepreneurial outlook, role and skill?
(iv) How should he behave like an entrepreneur?
(v) What kind of entrepreneurial behaviours does the trainee lack?
(vi) Does he posses the knowledge of technology, resources and other related
entrepreneurial knowledge?
(vii) Is he skillful in choosing the right project, mobilizing the right resources at the
right time?
Content of Training Programme : The main training inputs are as follows:
(i) Technical Knowledge : Once the entrepreneur selects a particular enterprise
the technical aspects of the trade is essential. He needs to also know the
economic aspects of the technology including costs and benefits.
(ii) Achievement Motivation Training : In order to develop human resources,
development of achievement motive is essential. The purpose of AMT is to
develop the need to achieve, risk taking, initiative and other such behavioural
traits. A motivational development programme creates self awareness and self
confidence among the participants and enables them to think positively and
realistically.
(iii) Market Survey : The participants should be given opportunity to actually
conduct market surveys for their chosen project.
(iv) Managerial Skill : Once a participant is able to start the enterprise he requires
managerial skills. Managerial skills are particularly essential for a small scale
enterprise who cannot afford to employ specialists in different areas of
management. The aim should be to enable the participant to look at an
enterprise in its totality and to develop overall managerial understanding.
(v) Project Preparation : A lot of time needs to be devoted to the actual preparation
of project. Their active involvement in this task would provide them necessary
understanding and also ensure their personal commitment.
(C) Post Training or Follow-Up Phase : This phase involves assessment to judge how
far the objectives of the programme have been achieved. Monitoring and follow up
reveals drawbacks in the earlier phases and suggests guidelines for framing the future
policy. In this phase infrastructural support, counseling and assistance in establishing
new enterprise and in developing the existing units can also be reviewed. Some
common activities in the monitoring and follow up process are as follows:
(1) Preparing and maintaining a separate file for each trainee.
(2) A history card indicating the bio-date of each entrepreneur and the work done by him.
(3) Keeping in touch with every entrepreneur through letters.
(4) Passing the desired information to the entrepreneur will in time.

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(5) Visiting every entrepreneur periodically.
(6) Follow up meeting and a follow up register to ensure the success of the
entrepreneurial development programme.
Q. Explain the Entrepreneurial Development Programme in India.
Ans. Institutions Conducting EDPs in India : Some of the major institutions for EDPs in
India are as follows:
(1) Entrepreneurial Development Institute of India : The entrepreneurship
development institute of India is an apex entrepreneurship institute promoted by
industrial development bank of India, Industrial credit and Investment Corporation of
India, Industrial Finance Corporation of India and state bank of India. The institute
enjoys acute support of government of Gujarat. The institute has been operating for
the past more than 15 years now. The institute undertakes entrepreneurship
development programmes to serve the following development objectives:
(i) Accelerated industrial development.
(ii) Industrial development of rural and less-developed areas.
(iii) Improving performance of small industries.
(iv) Diversifying sources of entrepreneurship.
(v) Enlarging the small and small medium enterprise sector.
(2) National Institute for entrepreneurship and small Business Development
(NIESBUD) : The National Institute for entrepreneurship and small Business
Development is an apex body established by the ministry of Industry, government of
India for Coordinating and overseeing the activities of various institutions/agencies
engaged in entrepreneurial development in small industry and small business. The
main objective of the institute are explained as follows:
(i) To provide vital information support to trainers, promoters and entrepreneurs.
(ii) To identify train and assist potential entrepreneurs for setting up
entrepreneur/self employment ventures in small industries.
(iii) To help and affiliate institution/Organization in carrying out training and other
entrepreneurship development related activities with greater success.
(iv) To evolve standardized materials and processes of selection, training support to
potential entrepreneur.
(3) Xavier Institute of Social Services, Ranchi : Xavier Institute of Social Services,
Ranchi has been training rural entrepreneurs since 1974. Xavier Institute provides the
training and assists the trainees in drafting project proposals and obtaining the
required finance. It offers a six months programme to tribal with minimum literacy and
numeracy skills. The programme consists of:

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(i) Identification and selection of candidates.
(ii) Motivation Training.
(iii) Managerial Training.
(iv) Placement and training for practical skills.
(v) Market survey and preparation of project report.
(vi) Financial assistance.
(vii) Follow up and Counseling.
(4) Madhya Pradesh Consultancy Organization Ltd. : This is a technical management
consultancy Organization. It was promoted by all-India financial institutions and state
Corporations. It undertakes assignments for project planning, detailed engineering,
market surveys, management surveys and entrepreneurship development
programmes. The programme consists of the following stages:
(i) Identification of industrial opportunities in the target area.
(ii) Advertising and promoting the programmes to attract applicants.
(iii) Selection of the participants.
(iv) Training, using lectures and practical instruction in the identified project.
(v) Follow up with industrial development and financial institutions.
(5) Calcutta "Y" Self Employment Centre : This Centre was organized as registered
society by a number of prominent industrialists, businessman, bankers, professionals
and social workers. It was setup in response to rapidly increasing unemployment and
social unrest in Calcutta during the early 1970s. It began as a vocational programme to
provide self employment for educated youths. It has developed innovative
approaches to help people set up their own business. The main programme are
explained as follows:
(i) Training in producing enterprise.
(ii) Assistance in drawing up a business plan.
(iii) Assistance in securing bank loans.
(iv) Arranging initial business contacts for their service and production.
(6) Technical Consultancy Organizations (TCOs) : Access to high quality consultancy
services improves the operational efficiency of entrepreneurs. All India financial
institutions have set up TCOs to provide industrial consultancy and training to
entrepreneurs. These organizations provide a comprehensive package of services.
Q. Write a short note on Target Group.
Ans. In an entrepreneurial development programmes, the target group refers to the group
of the persons for whom the programmes is design and undertaken. Every target group has
its own needs and constraints. Therefore, the programmes designed for one group might be

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inappropriate for others groups. Before the programmes is designed and started the target
group to be trained must be clearly defined. An executive development programmes may be
organized for any one of the following target groups:-
1. Technical and other qualified Persons : This group consists of those persons who
have pursued technical and allied courses of study. For instance degree/ diploma
holders in science, engineering and technology are in important group in India. The
training programmes for such people may be design to enable and assist them in
setting up their own manufacturing units. The industries selected for this purpose may
be directly related with their qualifications and experience.
2. Ex- Serviceman : Persons who have retired from the army, navy and air force
constitute an important group for entrepreneurial training. These persons have
acquired many useful skills and experience during their service period. They tend to
be highly disciplined, hardworking, engineering and innovative. Therefore they can
become successful entrepreneurs after proper entrepreneurial training.
3. Business Executives : Some business executives want to start their own
independent enterprise after getting sufficient business experience. Some of them
have certain innovative ideas which they are not able to try in their existing firms due to
lack of sufficient authority. Some among them are not satisfied with their present
economic and social status. After entrepreneurial training senior business executives
can become successful entrepreneurs.
4. Women Entrepreneurs : Women are entering the business especially traditional
food processing industries like spices, agarbati, papad etc. Several Governments and
non- governments organizations organizing entrepreneurial training programmes for
women.
5. S.C and S. T Entrepreneurs : Government of India is committed to be upliftment of
scheduled castes (S.C) and Scheduled Tribes (S.T). Therefore specified percentage
of jobs has been reserved for these castes. But all persons from these groups cannot
be offered employment. Government agencies give preference to S.C and S.T
entrepreneurs in providing finance and other necessary facilities.
6. Special agencies and Schemes : The government of India has been established
specialized agencies for training entrepreneurs. Special schemes have also been
launched to train, develop and assist entrepreneurs.
Q. Explain the Government Policy towards Small-Scale Industries (SSI's).
Ans. Government Policy : An Effort to Strengthen the Small-Scale Industries in India
The government of India for the first time tabled the new small enterprise policy in titled
'Policy Measures for Promoting and Strengthening and Supplementing Small, Tiny and
Village Enterprise, in Parliament on August 6, 1991. The main thrust of the new small

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enterprise policy was to impart more vitality and growth impetus to the sector to enable it to
contribute its mite fully to the economy, particularly in terms of growth of output, employment
and exports. The sector had been substantially licensed and concerted efforts were made to
regulate and debureaucratize the sector with a view to remove all fetters on its growth
potential on the one hand and reposing greater faith in small and new enterprises on the
other.
The salient features of the price policy were :
1. Increasing in the investment limit in plant and machinery of tiny enterprises from Rs. 2
Lakhs to Rs. 5 Lakhs, irrespective of the location of the enterprise.
2. Inclusion of industry related service and business enterprises, irrespective of their
location as small-scale industries.
3. To introduce a limited partnership act. This would limit the financial liability of the new
enterprises to the capital invested.
4. Introduction of a scheme of integrated infrastructural development for small-scale
industries.
5. Introduction of factoring services to help solve the problems of delayed payments of
small-scale sector.
6. Market promotion of small-scale industries products through co-operative/public
sector institutions, other specialized professional/marketing agencies and the
consortium approach.
7. To set up a Technology Development Cell in the small industries development
organization.
8. To accord priority to small and tiny sector ion the allocation of indigenous raw
materials.
9. Setting up of an Export Development Center in the small industries development
organization.
10. To widen the scope of the National Equity Fund (NEF) to enlarge the single window
scheme and also to associate commercial banks with provision of composite loans.
The new policy was founded on a proper understanding of the fundamental problems
of the small-scale sector and the measures proposed by it have integrated the various
handicaps that face this sector.
Taxation Benefits : Boon for the Growth of SSI
(1) Need for tax benefits : Small-scale industries are characterized by their limited and
scarce resources/capital. These make them sensitive. In fact, small business in such a
sensitive field where Murphy's Law (if anything can go wrong, it will) seems to operate
without fail. The first thousand days seems to be as critical in small business as in
administration. The former needs support and the latter indoctrination for survival. In
the beginning, small industries have to incur more expenses, but the returns are either

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nil or nominal. If this becomes uncontrollable, the unit may fall sick and needs
rehabilitation before it is actually anticipated. Therefore, they need to be provided
support and assistance to tide over the crucial initial stages to enable them to survive.
Hence, the government needs to come forward with various benefits to offer to small-
scale industries in the country. One way to support the development of small-scale
industries by the government is to provide them tax benefits. The government either
exempts them from tax or provides concession in tax liability. This helps small
industries accumulate capital, on the one hand, and plough back profits in business,
on the other. The various tax benefits available to small-scale industries are now
enumerated and discussed one by one.
(2) Tax Holidays : Under section 80J of the Income Tax Act, 1961, new industrial
undertakings, including small-scale industries, are exempted from the payment of
income-tax of their profits subject to a maximum of 6% per annum of their capital
employed. This exemption in tax is allowed for the period of five years from the
commencement of production. A small-scale industry has to satisfy the following two
conditions to avail of this tax exemption facility;
(i) The unit should not have been formed by the splitting or reconstitution of an
existing unit.
(ii) The unit should employ ten or more workers in a manufacturing process with
power, or at least twenty workers without power.
(3) Depreciation : Under section 32 of the Income Tax Act, 1961, a small-scale industry is
entitled to a deduction on depreciation on block of assets at the prescribed rate. In the
case of the small-scale industry, deduction from the actual cost of plant and machinery
is allowed subject to a maximum of rupees 20 Lakhs. The amount of depreciation is
calculated by the diminishing balance method. In case of an asset acquired before the
accounting period, depreciation is calculated on its written down value. For plant and
machinery that are used in manufacturing in double or triple shift, an additional
allowance called 'Extra Shift Allowance' is available. A small-scale industry should
satisfy the following conditions before it becomes eligible for deduction in
depreciation:
(i) The asset must be owned by the assessee.
(ii) The asset must actually be used for the purpose of the assessee's business of
profession.
(iii) Depreciation allowance or deduction is allowed only on fixed assets, i.e.,
building, machinery, plant and furniture.
(iv) All the prescribed particulars must be furnished to the income-tax officer as
required under section 34(1) of the Income-Tax Act, 1961.
(4) Rehabilitation Allowance : A rehabilitation allowance is granted to small-scale
industries under section 33-B of the Income-Tax Act, 1961. The allowance is give to
those small businesses that had to suffer on account of the following reasons:

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(i) Flood, Cyclone, earthquake or other natural upheavals.
(ii) Riot or civil disturbance Accident fire or explosion
(iii) Action by an enemy or action taken in combating an enemy.
The rehabilitation allowance should be used for the business purposes within three
years of the unit's re-establishment reconstruction of revival. The rehabilitation
allowance is allowed to the unit equivalent of 60% of the amount of the deduction
allowable to the unit.
(5) Investment Allowance : The investment allowance was introduced way back in 1976
to replace the initial depreciation allowance. The investment allowance under the
section 31A of the Income-tax Act, 1961, is allowed at the rate of 25% of the cost of
acquisition of new plant or machinery installed. Although the investment allowance
has been made available for the article or things except certain items of low priority,
yet, as per the 11th schedule to the Income Tax Act 1961, a special dispensation has
been provided for the plant and machinery installed in small-scale industries. In
comparison with other industries are at an advantage in claiming a deduction of
investment allowance.
A small-scale industry can avail of investment allowance provided it has put to use
machinery or plant either in the year of installation or in the immediate following year,
falling which the benefit will be forfeited.
(6) Expenditure on Scientific Research : Under the section 35 of the Income Tax Act
1961, the following deductions in respect of expenditure on scientific research are
allowed:
(i) Any revenue expenditure incurred on scientific research related to the business
of the assessee in the previous year.
(ii) Any sum that it pays to a scientific research association or a university, college,
institutions or to a public company which has as its object, the undertaking of
scientific research.
(iii) Any capital expenditure incurred on scientific research related to the business of
the assessee subject to the provision of section 35(2) of the Income Tax Act,
1961.
(7) Greater Attention on TQM in Small Enterprise : It is easy to start small enterprises
but difficult to make them survive. It is more so in the context of ever increasing
competition in business brought about by liberalization, globalization and privatization
of the Indian economy. The small businesses generally lose out on this platform. Only
those enterprises can survive that possess enough strength to face the stiff and
complex competition. Further, small enterprises find it more difficult to face
competencies, etc, and become weaker. The question then arises-how to develop
competitive strength among small enterprises to meet competition effectively? The
answer to this question is 'quality'.

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In aggregate, TQM can help strengthening of small enterprises in the following
manner:
(i) By increasing efficiency in processes.
(ii) By providing more time for innovation and creativity.
(iii) Boosting the morale of employees
(iv) Improving the quality of products and services
(v) Enhancing customer satisfaction
(vi) Snatching higher market share
(vii) Generating higher productivity
(viii) Achieving higher profits, etc.
A quality certification scheme was launched in 1994 to improve the quality standards
of SSI products which are to be assisted by awareness programmes and financial
support to acquired ISO 9000 or similar international quality standards.
Q. Write a note on Entrepreneurial Input.
Ans. Entrepreneurial Input : Various entrepreneurial inputs influencing the
entrepreneurship are as follows:
(A) Economic Inputs : Economic environment exercises the most direct and immediate
influence on entrepreneurship. The economic factors that affect the growth of
entrepreneurship are the following:
(1) Capital : Capital is one of the most important perquisites to establish an enterprise.
Availability of capital facilitates for the entrepreneur to bring together the land of one,
machine of another and raw material of yet another to combine them to produce
goods. Capital is therefore, regarded as lubricant to the process of production. Our
accumulated experience suggests that with an increase in capital investment, capital-
output ratio also tends to increase. This results in increase in profit which ultimately
goes to capital formation. This suggests that as capital supply increases,
entrepreneurship also increases.
(2) Labour : The quality rather quantity of labour is another factor which influences the
emergence of entrepreneurship. Most less developed countries are labour rich
nations owing to a dense and even increasing population. But entrepreneurship is
encouraged if there is a mobile and flexible labour force. And, the potential
advantages of low-cost labour are regulated by the deleterious effects of labour
immobility. The considerations of economic and emotional security inhibit labour
mobility. Entrepreneurs, therefore often find difficulty to secure sufficient labour.
(3) Raw Material : The necessity of raw materials hardly needs any emphasis for
establishing any industrial activity and its influence in the emergence of

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entrepreneurship. In the absence of raw materials, neither any enterprise can be
established nor can an entrepreneur be emerged. Of course, in some cases,
technological innovation can compensate for raw material inadequacies.
(4) Market : The fact remains that the potential of the market constitute the major
determinant of probable rewards from entrepreneurial function. Frankly speaking, if
the proof of pudding lies in eating, the proof of all function lies in consumption, i.e.
marketing. The size and composition of market both influence entrepreneurship in
their own ways. Practically, monopoly in a particular product in a market becomes
more influential for entrepreneurship than a competitive market.
(5) Infrastructure : Expansion of entrepreneurship presupposes properly developed
communication and transportation facilities. It not only helps to enlarge the market, but
expend the horizons of business too. Take for instance, the establishment of post and
telegraph system and construction of roads and highway in India.
(B) Social Inputs : Social factors can go a long way in encouraging entrepreneurship. In
fact it was the highly helpful society that made the industrial revolution a glorious
success in Europe. The main components of social environment are as follows:
(1) Caste Factor : There are certain cultural practices and values in every society which
influence the actions of individuals. These practices and value have evolved over
hundred of years. For example, consider the caste system (the varna system) among
the Hindus in India. It has divided the population on the basis of caste into four
divisions:
Ø The Brahmana (Priest)
Ø The Kshatriya (Warrior)
Ø The Vaishya (Trade)
Ø The Shudra (Artisan)
It has also defined limits to the social mobility of individuals. By 'social mobility' we
mean the freedom to move from one caste to another. The caste system does not
permit an individual who is born a Shudra to move to a higher caste.
(2) Family Background : This facto includes size of family, type of family and economic
status of family. In a study by Hadimani, it has been revealed that Zamindar family
helped to gain access to political power and exhibit higher level of entrepreneurship.
Backgroud of a family in manufacturing provided a source of industrial
entrepreneurship. Occupational and social status of the family influenced mobility.
(3) Education : Education enables one to understand the outside world and equips him
with the basic knowledge and skills to deal with day-to-day problems. In any society,
the system of education has a significant role to play in inculcating entrepreneurial
values.

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(4) Attitude of the Society : A related aspect to these is the attitude of the society towards
entrepreneurship. Certain societies encourage innovations and novelties, and thus
approve entrepreneurs' actions and rewards like profits. Certain others do not tolerate
changes and in such circumstances, entrepreneurship cannot take root and grow.
Similarly, some societies have an inherent dislike for any money-making activity.
(5) Cultural Values : Motives impel men to action. Entrepreneurial growth requires
proper motives like profit-making, acquisition of prestige and attainment of social
status. Ambitious and talented men would take risks and innovate if these motives are
strong. The strength of these motives depends upon the culture of the society. If the
culture is economically or monetarily oriented, entrepreneurship would be applauded
and praised, wealth accumulation as a way of life would be appreciated.
(C) Psychological Inputs : Many entrepreneurial theorists have propounded theories of
entrepreneurship that concentrate especially upon psychological factors. These are
as follows:
(1) Need Achievement : The most important psychological theories of entrepreneurship
were put forward in the early 1960s by David McClelland. According to McClelland
'need achievement' is social motive to excel that tends to characterize successful
entrepreneurs, especially when reinforced by cultural factors. He found that certain
kinds of people, especially those who became entrepreneurs, had this characteristic.
Moreover, some societies tend to reproduce a larger percentage of people with high
'need achievement' than other societies. McClelland attributed this to sociological
factors. Differences among societies and individuals accounted for 'need
achievement' being greater in some societies and less in certain others.
(2) Withdrawal of Status Respect : There are several other researchers who have tried
to understand the psychological roots of entrepreneurship. One such individual is
Everett Hagen who stresses the psychological consequences of social change.
Hagen says, at some point many social groups experience a radical loss of status.
Hagen attributed the withdrawal of status respect of a group to the genesis of
entrepreneurship. He postulates that four types of events can produce status
withdrawal:
(a) The group may be displaced by force;
(b) It may have its valued symbols denigrated;
(c) It may drift into a situation of status inconsistency; and
(d) It may not be accepted the expected status on migration in a new society.
He further postulates that withdrawal of status respect would give rise to four possible
reactions and create four difference personality types:
(a) Retreatist : He who continues to work in a society but remains different to his
work and position;

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(b) Ritualist : He who adopts a kind of defensive behavior and acts in the way
accepted and approved in his society but no hopes of improving his position;
(c) Reformist : He is a person who foments a rebellion and attempts to establish a
new society; and
(d) Innovator : He is a creative individual and is likely to be an entrepreneur.
(3) Motives : Other psychological theories of entrepreneurship stress the motives or
goals of the entrepreneurs. Cole is the opinion that besides wealth, entrepreneurs
seek power, prestige, security and service to society. Stepanek points particularly to
non-monetary aspects such as independence, person's self-esteem, power and
regard of the society.
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs.
(a) Managing entrepreneurs whose chief motive is security.
(b) Innovating entrepreneurs, who are interested only in excitement.
(c) Controlling entrepreneurs, who above all otter motives want power and
authority.
(4) Others : Thomas Begley and David P. Boyd studied in details the psychological roots
of entrepreneurship in the mid 1980s. They came to the conclusion that
entrepreneurial attitudes based on psychological consideration have five dimensions:
(i) First came 'need-achievements' as described by McClelland.
(ii) The second dimension is that Begley and Boyd call 'locus of control' This means
that the entrepreneur follows the ideas that he can control his own life and is not
influenced by factors like luck, fate and so on.
(iii) The third dimension is the willingness to take risks.
(iv) Tolerance is the next dimension of this study.
(v) Finally, here is what psychologists call 'Type A' behavior. This is nothing but "a
chronic, incessant struggle to achieve more and more ion less and less of time"
Entrepreneurs are characterizing by the presence of 'Type A' behavior in all their
endeavors.

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UNIT – III
Q. Explain that key to entrepreneurial behaviour is entreprenurial motivation.
Ans. Psychology can be distinguished from other behavioral sciencesby its emphasis on
the behavior of the individual person. Behavior, in turn is influenced by the way in which the
external world is represented in the mind, and by the individual's exercise of choice.following
are the points which explains that how entrepreneurial motivation influences entrepreneurial
behavior.
1. NEED FOR ACHIEVEMENT
David McCelland has developed an Achievement Motivation Theory in the early
1960.According to this theory an individuals need for achievement refers to the need for
personal accomplishment .It is the drive to excel , to strive for success and to achieve in
relation to a set of standards. People with high achievement motive like to take calculated
risk and want to win. They like to take personal responsibility for solving problems and want
to know how well they are doing . High achievers are not motivated by money . Such people
strive for personal achievement rather than the rewards of success. They want to do
something better and more more efficiently than it has done before . This drive is the
achievement need (n-ach) .From the researches into the area of achievement need
McCelland found that high achievers differtiate themselves from others by their desire to do
things better. They seek situations where they can attain personal responsibility for finding
solutions to problems , where they can receive rapid feedback on their performance so they
can set moderately challenging goals . High achievers are not gamblers, they dislike
succeeding by chance. They prefer the challenge of working at a problem and accepting the
personal responsibility for success or failure, rather than leaving the outcome to chance or
the actions of others.
The following psychological factors contribute entrepreneurial motivation:-
1. Need for achievement through self study, goal setting and interpersonal support
2. Keen interest in situations involving moderate risk.
3. Desire for taking personal responsibility.
4. Concrete measures of task performance.

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5. Anticipation of future possibilities.
6. Energetic or novel instrumental activity.
7. Organisational skill
2. LOCUS OF CONTROL
Closely related to the concept of a high need for achievement is the belief in an internal
locus of control. Individuals who are reluctant in believing in their ability to control the
environment though their actions, would also be expected to be reluctant to assume the
risks that starting a business entails
Rotter (1966, as cited in Chell, Haworth and Brearley, 1991) developed the notion of
control of reinforcement reinforcement /re·in·force·ment/ (-in-fors´ment) in behavioral
science, the presentation of a stimulus following a response that increases the frequency of
subsequent responses, whether positive to desirable events, or as part of a wider social
learning theory of personality. Rotter believed that the need for achievement is related to the
belief of internal locus of control. People with an internal locus of control are those
individuals who also believe themselves to be in control of their destiny (Chell, and
colleagues, 1991). In contrast, people with an external locus of control sense that fate, in the
form of chance events outside their control, or powerful people, has a dominating influence
over their lives (Chell and Colleagues, 1991). Rotter hypothesized that individuals with
internal beliefs would more likely strive for achievement than would individuals with external
beliefs.
3. RISK TAKING
Risk bearing is a prime factor in the entrepreneurial character and function. In
particular, Hull and colleagues (1980) found that the personality characteristics most
important in identifying entrepreneurial types of individuals are (1) functional task
preference and (2) personality constructs of creativity, risk and flexibility.
Researchers such as Palmer (1971, as cited in Kent and Sexton, 1982) and Likes
(1974, as cited in Shabbir and Gregorio, 1996) speculate that in becoming an entrepreneur,
an individual risks financial well-being, career opportunities, family relatives and psychic
well being. The level of uncertainty involved in an entrepreneurial venture indicates that
individuals drawn to such lines of business will possess a certain level of risk taking
propensity.
4. VALUES
Any consideration of personality characteristics of the entrepreneur must entail
restriction of inheritance to a limited class of descendants for at least several generations.
The object of entail is to preserve large estates in land from the disintegration that is caused
by equal inheritance by all the heirs and by the ordinary an examination of their value
systems. Value orientation- the principles of right and wrong that are accepted by an
individual or a social group; "the Puritan ethic"; "a person with old-fashioned values" ethic,
moral principle, value-system

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One of the major studies of personal values of entrepreneurs was done by Hornaday
and Aboud (1971, as cited by Sexton and Smilor, 1982). The researchers found that
entrepreneurs scored significantly higher than the general population reflecting the need for
achievement,
Thus it is concluded that values may be effective in distinguishing successful
entrepreneurs from the general population.
5. PROBLEM SOLVING STYLE AND INNOVATIVENESS
Gartner (1989) refers to innovation as the central value of the entrepreneurial
behavior, since it is successfully taking an idea or invention to market. Innovation and
problem solving capabilities are expected to be the core of the entrepreneurial capability of
an entrepreneur. But the level of innovation is dependent upon the entrepreneur's formal
education and managerial experience. Their study of 184 firms in the Midwest showed a
correlation between a higher level of managerial experience and more years of education
with a higher level of innovation
Q. Discuss that n- achievement theory of motivation is the key to management
success.
Ans. Introduction : David McCelland has developed an Achievement Motivation Theory
in the early 1960.According to this theory an individuals need for achievement refers to the
need for personal accomplishment .It is the drive to excel , to strive for success and to
achieve in relation to a set of standards. People with high achievement motive like to take
calculated risk and want to win. They like to take personal responsibility for solving problems
and want to know how well they are doing .
High achievers are not motivated by money . Such people strive for personal
achievement rather than the rewards of success. They want to do something better and
more more efficiently than it has done before . This drive is the achievement need (n-ach).
From the researches into the area of achievement need McCelland found that high
achievers differtiate themselves from others by their desire to do things better. They seek
situations where they can attain personal responsibility for finding solutions to problems ,
where they can receive rapid feedback on their performance so they can set moderately
challenging goals .
High achievers are not gamblers, they dislike succeeding by chance. They prefer the
challenge of working at a problem and accepting the personal responsibility for success or
failure, rather than leaving the outcome to chance or the actions of others.
The following psychological factors contribute entrepreneurial motivation :
1. Need for achievement through self study, goal setting and interpersonal support
2. Keen interest in situations involving moderate risk.
3. Desire for taking personal responsibility.

199

4. Concrete measures of task performance.
5. Anticipation of future possibilities.
6. Energetic or novel instrumental activity.
7. Organisational skill
The researchers have criticized McClelland's achievement motivation theory of
entrepreneurs over the last three decadOes. Most notably, Brockhaus (1982, as cited in
Sexton and Smilor, 1986) questioned the predictive power. The predictive power of a
scientific theory refers to its ability to generate testable predictions. Theories with strong
predictive power are highly valued, because the predictions can often encourage the
falsification of the theory. of the theory. The author has pointed out that McClelland's
empirical research did not directly connect need for achievement with the decision to own
and manage a business.
Other criticisms of McClelland's achievement motivation theory on entrepreneurs look
at the attempt to relate economic development to the prevalence of achievement imagery
(Chell, Haworth and Brearley, 1991). The cultural basis of the achievement is motive .In
some cultures, failure is seen as a positive learning experience, while in others it has a
certain negative stigma
There is however some empirical support for the idea that entrepreneurs have a
higher motive to achieve compared to non-entrepreneurs. Begley (1995) and Hornaday and
Aboud (1971) consistently found that the achievement motivation exists as a stable
characteristic and is more prevalent among entrepreneurs when compared to others.
Q. Explain the concept of entrepreneurial success in rural area in detail.
Ans. The traditional approach to rural development was 'top-down' meaning that central
development authorities designed programmes which brought in infrastructure, human
capital and investment from outside the rural community. While the investment in
infrastructure and extension services was clearly beneficial in attracting basic commercial
activities and increasing the quality of life in rural areas, it did not necessarily provide a long
term growing economic base. Many rural areas were not beneficiaries of such schemes,
since many projects were too expensive to implement in all rural areas.
The new approach which emerged over the past decade is the development 'from
below'. It stressed the importance of community development based on local
entrepreneurial initiatives, with the explicit goal to ensure balanced technological
development of rural areas which would offer adequate employment opportunities and a
quality of life comparable to urban areas. This approach assumes that the development of
rural areas is based on stimulating local entrepreneurial talent and subsequent growth of
indigenous companies. Specifically, to accelerate economic development in a rural area, it
is necessary to increase the supply of entrepreneurs that is to build up the critical mass of
first generation entrepreneurs who will take risks and accept the uncertainties of new

200


venture creation and who will by their example stimulate an autonomous entrepreneurial
process thereby ensuring continuous rural development. To support such development, the
community must develop links among key institutions, a vibrant entrepreneurial spirit and a
commitment and dedication to risk taking and risk sharing. following are the requirements of
entrepreneurial success in rural area:
Public-private institutions partnership
One of the principal challenges of economic development of rural areas is the
development of a socio-economic environment that would be attractive to people.
To meet this challenge, all available and hidden development potential of the local
community must be mobilised. This in turn requires an environment favourable to
entrepreneurship which a community basically can create in two ways. First, the community
should utilise all the available incentives provided by the government to stimulate the
development of economically depressed areas. These incentives usually include
favourable investment conditions, low interest rates, tax concessions, guarantees, export
subsidies, employment provisions, subsidies on public utility charges and the like.
Second, the community should create and foster the development of institutions and a
variety of partnerships to support local development. As experience shows, personal and
organizational networks are very effective in achieving broad and fast growing regional
economic development.
Today we are witnessing many examples of institutional developments that are
fostering businesses and community collaborative efforts-while nurturing positive
government/academic/business relationships in promoting economic growth. Such
institutions and their collaborative efforts should play a significant role in rural
communities/regions where the development strategy of the rural community places
entrepreneurship in the centre of economic development. Among the most important are:
institutions of education and training; inter-firm institutions and financial institutions.
Institutions of Education
The role of institutions of education in rural development is of crucial importance. They
help to create a capable labour force and to maintain a skilled work force in the community. In
rural areas they can act as agents of change, such as:
• redesigning curricula to teach students high level skills and those skills that would help
to up-grade businesses;
• developing technical training programmes to provide people with basic skills for jobs
required by local businesses;
• developing and implementing programmes to improve the competitiveness of local
firms and their ability to expand into new markets; and
• developing links with other higher educational institutions, especially with universities
outside the rural region in order to bring into the region technical expertise available

201

outside the region and which could be beneficial to the existing businesses in the
region, to new community enterprises, or to stimulate new entrepreneurship in the
community.
Inter-firm Institutions

Efforts to support and enhance existing businesses within a community and to
promote new enterprises in a community can be most successfully earned out through
different inter-firm institutions. Among different inter-firm institutions, business incubators,
industrials parks, different non-profit seeking organizations facilitating networking and
business support centres are one of the most successful ones promoting the growth of new
and existing enterprises. These institutions can significantly contribute to rural development
because of the following:

Business Incubators

Business incubators are a facility designed to assist the development of new
enterprises (Smilor, R.W., 1987). They help entrepreneurs by providing them with services
which support and compliment their own talents and abilities.

Their support system usually includes secretarial, administrative and business
expertise and facilities which are available to entrepreneurs below or at market rates. The
entrepreneurs receive not only help regarding the management of their enterprises but also
other services such as provision of financial assistance and training. They organize
conferences, business luncheons and different types of activities for the purpose of
networking. They create a good business climate inside the incubator and ensure a constant
inflow of moral and financial support. As such, they thus seek to give form and substance,
structure and credibility to emerging ventures.

The business incubator presents a rather unique approach to economic development.
Unique in the sense that it is an independent enterprise whose business is the process of
'incubating' enterprises. The business incubator has emerged as a solution to the high
failure rates among new firms. Many new firms fail, not because they are not innovative
enough but because in their early stage they have difficulty in competing. Therefore, the
basic concept of the incubator is to nurture entrepreneurial activities so as to provide start-
ups with the necessary services and support until they mature and are ready to enter
successfully into the competitive business environment.

The business incubator industry was one of the fastest growing industries in the late
eighties in the U.S.A. Nearly every regional development programme includes the
development of the incubator network, especially in those regions which had experienced
economic decline and severe job losses due to the closing down of industries. Initially,
practically all incubators in the U.S.A. were publicly supported by communities or states and
public funds covered practically all investment and start-up costs.

202


Incubators in a rural area can be designed for a number of purposes to:
• Encourage skilled and professional people who have left the community to come back
to the region to start new companies;
• Attract to the area, laid-off skilled labour from nearby town;
• Promote specific types of businesses;
• Nurture a pool of potential growth enterprises through equity investments;
• Meet particular local employment needs;
• Help develop flexible manufacturing networks of co-operatives and other
manufacturing businesses;
• Develop and produce a particular product that none of the firms could manufacture
alone;
• Foster greater access to capital for start-up firms;
• Intensify training programmes to build the vocational skills of its members;
• Provide job opportunities for high-tech graduates; and
• Develop ways by which technical engineering and management expertise from
outside the enterprise can help start-ups to develop, diversify product lines and
markets and expand.
Business incubators are usually established by private initiative with the financial
assistance from the federal, state and local governments and private sector contributions.
Industrial Parks
As an unemployment-reducing effort and/or for revitilizing the community economic
base, communities could establish industrial parks by purchasing marginal agricultural
property at the market price and converting it to industrial purposes in order to accelerate
entrepreneurial restructuring of rural communities. Communities could increase the
attractiveness of industrial parks to potential entrepreneurs by delivering conventional
common infrastructural services, by customisable layouts that could be rearranged over
time to meet user needs in a flexible way and by the final price which should be much lower
than the price of equivalent buildings in other, especially urban, areas.
Networking among firms in the industrial park is a common outcome. The firms in the
industrial park benefit in several ways through networking. The benefits could be grouped
into those resulting from reducing the problems of isolation in the process of starting-up,
those resulting from economies of scale as overhead functions among firms in the network
are shared and those due to the aggregation of production of small firms with the same or
compatible production and due to large scale purchases of equipment and raw material.
Institutions Facilitating Networking
These are non-profit seeking associations, registered or non-registered which
facilitate networking between small firms located in the same region2. They usually perform
the following tasks:

203

• Promote co-operation between small firms in the network, thus promoting their
competitive efficiency;
• Provide different services in the areas of finance, marketing, research and
development;and
• Provide common services of daily matters in production and administration in order to
reduce transaction costs.
Networking among small firms permits aggregation of production, large scale
purchases, enables specialised firms jointly to manufacture finished products, facilitates
shifts from product to product and market to market and leads to important economies of
scale as overhead functions are shared (Hatch, 1989, p.6).
Business Support Centres
Business support centres can be established to meet the needs of start-ups, emerging
or established businesses. They provide different types of services according to the needs
of the three different clients (Small Business Administration, p. 19):
• Assistance to start-ups: business planning and finance.
• Assistance to emerging and established businesses: management skills in the areas
of finance, sales, marketing and administration.
• Assistance to business partnership: sub-contracting of local firms with larger
enterprises outside the community; attracting spin-offs from fast growing firms or firms
who are rationalising, production by spinning off auxiliary production units; identifying
franchising opportunities to the potential local entrepreneurs.
Business support centres can be part of the local government or semi private
institutions or for non-profit private organizations. They can also be established at the
community colleges or at the university to help small business owners learn necessary
business skills at low cost.
Financial Institutions
Communities should support the development of a strong venture capital base and
risk capital networks specialising in funding new entrepreneurial activities. Seed financing
could be an important bottleneck for new enterprise creation. For this reason, special
attention must be given to the creation of institutions that provide seed financing and start-
ups targeted venture capital and are engaged in equity financing. If it would be difficult for
such institutions to be attractive to a rural community, the community leadership must
encourage existing institutions to link new start-ups or potential entrepreneurs with such
institutions outside the community. They should also be responsible for screening all
financial schemes existing in the country for the development of new enterprises and for the
growth of existing ones. Potential entrepreneurs must have access to information such as:
which are the state financial agencies, banks that provide guarantees, issue tax free bonds,

204


direct loans to smaller enterprises or to Consortia of enterprises? What type and how many
economic development funds are available? Who provides favourable investment financing
for the equipment and working capital? Which development corporations finance new and
expanding businesses'? What state funds are available for small and medium sized
enterprise development, etc.'?
Public-Private Partnership
The impact of institutions discussed earlier on rural economic development will
increase if the individual efforts of those institutions are combined into a co-ordinated action.
Therefore, the task of community leadership is to encourage close co-operation among
different institutions supporting rural development, both public and private, in order to
develop programmes that would address the key barriers to community development:
human and financial capital drain, inefficient use of natural and productive resources,
inability to meet the local business needs, inability to create effective community
infrastructure, inability to encourage new enterprise formation, inability to increase local
economic opportunities, etc.
The key to the evolution of economic development based on a partnership approach is
the leadership that could come either from the local government or from already existing
successful private companies, local development private or public agencies, community
civic organizations, educational institutions and the like. What is crucial is the development
of personal and organizational networks which combine otherwise individual efforts into a
comprehensive approach to regional development of rural areas. Therefore, it is important
to identify or to establish the principal community civic agency, the lead organization
responsible for designing and carrying out the development strategy based upon
identification of an area's major problems (lack of job opportunities, substandard housing,
deteriorated social infrastructure, etc.). This organization should act as a planning and
brokering organization, bringing together public and private initiative to attain common
community goals. It should support the creation of new agencies if ongoing implementation
of a development strategy so requires. Personnel should also include representatives of the
major enterprises in the region, universities and research and development institutions. It
should focus on broad community concerns and co-ordination of separate efforts in the
region.
Conclusions
Economic development in general requires more than just a proper macro economic
environment. In addition it demands institutional framework conducive to economic
development, practical mechanisms for risk taking and risk sharing in the early and most
uncertain stages of entrepreneurial ventures and an organizational system conducive to
growing new and existing businesses. It takes cross-institutional networking. The role of
public policy is therefore to continually find ways to implement critical success factors of
economic development. Economic development of rural areas cannot be an exception in
this respect.

205

Entrepreneurial Development Syllabus

Entrepreneurial Development Syllabus

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