INTRODUCTION TO ENTREPRENEUR

1.1 Evolution of the word Entrepreneur

The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means
undertaking the risk of enterprise and further it was used to designate an organizer of musical or
other entertainments. Later in 16th century it was used for army leaders. It was extended to cover
civil engineering activities such as construction in 17th century. But it was Richard Cantillon, an
Irishman living in France who first used the term entrepreneur to refer to economic activities.
According to Cantillon “An entrepreneur is a person who buys factor services at certain prices with
a view to selling its product at uncertain prices”. Entrepreneur, according to Cantillon, is a bearer of
risk, which is non-insurable. Schum peter gave a central position to the entrepreneur who believed
that an entrepreneur was a dynamic agent of change; that an entrepreneur was a catalyst who
transformed increasingly physical, natural and human resources into correspondingly production
possibilities. Since then the term entrepreneur is used in various ways and various views.

1.2 Meaning of Entrepreneur

Entrepreneur is a person who tries to create something new, searches new opportunities,
bears risk, unites various factors of production like land, labour and capital carries innovations and
from his skill and farsightedness faces unforeseen circumstances and thereby earns profits.
Entrepreneurs are the pioneers who are instrumental in the economic development, growth and
development of and prosperity of a country.

1.3 Definition of Entrepreneur

There are various views about entrepreneur which are broadly classified into three groups,
namely risk bearer, organizer and innovator.

Entrepreneur as Risk Bear : Richard Cantilon defined entrepreneur as an agent who buys
factors as production at certain prices in order to combine them into a product with a view to selling
it at uncertain prices in future. He illustrated a farmer who pays contractual incomes, which are
certain to land owners and labourers and sells at prices that are ‘uncertain’. He includes, merchants
also who make certain payments in expectation of uncertain receipts. Hence both of them are risk-
bearing agents of production. F.H. Knight described entrepreneur to be a specialized group of
persons who bears uncertainly. Uncertainty is defined as risk, which cannot be insured against and
is incalculable. He made distinction between certainty and risk. A risk can be reduced through the
insurance principle, where the distribution of outcome in a group of instance is known, whereas
uncertainty cannot be calculated.

Entrepreneur as an Organizer : According to J Baptist Say “an entrepreneur is one who combines
the land of one, the labour of another and capital of yet another, and thus produces a product. By
selling the product in the market, he pays interest on capital, rent on land and wages to laborers and
what remains is his/her profit”. Say made distinction between the role of capitalist as a financer and

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the entrepreneur as an organizer. This concept of entrepreneur is associated with the functions of
coordination, organization and supervision.

Entrepreneur as an Innovator : Joseph A. Schumpeter Peter in 1934 assigned a crucial role of

‘innovation’ to the entrepreneur. He considered economic development as a dynamic change
brought by entrepreneur by instituting new combinations of factors of production, i.e. innovations.
The introduction of new combination according to him, may occur in any of the following forms.

(a) Introduction of new product in market

(b) Use of new method production, which is not yet tested.

(c) Opening of new market.

(d) Discovery of new source of raw materials.

(e) Bringing out of new form of organization.

Schums Peter also made distinction between inventor and innovator. An inventor is one who
discovers new methods and new materials. An innovator utilizes inventions and discovers in order
to make new combinations.

Hence the concept of entrepreneur is associated with three elements risk bearing, organizing
and innovating. Hence an entrepreneur can be defined as a person who tries to create something
new, organizes production and undertakes risks and handles economic uncertainty involvement in
enterprise.

Some more important definitions of entrepreneur

1. According to F.A. Walker : “Entrepreneur is one who is endowed with more than average
capacities in the task of organizing and coordinating the factors of production, i.e. land, labour
capital and enterprises”.

2. Marx regarded entrepreneur as social parasite.

3. According to Gilbraith : “An entrepreneur must accept the challenge and should be willing
hard to achieve something”.

4. 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 basic tool of entrepreneurs, the means by
which they exploit change as an opportunity for a different business or service.

5. According to E.E. Hagen : “An entrepreneur is an economic man who tries to maximize his
profits by innovation, involve problem solving and gets satisfaction from using his
capabilities on attacking problems”.

6. According to Mark Casson : “An entrepreneur is a person who specializes in taking

judgement decision about the coordination of scarce resources”.

7. Frank Young defined entrepreneur as a change agent.

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8. According to Max Weber : “Entrepreneurs are a product of particular social condition in
which they are brought up and it is the society which shapes individuals as entrepreneurs”.

9. International Labour Organization (ILO) defines “entrepreneurs as those people who have
the ability to see and evaluate business opportunities, together with the necessary resources to
take advantage of them and to initiate appropriate action to ensure success”.

10. Akhouri describes “entrepreneur as a character who combines innovativess, readiness to take
risk, sensing opportunities, identifying and mobilizing potential resources, concern for
excellence and who is persistent in achieving the goal”.

1.4 INTERNAL AND EXTERNAL FACTORS OF ENTREPRENEUR

Entrepreneur is a person of telescopic faculty drive and talent who perceives business
opportunities and promptly seizes them for exploitation. Entrepreneur needs to possess
competencies to perform entrepreneur activities.

Personal entrepreneurial characteristics

Core Competencies Entrepreneurial Activities
1. Initiative Does things before asked for or forced to by events and acts to extend the
business to new areas, products or services.
2. Perceiving opportunities Identifies business opportunities and mobilizes necessary resources to make
good an opportunity.
3. Persistence Takes repeated or different actions to overcome obstacles.
4. Information gathering Consults experts for business and technical advice. Seeks information of a
client or supplier’s needs. Personally undertakes market research and make
use of personal contacts or information networks to obtain useful
information.
5. Concern for quality State desire to produce or sell a better quality product or service. Compares
work his performance favourably with that of others.
6. Commitment to Makes a personal sacrifice or expands extraordinary effort to complete a job,
contractual obligations accepts full responsibility in completing a job contract on schedule, pitches in
with workers or work in their place to get the job done and shows atmost
concern to satisfy the customer.
7. Efficiency orientation Finds ways and means to do things faster, better and economically.
8. Planning Various inter-related jobs are synchronized according to plan.
9. Problem solving Conceives new ideas and finds innovative solutions.
10. Self-confidence Makes decisions on his own and sticks to it in spite of initial setbacks.
11. Experience Possesses technical expertise in areas of business, finance, marketing etc.
12. Self-critical Aware of personal limitations but tries to improve upon by learning from his
past mistakes or experiences of others and is never complacent with success.
13. Persuasion Persuades customers and financers to patronize his business.
14. Use of influences Develops business contracts, retains influential people as agents and restricts
strategies dissemination of information in his possession.
15. Assertiveness Instructs, reprimands or disciplines for failing to perform
16. Monitoring Develops a reporting system to ensure that work is completed and quality
norms.

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17. Credibility Demonstrates honesty in dealing with employees, suppliers and customers
even if it means a loss of business.
18. Concern for employee Express concern for employees by responding promptly to their grievances.
welfare
19. Impersonal relationship Places long-term goodwill over short-term gain in a business relationship
20. Expansion of capital base Reinvests a greater portion of profits to expand capital of the firm.
21. Building product image Concerned about the image of his products among consumers and does
everything possible to establish a niche for his products in the market.

1.5 CHARACTERISTICS OF AN ENTREPRENEUR

An entrepreneur should possess all such characteristics with the help of which he can perform
various responsibilities successfully. The following characteristics are :-

1. Innovator

Schumpeter differentiates between an inventor and innovator. An inventor discovers new

methods and new materials and an innovator is the one who utilizes those discoveries and
inventions. Not only this, the entrepreneur further exploits the inventions commercially and thus
produces newer and better goods which give him profit and satisfaction.

Innovation may occur in the following forms :

(i) The introduction of new goods.

(ii) The introduction of new methods of production.

(iii) The opening of a new market.

(iv) The conquest of a new source of supply of raw-material.

(v) The carrying out of the new form of organization of any industry.

The entrepreneur locates ideas and puts them into effect in the process of economic
development. According to Baumol, an entrepreneur is a Schumpetarian innovator and something
more than a leader.

2. Risk-taker

Risk means the condition of not knowing the outcome of an activity or decision. A risk
situation occurs when one is required to make a choice between two or more alternatives whose
potential outcomes are not known and must be subjectively evaluated. A risk situation involves
potential gain or loss. The greater the possible loss, the greater is the risk involved.

An entrepreneur is a calculated risk-tasker. He enjoys the excitement of a challenge but he

does not gamble. An entrepreneur avoids low-risk situation because there is a lack of challenge and
he avoids high-risk situation because he wants to succeed. He likes achievable challenges.

An entrepreneur likes to take realistic risks because he wants to be successful. He gets

greater satisfaction in accomplishing difficult but realistic tasks by applying his own skills. Hence,

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low-risk situation and high-risk situation both are avoided because these do not satisfy the
entrepreneur.

3. Organiser

An entrepreneur has to bring together various factors of production, minimize losses and
reduce the cost of production. Initially, he may take all the decisions but as the enterprise grows, he
starts delegating the authority. He produces that best results as an organizer. Not only this, it is the
entrepreneur who has to pick or select the right piece of land, choose the right person and opt for
the finance. He must be able to inspire loyalty and hard work amongst the workers to raise
productivity and efficiency. In order to expand the business, he must have willingness to delegate
authority and trust his sub-ordinates and managers although shaping of long-run policies of the
enterprise would remain in his hands.

4. Creative

Creatively, as field knowledge, seeks to explain how humans, either individually or

collectively, reach solutions that are both novel and useful. Innovation means the effort to create
purposeful ventures.

Harry Nystrom states that innovation may be defined as radical discontinuous change and
creativity is the ability to devise and successfully implement such changes. Successful innovations
depend on creativity and one of the most important requirements of an entrepreneur is to be creative
as creativity may be taken as the cause and successful innovation as the effect.

5. Motivator

McClelland explicitly introduces the need for achievement motivation as a psychological

motive and implicitly emphasised the need for achievement as the most directly relevant factor for
explaining economic behaviour.

Achievement motivation is a drive to overcome challenges, to advance and to grow. An

entrepreneur is an achievement-oriented person, not ‘money hungry’. He works for his desire for
challenge, accomplishment and service to others.

Achievement concerns refers to the accomplishment of excellent, innovative and risk

involving tasks. The organizational goal of an entrepreneur can be boosted by inculcating in him the
need for achievement.

6. Technical Competent

Success of an entrepreneur depends largely upon his ability to adopt latest technology.
Technical knowledge implies the ability to devise and use new and better ways of producing and
marketing goods and services. An entrepreneur must have a reasonable level of technical
knowledge. Technical knowledge is the ability that people can acquire with hard work.

An entrepreneur who has a high level of administrative ability, mental ability,

communication ability, human relations ability and technical knowledge can be more successful
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than a person with low level of these abilities. A dynamic entrepreneur must also be interested in
changing the pattern of production to suit the requirements.

7. Self-confident
It is necessary for an entrepreneur to be self-confident. He should have faith in himself only
then he can trust others.

In an expanded business, delegation of authority is a must and only a self-confident

entrepreneur can delegate his authority. He can seek cooperation of his staff and inculcate a sense of
team work in them.

8. Socially Responsible

The changing environment calls for a socially conscious entrepreneur who is not threatened
by progress of others. On the contrary, he acts in full awareness of social repercussions of his
actions. His entrepreneurial ability may create jobs for others. He may invent new products and new
manufacturing methods. He may innovate new ways of doing things. All these have social
consequences. An entrepreneur should think of projects of social significance and of importance to
others. He should expand his entrepreneurial activities, in order to help in creating conditions for
social change and for development of business which benefit the society. Such an attitude for others
raises the level of entrepreneurship from that of an individual activity to a meaningful social
endeavour.

9. Optimistic

An entrepreneur should approach his task with a hope of success and optimistic attitude. He
attempts any task with the hope that he will succeed rather than with a fear of failure. Such a hope
of success enhances his confidence and drives him towards success.

10. Equipped with Capability to Drive

Drive is a person’s motivation towards a task. It comprises of such personality traits as

responsibility, vigour, initiative, persistence and ambition. An entrepreneur must exert considerable
effort in establishing and managing his business. Those entrepreneurs who work hard in planning,
organizing, co-ordinating and controlling their business are more likely to have a successful
business than the entrepreneur who is lost and haphazard.

11. Blessed with Mental Ability

Mental ability that contributes to the success of an entrepreneur consists of overall

intelligence, i.e. IQ, creative thinking ability and analytical thinking ability. An entrepreneur must
be intelligent, adaptable, creative and he must be able to engage in analysis of various problems and
situations in order to deal with them.

12. Human Relations Ability

Personality factors such as emotional stability, personal relations, sociability, consideration

and tactfulness are important contributors to entrepreneur’s success. One of the most important
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facets of human relations ability is one’s ability to “put himself in someone else’s place” and to
know how the other person feels. This is the ability to practice empathy.

The entrepreneur must have good relations with his employees, customers etc. He must be
aware of the needs and motivations of customers if he is to adequately train his employees to
maintain good customer relations.

13. Communication Ability

An entrepreneur must possess the quality of communicating effectively in written and oral
communications. Good communication also means that both the sender and the receiver understand
and are being understood.

14. Decision-Making

An entrepreneur must be clear and creative when it comes to decision-making. He must

believe in himself and should be possessing ability to take decisions effectively. Decisions taken
should be based on quantitative facts. Decisions which effect organisaton’s future and are likely to
be irreversible must be taken with great care.

Here are some tips to become a good decision-maker (1) Define the problem, (2) Collect
information and relevant data, (3) Begin with a brain storming session and discuss the problem
with each other, (4) Never criticize or reject any solution suggested during the brain storming
session, (5) Encourage group members to come up with potential solutions, (6) Reduce the number
of alternatives to three or four after discussion, (7) Consider each alternative extensively and
determine the best to meet your needs and (8) Implement decisions.

Decision-making is an art; the more one practices it, better expert he/she becomes.

15. Business Planning

The decision to become an entrepreneur is the first step followed by the choice of the
product. As the business venture is undertaken, need for planning arises. It is the rigor and
thoroughness of the business plan which could be behind the successful entrepreneur throughout
his venture’s life.

Planning is really nothing more than decision-making, that is, deciding what to do, how to
do and when to do. It is vital for the success of a business. As a business person puts it:

“Planning is so important today that it occupies a major part of the time of the most
respective men in business. Planning allows us to master change. It forces us to organize our
expectations and develop programs to bring them about. Planning is the most effective way to draw
out the best in all of us-our best thinking, out best interests and aims and to enable us to develop the
most efficient way of achieving our maximum goals”.

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16. A Venture Capital

A David Silver, a successful capitalist described an entrepreneur as “Energetic”, single-

minded’, having ‘a mission and a clear vision”. He or she intends to create out of this vision a
product or service in a field which many have determined is important to improve the lives of
millions”. Silver also suggests that entrepreneurs venture out on their own from a sense of
dissatisfaction with their organization, but they are not necessarily unhappy with their existing
career fields.

17. Visionary

Entrepreneurs are visionaries like J.R.D. Tata, Dhirubhai Ambani, Narayanamurthy, Aziz
Premji etc. Entrepreneurs have a vision for growth, commitment to constructive change, persistence
to gather necessary resources and energy to achieve results. An Entrepreneur is distinguished from a
small business person. A person who leaves his job to start an independent business is not an
entrepreneur. Constructive change is an essential feature of a visionary. For example, Gulshan
Kumar (T-Series) was a venture capitalist and a visionary as well. He has left behind an unequalled
legacy of music innovations. Henry Ford created the manufacturing miracle that launched a modern
era in industry.

An effective visionary performs two key roles : (i) A charismatic role which involves
establishing support for a vision and direction. He inspires and empowers his employees for
support. Secondly, he plays an architectural role in order to build an appropriate organization
structure. He has to look after various functions of management and discharge them effectively.

18. Entrepreneurs make Significant Differences

The differences made by the entrepreneurs are significant. They have their own style of
dealing with various problems, set backs and uncertainties. They tend to change the existing state of
affairs and get the work done without bothering about obstructions and barrers.

19. Ability to Spot and Exploit Opportunities

A story is told of a Jeweller who many years ago sent two of his marketing graduates to a
remote village to see if they could come up with new product ideas for underdeveloped jewellery
market. The first one after exploring the market said, “There is no business here, the residents of the
village don’t wear jewellery of any type!” The second one was enthusiastic about the prospects and
he said, “This is a great opportunity; the people here haven’t discovered Jewellery yet.”

This is how entrepreneurs spot the opportunities which others miss. Mc Grath states that the
entrepreneurs are comfortable with ambiguity and they can bring clarity by piecing together
previous unrelated messages and signals.

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 The entrepreneurs craft or carve out opportunities for themselves. Their perceptions differ
from non-entrepreneurs. There are very few persons who are inventors and entrepreneurs at the
same time. Such persons have an edge over those who are only inventors or entrepreneurs.

20. Courage to Face Adversities

Entrepreneurs face the adversities boldly and bravely. They refuse to be beaten and become
tougher during adverse situations. They have faith in themselves and attempt to solve the problems
even under pressure. Every unpredictable situation is a challenge before them which they overcome
and survive through.

21. Leadership – An essential trait of the entrepreneur

Leadership is the process of influencing and supporting others to work enthusiastically

towards achieving objectives. It is a critical factor that not only helps an entrepreneur to identify his
goals but also motivates and assists him in achieving the stated goals. Without leadership, an
organisation would be only a confusion of people and machines, just as an orchestra without a
conductor would be only musicians and instruments. Leadership is one of the primary traits of an
entrepreneur by which he can influence others to voluntarily seek defined objectives. Leadership,
thus, is the catalyst that transforms potential into reality, problems into opportunities, heading
towards the achievement of objectives. This role is often seen dramatically when a small scale unit
transforms itself into medium-scale and finally it turns into a giant organization. Leadership is
equally important in all sizes of organization – be it small, medium or large Wrarren Bennis, the
leadership guru, says that effective leadership can’t exist without the full inclusion, initiatives, and
the co-operation of employees. Since a small industry is as labour-intensive industry, the
entrepreneur must have leadership qualities to influence his workers or employees.

Traits of Leadership :- The path to leadership that one takes differs from individual to
individual.

However, there are a few key traits we can focus on :

o High level of personal drive
o The desire to lead
o Personal integrity
o Self-confidence
o Cognitive (Analytical) ability
o Business Knowledge
o Charishma
o Creativity
o Personal Warmth

The traits between leaders and non-leaders may differ at the physical level, intellectual level
or personality features could be different as well.

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1.6 MANAGER VERSUS LEADER :

Warren Bennis point out the characteristics of managers versus leader in the 21st
century like this :

Manager Characteristics Leader Characteristics

Administers Innovates
A copy An originally Develops
Maintains Focuses on people Inspires trust
Focus on systems and structure Long-range perspective
Relies on Control Asks what and why
Short-range view Eye on the horizon
Eye on the bottom line Originates
Imitates Challenges the status quo
Accepts the status quo Own person
Classic good soldier Does the right thing
Does things right

Although a manager has different features than a leader but in small business the
entrepreneur has to play the role of both. By creating an environment that encourages personal
interaction, the leader and entrepreneur of a small firm can get the best from her/his employees and
also offer a strong inducement to prospective employees. Several decades ago, managers were hard-
nosed autocrats, giving orders and showing little concern for those who worked under them. Over
the years, this style of leadership has given way to a gentler and more effective variety that
emphasis as respect for all members of organisation and shows an appreciation for their potential as
well. Manager leader entrepreneur frequently seeks some degree of employee participation in
decisions that affect personnel and work process. This leadership approach taken upto a level can
also be termed as empowerment. By using empowerment, managers go beyond solicitation of
employees’ opinion and ideas by increasing their authority to act on their own and to make
decisions about the process they are involved with.

1.7 FUNCTIONS OF AN ENTREPRENEUR

An entrepreneur has to perform a number of functions right from the generation of idea up
to the establishment of an enterprise. He also has to perform functions for successful running of his
enterprise. Entrepreneur has to perceive business opportunities and mobilize resources like man,
money, machines, materials and methods. The following are the main functions of an Entrepreneur.

1. Idea Generation : The first and the most important function of an Entrepreneur is idea
generation. Idea generation implies product selection and project identification. Idea
generation is possible through vision, insight, keen observation, education, experience
and exposure. This needs scanning of business environment and market survey.

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2. Determination of Business Objectives : Entrepreneur has to state and lay down the
business objectives. Objectives should be spelt out in clear terms. The entrepreneur must
be clear about the nature and type of business, i.e. whether manufacturing concern or
service oriented unit or a trading business so that he can very well carry on the venture
in accordance with the objectives determined by him.

3. Raising of Funds : All the activities of the business depend upon the finance and hence
fund raising is an important function of an entrepreneur. An entrepreneur can raise the
fund from internal source as well as external source. He should be aware of different
sources of funds. He should also have complete knowledge of government sponsored
schemes such as PMRY, SASY, REAP etc. in which he can get government assistance
in the form of seed capital, fixed and working capital for his business.

4. Procurement of Machines and Materials : Another important function of an

entrepreneur is to procure raw materials and machines. Entrepreneur has to identify
cheap and regular sources of raw materials which will help him to reduce the cost of
production and face competition boldly. While procuring machineries, he should specify
the technical details and the capacity. He should consider the warranty, after sales
service facilities etc. before procuring machineries.

5. Market Research : Market research is the systematic collection of data regarding the
product which the Entrepreneur wants to manufacture. Entrepreneur has to undertake
market research persistently to know the details of the intending product, i.e. the demand
for the product, size of the market/customers, the supply of the product, competition, the
price of the product etc.

6. Determining form of Entreprise : Entrepreneur has to determine form of enterprise

depending upon the nature of the product, volume of investment etc. The forms of
ownership are also proprietorship, partnership, Joint Stock Company, co-operative
society etc. Determination of ownership right is essential on the part of the entrepreneur
to acquire legal title to assets.

7. Recruitment of Manpower : To carry out this function, an entrepreneur has to perform

the following activities.
a. Estimate man power requirement for short term and long term
b. Laying down the selection procedure.
c. Designing scheme of compensation.
d. Laying down the service rules.
e. Designing mechanism for training and development.

8. Implementation of the Project : Entrepreneur has to develop schedule and action plan
for the implementation of the project. The project must be implemented in a time bound
manner. All the activities from the conception stage to the commissioning stage are to be

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 accomplished by him in accordance with the implementation schedule to avoid cost and
time over run. He has to organize various resources and coordinate various activities.
This implementation of the project is an important function of the entrepreneur. All the
above functions of the entrepreneur can precisely be put into three categories of
innovation, risk bearing, and organizing and managing functions.

1.8 TYPES OF ENTREPRENEUR

Today various types of entrepreneur are found engaged in different types of activities, not
only in industrial activities but also in agriculture and commercial activities. Today we can
recognize entrepreneur in industry, service and business sectors which are technically called as ISB
sectors. Entrepreneurs are classified in a number of ways as discussed below.

Clearance Danhof’s Classifications

Danhof classifies Entrepreneur into four types.

1. Innovative Entrepreneur: This category of entrepreneur is characterized by smell of

innovativeness. This type of entrepreneur sense the opportunities for introduction of new
ideas, new technology, discovering of new markets and creating new organizations.
Such entrepreneur can work only when certain level of development is already achieved
and people look forward to change and improve. Such entrepreneur are very much
helpful for their country because they bring about a transformation in life style.

2. Adoptive or Imitative Entrepreneur : Such entrepreneurs imitate the existing

entrepreneur and set their enterprise in the same manner. Instead of innovation, he may
just adopt the technology and methods innovated by others. Such types of entrepreneur
are particularly suitable for under developed countries for imitating the new combination
of production already available in developed countries.

3. Fabian Entrepreneur : Fabian entrepreneurs are characterized by great caution and

skepticism, in experimenting any change in their enterprise. They imitate only when it
becomes perfectly clear that failure to do so would result in a loss of the relative position
in the enterprises.

4. Drone Entrepreneur : Such entrepreneurs are conservative or orthodox in outlook.

They always feel comfortable with their old fashioned technology of production even
though technologies have changed. They never like to get rid of their traditional
business, traditional machineries and traditional system of business even at the cost of
reduced returns.

Arthur H Cole Classification

Arthur H Cole classifies entrepreneurs as empirical, rational and cognitive entrepreneur.

Empirical : He is an entrepreneur who hardly introduces anything revolutionary and follows the
principle of rule of thumb.
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Rational : The rational entrepreneur is well informed about the general economic conditions and
introduces changes, which look more revolutionary.

Cognitive : Cognitive entrepreneur is well informed, draws upon the advice and services of experts
and introduces changes that reflect complete break from the existing scheme of enterprise.

Classification Based on the Scale of Enterprise

Small Scale : These entrepreneurs do not possesses the necessary talents and resources to initiate
large scale production and to introduce revolutionary technological charge.

Large scale : They possess the necessary financial and other resources to initiate and introduce new
technological changes. They possess talent and research and development facilities.

Other Classification

Following are some more types of entrepreneurs listed by hehavior scientists.

Solo Operators : These are the entrepreneurs who essentially work alone, introduce their own
capital and if essential employ very few employees. In the beginning most of the entrepreneurs start
their enterprises like them.

Active Partners : Such entrepreneurs jointly put their efforts and resources. They actively
participate in managing the daily routine of the business concern. Entrepreneurs who only
contribute their funds but not actively participate in the business are called simple ‘Partners’.

Inventors : Such entrepreneurs are creative in character and feel happy in inventing new products,
technologies and methods of production. Their basic interest lies in research and innovative
activities.

Challengers : According to such entrepreneurs, if there is no challenge in life, there is no charm in

life. Such entrepreneurs plunge into industry/business because of the challenge it presents. When
one challenge seems to be met, they begin to look for new challenges. They convert odds and
adversities into opportunities and make profit.

Buyers : These are the entrepreneurs who do not like to face the hassles of building infrastructure
and other facilities. They simply purchase the existing one and by using their experience and
expertise try to run the enterprise successfully.

Life Timers : Such entrepreneurs take business as an integral part of their life. Family enterprises,
which mainly depend on exercise of personal skill, fall in this category.

Industrial Entrepreneurs : Such entrepreneurs engage in manufacturing and selling products.

Service Entrepreneurs : Such entrepreneurs engage in service activities like repair, consultancy,
beauty parlor etc., where entrepreneurs provide service to people.

Business Entrepreneurs : They are also called as trading entrepreneurs which buy and sell goods.

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Agricultural Entrepreneurs : They engage themselves in agricultural activities like horticulture,
floriculture, animal husbandry, poultry etc.

Corporate Entrepreneurs : Corporate entrepreneurs undertakes their business activities under

legally registered company or trust.

Rural Entrepreneurs : Entrepreneur’s selecting rural-based industrial opportunity in either khadi

or village industries sector or in farm entrepreneurship are regarded as rural entrepreneurs.
According to Kkhadi and Village Industry Commission (KVIC) village or rural industry means any
industry located in rural areas, population of which do not exceed 10,000, which produces any
goods or services in which fixed investment of an artisan or a worker does not exceed one thousand
rupees.

Women Entrepreneurs : According to Government of India an women entrepreneur is defined as

an enterprise owned and controlled by a woman and having minimum financial interest upto 51% of
the capital and giving at least 51% employment to women.

1.9 RELATIONSHIP BETWEEN ENTREPRENEURS AND ENTREPRENEURSHIP

Entrepreneurs Entrepreneurship
Producer Production
Person Process
Organiser Organization
Innovator Innovation
Risk bearer Risk-bearing
Motivator Motivation
Creator Creation
Leader Leadership
Imitator Imitation
Visualiser Vision
Planner Planning
Investor Investment

The term entrepreneur is often used interchangeably with entrepreneurship, yet they are
conceptually different. The relationship between the two is just like the two sides of the same coin.
Thus, entrepreneurship is concerned with the performance and coordination of the entrepreneurial
functions.

1.10 ENTREPRENEURIAL CULTURE

The famous study on culture’s consequences by Greet Hofsted has long proved that there
culture-dependent differences in thinking and acting, and at times this cultural differentiation may
prove the crucial element in fostering entrepreneurship. Culture both reflects the environment –
physical and social – and in turn shapes it. It is important, therefore to understand the relationship
between culture and entrepreneurship. The cultural moulding of one’s perception, memory and
attitudes indicates the massive impact of different designs for living upon the individual. A
convenient shorthand way of referring to the training in the life-ways of a society, which the new
member acquires through social interaction, is to speak of the effect of culture upon the individual.
But in so speaking, we are merely using a convenient abstraction to point to the myriad ways in

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which various people (who themselves learn the ways of the group from others) train the new
individual in the approved ways. There is no single thing called ‘culture’ which influences a person.
The relationship between culture and the individual is intertwined. Culture influences a person in a
massive and pervasive way and this makes for the stability of a society and the continuity of its
culture; the person also influences his culture and thus makes social change possible. The culture of
a society consists, in part, of a particular set of arrangements for solving the problems of the
members of the society. Some of these problems are special ones peculiar to the members of a
particular society. Others are universal problems common to all human beings – such as meeting
biological needs of the members, training the young caring for the sick. There are, of course, many
different possible arrangements for solving those problems. From among these possible
arrangements, one society adopts one set; a second society, a different set. This is another way of
saying that no two cultures are identical.

The particular set of cultural arrangements adopted by a society is influenced by the

physical environmental factor, as well as man’s attitude and desire to improve his habitat. A
society’s culture, in other words, is not entirely determined by the ‘given’ physical environment.
Man is not a passive victim of his physical environment. Within limits, he can act on it and
transform it to suit his ends.

The historically important things with regard to natural resources is man’s attitude towards
them. It was not the availability of iron that created the Iron Age in Britain, nor the presence of coal
that ushered in the Industrial Revolution, but the initiative of certain men at particular moments in
time in finding a sue for these mineral riches of the earth. The modifications or changes that have
taken place in mechanical contrivances follow and tangibly employ prior modifications and changes
in the purposes of human tool makers and tool users. The conversion of an agricultural parish in
England into an industrialized community, the adoption of a new tool or the incorporation of a new
technique of production into a small local cultural system has occurred early or late in time, here or
there in space, as dictated by human will. Human geography demands as much knowledge of
human beings as of geography.

The culture of a given society is also influenced by contacts with other cultural groups. Just
as there is congruence between the ‘physical surround’ and culture, so is there congruence between
the ‘social surround’ neighboring cultures and the culture of any given society. The borrowings of
one society from the culture of another are not, however, blind and random scavenging of odd bits
and pieces. A society borrows only those cultural ways that are seen by its members as helpful in
solving the problems they face; that are seen, in other words, as a means of reaching their goals.
However, the impact of social surround is a slow and complex process that is determined, among
other things, by strength of the cultures, the value system and the attitude of people towards change.
Education plays an important role in determining attitudes. Perhaps, this is the reason why
providing education for all is a central pillar of the Millennium Development Goals stipulated by
the United Nations. The relationship between quality education and economic growth is now a
proven fact. A few cases provided hereafter may be relevant at this stage. The Chotanagpur region
25
of the Jharkhand state, which was earlier the southern part of the erstwhile Bihar state was one of
the first regions to have acquired industrial status in independent India. The mineral-rich region had
attracted the attention of our first Prime Minister Pt. Jawaharlal Nehru and a number of large
industries came up in the region. Along with large public/private sector undertakings like HEC,
SAIL, IISCO, HSCL, FCL, PDIL, TISCO, the central as well as state governments promoted
growth of small scale industries and entrepreneurs were encouraged to set up units. With the
nationalization of coal mines in the early 1970s this process gained further impetus. Thus, four
major industrial area development authorities were created around the four industrial cities of
Ranchi, Jamshedpur, Bokaro and Dhanbad. These were Ranchi Industrial Area Development
Authority. Adityapur Industrial Area Development Authority, Bokaro Industrial Area Development
Authority and New Kandra Industrial Estate, respectively. The objectives of these area development
authorities were manifold. The state government wanted to enhance the pace of industrialization,
exploit the natural resources of the region judiciously and catalyze economic growth and regional
development. Many small scale units were set up on the region. Some were ancillaries to the
existing large industries and some were set up to use the natural resources, particularly coal and
other minerals available as raw material. This period saw rapid industrial activity in the region. It is
to be remembered that today’s highly developed regions like Gurgaon and NOIDA were not even
planned then.

In the 1980, the Government of Uttar Pradesh (UP) decided to develop the industrially
backward eastern region, and a number of strategic initiatives like incentives to set up units in zero
industrial areas were announced. Land, finance, etc. were made available and industrial estates
around industrially backward districts like Varanasi and Jaunpur were developed. Thus, Ramnagar
Industrial Estate in Varanasi District and SathariaI industrial Development Authority in Jaunpur
were created. Many units came up. It was much later that NOIDA started coming up, after the
government of UP decided to use the proximity of the region to Delhi as a strategic advantage. The
Haryana Government’s plan of developing Gurgaon came even later. However, as things stand
today, the industrial area development authorities of Jharkhand and industrial estates of eastern UP
are in shambles, while Gurgaon has become a leading industrial hub of the country, overtaking even
NOIDA. A systematic observation of the industrial development process in and around the regions
mentioned above will suggest that for entrepreneurship to flourish mere government support in
terms of incentives is not enough. Nor, also, is the abundance of natural resources in the region.
There is an entrepreneurial culture that is needed which includes many more things. It was this that
was missing in eastern UP and Jharkhand.

Why the attempts to industrialize Jharkhand and eastern UP failed and why NOIDA and
Gurgaon grew has to be understood. The difference lies in the cultures of these regions While
Jharkhand and eastern UP represent stifling cultures, NOIDA and Gurgaon represent facilitative
cultures.

In stifling cultures, entrepreneurs set units to misuse the finance and other incentives that are
offered, the political establishment is exploitative, the support system is rudimentary and the social
26
system is indifferent. Thus, all the stakeholders lack commitment. And without commitment the
result is what we saw, efforts and intentions do not yield results.

Attempts have been made by researchers to find out the basic elements of the
entrepreneurial culture. While opinions vary and views are myriad, there is a wide agreement on the
fact that entrepreneurship flourishes in some societies much more than in others. In India, for
instance, Sindhi, Marwari, Gujarati and Punjabi cultures have thrown up many more successful
entrepreneurs than others. This, however, is not to rule out the growth of entrepreneurship in other
cultures. Rather, it is to identify the elements of successful entrepreneurial cultures and inculcate
them in other cultures. But this is easier said than done.

There is a need to study and understand the entrepreneurial culture, identify the elements of
cultures and inculcate them in other cultures.

1.11 DEVELOPING ENTREPRENEURIAL CULTURE

India can make rapid strides if entrepreneurship gets due importance in national economic
policies. The growth of Japan, South Korea, Singapore and other leading Asian economies can
largely be attributed to entrepreneurship. The point to be noted here is that a culture for facilitating
entrepreneurship is to be fostered How to do this is perhaps to be learned from those who have
realized it. Culture, like personality, has both content and pattern. Just as mere testing of the
separate traits of an individual does not describe his personality, so the mere listing of the separate
institutionalized ways of a society does not describe its culture. Two cultures, just as two
personalities, may contain highly similar elements and yet be extremely unlike one another in
pattern. It is this pattern, the arrangement of elements, that is critical. Just as in diamond and coal,
the basic element carbon is same but the arrangement of molecules does the trick.

Developing entrepreneurship is thus a difficult task given the fact that you need a facilitative
culture. Industries fail to flourish in Jharkhand, Bihar and eastern UP despite government efforts.
The entire set of social, psychological, political, legal and economic environment needs to be taken
into account. Delineating areas, outlining policies and announcing incentives may not be enough as
has been proved in the cases mentioned above. A culture needs to be created. There is need to learn
from the experiences and experiments of other cultures.

In India, the problem is diversity. There is so much diversity that a one-size-fits-all

intervention will not work. Down south, the knowledge-based industry and its servicing has thrown
up many entrepreneurs. Chennai and Hyderabad have seen rapid growth. East on the other hand is
sluggish; rather the growth in Bihar, Jharkhand and eastern UP is negative, West Bengal being no
better. Jharkhand is a classic case to prove how absence of entrepreneurial culture stifles growth.
The state has abundance of natural resources, and industrial background running back to late sixties
and availability of finances, yet it is ranked amongst the worst states in the country. In fact, the
Honourable High Court of the state has been constrained to observe time and again that Jharkhand
is going the Bihar way. These remarks made by a highly responsible agency of the state sum up the
quality of governance of the state. This quality, incidentally, is a crucial determinant of an
27
entrepreneurial culture because other determinants like infrastructure and law and order are
dependent on it. Another important aspect is the social-cultural milieu. But more than their presence
it is their interaction that is critical.

What makes an economy tick ? This, perhaps, is the most relevant economic question for us
in present times. Particularly, because many in India see this country emerging as an economic
superpower in the next few decades. The popular one word answer to this vital question should be
entrepreneurship. Both the theory and evidence suggest that entrepreneurial activities play a pivotal
role in economic growth, small and medium enterprises being the crucial determinants. It is
precisely because of this that the Government of India as well as different states are so keen to
encourage entrepreneurship. In fact, the various state governments are boasting about their open
arm policy towards entrepreneurs. Finances are available, policy measures are initiated and
technical support is being extended. Despite these, however, growth of entrepreneurship is not
satisfactory. But why does the entrepreneurship that steered growth in the West, Association of
Southest Asian Nations (ASEAN) countries and Japan fail to click in India. Small and medium
enterprises have not shown the competitiveness and the character that boosts the economic
development. The reason in one simple word is culture – entrepreneurial culture. This has to be
systematically developed.

The Jharkhand example sums this up very well. This new state has the potential to be a
leading state of the country. But it is a laggard. The same can be said of Bihar and eastern UP. To
develop entrepreneurial culture, policy initiatives have to take a culture-specific view. What works
in one region may not necessarily work in another region. A holistic approach is required for
developing an entrepreneurial culture, where the society at large is involved in entrepreneurial
development. It is the social environment that ignites young minds towards achievement
orientation.

1.12 CONCEPT OF ENTREPRENEURSHIP

Entrepreneurship can be defined as the propensity of mind to take calculated risks with
confidence to achieve a pre-determined business or industrial objectives. That points out the risk
taking ability coupled with decision making.

The word ‘entrepreneurship’ typically means to undertake. It owes its origin to the western
societies. But even in the west, it has undergone changes from time to time. In the early 16 th
century, the term was used to denote army leaders. In the 18th century, it was used to denote a dealer
who buys and sells goods at uncertain prices. Towards 1961, Schumpeter, used the term innovator,
for an entrepreneur. Two centuries before, the concept of entrepreneurship was shady. It is only in
the recent years that entrepreneurship has been recognized widely all over the world like in USA,
Germany, Japan and in the developing countries like ours. Gunnar Myrdal rightly pointed out that
Asian societies lack entrepreneurship not because they lack money or raw materials but because of
their attitudes. Till recently, in the west, the entrepreneurship is mainly an attribute of an efficient
manager. But the success achieved by entrepreneurs in develoing countries demolishes the
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contention that entrepreneur is a rare animal and an elusive character. In India the definition of an
entrepreneur being the one who undertakes to organize, own and run a business has been accepted
in a National Seminar on entrepreneurship organized in Delhi in 1975. Still there has been no
consensus on the definition of entrepreneurship and qualities of entrepreneurship.

Incidentally, entrepreneurship has engaged the attention of sociologists, psychologists and

economists. Sociologists analyse the characteristics of an entrepreneur in terms of caste, family,
social status etc. Psychologists analyse their attributes on the basis of their personality traits such as
need for achievement, affiliation and power, risk taking, decision making, creativity, leadership etc.
The economists analyze them on the basis of occupational background, access to capital, business
and technical experiences.

1.13 DEFINITIONS OF ENTREPRENEURSHIP

McClelland identifies two characteristics of entrepreneurship. Firstly, doing things in a new and
better way (Schumpetrian’s innovator). Secondly, decision making under uncertainty (Cantillon’s
entrepreneur). McClelland emphasized that entrepreneurial manager should have a high need for
influencing other (need for power), a low need to establish emotional relationships (low need for
affiliation) and a high capacity to discipline one’s own self (inhibition). In other words,
entrepreneurship means the function of creating something new, organizing and co-ordinating and
undertaking risk and handing economic uncertainty.

“Entrepreneurship is meant the function of seeing investment and production opportunity,

organizing an enterprise to undertake a new production process, rising capital, hiring labour,
arranging for supply of raw materials and selecting top managers for day to day operations of the
enterprise”.

- Higgins

“Entrepreneurship is essentially a creative activity or it is an innovation function. The

process of innovation may be in the form of

(a) Introduction of a new product

(b) Use of a new method of production

(c) Opening of a new market

(d) The conquest of new source of supplying raw material

(e) A new form of organisation” - Joseph A. Schumpeter

“Entrepreneurship is neither a science nor an art. It is a practice. It has a knowledge base.

Knowledge in entrepreneurship is a means to an end. Indeed, what constitutes knowledge in
practice is largely defined by the ends, that is, by the practice”. - Peter F. Drucker

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 “Entrepreneurship is the purposeful activity of an individual or a group of associated
individuals, undertaken to initiate, maintain or organize a profit-oriented business unit for the
production or distribution of economic goods and services”. - A. H. Cole

“Entrepreneurship is that form of social decision making which is performed by economic

innovators”. - Robert K. Lamb

“Entrepreneurship connotes innovativeness, an urge to take risk in face of uncertainties, and

an intuition, i.e. a capacity of seeing things in a way which afterwards proves to be true”.

- V.R. Gaikwad

“Entrepreneurship is the investing and risking of time, money and effort to start a business
and make it successful”. - Musscleman and Jakson

1.14 IMPORTANCE OF ENTERPRENEURSHIP

Entrepreneurship being an intangible factor is the moving force and development is the
consequence. It has an important role in the context of a developing nation like India which is
confronted with major socio-economic problems. Entrepreneurship can play an important role not
only in the industrial sector of a country but in the farm and service sectors also.

India is being attacked by baffling problems of over population, unemployment, under-

employment, poverty and the like. entrepreneurship is consistently equated with the establishment
and management of small business enterprises and setting up these units is the solution to these
baffling problems.

Concentration of economic power, regional imbalances, exploitation by monopolists, and

many other giant problems find their solutions in the development of small scale industry which is
another name of entrepreneurship in the developing countries. Mahatma Gadhiji also asserted the
same. Entrepreneurship has not grown much in India but it is gaining importance fast. The factors
which retard the success of Entrepreneurship in India are inadequate infrastructural facilities
shortage of capital, technical knowledge and transport, absence of cheap and good quality raw
material and shortage of power, etc. The government has been taking significant steps to encourage
entrepreneurship as entrepreneurship is the only solution to various problems of developing
countries. Entrepreneurship caught strong waves during the last three decades and became a
worldwide movement spreading across countries, regardless of their level of development. Even in
Europe and United states, revival of small business has been seen for more than a decade. Constant
change and innovations are simply a necessity of entrepreneurship and is becoming essential to
survive in a global economy. An American magazine. “The Economist’ (1999) recently put it,
“Innovation has become the industrial religion of the late 20th Century”. It is being increasingly
realized that today’s managers and businessmen need not only managerial skills but entrepreneurial
skills as well. Entrepreneurship needs to be demystified and transformed into a skill by teaching and
practicing. Skill of entrepreneurship knows how to turn an ordinary corporation, managed in a

30
routine manner, into an entrepreneurial organisation. People within the organisation can be trained
to:

(i) defect the opportunities;

(ii) peruse the opportunities and rewarded;

(iii) to lesson the consequences of failing;

Entrepreneurship plays a premium mobile role in promoting development of an economy. Hence, it

is said that an economy is the effect for which entrepreneurship is the cause. Various levels of
economic development across the countries and even within the country are attributed to their
differences in entrepreneurship development.

1.15 EATURES OF ENTREPRENEURSHIP

Entrepreneurship is the tendency of a person to organize the business of his own and to run
it profitably, using various traits like leadership, decision making, innovation, managerial caliber
etc. Entrepreneurship is a set of activities performed by an entrepreneur. In a way, entrepreneur
precedes entrepreneurship. The main features of entrepreneurship as are follows:

(i) Economic Activity : Although classical economists like Adam Smith and Richard Cantillon and
many others didn’t recognize entrepreneurship as an economic activity but since last few decades
entrepreneurship s catching up and is primarily becoming an economic function because n involves
creation and operation of an enterprise.

Cantillon also pointed out that entrepreneurship involves conscious decision making about
resource allocations. It also implies seeking the best opportunities for using resources for their
highest commercial yields. Adam Smith viewed that there was no difference between an
entrepreneur and an industrialist. He agreed that economic change could be brought through
entrepreneurs.

Entrepreneurship is a continuous economic process which recognize the need to change and
entrepreneur is a key person to initiate any change.

(ii) Innovative Activity : Innovation is the process of doing new things. Drucker elaborates:
“Innovation….. is the means by which the entrepreneur either creates new wealth-producing
resourses or endows existing resources with enhanced potential for creating wealth.”
Entrepreneurship is innovation where new products, services, ideas and information is produced,
new efficient production techniques are introduced by the firms, new market opportunities are
identified and better ways of meeting existing demands are looked into. Whenever a new idea
occurs, entrepreneurial efforts are essential to convert the idea into practical application. According
to Schumpter, innovation may occur in any of the following ways :

(a) The introduction of a new good with which the customer is not yet familiar.

(b) The introduction of a new method of production which is not tested by experience in
the branch of manufacture concerned;
31
 (c) The opening of a new market the customers are not yet familiar with the product and
the market for that innovative product has not previously been entered;

(d) The conquest of new source of supply of raw-material irrespective of the fact
whether that source already exists or it has been created.

(e) The creation of a new organization of an industry a new innovation may create the
monopoly for that product or break the monopoly of similar existing product.

iii. A function of High Achievement. People differ not only in their ability to do but also in their
will to do, or motivation. The motivation, in turn depends on the strength of their motives
sometimes defined as needs, wants, drives or impulses within the individuals. McClelland identified
two features of entrepreneurship (a) doing things in a different and better way (b) decision making
under uncertainty. He found that looking at the history of industrial development, money of the
pioneers who built up industrial empires are strongly motivated by need for power and
achievement. Thus, people having high need for achievement and power are more likely to succeed
as entrepreneurs and this is a very critical factor that leads one towards entrepreneurship.
Researches also show that stable personality characteristic like motive are laid down in childhood.

iv. Creative and Purposeful Activity. Creativity is “the ability to bring something new into
existence”. The definition emphasizes on “ability” and not the “activity” of bringing something new
into existence. A person may conceive of something new and also visualize its usefulness but unless
he takes necessary action to convert it into reality, his ideas will not be termed as creative.
Innovation is the process of doing new things. Innovation, therefore, is the transformation of
creative ideas into useful applications but creativity is a prerequisite to innovation.

Entrepreneurship is virtually a creative and a purposeful activity. The entrepreneur passes

through the five stages during the process of entrepreneurship viz. idea germination, preparation,
incubation, illumination and verification. Earning profits is never the sole objective but to introduce
something new and creative is the purpose of entrepreneurship. The benefits of his creativity are
enjoyed by people at large, e.g. Internet benefits are being enjoyed by more than 50 million people
world over.

v. Entrepreneurship : An Organising function. J.B. Say describes entrepreneurship as an

organizing function whereby the entrepreneur brings together various factors of production, ensures
the continuing management and renders risk-bearing functions as well. According to J.B. Say, an
entrepreneur is one who combines the land of one, the labour of another, and capital of yet another,
and thus produces a product. By selling the product in the market, he pays interest on capital, rent
on land, wages to labourers and what remains is his profit. Thus, J. B. Say clearly distinguishes
between the role of a capitalist as a financer and the entrepreneur as an organizer. Marshall also
advocated the significance of organization among the services of special class of business
undertakes.

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vi. Entrepreneurship : A function of risk-bearing. Richrd Cantillon, an Irishman living in France
is credited with giving the concept of entrepreneurship. Cantillon described in his book published in
1755, an entrepreneur as a person who buys things at a certain price and sells them at an uncertain
price. Thus, he makes decisions about obtaining and using resources while consequently assuming
the risk of enterprise. Thus, Cantillon conceived of an entrepreneur as a bearer of non-insurable
risk. According to him, risk-bearing forms an unique constitutive function of entrepreneurship.

1.16 GROWTH OF ENTREPRENEURSHIP IN PRE-INDEPENDENCE PERIOD

Entrepreneurial growth in India is as old as Rigveda but there was no manufacturing as such
before 1850. This manufacturing entrepreneurship was too confined to cottage & small scale
industry. But it could not grow further due to various reasons such as lack of political unity, capital,
network of custom barriers, existence of multiple systems of currency.

Emergence of entrepreneurial class is as old as our ancient history itself dating back to the
pre-vedic period when the Harappan culture flourished in India. However, history of
entrepreneurship and emergence of entrepreneurial class in India may be viewed under the
following periods :

1. Period 1 : Entrepreneurship in ancient period

2. Period II : Entrepreneurship in pre-independence era i.e. before 1850.

3. Period III : Entrepreneurship between 1850-1947

4. Period IV : Entrepreneurship after 1947 & onwards i.e. post independence period.

1. Period I : Entrepreneurship in Ancient Period : As per the ancient literature, the ancient
Indians took up a variety of commercial vocations akin to present day entrepreneurial activities. The
arrival of Aryans opened the first phase of entrepreneurship, with their innovative new crafts and
occupations, evolving division of labour for the new handicrafts, breeding of cattle, & cultivating
land which were nearly non-existing before them. The ancient literature like Manusmriti gives a
more clear picture about the entrepreneurial class of people during pre-vedic period. According to
him, vaisyas were the specialized class of people carrying entrepreneurial activities in agriculture,
industry & banking sector. During the Gupta & Post-Gupta period, agriculture, crafts and
handicrafts comprised the basic sources of occupation for the people.

2. Period II : Entrepreneurship in Pre-independence Era before 1850 AD : During the

pre-independence period, agriculture was the main occupation of the people of India. Besides
agriculture, the bania, Parsis, Cherriars & Gujaratis etc., specialized in the manufacturing of
handicrafts, metal works, stone carving & jewellery designing etc. had dominated the industrial
entrepreneurship sector in rural areas. These communities actually laid the foundation of
entrepreneurship by carrying out trade & commerce activities initially & later by establishing
manufacturing centers.

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 British colonialism in India dealt a severe below to the Indian entrepreneurship & industrial
revolution in Great Britain reduced India to the status of material supplier for consumer market for
the finished products manufacture in Britain.

Due to lack of support from the British Government and its discriminatory policies towards
Indian made products, the industrial entrepreneurship suffered a great deal.

3. Period III : Entrepreneurship during 1850-1947 : The mid nineteenth century opened up
path for rapid industrialization with the introduction of railways in 1853, development of other
infrastructural facilities like roads, ports etc. The eastern part of the country witnessed
entrepreneurship mainly due to Europeans who engaged in export-oriented industries, like jute,
textiles, tea, coal etc. whereas in the western part, entrepreneurship was mostly among the Indians.
It is observed that during the last decades of the 18th century, the Parsis along with Marwaris &
Gujaritis trading castes, took to entrepreneurial behaviour.

The adoption of the concept of swadeshi & boycott in 1905 to counter the discriminatory
policies o the British Government encouraged the Indians to plunge into entrepreneurship.
Jamshedji Tata established his first iron & steel industry with the help of ‘swadeshi contribution’.
Due to the swadeshi movement which emphasized on manufacturing & using indigenous goods by
the Indian’s, indigenous entrepreneurship developed in many types of activities such as textiles,
soap, matches, oil, tanneries, potteries, banking, insurance etc.

As such, indigenous entrepreneurship grew at a rapid pace with emergence of entrepreneur

classes such as Parsis, Marwaris & Gujaratis in the country on the eve of independence of India.

4. Period IV : Entrepreneurship in 1947 & onwards – Post-Independence period : In the post-

independence period, the Government identified the need for rapid industrialization with the
establishment of heavy & basic industries. The post independence period witnessed the emergence
of Marwaris as big investors and industrialists. Before independence, where the Marwaris
controlled only 6 companies, after independence, they had 618 directorships which rose to 1/4th of
the total in 1951. The Monopolies Inquiry Commission in 1964 has mentioned in its report that the
Marwaris accounted for 10 large industrial houses out of a total of 37 showing the strength of the
Marwaris in the growth of entrepreneurship during this period. The Marwaris community emerged
as a giant entrepreneurial class in the post-independence period. The house of Birla, Singhania,
Bajaj & others have created their image in the industrial market in the field of industrial
development in India.

1.17 THEORIES OF ENTREPRENEURSHIP

Entrepreneurial history is left to be interdisciplinary in approach and, thus, it is difficult to

label entrepreneurship as purely a theory of economics or sociology or psychology or a
anthropology. The concept of entrepreneurship is as old as civilization while the theories of
entrepreneurship have been evolved from over a period of more than two centuries.

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 Theories of entrepreneurship can a broadly be classified into four categories :

(i) The economist’s view (ii) the sociologist’s view

(iii) The psychologist’s view (iv) The anthropologist’s view

Economic Theory

Economics is the social science that deals most directly with contemporary economic
reality. Economists have done little work on entrepreneurship and therefore, have tended to be in
minority. Economists like Adam Smith and David Richard assigned no significance to
entrepreneurial role in economic development. Richard Cantillon (1755) was the first person to
recognize the role of entrepreneurs in economic theory. He stated that, “the farmer is an
entrepreneur who promises to pay the land owner for his farm or land, a fixed sum of money
without assurance for the profit he will derive from his enterprise”.

He described an entrepreneur as a person bearing risk. He makes profit by buying good at a

known price and by selling at an increased higher price but there is always an element of
uncertainty in market. Hence, entrepreneur is always at a risk of bearing losses if he would be
unable to sell the goods at a higher price. Cantillon stressed on the economic function of
entrepreneur over his social status or his personality. JB Say broadened the definition and role of
an entrepreneur to include the concept of combining factors of production, also noting that the
entrepreneur must have special personal qualities.

The economic theory of entrepreneurship centres around Joseph Schumpeter which is

versatile and multi-disciplinary. J. Schumpeter (1934) added the concept of innovation to the theory
of entrepreneurship. He visualized the entrepreneurs as the key figure in economic development
because of his role in introducing innovations. For Schumpeter, the ability to identify new
opportunities in the market is a central entrepreneurial activity which creates disequilibrium in the
economy. He states that the entrepreneur is the bearer of the ‘mechanism for change’. Changes can
occur from inside and outside the economy. Joseph, in one of his books, attempts to develop a
number of economic theories of interest, capital, credit, profit and the business cycle by relating
them to the theory of entrepreneurship. He centres the whole new economic theory around the
entrepreneur rather than just a theory of the entrepreneur emphasis the vital role played by the
entrepreneur in an economy.

ii. Sociological Theory

Sociologists suggest that entrepreneurship can be conceptualized as a social movement an

entrepreneurs exist not only in the economy but in other spheres of society as well. S. M. Lipset
argues that cultural values deeply affect entrepreneurship and the level of economic development.
Mark Granovetter points that family ties may create an obstacle for a businessman if he cares for his
family too much; but the same strong family feelings can turn into an advantage once the
businessman has emigrated – as long as the distant family members stay behind. He also discusses
the role of trust in entrepreneurial ventures. According to him, in social groups and societies where
35
people are isolated from each other, it may be difficult to develop the kind of confidence that is
absolutely necessary to start a firm or otherwise cooperate in economic matters. Thus, Mark
Granovetter emphasizes the role played by society and family-members in growth of
entrepreneurship.

According to Cochran, the entrepreneur represents society’s model personality. His

performance depends upon his own attitudes towards his occupation, the role expectations of
sanctioning groups and the occupational requirement of the job. Society’s values are the most
important determinant of attitudes and role expectations.

Everett. E. Hagen in his book ‘On The Theory of Social Change’ (1962) argues that people
who have grown up in certain minorities develop a much stronger psychological propensity for
entrepreneurship than who have not. Hagen’s theory may well contain a grain of truth but his
approach is discredited by others. Hagen also concluded that entrepreneurs have emerged from
certain communities and castes.

Thus, Hagen disregard the complicated institutional environment that surrounds the
entrepreneur.

iii. Psychological Theory

Psychological theory of entrepreneurship has a fairly high status among social scientists
who study entrepreneurship because it is very difficult to single out one or several psychological
traits as typical for the entrepreneurial personality. However, advocates of this theory assert that
entrepreneurship is most likely to emerge when a society has sufficient psychological
characteristics.

Joseph Schumpeter states that the entrepreneur is mainly motivated and driven by
three things :

(i) the dream and the will to found a private kingdom;

(ii) the will to conquer;

(iii) the joy of creating;

J. Schumpeter’s formulation can be translated as :

(i) the desire for power and independence;

(ii) the will to succeed;

(iv) the satisfaction of getting things done.

According to him, money is not what ultimately motivates the entrepreneur.

‘Entrepreneurs’, according to Schumpter, ‘are certainly not economic men in the theoretical sense’.
Thus, he supports the psychological theory and not the economic theory He asserts that what
matters is the behaviour, and not the actor.

36
 According to David Mc Clelland’s book The Achieving Society (1961), entrepreneurship has
to do with an individual’s so called need for achievement (referred to n-Achievement). He
identified three features of entrepreneurs that were related to their need for achievement : (1) desire
to accept responsibility for solving problems, setting goals and reaching the goals; (2) a willingness
to accept moderate risks; (3) a desire to know the outcomes of their decisions. It was widely
believed that a high achievement motivation has a strong likelihood of predicting entrepreneurial
behaviour. Individuals with high achievement motive tend to take keen interest in situations of high
risk, desire for responsibility and a desire for a concrete measure of task performance.

iv. Anthropological Theory

Fredrik Barth made his first attempt to develop an anthropological theory of

entrepreneurship. According to Barth, entrepreneurship has essentially to do with connecting two
spheres in the society, between which there exists a difference in value. Something which is cheap
in one sphere, may be expensive in another sphere. Barth, one of the leading anthropologists of the
world, states that entrepreneurial behaviour means to connect two different spheres in the society,
between which there is a huge discrepancy in value.

Each of the above theories is incomplete and none of them is right or wrong. Theories of
entrepreneurship are inter-disciplinary and are influenced by a multitude of factors. It is the
integration of external environment, achievement motivation, ability and ambition which largely
determines whether an individual become an entrepreneur or not.

1.18 PROBLEMS IN GROWTH OF ENTREPRENEURSHIP

Entrepreneurship is a skill, the resultant of a mix of many qualities, traits and competencies.
Entrepreneurship must be a cluster of many entrepreneurial people devoted to their respective
ventures. Entrepreneurship is nothing unless entrepreneurs give a creative response to the
environment and undertake to establish their enterprise. But devoted, imaginative, hard-working
creative and competent entrepreneurs are not enough to further the process of entrepreneurship.
Entrepreneurship refers to a process of actions taken by entrepreneur in a specific environment. We
can say that entrepreneurship is sum total of entrepreneur and his environment. We have studied
both the aspects of entrepreneurship – and environment. Let us now study that what is obstructing
the growth of entrepreneurship. It is poor entrepreneurs or unhealthy environmental factors or both?

Undoubtedly, entrepreneurship growth in India is slow as compared to other countries.

Women’s entrepreneurship is still slower and rather negligible. As far as development of
entrepreneurship is concerned, the factors responsible for its slow growth are :

(i) Incompetence and poor management;

(ii) Low level of commitment;

(iii) Restriction imposed by custom and tradition;

(iv) Involvement of high risk;

37
 (v) Socio-cultural rigidities;

(vi) Lack of motivation;

(vii) Lack of infrastructural facilities;

(viii) Lack of communication network;

(ix) Absence of entrepreneurial aptitude;

(x) Low status of businessmen;

(xi) Market imperfections;

(xii) Legal formalities involved to set up a unit

(xiii) Low quality products

(xiv) Low package of salaries to employees

The reasons or the obstacles are many. An enthusiastic entrepreneur starts his venture with
determination but generally ends up with a sick unit. Incompetence of entrepreneur and
environmental factors, both are responsible for his failure. Financial institutions are liberally
sanctioning loans but the permission to commence production is not given in time resulting into
heavy interest and debt burden. Entrepreneurs have to wait for months to get power connection for
their unit making this financial position still more grave and pathetic. Although the government has
simplified the loan procedures to a great extent but realities are different from theory. The
stimulation of entrepreneurship is a function of both internal and external variables. There is no
dearth of men with the right blend of vision and practical sense to become successful entrepreneurs.
But how to identify such persons without a mistake The magnitude of industrial sickness proves and
self-explains the causes of poor growth of entrepreneurship. Everyone cannot become
demonstration model like Shehnaz Hussain or Dhirubhai Ambani or like. The right type of climate
has to be generated. Once it is existing, entrepreneurship becomes a way of life. A mischievous
child cannot be disciplined in a day, similarly, entrepreneurship cannot grow overnight. Growth
also depends upon level of development.

Robert L. Garner quotes, “Development is a state of mind. People have to develop

themselves before they can change their physical environment and this is a slow process….. it
involves changes in relations between classes and races. It requires improvement of governmental
organizations and operations; the extension of social institutions, school, courts and health services.
Habits of thoughts and conduct are the most stubborn obstacles to development’.”

Similar are problems in the growth of women entrepreneurship. Various problems obstruct
the growth of women entrepreneurship.

To name a few, various social factors includes

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 (i) lack of education; (ii) dual role of women; (iii) lack of independence; (iv) family burden;
(v) responsibility of rearing the children and their home work; (vi) unfavouring family background
(vii) lack of cooperation from spouse and other family members.

Similarly, economic factors could be the (i) lack of mobility; (ii) problem of getting the loan
sanctioned; (iii) exploitation; (iv) shortage of finance; (v) lack of technical know- how (vi) non-
availability of power and raw-material; (vii) insufficient intrastructural facilities etc.

1.19 DIFFERENCE BETWWEEN ENTREPRENEURSHIP AND INTRAPRENEUR

Basis of difference Entrepreneur Intrapreneur

1. Ownership Entrepreneur is owner of the Intrapreneur is dependent on

enterprise. entrepreneur who performs the task of
innovation.

2. Status An entrepreneur is independent in his The intrapreneur is dependent upon

operatons. entrepreneur.

3. Capital formation Entrepreneur himself forms capital Intrapreneur does not form capital

4. Risk Entrepreneur bears the risk involved An intrapreneur does not fully bear
in an enterprise the risk involved in an enterprise.

5. Operation An entrepreneur operates from Intrapreneur operates from within the

outside organisation.

6. Guarantee of Entrepreneur gives guarantee to the Intrapreneur himself is a manager, so

investment investors for their investment he manages from within. Question of
guarantee does not arise.

7. Management Entrepreneur manages the enterprise Intrapreneur is a professional

from outside. manager.

8. Professional Entrepreneur need not possess Intrapreneur must possess

qualification professional qualification professional qualification.

1.20 TYPES OF ENTREPRENEURSHIP

There are various types of entrepreneurship which are as follows :-

(i) Small business entrepreneurship

Today, the overwhelming number of entrepreneur and startups in the United States are still
small business. There are 5.7 million small business in the U.S. They make up 99.7% of all
companies and employ 50% of all non-governmental workers.

39
 Small businesses are grocery stores, hair dressers, consultants, travel agents, internet
commerce store fronts, carpenters, plumbers, electricians, etc. They are any one who runs his/her
own business. They hire local employees or family. Most are barely profitable. The definition of
success is to feed the family and make a profit not to take over an industry or build a 100 mn
business. As they can’t provide the scale to attract venture capital they fund their business via
friends/family or small business loans.

(ii) Scalable startup entrepreneurship

Unlike small business, scalable startups are what silicon valley entrepreneurs and their
venture investors do. These entrepreneurs start a company knowing from day one that their vision
could change the world. They attract investment from equally crazy financial investor – venture
capitalists. They hire the best and the brightest. Their job is to search for a repeatable and scalable
business model when they find it, their focus on scale requires even more venture capital to fuel
rapid expansion. Sealable startups in innovation clusters make up a small percentage of
entrepreneurs and startups but because of the outsize returns, attract almost all the risk capital.

(iii) Large company entrepreneurship

Large companies have finite life cycles. Most grow through sustaining innovation, offering
new product that are variants around their core products, shares in customer tastes, new
technologies, legislation, new competitors, etc. can create pressure for more disruptive innovation –
requiring large companies to create entirely new products sold into new customers in new markets.
Existing companies do this by either acquiring innovative companies or attempting to build a
descriptive product inside. Ironically, large company size and culture make disruptive innovation
extremely difficult to execute.
(iv) Social entrepreneurship
Social entrepreneurs are innovators who focus on creating products and services that solve
social needs and problems. But unlike scalable startups their goal is to make the world a better place
not to make market share or to create to wealth for the founders. They may be non-profit, for profit,
or hybrid.

1.21 ENTREPRENEURIAL TRAITS OR COMPETENCIES.

There has been a controversy on what it takes to be a successful entrepreneur. Some people
argue that entrepreneurs are born with the right personality attributes and others insist that any one
can be taught to be an entrepreneurs. In view of above controversy in order to understand clearly
what it takes to be a successful entrepreneurs research institutions and behavioural scientists
through their research studies have tried to resolve the interiorly on what makes a successful
entrepreneur. Following is a lot of major competencies as identified by the Entrepreneurship
Development Institute of India (EDI) Ahmedabad.

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1. Initiative :- The entrepreneur initiates a business activity i.e. he takes the first step to start
an enterprise. He takes initiative that goes beyond enterprise establishment or the demand of the
situation. For example, he does things before being asked or forced by the situation.

2. Passion :- The entrepreneur should possess passion for his enterprise. He therefore, develop
more than a casual interest in the enterprise so that the could overcome various hurdles and
obstacles coming on the way of starting an enterprise. Available evidence indicate that without
passion or consuming interest, business will not succeed. Such a personal or emotional or
consuming commitment to do some thing by giving full try is an example of ‘passion’.

3. Tenacity despite failure

Because of the hurdles and obstacles that must be overcome, the entrepreneur must be
persistent and must not give up easily. Many successful entrepreneurs succeeded only after they had
failed several times. It has been said that successful entrepreneurs do not have failures. They have
learning experiences.

4. Self-confidence

Entrepreneur is a strong believer in his strength and abilities. He believes that he possesses
the ability to accomplish whatever he sets out to do and achieve. The confidence is not unfounded
however. The entrepreneur who believes that “He can” becomes successful.

5. Sheer grit and strong determination

The life history of successful entrepreneurs reveals that they are characterized by self
motivation and strong determination in their goal. They act out of choice. They are never victim of
fate. The entrepreneur believes that the success or failure depends on his own actions. This quality
is known as “internal locess of control’. A person who believes that fate and other outside factors
determine success has an external locus of control and is not likely to succeed as an entrepreneur.

6. Creativity

One of the reason that entrepreneurs are successful is that they have imagination and can
envision alternative scenarios. They have the ability to recognize opportunities that other people do
not see. Here again let us take the example of Henry Ford.

7. Change Seeker

To the most of people change is often frightening and is something to be avoided. But,
successful entrepreneurs see change as normal and necessary. Therefore, they search for change,
respond to it and exploit it as an opportunity. In fact, this exploitation of change is the basis of
innovation. In economics, change is considered a prerequisite for improvement and development.

8. High need for achievement

Many studies have shown that the successful entrepreneurs have ‘high need for
achievement’ than the general population. David. C. McClelland considers it the most crucial

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element to become an entrepreneur. It is the high need for achievement which makes entrepreneurs
act on their ideas. The achievement motive is converted into drive and initiative that results in
accomplishment.

9. Team spirit

Successful entrepreneurs build team and work with teammates. In simple words, team is a
group of individuals who work in a face-to-face relationship to achieve a common goal. They share
collective accountability for the outcome of the team’s effort. Working in teams creates synergy and
achieves success in its endeavours. While appreciating the role of team spirit in success. Henry
Ford’s view seems worth citing “Bringing people together is beginning, keeping people together is
progress and working with people is success”.

10. Information Seeker. A successful entrepreneur always keep his eyes and ear open and is
receptive to new ideas which can help him in realizing his goals. He is ready to consult expert for
getting their expert advise.

11. Quality Consciousness. Successful entrepreneur always keep his eyes and ear open and is
receiptive to new ideas which can help him in relishing his goals. He is ready to consult expert for
getting their expert advise.

12. Proper Planning. Successful entrepreneurs develop or evolve future course of action
keeping in mind the goals to be realized. They believe in developing relevant and realistic plans and
ensure proper execution of the same in their pursuit of attaining their goals.

13. Problem Solver. Successful entrepreneurs take problem as a challenge and put in their best
for finding out the most appropriate solution for the same. They will first of all understand the
problem and then evolve appropriate strategy for overcoming the problem.

14. Assertive. An assertive person knows what to say, when to say, how to say and whom to
say. He believes in his abilities and ensures that others fall in line with his thinking, aimed at
promoting the interests of the organization.

15. Effective Monitoring. Top performers ensure that everything is carried out in their
organizations as per their wishes. They ensure regular monitoring of the working so that the goals
of the organization are achieved in best possible manner.

16. Employees Welfare. Future of the organisation depends on its employees. If the employees
are dedicated, committed and loyal, the organization is bound to perform well. A successful
entrepreneur tries to promote organization’s interests through promotion of interests of the workers.
He takes personal interest in solving problems confronting workers and generates the feeling that
there is interpendence of the interests for workers and the management.

1.22 MEANING OF MOTIVATION

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 Motivation is the inner urge of a person that ignites and sustains behaviour to satisfy need of
himself as well as of the society. Motivation has been derived from the Latin word “Motive” which
implies the inner state of mind that activates, provokes and directs our behaviour towards the goal.

1.23 DEFINITON OF MOTIVATION

According to Mcfarland, “Motivation refers to the way in which urges, drives, desires,
striving, aspirations or needs, direct or explain the behaviour of human beings”. Thus
entrepreneurial motivation may be defined as the process that motivates an entrepreneur into action
and induces him to follow the course of action till the goals are not achieved finally or till the
establishment of an well-established enterprise. In a nut shell motivation includes motives,
behaviours and goals.

“A motive is an inner state that energies, activates or moves and that directs behaviour
towards goals”. – Bernard and Steiner

“Motivation is getting people to do. What you want them to do, because they want to do it”.
– D.D. Eisenhower

“A willingness to expend energy to achieve a goal or reward. It is a force that activates

dormant energies and sets in motion the action of the people. It is the function that kindles a
burning passion for action among the human beings of an organization” – C.B. Memoria

“Motivation represents an unsatisfied need which creates a state of tension or

disequilibrium, causing the individual to make a goal directed pattern towards restoring a state of
equilibrium by satisfying the need”. – Vitiles

1.24 NATURE OF MOTIVATION

Based on above definitions the following points of nature of motivation emerge :

1. Motivation refers to the internal feelings of an individual or individual’s motives.

2. These emotions, feelings or desires of a person prompt him to work more.

3. Unsatisfied needs of an individual disturb his equilibrium, forcing an individual to resort to

a goal directed approach.

4. Motivation activates and channelises dormant energies of an individual towards productive

action.

5. Motivation is linked to satisfaction. Satisfaction is the felling of contentment a person

experiences out of need fulfillment.

6. An individual is motivated in totality and not in parts.

1.25 TYPES OF MOTIVATION

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 In order to extract more out of his subordinates a manager will be required to motivate them
for performing better. This can be done either by offering them reward for more work or by
instilling fear among them in the form of punishment.

Motivation can be of two types and these are :-

1. Positive Motivation. Workers are tempted to put in their best for achieving the desired
objectives. These temptations rewards or incentives can be in the shape of extra pay, promotion,
recognition etc. Positive motivation will result in willing cooperation of workers for the attainment
of organizational goal.

2. Negative Motivation. Negative motivation creates fear or deterrent amongst workers. Fear
forces workers to behave in the way the owner wants them to behave. Workers are coerced to
behave in a certain manner, failing which they are threatened with lay offs, demotions, pay cuts etc.
Workers work not willingly but out of fear.

Out of the two positive motivation should be preferred as it leads to willing rather than
forced cooperation of workers towards the realization of organizational goals.

1.26 IMPORTANCE OF MOTIVATION

Motivation has become all the more important due to the following reasons.

1. Improved Morale. Motivation acts as morale booster for employees. Motivated workers are
tempted to put in their best for the realization of organizational goals. High Morale will result in
more interest in work and higher productivity. It will enable the organisation to produce more at
lower costs. It will have overall positive impact on the interests of the various parties linked with
the business.

2. Lower labour turnover. Motivated employees will never feel like leaving the organisation
and as such the firm will be able to utilize the services of trained, committed and loyal workers for
longer period of time. Organization will be saved from the botheration of making fresh recruitment,
selection, training and placement of workers. Lower labour turnover will result in saving of time,
effort and money of the organisation. Rate of absenteeism will be reduced and workers will try to
promote organizational interest.

3. Improved goodwill. Motivated employees can help the organization in improving its good
will or image. A reputed organization is in a position to attract best possible talent from the market.
Existing employees won’t leave the organization and outsiders will be taken to join.

4. Cordial Industrial Relations. A sound motivational system will promote job satisfaction
amongst workers. Workers will start identifying their interests with the interests of organization due
to positive motivation. The feeling of distrust, conflict or clash of interest will be removed amongst
motivated workers. There won’t be any strike or lockout in the organization and motivation will
ensure cordial industrial relations.

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5. Quality Orientation. A motivated employee is generally more quality oriented. Everyone
from bottom to top or top to bottom takes extra care while performing the assigned work. It leads to
overall improvement in the working and people start recognizing the organization as a quality
conscious organization.

6. Acceptability of Change. An organisation is required to remain in touch with the changing

scenario and at the same time take effective steps for making adjustments according to changes. Its
survival and future depends upon its ability to cope up with the changes. Motivated employees
rather than opposing changes welcome these. They help the owners in converting these changes into
opportunities to be exploited in the best possible manner for the promotion of business interests.

1.27 THEORIES OF MOTIVATION

Need is the starting point of motivation. A satisfied need does not motivate an individual. It
is only the unsatisfied need which creates tension and stimulate drives within the individuals for the
satisfaction of the need and reduction of tension. The efforts or actions initiated by the individual
will yield results which will lead to satisfaction of need or removal of tension. Classical theories
and scientific management thinkers were of the opinion that people were mainly interested in
maximizing economic gains as they were primarily concerned with satisfying their basic needs of
food, water, air, shelter etc. Thus they tried to link up performance and productivity with monetary
rewards or incentives. F.W. Taylor, father of Scientific Management proposed Differential Piece
Rate system for motivating workers to work at their level best. The traditional thinkers were mainly
concerned with the monetary reward and were treating human beings as mere machines, which do
not have any inner feelings or emotions. Under Hawthorne Experiments, it was proved that there
was not direct relationship between productivity and economic rewards. Money is an essential
condition but not a sufficient one for motivating people to work. Human beings are not machines
and they have also social and psychological needs.

Various researchers are actively engaged in finding answer to one basic question i.e. What
motivates people ? or what makes them work ? Various theories have been propounded by different
experts to focus attention on this basic issue.

Some of the theories which are prominent and relatively more relevant to entrepreneurship
are as under :-

I. MASLOW’S NEED HIERARCHY THEORY

Maslow’s theory is based on human needs. He developed a conceptual framework for

understanding human motivation. He was of the opinion that every individual has a complex set of
exceptionally strong needs and the behaviour of an individual at a particular moment of time is
usually determined by his strongest need. He defined a person’ effectiveness as a function of
matching man’s opportunity with the appropriate position of hierarchy of needs. Process of
motivation begins with the assumption that the behaviour, atleast in part, is directed towards the
achievement or the satisfaction of needs. Maslow felt that the ‘needs have a definite sequence of

45
domination. Second need does not dominate till first need is reasonably satisfied and third need
does not dominate until first two needs have been reasonably satisfied. Man in never fully satisfied,
if one need is satisfied the other will arise and so on. Once a need or certain order of needs is
satisfied, it ceases to be a motivating factor. Maslow stated that human beings have five basic levels
of needs, which they tend to satisfy in a hierarchical manner. He proposed that human needs can be
arranged in a particular order from the lower level needs to the highest level needs. This hierarchy
of human needs can be shown in the following figure.
SELF-
FULFIL
MENT OR
ACTUAL-
ISATION
PHYSIO- SOCIAL ESTEEM NEEDS
SAFETY NEEDS OR EGO
LOGICAL NEEDS
NEDS NEEDS

Maslow’s Need Hierarchy

These five needs can be discussed as follows :

(i) Physiological Needs : These needs are basic and are related to survival and maintenance of
life. These needs comprise of food water, air, shelter, clothing and other necessities of life. The first
priority of human beings is to acquire these basic necessities of life and then move to second level
of needs.

(ii) Safety and Security Needs : After satisfying physiological needs, human beings aim at
satisfying safety and security needs. Human beings are not content with just satisfying present
physiological needs, they want to make provision for the same for future also. They want job
security, personal body security, security of source of income, provision for old age, insurance
against risks etc. Entrepreneurs just like other human beings are guided by all these factors.

(iii) Social Needs : Man is a social animal and wants to belong to a social group where his social
and emotional needs for love, affection, warmth and friendship are satisfied. An entrepreneur too is
interested in conversion, exchange of feelings and grievances with fellow entrepreneurs, his
employees and others. He wants to belong to others and expects that others should belong to him
i.e. the feeling of belongingness.
(iv) Esteem Needs : These needs include self respect, self confidence, recognition, appreciation,
prestige, power & control These are also known as egoistic needs and affect prestige and status of
individuals. Entrepreneur derive status and respect through their ownership and control over their
business.
(v) Self-actualization or Self fulfillment needs : This is the ultimate goal and involves
realizing one’s potentialisities for continued self development. After other needs are fulfilled a man
has the desire for personal achievement. He want to do something which is challenging and since
this challenge gives him enough push and initiative to work It is beneficial to him and the society.

46
The sense of achievement gives him psychological satisfaction. An entrepreneur can achieve self
actualization in being a successful entrepreneur.

Though the impulse to realize one’s potential is natural and necessary, only a few usually
the gifted ever do so. Maslow himself estimated that less than one percent of the people realize the
need for self actualisaton.

Maslow states three reasons for it.

(i) People are invariably blind to their own potentialities.

(ii) Social environment often stifles development towards self fulfilment.

(iii) The strong negative influence is exercised by the safety needs. The growth process
demands a constant willingness to take risks, make mistakes and to break old habits.
All these result in breaking the safety barriers.

II. MCCLELLAND’S THREE NEED MODEL :

According to David McClelland, “a person acquires three types of needs as a result of one’s
life experience. He tends to develop certain motivation drives as a result of his interaction with the
environment in which he lives.

These three needs are :

1. Need for achievement. It is a drive to excel, advance and grow. This refers to one’s desire
to achieve something with own efforts. People with a high need for achievement derive satisfaction
from achieving goals. These people are often wealthy and their wealth comes from their ability to
achieve goals. High achievers want immediate feedback on their performance and they generally
undertake tasks of moderate difficulty rather than those which are either very easy or very difficult.

These people prefer to work independently so that successful task performance can be
linked to their own efforts rather than to someone else’s McClelland and his associates made
specific suggestions for the development of achievement need and these are -

(i) Give employees periodic feedback on performance. This will provide information
that will enable them to modify or correct their performance.

(ii) Provide good models of achievement. Employees who are successful should be
made available for others to emulate.

(iii) Arrange tasks so that employees can pursue moderate challenges and
responsibilities. Avoid tasks that are either very difficult or very easy.

(iv) As much as possible employees should be able to control their own destiny and
imagination. They should be trained to think realistically and positively about how
they will accomplish goals.

2. Need for power. A drive to influence others and situations. It refers to one’s desire to
influence and dominate others through use of authority. Achievement of goals is less important than
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the means by which goals are achieved. Alfred Adler was leading advocate of power motive. He
propounded the concept of inferiority complex and compensation. According to him the
individual’s life style is characterized by striving to compensate for the feeling of inferiority which
are combined with innate drive for power. As such there arises need to manipulate others or there is
drive for superiority over others McClelland and his associates have found that people with high
power need have a great concern for exercising influence and control. Such type of people generally
seek positions of leadership and are forceful, outspoken, hard headed and demanding.

3. Need for affiliation : A drive for friendly and close interpersonal relationships. It refers to
one’s desire to establish and maintain friendly relationship with others. People with affiliation need
derive satisfaction from social and inter personal activities. Affiliation plays a very vital role in
human habaviour. McClelland has suggested that people with high need for affiliation usually
derive pleasure from being loved and tend to avoid pain of being rejected. These individuals are
concerned with maintaining pleasant social relationship, enjoying a sense of intimacy and
understanding and enjoy assisting or helping others in trouble.

People possess the above needs in varying degrees and these needs may be simultaneously
acting on an individual. In case of entrepreneurs, need for achievement is more dominating.

McClelland is of the opinion that people with high need for achievement are characterized
by the following :

(i) They set moderate, realistic and attainable goals for them.

(ii) The take calculated risks and look for challenging tasks.

(iii) They prefer situations where in they can take personal responsibility for solving
problems.

(iv) They need concrete feedback on how well they are doing.

(v) Their need for achievement exists not merely for the sake of economic rewards or social
recognition rather personal accomplishment is intrinsically more satisfying to them.

III. ALDERFER’S ERG THEORY :

Clayton Alderfer reformulated Maslow’s need hierarchy theory. According to

Alderfer, Maslow’s five levels of needs can be regrouped under three heads namely Existence,
Relatedness and Growth (ERG)

1. Existence Needs : These existence needs combine the physiological and safety needs of
Maslow. These existence needs can be satisfied by material or financial incentives and include
survival needs, physical & psychological safety etc.

2. Relatedness Needs : These include Maslow’s social and esteem needs which are derived
from other people. These needs are satisfied by personal relations & social interactions.

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3. Growth Needs : These include Maslow’s self actualization needs. These needs will be
satisfied only if an individual involves himself in activities of the organisation and is always on the
lookout for new challenges and opportunities. Through creative efforts individual can realize his
potential by making best use of the available opportunities.

For the proper development of entrepreneurship, Relatedness and Growth needs are more
important. Alderfer theory assumes that different types of needs can operate simultaneously
whereas Maslow’s theory follows a rigid need hierarchical order.

Very little research exists on the ERG theory of motivation. Still there seems to be some
support for the theory over the need priority model or the two factor theory of motivation. ERG
theory seems to take some of the strong points of the earlier theories, but is less restricting and
limiting. Besides disagreement over the exact number of categories of needs persist. Satisfing needs
is an important part of motivating employees. If a manager finds that a subordinate’s growth needs
are blocked, for whatever reasons, he may attempt to redirect employees behaviour towards
satisfying relatedness or growth needs.

1.28 MEANING OF WOMEN ENTREPRENEUR

Women constitute around half of the total world population. So is in India also. They are,
therefore, regarded as the better half of the society. In traditional societies, they were confined to
the four walls of houses performing household activities. In modern societies, they have come out
of the four walls to participate in all sorts of activities. The global evidences buttress that women
have been performing exceedingly well in different spheres of activities like academics, politics,
administration, social work and so on. Now, they have started plunging into industry also and
running their enterprises successfully. Therefore, while discussing on entrepreneurial development,
it seems fit to the context to study about the development of women entrepreneurs in the country.
The present discussion therefore, aims at discussing the growth and problems of women
entrepreneurs in India. Let us begin with understanding the concept of women entrepreneurs.

1.29 DEFINITION OF WOMEN ENTREPRENEUR

“Women entrepreneur according to government of India is an entrepreneur who runs an

enterprise owned and controlled by her and having minimum financial interest upto 51% of the
capital and giving at least 51% employment to women”.

Thus, women entrepreneur is one who intitiates, organizes and operates a business
enterprise. In developing countries like India, such innovators are found less in number when
compared with other advanced countries.

1.30 FUNCTIONS OF WOMEN ENTREPRENEURS

As an entrepreneur, a woman entrepreneur has also to perform all the functions involved in
establishing an enterprise. These include idea generation and screening, determination of objectives,
project preparation, product analysis, determination of forms of business organisation competitive

49
of promotional formalities, raising funds, processing men, machines and materials and oeration of
business.

Frederick Harbinson has enumerated the following five functions of a woman entrepreneur :

1. Introduction of innovations or imitation of innovations.

2. Exploration of the prospects of starting a new business enterprise.

3. Supervision and leadership.

4. Undertaking of risks and the handling of economic uncertainties involved in business.

5. Coordination, administration and control.

The fact remains that, like the definition of the term ‘entrepreneur’, different scholars have
identified different sets of function performed by an entrepreneur whether man or woman. All these
entrepreneurial functions can be classified broadly into three categories. 1. Risk-bearing, 2.
Organisation and 3. Innovations.

1.31 GROWTH OF WOMEN ENTREPRENEURS

Women in India constitute around half of the country’s population. In the official
proclamation, they are at par with men. But, in real life, the truth prevails otherwise. Our society is
still male-dominated and women are not treated as equal partners both inside and outside four walls
of the house. In fact, they are treated as abla, i.e. weak and dependent on men. As such, the Indian
women enjoy a disadvantageous status in the society. Let some facts be given. The much low
literacy rate (40%), low work participation rate (28%) and low urban population share (10%) of
women as compared to 60%, 52% and 18% respectively of their male counterparts well confirm
their disadvantageous position in the society. Our age old-cultural traditions and taboos arresting
the women within four walls of their houses also make their conditions more disadvantageous.
These factors combined by serve as non-conducive conditions for the emergence and development
of women entrepreneurship is expectedly low in the country. This is well indicated by a dismally
low level of women (5.2%) in total self-employed people in the country.

In India, women entry into business is a new phenomenon. Women entry into business, or
say, entrepreneurship is traced out as an extension of their kitchen activities mainly to 3 Ps, viz,
Pickles, Powder and Pappad. Women in India plunged into business for both pull and push factors.
Pull factors imply the factors which encourage women to start an occupation or venture with an
urge to do something independently. Push factors refer to those factors which compel women to
take up their own business to tide over their economic difficulties and responsibilities. With
growing awareness about business and spread of education among women over the period, women
have started shifting from 3Ps to engross to 3 modern Es., viz, Engineering., Electronic and
Energy. They have excelled in these activities. Women entrepreneurs manufacturing solar cookers
in Gujarat, small foundries in Maharashtra and T.V. capacitors in Orissa have proved beyond doubt
that given the opportunities, they can excel like their male counterparts. Smt. Sumati Morarji

50
(Shipping Corporation), Smt. Yamutai Kirloskar (Mahila Udyog Limted), Smt. Neena Malhotra
(Exports) and Smt. Shahnaz Hussain (Beauty Clinic) are some exemplary names of successful and
accomplished women entrepreneurs in our country.

According to a survey, Bengaluru seemed to be the nation’s top incubator for women entrepreneurs,
followed by Delhi, Chennai, Mumbai, Hyderabad, Pune and Ahmedabad. The major areas of their
business are professional services, IT, Apparels, Travel, Media, Manufacturing etc. Statistics
showed that most women entrepreneurs had small to medium sized enterprises and more than 70%
had less than 5 employees working for them.

1.32 PROBLEMS OF WOMEN ENTREPRENEURS

Women entrepreneurs encounter two sets of problems, viz, general problems of

entrepreneurs and problems specific to women entrepreneurs. These are discussed as follows:

1. Stiff completion : Women entrepreneurs do not have organizational set-up to pump in a lot
of money for canvassing and advertisement. Thus, they have to face stiff competition for making
their products with both organized sector and their male counterparts. Such a competition ultimately
results in the liquidation of women enterprises.

2. Family ties : In India, it is mainly a women’s duty to look after the children and other
members of the family. Man plays a secondary role only. In case of married women, she has to
strike a fine balance between her business and family. Her total involvement in family leaves little
or no energy and time to devote for business. Support and approval of husbands seem necessary
condition for women’s entry into business. Accordingly, the educational level and family
background of husbands positively influence women’s entry into business activities.

3. Male-dominated society : Male chauvinism is still the order of the day in India. The
Constitution of India speaks of equality between sexes. But in practice, women are looked upon as
abla, i.e. weak in all respects. Women suffer from male reservations about a woman’s role, ability
and capacity and are treated accordingly. In nutshell, in the male-dominated Indian society, women
are not treated equal to men. This, in turn, serves as a barrier to women entry into business.

4. Problem of finance : Finance is regarded as “life-blood” for any enterprise, be it big or

small. However, women entrepreneurs suffer from shortage of finance on two counts. Firstly,
women do not generally have property in their names to use them as collateral for obtaining funds
from external sources. Thus, their access to the external sources of funds is limited. Secondly, the
banks also consider women less creditworthy and discourage women borrowers on the belief that
they can at any time leave their business. Given such situation, women entrepreneurs are bound to
rely on their own savings, if any, and loans from friends and relatives which are expectedly meager
and negligible. Thus women enterprises fail due to the shortage of finance.

5. Scarcity of raw material : Most of the women enterprises are plagued by the scarcity of
raw material and necessary inputs. Added to this is the high prices of raw material on the one had,
and getting raw material at the minimum of discount, on the other. The failure of many women co-
51
operatives in 1971 engaged in basket making is an example of how the scarcity of raw material
sounds the death-knell of enterprises run by women.

6. Limited mobility : Unlike men, women mobility in India is highly limited due to various
reasons. A single woman asking for room is still looked upon with suspicion. Cumbersome exercise
involved in starting an enterprise coupled with the officials’ humiliating attitude towards women
compels them to give up the idea of starting an enterprise.

7. Low risk-bearing ability : Women in India lead a protected life. They are less educated
and economically not self-dependent. All these reduce their ability to bear risk involved in running
an enterprise. Risk-bearing is an essential requisite of a successful entrepreneur.

8. Lack of education : In India, around three-fifths (60%) of women are still illiterate.
Illiteracy is the root cause of socio-economic problems. Due to the lack of education and that too
qualitative education, women are not aware of business, technology and market knowledge. Also
lack of education causes low achievement motivation among women. Thus, lack of education
creates problems for women in setting up and running business enterprises.

9. Legal formalities : Women entrepreneurs find it extremely difficult to comply with various
legal formalities in obtaining licenses etc.

In addition to above problems, inadequate infrastructural facilities, shortage of power, high

cost of production, social attitude, low need for achievement and socio-economic constraints also
hold the women back from entering into business. According to Pandit Jawahar Lal Nehru, the then
Prime Minister of India, “When woman moves forward, the family moves, the village moves and
the nation moves”.

1.33 REMEDIES FOR THE PROBLEMS OF WOMEN ENTREPRENEURS

Once an enterprise starts, the difference between a male and female must be forgotten
because an entrepreneur is an entrepreneur, business is business and profit and loss strictly depend
upon entrepreneurial competencies. In order to make the women entrepreneurs to start the business
venture, the following measures can be taken :
1. Proper supply of raw materials : Women entrepreneurs should be ensured of proper
supply of scarce raw materials on priority basis. A subsidy may also be offered to make the
products manufactured by women entrepreneurs cost competitive and reasonable.
2. Creation of finance cells : The Financial Institutions and banks which provide finances to
entrepreneurs must create a special cell for providing easy finance to women entrepreneurs. For the
convenience of such entrepreneurs, these cells should be manned by female staff.

3. Changing the social attitudes : It is absolutely necessary to change the negative social
attitudes towards women. The elders particularly mothers and mother-in-law, need to be made
aware of the potentiality of the girls and their role in the family and society. Unless the social
attitudes are made positive through education and awareness programmes, the women entrepreneurs
cannot get the required support from their family members.
52
4. Concessional rate of interest : The women entrepreneurs should be provided finance at
concessional rates of interest and at easy repayment basis. The cumbersome formalities should be
avoided in sanctioning the loans to women entrepreneurs.

5. Setting up marketing co-operatives : Proper encouragement and assistance should be

provided to women entrepreneurs for setting up marketing co-operatives. These cooperatives shall
help in getting the inputs at reasonable rate and they are helpful in selling their products at
remunerative prices. Hence, middlemen can be avoided and women entrepreneurs can derive
maximum benefits of enterprises.

6. Offering training facilities : Training is essential for the development of entrepreneurship.

It enables the women entrepreneurs to undertake the venture successfully as it imparts required
skills to run the enterprise. Additional facilities like stipend, good hygienic crèches, transport
facilities etc. can be offered to attract more and more women entrepreneurs. Presently, the
economically weaker entrepreneurs of the society are offered such training facility under Prime
Minister’s Rozgar Yojana (PMRY). FICCI, Lions club, Rotary club and other voluntary
organizations can also arrange such training programmes for women entrepreneurs.

Thus, proper education, comprehensive training, setting up of separate financial cells,

development of marketing co-operatives to a large extent will help to flourish the women
entrepreneurship in India. Further, both government and non-government agencies should play an
important role to solve the problems of women entrepreneurs.

1.34 SUMMARY
• The word ‘entrepreneur’ is derived from French word ‘Entrepreneur’ which was used to
designate on organizer of musical or other entertainment.
• Entrepreneur is a person of telescopic faculty drive and talent, who perceives business
opportunities and promptly seizes them for exploitation.
• An entrepreneur has to perform a number of functions right from the generation of idea upto the
establishment of an enterprise.
• Entrepreneurship is a set of activities performed by an entrepreneur. Entrepreneurship is
influenced by economic, social and psychological factors.
• A successful entrepreneur must be a person with technical competence, initiative good
judgement, Intelligence leadership qualities, self-confidence, energy, attitude, creativeness,
fairness, honesty, tactfulness and emotional stability.
• The particular set of cultural arrangements adopted by a society is influenced by the physical
environmental factor as well as man’s attitude and desire to improve his habitat.
• The culture of a given society is also influenced by contacts with other cultural groups.

1.35 SELF ASSESSMENT QUESTIONS

1. Explain in brief the concept of entrepreneur.
2. Give various definitions of entrepreneur.
53
3. Enumerate the characteristics of entrepreneur.
4. Distinguish between entrepreneur and manager.
5. Explain in brief the functions of entrepreneurs.
6. Explain in brief classification of entrepreneurs.
7. Explain in brief the concept of entrepreneurship.
8. Explain in brief the evolution of concept of entrepreneurship in India.
9. Explain in brief the role of entrepreneurship in economic development.
10. Write a note on barriers of entrepreneurship.
11. Write the short notes on entrepreneurship culture.
12. Define motivation and discuss its importance.
13. Discuss various theories of motivation.
14. Define women entrepreneur and discuss its functions.
15. Define various problems of women entrepreneurs.
16. What are the remedies for the problem of women entrepreneur.

54
 UNIT-2
ENVIRONMENT AND ENTREPRENEURIAL DEVELOPMENT
AIMS AND OBJECTIVES
After studying this unit you will be able to:
• Understand Entrepreneurial Environment
• Define Economic Environment & Social Environment
• Define socio-economic environment in the emergence of entrepreneurship.
• Understand Entrepreneurial Development Programme
• Define Role, Relevance and Achievements of Entrepreneurial Development
Programme
• Understand Institutional Support to EDP
• Define Financial Institutions that Provide Finance to entrepreneurship.
CONTENTS
2.0 Entrepreneurial Development
2.1 Meaning of Entrepreneurial Development
2.2 Environmental factors
2.3 Socio-economic environment in the emergence of entrepreneurship
2.4 Meaning of EDPs
2.5 Definition of EDPs
2.6 Objectives of EDPs
2.7 Need of EDPs
2.8 Evaluation of EDPs
2.9 Problems in the conduct of EDPs
2.10 Suggestions to make EDPs successful
2.11 Organizing product/ process oriented EDPs
2.12 Course contents of EDP
2.13 Role of Entrepreneurial Development Programme
2.14 Relevance of Entrepreneurial Development Programme
2.15 Achievements of EDPs
2.16 Financial Institutions ^provide finance to entrepreneurship at National
2.17 Institutional support to small entrepreneurs
2.18 Specialized Institutions
2.19 Institutional support for EDPs
2.20 Summary
2.21 Self Assessment Questions

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 ENVIRONMENT AND ENTREPRENEURIAL DEVELOPMENT
2.1 ENTREPRENEURIAL ENVIRONNENT
Meaning: Entrepreneurial Environment is a combination of factors that play a role in the
development of entrepreneurship first, it refers to the overall economic, socio-cultural and political
factors that influence people’s willingness and ability to undertake entrepreneurial activities.
Various economic social, political, technological and psychological factors and responsible
for growth by entrepreneurship. Entrepreneurship environment refers to the various positive and
negative constraints within which various enterprises are required to operate. The environment
especially the external environment is highly dynamic. It keeps on changing and affects different
organizations to a varying extent. The degree or extent of environmental impact depends upon the
extent upto which the organization depends on it and the organizational response to the changes in
environment. An entrepreneur should understand the behaviour of key environmental forces that are
going to affect the present and future operations of the enterprise. The post independence period has
witnessed tremendous social, economic and political changes, which have directly or indirectly
influenced environment of entrepreneurship. During the last decade many established big business
houses have yielded competitive advantage to relatively new entrants. In the automobile sector
Hindustan Motors and Premier automobiles had to meekly surrender their market share to Maruti
Udyog Limited and the same story was repeated in the detergent market wherein a relatively
unknown new entrant Nirma grabbed major market share of Surf, a product produced and marketed
by a reputed multinational corporation i.e. Hindustan Lever. All these examples clearly highlight
the fact that an enterprise, howsoever big or reputed, cannot afford to remain insensitive to the
external environment. It must identity the opportunities presented by the environment and exploit
them in the best interests of the organization. No enterprise can afford to ignore the threats arising
out of environment and in its interests, it must chalk out corrective measures for minimizing
adverse impact of these threats.
2.2 ENVIRONMENTAL FACTORS
The following environmental factors are:
I. ECONOMIC ENVIRONMENT
One of the most important factor affecting entrepreneurship is economic environment. It
comprises of capital, labour, raw material and market demand.
(a) Capital: Capital is one of the most important factor of production for the establishment of an
enterprise. Adequate funds are required for bringing together other factors of production. It is with
the capital that other factors of production like labour, raw material, machinery etc. can be arranged.
Capital acts as a lubricant for the production process. Increase in capital investment in viable

56
projects result in increase in profits which help in accelerating the process of capital formation.
Entrepreneurship activity too gets a boost with the easy availability of funds for investment.
(b) Labour: Easy availability of right type of workers also effect entrepreneurship. The quality
rather than quantity of labour influences the emergence and growth of entrepreneurship. The
advantages accruing to an entrepreneur due to low cost labour are often offset by the disadvantages
arising out of immobility of unskilled workers. The disadvantages arising out of immobility and
high cost labour can be better tackled by resorting to capital intensive technologies. But a country
like India, confronted with the twin problems of unemployment and shortage of capital, cannot
afford to adopt capital intensive technologies. Labour intensive rather than capital intensive
technology will serve our interests in a better manner. The problem of labour immobility can be
solved by providing infrastructural facilities including efficient transportation, wherever
entrepreneurship is to be promoted.
(c) Raw Material: Raw material is one of the basic ingredient required for production. Shortage
of raw material can adversely affect entrepreneurial environment. Without adequate supply of raw
materials no industry can function properly and emergence of entrepreneurship too is adversely
affected. Shortage, high prices and inferior quality of raw materials are the major problems
confronting entrepreneurs. The more favourable are these conditions, better would be its influence
on entrepreneurial emergence.
(d) Market: The role and importance of market and marketing is very important for the
emergence and growth of entrepreneurship. Monopoly in a particular product line is more tempting
to an entrepreneur than a competitive market. In the modern competitive world no entrepreneur can
think of surviving in the absence of latest knowledge about market and various marketing
techniques. The benefits of improved and healthy market conditions in the environment on
entrepreneurial growth are self evident. Germany and Japan are examples where rapid improvement
in market was followed by rapid entrepreneurial appearance. Entrepreneurs should keep track of
main trends in the economic environment. Market demand depends upon purchasing power, which
in turn depends upon current income, prices, savings and availability of credit. Changes in major
economic variables like money income, cost of living, interest rates, savings and credit availability
have an immediate impact on the working of an enterprise.
II. SOCIAL ENVIRONMENT
Social environment strongly affect the entrepreneurial behaviour which contributes to
entrepreneurial growth. The social setting in which the people grow, shapes their basic beliefs,
values and norms. The social factors can be (i) Family background (ii) Friends, relatives and
teachers, (iii) Religion, (iv) Social status (v) Social mobility and social marginality.

57
 Family background greatly influences the entrepreneurial environment and maintenance of
social system. The environment of the family affect entrepreneurship. Joint family can provide
family resources to invest and expand family business. If the father is a professional entrepreneur or
businessman, the son is more likely to enter the same line because of certain inherent advantages.
Background of a family in manufacturing provide a source of industrial entrepreneurship. Mobility
of the entrepreneur is influenced by the occupational and social status of the family. Social status
too affect entrepreneurship.
All human beings aspire for high social status and on attaining a particular level they start
aspiring for higher & higher levels. People become quite responsible in their pursuit of protecting
and developing their status. Chester I Bernard believes that the desire for improvement and
protection of status, forces people to behave responsibly. People work hard to maintain and improve
their status, and it contributes to entrepreneurial growth.
Caste and religion of entrepreneur are contributory factors of entrepreneurial growth. Some
of the castes have inculcated in themselves a particular culture that fosters entrepreneurship. In
India certain ethnical communities engaged in trade and industry for centuries like Jains, Baniyas,
Vaishyas and Khatris have been the dominant sources of entrepreneurship. Similarly certain
religious communities like the Parsees, Marwaris and Sindhis have inclination for industrial activity
and this has definitely helped in the emergence and growth of entrepreneurship. A person is likely
to assume the guidelines or rules of the reference group to which he belongs. The reference group
can be religious groups, close circle of friends and relatives. The prospective entrepreneur would
discuss his business ideas with them artd seek their advice before starting a new business.
Social mobility involves the degree of social and geographical mobility and the nature of
mobility within the system. The opinion that social mobility is crucial for entrepreneurial
emergence is not unanimous. There are persons of the view point that high degree of mobility is
conducive for the emergence of entrepreneurship. At the, same time there are others of the opinion
that lack of mobility would result in the emergence of entrepreneurship. There are still fee others
putting forth the argument that the system should not be too flexible nor too rigid because the
former would pull the entrepreneur away from his role and latter would restrict the entrepreneur.
Social marginality also positively influences entrepreneurship. Social marginality implies a
situation in which there is a discontinuity between the individuals personal attributes (comprising of
physical characteristics, intellectual make up and social behaviour patterns) and the role or roles
which the individual plays in the society. A person belonging to a social group traditionally
constrained to enter economic activity and barred from any other activity by the society is expected
to choose the ownership manager role in a small industry. The number of openings available also
affect the emergence of entrepreneurship. Expanding economy and increase in per capita income
58
give boost to the entrepreneurial activity. Similarly, the pace of structural change in the economy
opens new opportunities| for the prospective entrepreneurs.
III. PSYCHOLOGICAL FACTORS
McClelland developed theory of Achievement Motivation.-Achievement motivation is a
drive to overcome challenges. According to McCelland a constellation of personality characteristics
which are indicative of high: need achievement is the major determinant of entrepreneurship
development.
If the average level need achievement in a society is relatively high, one can expect a
relatively high amount of entrepreneurship in the society. The trait of need for achievement is not
by birth and can be developed through intensive training programmes. In India, Small Industries
Training Institute (SIET) Hyderabad and Small Industries Service Institutes (SISI) and others all
over India are extensively conducting training programmes aimed at generating confidence amongst
new entrepreneurs. In Kakinada Experiment, McClelland carried out a full fledged programme in
Kakinada City of Andhra Pradesh. The training was to be given to a group of persons and was
designed primarily to stimulate the imagination and encourage introspection of personal motivation
and community goals. McClelland concluded that those participating in the programme
displayed a more active business behaviour and worked for longer time. He found that caste
traditional beliefs or even western ways of life did not determine the mental make up of
participants. McClelland explains that people with low achievement motivation are prepared to
work hard for money or other such incentives but the people with high achievement motivation
work for status.
He states that people with high need for achievement possess the following attributes
(a) Prefer personal responsibility for decisions
(b) Are moderate risk takers and
(c) Possess interest in complete knowledge of the results of decisions.
McClelland believes that achievement motivation can be developed through intensive
training programmes.
Hagen was of the opinion that the withdrawal of status respect of a group led to the
emergence of entrepreneurship in Japan.
Hagen states that the initial conditions leading to eventual entrepreneurial behaviour is the
loss of status respect by a group and four different types of events can produce status withdrawal—
(a) The group may be displaced by force.
(b) It may have its value symbols denigrated.
(c) It may drift into a situation of status inconsistency.

59
(d) It may not be accepted into expected status on migration in a new society. Whenever there is
any withdrawal of status respect it would lead to four different responses and create four
different types of personalities.
(a) Retreatist. It refers to the person who continues to work in the society but remains
indifferent to his work and position.
(b) Ritualistic. He is the type of person who adopts a kind of defensive behaviour and acts in a
way accepted and approved in his society but with no hope of improving his position.
(c) Reformist. He is the one who forments a rebellion and attempts to establish a new society.
(d) Innovator. A creative individual who is likely to be an entrepreneur.
Hagen believes that creative personalities emerge when the members of some social group
experience the withdrawal of status respect. Innovation, which is basic for the emergence of
entrepreneurship, requires creativity and such creative individuals act as catalytic agents for
economic growth.
IV. ATTITUDE OF GOVERNMENT
Government all over the world can play a very important role in the emergence of
entrepreneurship. Positive actions by the government can facilitate-grow-potent influence
entrepreneurial emergence and growth. The Industrial Policy framed by the government proves to
be crucial factor for the setting up of industrial units. The government by providing right type of
infrastructural facilities and other incentives can definitely play a positive role leading to the
emergence of entrepreneurial class and setting up of more and more viable industrial units. The
supportive actions of the government help in creating conducive environment which finally leads to
entrepreneurial growth. It is only due to the various steps initiated by the government under
development planning over years that positive environment for entrepreneurial growth has been
created. The slogan 'Export or Perish' led to export promotion.
The government took three important steps in various industrial resolutions.
(a) To maintain a proper distribution of economic power between private and public sector.
(b) To encourage the tempo of industrialisation by spreading entrepreneurship to every city,
town or village.
(c) To disseminate the entreprenurial talent concentrated in a few dominant communities to a
large number of people of varied social and economic groups.
It is the government which regulates business activities. Government policies are going to
influence all the decisions of the entrepreneurs regarding what to produce, how much to produce, of
what quality to produce, where to produce and for whom to produce. The entrepreneurs are to
operate within the concessions and limits set by the government. It is in the interest of the potential

60
entrepreneur to thoroughly scan the government policies before taking decision with regard to
setting up his enterprise.
V. EDUCATION AND TECHNICAL KNOW-HOW
Education, entrepreneurship and development are interrelated. Education helps in the
development of capabilities of individuals which facilitates the emergence and growth of
entrepreneurship. An alert entrepreneur, in order to survive in the modern competitive world, has to
keep an eye over the technological advances taking place around. These technological
developments provide opportunities for the entrepreneurs to develop and produce new products.
Moreover various studies too have revealed that many entrepreneurs have been driven to the
threshold of entrepreneurship for making use of their technical and professional skills. After
acquiring these skills they want to use these skills for themselves rather than benefiting others by
taking employment. Thus, the high level of education and training may enable the entrepreneurs to
use their entrepreneurial talent more effectively and efficiently.
VI. FINANCIAL ASSISTANCE
Liberal financial assistance on easy terms & conditions act as a motivating force for
boosting the morale of the young entrepreneurs to set up their own enterprises. To create an
environment conducive to entrepreneurial growth, a policy of support and incentive has been
introduced by the government. Various types of subsidies, concessions and facilities are extended to
attract entrepreneurs in backward areas. The government of various states have floated various
schemes aimed at providing adequate financial assistance to the entrepreneurs on easy terms and at
low rate of interest.
VII. MOBILITY OF ENTREPRENEURS
Mobility refers to the drive in the entrepreneurs to locate green postures for setting up their
units. It is an urge to move to other places in search of better opportunities. In India, Marwaris,
Sindhis and Sikhs have moved to every corner of India and abroad to carry on business and
entrepreneurial activities. This will help in reducing regional imbalances in economic growth. In the
initial phase of industrialization, entrepreneurs set up their units at or near their places due to
limited resources, communication, bottlenecks and absence of institutional support. An entrepreneur
after tasting success and gaining experience is ready to make investment anywhere. He is always on
the lookout for opportunities, which can be exploited for furthering his business interests. He is not
tied to any place and is ready to move to any place wherever viable business opportunities exist.
VIII. COMPETITIVE FACTORS
No prospective entrepreneur can afford to ignore competitive factors. Study of competitive
factors covers members of competing firms, their scale of operation, product range and features,
prices, channels of distribution, terms & conditions of sale etc.
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 Michael E Porter states the following four factors for the analysis of industry and
competitors.
1. Existing and Potential Extranets. Various aspects studied are capital requirement, scale of
operation, product differentiation, channels of distribution etc. Threat perception from
existing and potential extranets is scanned under this head.
2. Bargaining Power of Buyers. Keeping in mind demand and supply position, bargaining
power of buyers is studied.
3. Bargaining Power of Suppliers. Bargaining power of suppliers of raw materials and other
factors can be assessed keeping in mind the demand and supply position.
4. Availability of Substitutes. Demand for a particular product will depend upon the
availability and prices of substitutes.
IX. COMPETITIVE OR INDUSTRIAL ENVIRONMENT
An industry comprises of group of enterprises offering similar products or services. Industry
includes close substitute products or services that satisfy same consumer needs. No prospective
entrepreneur can afford to ignore competitive factors. Study of competitive factors covers members
of the competing firms, their scale of operation, product range and features, prices, channels of
distribution, terms and conditions of sale etc. An entrepreneur as a strategic manager has to analyse
competitive forces in industrial opportunities and threats that a company will meet.
2.3 SOCIO-ECONOMIC ENVIRONMENT IN THE EMERGENCE OF
ENTREPRENEURSHIP.
Entrepreneurship does not emerge & grow spontaneously. Rather it is dependent upon
several economic, social, political & legal factors. An entrepreneur should understand the behaviour
of key environmental forces that have an implication on the enterprise & get a grasp of the
technique for environmental scanning.
The socio-economic environment plays a crucial role in governing entrepreneurial acumen
among the people. The growth of entrepreneurship depends on a favourable socio-economic
environment. Environment is the aggregate of external factors within which the enterprise operates.
In order to achieve success the entrepreneur has to operate and adapt themselves to different
situations of the environment.
(A) Social Environment:
A conducive & congenial social environment helps in manifold increase of entrepreneurial
activities. Social environment presupposes a number of social factors which are critical for the
growth of entrepreneurship. These factors are:
(i) Family background
(ii) Caste & religion
62
(iii) Kith & Kin
(iv) Social status
(v) Social mobility
(vi) Social marginality
(i) Family Background :
This is one of the most crucial factor influencing the entrepreneurial movement. This
comprises of family size, type of family, status of family etc. In India, there are joint or nuclear
family which have wider impact on the running of the enterprise. There is more emotional
attachment of family members in a joint family which influences the entrepreneurship supply to a
greater extent. For example, if father is a businessman or professional, son is likely to adopt the
same occupation and continue the business or profession of the father.
(ii) Caste & Religion :
In India, caste and religion of the entrepreneur also plays an important role in influencing
entrepreneurial emergence and growth. Specific castes & religions in the society exhibit more
entrepreneurial talent than their counterparts as they have possessed latent potential and specialized
culture which helps to foster entrepreneurship. For example, Parsis & Marwaris of Maharashtra,
Vysyas of Andhra Pradesh. Jains of Gujarat & Rajasthan, Sikhs of Punjab have exhibited
extraordinary entrepreneurial talent in enterprise building & management. But in recent times this
trend is changing. Entepreneurial traits do not belong to any specific caste or religion, rather they
emerge from varied communities and religions.
(iii) Kith & Kin :
Entrepreneurial initiatives are influenced by kith & kin, friends, relatives, well wishers,
teachers & trainers. They exert considerable influence in decision-making process for starting a
particular business which has significant effect on creation of entrepreneurship. A person is likely to
adopt the guidelines or rules of the reference group to which he belongs.
(iv) Social Status :
Social status plays a very important role in the growth of entrepreneurship. Every human
being aspires to be a man of high social esteem in the society. This aspiration drives him to be self-
propelled & entrepreneurial in his activities & once he achieves a reasonable level, his aspiration &
desires for it starts getting multiplied. People are very much interested in protecting and developing
their status.
(v) Social Mobility:
Social mobilities involves the degree of social & geographical mobility & nature of mobility
channels within a system. This factor greatly influences the emergence of entrepreneurship. There
are different opinions on the influence of social mobility on the entrepreneurial environment.
63
Hoselitz & McClelland are of the view that openness of a system and flexibility in role relations
reveals an imperative role of mobility within a system of entrepreneurship movement. High degree
of social mobility would help in promoting entrepreneurial talents, thereby paving the way for
entrepreneurial development. In the view of Hagen, lack of mobility promotes entrepreneurship.
(vi) Social Marginality :
Social marginality has also considerable impact on the entrepreneurial growth. The persons
from socially marginal classes often come forward and show keen interest in choosing
entrepreneurship as their career.
(vii) Social Values :
Social values and the philosophy of a country play a predominant role in the growth of
entrepreneurial culture in the society. Ideologies of the society like freedom, democracy,
secularism, emancipation of weaker sections, fair play, tolerance, social justice & non-violence also
influence the promotion of entrepreneurship.
B. Economic Environment:
Economic environment refers to those economic factors which influence the entrepreneurs
in identifying the business opportunities & giving their decision to finalize the ventures out of those
opportunities that are economically viable & financially feasible. The following are the most
important economic factors which very often affect entrepreneurship.
(i) Capital requirements;
(ii) Availability of labour;
(iii) Availability of raw materials
(iv) Market demand
(i) Capital Requirements : Capital is one of the most important factor affecting almost all
related elements such as raw materials, labour, machinery etc. Adequate funds are required for
bringing together other factors as they can be arranged with the help of capital. Entrepreneurship
activity too gets a boost with the easy availability of funds for investment. Investment decisions are
generally influenced by the availability of both fixed & working capital. Economic & financial
environment should be conducive so as to broaden the base of availability of capital so as to
accelerate entrepreneurial development.
(ii) Availability of Labour: Easy availability of quality labour rather than quantity also affects
the emergence & growth of entrepreneurship. The disadvantages arising out of immobility & high
cost labour can be better tackled by resorting to capital intensive technologies. But a developing
country like India, cannot afford to adopt capital intensive technologies because of the acute
problems of high rate of unemployment & shortage of capital. Labour intensive rather than capital
intensive technology will serve our interests in a better manner.
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(iii) Availability of Raw Materials : Raw materials is one of the basic ingredients required for
production. Shortage of raw materials can hamper the entrepreneurial growth. No industry can
function and prosper without adequate supply of raw materials which in turn adversely affects
entrepreneurship development. Hence, availability of materials in right quantity, of good quality, at
right prices & at right place influences the growth of entrepreneurship in the right direction. The
more favourable these conditions, the better would be its influence on entrepreneurial emergence.
(iv) Market & Market incentives: The knowledge of market & marketing cannot be
underestimated for the development of entrepreneurship. Hence, the entrepreneur must possess the
knowledge & track of main trends in the marketing environment to survive for a longer period in
the market. The size & composition of market, the knowledge of marketing techniques or strategies
adopted by competitors in the market shall influence the emergence & growth of entrepreneurship.
ENTREPRENEURIAL DEVELOPMENT PROGRAMME (EDP)
2.4 Meaning of EDP
Entrepreneurial development is a process by which persons are prepared to face business
uncertainties and risks through proper education, training, motivation, orientation and re-orientation
of entrepreneurs.
Entrepreneurial development programme plays very important role in the development of
business and industry. EDPs are based on the thinking that the attitude of people can be changed by
developing their skill, so that they can convert their ideas into an organization. It is not a training
programme but it is a technique which helps to increase motivation, working capacity and
knowledge of the prospective entrepreneurs.
An entrepreneurial development programme is a process to help the entrepreneur in
strengthening and fulfilling his motive and in acquiring skills and capabilities to promote and
manage his enterprise efficiently and effectively.
2.5 DEFINITION OF EDP
According to C.B. Gupta & N.P Srinivasan, development of an entrepreneur means
inculcating entrepreneurial traits into a person, imparting requisite knowledge, developing the
technical, mechanical, financial and marketing skills and building the entrepreneurial attitude.” The
process of entrepreneurial development involves equipping a person with the relevant information
needed for enterprise building and sharpening his entrepreneurial class.
In the words of Joseph. E. Steparek, “intelligence, motivation, knowledge & opportunity are
the pre-requisites for entrepreneurial development.”
It has been rightly pointed out that entrepreneurial development is a prerequisite
qualification for an overall economic development of any country.

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 The importance of small scale industries in employment creation and economic
development made the government realise & envisage promotional packages facilitating the
establishment of new enterprises. To promote entrepreneurial growth, the policy makers and
financial institutions started thinking in terms of imbibing entrepreneurial culture through training
interventions & thus, the emergence of entrepreneurial development programmes.
Entrepreneurial Development Programme may be defined “as programme designed to help
individuals to strengthen his entrepreneurial motive by acquiring skills and capabilities necessary
for playing his entrepreneurial role effectively.”
The EDP, considered as an effective human resources development programme, helps in
removing unemployment, promotion of small scale units, development of industrial regions, overall
economic development etc.
2.6 OBJECTIVES OF EDPs
(i) To accelerate the pace of industrial development by enlarging the supply of entrepreneurs;
(ii) Inculcating entrepreneurial qualities and motivating the prospective entrepreneurs to achieve
the goal;
(iii) Promoting the growth of small and medium scale enterprise sectors offering better potential
for employment generation & dispersal of industrial units;
(iv) Providing productive self-employment avenues to a large number of educated and less
educated unemployed young men & women passing as well as dropping out of schools &
colleges;
(v) Improving the performance of small & medium-scale industries with the help of carefully
selected and trained entrepreneurs and diversifying the sources of entrepreneurship;
(vi) To industrialize rural and backward areas.
(vii) To improve managerial skills of entrepreneurs.
An entrepreneurial development programme highlights the fact that an individual can be
developed, their outlook can be changed and their ideas can be given a true shape of enterprises
through an organized and systematic programme. Entrepreneurial development programme is not
only a training programme but also a technique of enhancing the motivation, skills and knowledge
of the potential entrepreneur, simultaneously aiming at arousing and reforming the entrepreneurial
behaviour in their day-to-day activities and helping them develop their own ventures or enterprises.
In other words, the process of entrepreneurial development involves equipping a person with the
information necessary for enterprise building and shaipening his entrepreneurial skills.
2.7 NEED OF EDPs
The Entrepreneurship Development Programme may be regarded as an important,
innovative breakthrough in the strategy for developing human resources and promoting economic
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development of the country. In the words of A. N. Oza; the EDP is an innovation in which those
persons possessing certain distinct qualities of entrepreneurship undergo counselling, motivation
and training in order to strengthen their self-confidence, seize a business opportunity, initiate an
enterprise and be the master of his destiny i.e., to become entrepreneurs instead of passively waiting
for suitable employment or continue suffering from frustration in their current jobs. In the above
backdrop, the role of EDP can be considered as the most important tool to tackle- the problems of
poverty and widespread chronic unemployment through rapid growth of small scale industrial
sector in India.
Entrepreneurial development being an organised and systematic development results in the
proper utilisation of local resources, generating more employment opportunities, promotion of small
scale units & overall development of an area. One trained and successful entrepreneur can become a
role model for others to follow. In other words, trained entrepreneurs act as catalysts of industrial
development and economic progress. EDP is a comprehensive programme comprising the
following process :
(i) Enhancing the motivation, knowledge and skills of the potential entrepreneurs.
(ii) Arousing and reforming the entrepreneurial behaviours in their day-today activities.
(iii) Assisting them in the development of their own enterprise. EDPs not only instills confidence
amongst participants but also prepares them to face numerous problems confronting
business with patience and boldness.
EDPs are becoming increasingly popular now-a-days and this can be judged on the basis of
the following points :
1. Eliminates Poverty & Unemployment: The twin problems of poverty and unemployment are
the major obstacles in the path of economic development that most of the developing and under
developed countries have to dealt with. EDPs provides an answer to solve the above problems to a
greater extent by helping unemployed people to opt for self-employment thereby creating job for
themselves as well as for others in the process.
Under different five-year plans in India, a number of schemes such as IRDP, ERRP, SGSY,
PMRY, REGP, NREP, etc., were introduced from time to time to solve the problems ot poverty and
unemployment by inducing the people to take up self-employment activities or entrepreneurship as
an alternative to wage employment.
2. Balanced Regional Development: Successful EDPs not only helps in accelerating the pace
of industrialisation but also results in reduction of concentration of economic power in the hands of
few. Small scale units can be put up in industrially backward and remote areas with limited
financial resources which help in achieving balanced regional development. The Government in
order to encourage the entrepreneurs to set up more small scale units in the backward regions to
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promote balanced regional development of areas has offered several incentives, concessions and
subsidies. EDPs aimed at promoting small scale units are more useful for balanced regional
development than medium and large scale units.
3. Prevents Industrial Slums : Industrially developed areas are faced with the problems of
industrial slums resulting in overburdening of civic amenities and having adverse impact on the
health of the people. EDPs help in the removal of these slums as entrepreneurs are provided with
various schemes, incentives, subsidies & infrastructural facilities to set up enterprises of their own
in the industrial backward areas. This not only helps in preventing the industrial slums but also
reduces pollution, traffic congestion, overcrowding in development areas and overtaxing of civic
amenities.
4. Utilizing Locally Available Resources : Local resources remain unutilized until the absence
of any initiation to develop that area industrially and that too at lower cost. Alert entrepreneurs seize
the opportunity and exploit it in the best interests of the area and industry. The EDPs can help in
harnessing locally available resources by providing guidance, training and education to the
entrepreneurs and assist in setting up industrial units which will lead to creation of a healthy base
for sound economic growth and rapid industrialisation.
5. Reducing Social Tension : Unemployment amongst the young and educated people is a
major cause of concern as the meer frustration of not getting gainful employment and the lure of
money may compel them to indulge in antisocial and anti-national activities resulting in social
unrest. EDPs helps in channelizing the talent of this section of the society in the right direction by
proper guidance, training and assistance for setting up their enterprises which results in the
generation of self-employment and prevention of social tension, unrest, etc.
6. Improvement in the standard of living: Entrepreneurs take lead in organizing various factors of
production by putting them into productive use through the setting up of enterprises. More
enterprises will lead to more production, employment and generation of wealth in the form of goods
and services resulting in the increase in the overall productivity and per capita income in the
country. By adopting latest innovations during production of variety of goods and services and the
efficient use of resources the entrepreneurs produces goods of better quality at a cheaper &
reasonably lower costs. With better quality products available at reasonable prices which enables
the consumers to buy freely indicates improvement in the standard of living. EDPs, thus, helps in
the generation of employment, industrialization of rural and backward areas, providing gainful self-
employment, developing small and medium sized industries and diversifying the sources of
entrepreneurship.

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2.8 EVALUATION OF EDPs
Evaluation of an EDP can be judged on the basis of extent of success achieved in the
realization of objectives established under EDP.
According to Dr. Sharma entrepreneurial performance is a function of the following factors.
(a) Socio cultural background of the entrepreneur (SB). This implies the environment in which
the entrepreneur was born and brought up. It conditions the values and attitudes of the
entrepreneur.
(b) Motivational force (MF). It implies the motives which prompts a person to undertake
entrepreneurship e.g. wealth, status, self employment etc.
(c) Knowledge and ability of the entrepreneur (K.A.). It refers to the education, training and
experience of the entrepreneur.
(d) Financial Strength (FS). It means the funds which an entrepreneur can mobilise from
internal and external sources.
(e) Environmental Variables (EV). These consist of government policies, market conditions,
availability of technology and labour situation. Symbolically Entrepreneurial Performance
(EP) can be represented in the following way-—
EP = f (SB, MF, KA, FS and EV)
Various studies have been undertaken by different organisations to find out how many
participants in different EDPs have actually started their own enterprise after completing their
training under EDPs. Entrepreneurship Development Institute of India, Ahmedabad had made
nationwide evaluation study on the effectiveness of EDPs. The major findings of this study are—(i)
One out of four trainees actually started his/her enterprise after completing EDPs (ii) The final start
up rate is higher around 32 per cent, (iii) About 10 percent trainees are found blocked due to various
reasons at various stages in the process of setting up their enterprises. If proper assistance is not
provided they may add to the category of 29 percent trainees who have already dropped the idea of
setting up their own enterprises (iv) 17 percent
have given up the idea of starting their ventures as they are engaged in other activities.
The following main criteria can be employed to comment on the performance of
entrepreneurs.
(i) Financial Results. Judgement about the financial health of the enterprise can be made on the
basis of various yardsticks like return on capital employed:, net profit over sales etc.
(ii) Gestation Period. It represents the time gap between the registeration and commencement of
commercial production. Gestation period of two to three years is regarded as satisfactory by the
financial institutions. Projects can be delayed due to various reasons like delay in governmental

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approvals, assistance from financial institutions, manpower availability problem and problems with
collaborators.
(iii) Capacity Utilisation. It depends upon the demand for finished products and availability of
various factors of production like funds, raw material, power labour etc. Break even occurs for
majority of entrepreneurs at 60 percent of installed capacity. Approximately 50 percent of
entrepreneurs were operating at 80% of installed capacity.
(iv) Expansion and Diversification. Expansion refers to the increased production of the same
product whereas diversification implies production of new type of products. Depending upon the
demand and availability of resources firms can opt for expansion or diversification.
(v) Value Addition. It refers to the gross value of output minus value of raw materials and other
inputs used in the production. More is the value addition more efficient is the entrepreneur,
(vi) Other Factors. Various other factors can be used to examine entrepreneurial effectiveness.
These can be employment generation, rural development, sales turnover, export promotion and
import substitution etc.
2.9 PROBLEMS IN THE CONDUCT OF EDPs
1. No Policy at the National Level. Though Government of India is fully aware about the
importance of entrepreneurial development, yet we do not have a national policy on
entrepreneurship. It is expected that the government will formulate and enforce a policy
aimed at promoting balanced regional development of various areas through promotion of
entrepreneurship.
2. Problems at the Pre training Phase. Various problems faced in this phase are—identification
of business opportunities, finding & locating target group, selection of trainee & trainers etc.
3. Over Estimation of Trainees. Under EDPs it is assumed that the trainees have aptitude for
self employment and training will motivate and enable the trainees in the successful setting
up and managing of their enterprises. These agencies, thus, overestimate the aptitude and
capabilities of the educated youth. Thus, on one hand the EDPs do not impart sufficient
training and on the other financial institutions are not prepared to finance these risky
enterprises set up by the not so competent entrepreneurs.
4. Duration of EDPs. An attempt is made during the conduct of EDPs to prepare prospective
entrepreneurs thoroughly for the various problems they will be encountering during the
setting up and inning of their enterprises. Duration of most of these EDPs varies between 4
to 6 weeks, which is too short a period to instill basic managerial skills in the entrepreneurs.
Thus the very objective to develop and strengthen entrepreneurial qualities and motivation is
defeated.

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5. Non Availability of Infrastructural Facilities. No prior planning is done for the conduct of
EDPs. EDPs conducted in rural and backward areas lack infrastructural facilities like proper
class room, suitable guest speakers, boarding and lodging etc.
6. Improper Methodology. The course contents are not standardised and most of the agencies
engaged in EDPs are themselves not fully clear about what they are supposed to do for the
attainment of pre-determined goals. This puts a question mark on the utility of these
programmes.
7. Mode of Selection. There is no uniform procedure adopted by various agencies for the
identification of prospective entrepreneurs. Organisations conducting EDPs prefer those
persons who have some project ideas of their own and thus this opportunity is not provided
to all the interested candidates.
8. Non Availability of Competent Faculty. Firstly there is problem of non availability of
competent teachers and even when they are available, they arc not prepared to take classes
in small towns and backward areas. This naturally creates problems for the agencies
conducting EDP.
9. Poor Response of Financial Institutions. Entrepreneurs are not able to offer collateral
security for the grant of loans. Banks are not prepared to play with the public money and
hence they impose various conditions for the grant of loans. Those entrepreneurs who fail to
comply with the conditions are not able to get loan and hence their dream of setting up their
own enterprises is shattered. Helpful attitude of lending institutions will go a long way in
stimulating entrepreneurial climate.
PROBLEMS FACED BY WOMEN ENTREPRENEURS
Various problems are as under
(i) Stiff competition from male entrepreneurs
(ii) Low ability to bear risk.
(iii) Low level of family support.
(iv) Shortage of funds.
(v) Slow progress of Women Entrepreneur Association.
(vi) Production, marketing, managerial, administrative and organizational problems
2.10 SUGGESTIONS TO MAKE EDPs SUCCESSFUL
1. Emphasis on Stimulating, Supporting and Sustaining Activities.
There should be balance between stimulating, supporting and sustaining activities for
making EDPs successful. Stimulating activities comprise of entrepreneurial education,
publicity of entrepreneurial facilities, motivational training and assistance in the
identification of viable projects, creating a common platform for entrepreneurs where they
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 can share their problems, experiences and success. Under supporting activities, comes
various forms of support that can be extended to the potential entrepreneurs for setting up
and running of their units. Supporting activities include registration, funds mobilisation,
licence, tax relief and incentives and management consultancy services. Sustaining activities
include expansion, diversification, modernisation and quality control.
EDPs normally lay more emphasis on stimulating and supporting activities and
neglect sustaining activities. This results in imbalance which will adversely affect
entrepreneurial development and the credibility of EDPs will be eroded.
2. Model Based EDPs. Entrepreneurial development is an area where there is no ready made
solution available. The agency undertaking an EDP is expected to have indepth study of the
demand pattern and availability of local resources. Any particular model of training which
may be very successful in one area may prove to be utter failure in another area.
3. Focus on Achievement Motivation. In order to create right impact on potential entrepreneurs
it is essential to develop achievement motivation amongst them through proper training and
conducive environment. Entrepreneurs should be assisted in converting their dream into
reality. A successful entrepreneur will serve as a role model for others and they will like to
follow him.
4. Designing of Viable Projects. A viable project is that project which is feasible in terms of
availability of resources and market potentials. A viable man has the requisite aptitude and
competence to initiate a project. The EDP organisers should prepare the projects keeping in
mind local resources, funding, training requirements and assessing the feasibility of the
same. The entrepreneurial development agencies should select right people, impart right
training and entrust viable projects to them for making EDPs successful.
5. Selection of Trainees. Trainees should be selected after proper screening. Educated
unemployed youth having aptitude for self employment should be selected for EDPs.
Persons having traditional background in the chosen economic activity should be preferred.
Efforts, money and other resources must not be wasted on those trainees, who lack requisite
aptitude and commitment.
6. Training of Trainers. Success of EDPs depends on the trainers. They should be committed,
competent and qualified. Trainers must be fully acquainted with whatever is latest in their
respective fields.
7. Organizing Part Time Programmes. Part time EDPs can definitely suit those persons who
are working or studying somewhere else. These EDPs can be conducted during week ends
or in the evening. By providing part time EDPs, we can provide opportunity to those who
cannot joint any regular EDP.
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8. Duration of EDPs. There are no short cuts for entrepreneurial development. Under EDPs, an
attempt is made to provide self employment to unemployed through a series of activities
involving identification of potential entrepreneurs, providing them with the requisite
training, developing achievement motivation amongst them and helping them in various
ways for making them a successful entrepreneur. Since it is a lengthy process and as such
the duration of EDPs should be increased to six months so that these may remain relevant
and serve the purpose for which we are conducting these programmes.
PRODUCT PROCESS ORIENTED EDPS
The concept of organizing product/process oriented EDPs was introduced from 1990
onwards by Small Industries Development Organization as tool for widening the entrepreneurial
base by motivating a large number of young entrepreneurs in setting up self employment ventures.
The main feature of such training programmes is that participants are given practical exposure in
selected manufacturing activities in addition to class room lectures, group discussions, case studies
etc.
Since 1960 a large number of entrepreneurial development programmes were organized
both by the Government and Non Government Organizations. The courses were designed to
develop entrepreneurial skills among the participants. It was assumed that the proposed activities
and technology was not an essential input. This assumption was valid for technocrat entrepreneurs
who had good technology base but it was not so as far as other entrepreneurs were concerned. It
was discovered that the success rate amongst the participants of the general entrepreneurial
development programmes was uniformly low due to lack of proper knowledge of the participants in
key areas like technology, marketing, project management and product quality. The significance of
these inputs became more crucial for small entrepreneur who had to gear themselves up for multi
faceted role of designer, production supervisor, financial controller and marketing person besides
routine managerial activities. Looking at these shortcomings experts in Small Industries
Development Organisation (SIDO) through systematic analysis and brain storming sessions came to
the conclusion that entrepreneurial development programmes would need to be restructured with a
thrust to improve success ratio.
Small Industries Service Institute caters to the needs of existing small scale units and
prospective entrepreneurs to strengthen and develop small scale industries. It provides common
facility support services such as machinery, heat treatment, electroplating, designs and drawings to
small scale units to enhance their productivity. It initiates various promotional programmes aimed
at developing entrepreneurship amongst the educated unemployed youth belonging to various
sections of society. This Institute has conducted various product and process oriented programmes
of four to six weeks duration in different fields comprising of food processing, computer education,
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fashion garments, knitwear hosiery and cosmetics including herbal cosmetics. This institute instead
of paying stipend, levied fee on participant and still could attract a large number of potential
entrepreneurs. The institute took an initiative to design innovative course curricula to meet the
requirements of the programme. These programmes aim at instilling achievement motivation,
opportunity identification guidance, knowledge about assistance being provided by various
promotional agencies, project management etc. An effort is also made to improve technological and
marketing competence of the entrepreneurs. Theoretical knowledge is also supported by practical
exposure.
2.12 COURSE CONTENTS OF ENTREPRENEURIAL DEVELOPMENT PROGRAMME
Contents of entrepreneurial development programme arc decided keeping in mind the
Iraining requirements of both existing and the potential entrepreneurs.
The training programme may include the following aspects.
(i) Knowledge about entrepreneurship.
(ii) Motivational Training.
(iii) Basics of Management.
(iv) Project Study.
(v) Support System.
(vi) Initiating the Venture.
(vii) Factory Visits/Plant-Training
(i) Knowledge about entrepreneurship. Main objective is to acquaint a prospective entrepreneur
about minute details regarding factors affecting business, role of entrepreneurs in economic
development and availability of various incentives and facilities. Innovative behaviour
related issues should be focused to eighteen the entrepreneurs about future prospects and
challenges. Developmental agencies should highlight various risks inherent in the business
like technical, social, economic and environmental and suggest suitable strategies for
overcoming these risks.
(ii) Motivational Training. Motivational training inputs are meant to develop the motivation of
potential entrepreneurs and their enterprise building skills. Motivational training is aimed at
increasing the participant's level of confidence and developing the right attitude towards
business. The understanding of the entrepreneurial personality and behaviour will be
enhanced through interaction with successful and not so successful entrepreneurs.
(iii) Basics of Management. Prospective entrepreneurs are made conversant with the basic
management and technical know how to enable them to operate their enterprises effectively
and efficiently. These entrepreneurs are given exposure in different types of managerial
problems for shaipening their problem solving and managerial skills. This management
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 training may include knowledge about general management, purchase and production
management, marketing and financial management.
(iv) Project Study. Project inputs are required to help the potential entrepreneur to convert their
project ideas into viable projects. Necessary information regarding opportunities available in
the area and assistance in the selection of a product/project should be made available to the
prospective entrepreneurs. Essential information regarding project feasibility, viability and
implementation should be provided. Knowledge about technical and financial feasibility
should be made available.
Prospective entrepreneurs should be imparted proper training about scheduling of various
activities, provision for effective supervision and timely execution of project to save on
delays and cost overruns,
(v) Support System. Under this an attempt is made to tempt prospective entrepreneurs by
highlighting various incentives and facilities being made available by the government.
Support system is used as motivational input to encourage the participants about the future
prospects. They are made conversant with the concessions available like tax incentives, tax
holiday, backward/zero industries area concessions, soft loans scheme etc. Procedure for
applying for these concessions and availing these concessions/facilities is also made clear to
the entrepreneurs.
(vii) Initiating the Venture. This main purpose here is to give practical shape to the enterprise.
Here an attempt is made at familiarizing the participants about the proposed structural
arrangements for the business or industrial unit. Formalities regarding registration and
licensing procedures, forms of organizations etc are made clear to the participants. Training
is also imparted to entrepreneurs for mobilising of various resources for the setting up and
smooth running of the enterprise.
(viii) Factory Visits/Plant Training. Practical exposure to the participants is given organizing plant
visits. These trips provide entrepreneurs with opportunities to study entrepreneur, behaviour
and production processes.
The training method comprise of lectures, discussions, case studies, preparation of project
report and workshop exposure.
2.13 ROLE OF ENTREPRENEURIAL DEVELOPMENT PROGRAMME
An individual has two types of qualities, traits or skill i.e innate skills and skill which are not
entirely innate. Innate skills are those skills which can't be enhanced or developed. For, example
honest, integrity or habit of Industry. Such skills are found in the blood of an individual. He inherits
these skills in the form of genes from his parents. These can't be developed or enhanced through
education, training or experience.
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 An individual has also some qualities which are not innate. Such qualities can be enhanced
through, EDPs, education, training and experience. Similarly foresightedness can also be enhanced
through education, training and experience. EDPs help in enhancing qualities of an entrepreneur so
that he can successfully run his venture. EDPs are helpful in the following ways:
(i) Enhancing entrepreneurial qualities
The most important role of EDPs is to enhance the qualities of an entrepreneur so that he
can successfully run his enterprise. EDPs through training, education, experimental orientation
programmes tend to develop or enhance the entrepreneurial qualities.
(ii) Helps in formulating projects
EDP helps an entrepreneur in formulating project by providing the entrepreneur necessary
technical guidance and support. EDP helps him in formulating viable project within his means. It
gives him necessary information regarding infrastructural facilities, machinery and equipment, their
sources of supply along with addresses. Information regarding other inputs such as raw materials,
labour, land and building, power, methods of production, testing and quality control is also made
available.
(iii) Enhances capacity to search and exploit business opportunities:
EDP helps an entrepreneur to select a project suiting his attainments, resources and attitude.
It helps him in evaluating the various projects and products and choosing the project and product
which will give him maximum profit and which have good scope for further development in future.
(iv) Enhances capacity to search and exploit business opportunities:
Business opportunities have to be searched and exploited, they will not come
automatically. EDPs highlight available opportunities to the entrepreneurs and encourage
then to grab and exploit them. The entrepreneurs are guided to select a suitable project, appraise it
and mobilize the resources to start the enterprise.
(v) Strengthening and fulfilling motivation
EDPs arouse motivation among entrepreneurs through planned publicity of success stories
of other entrepreneurs and through cultivating among then reading and observation. An
entrepreneur is motivated to achieve or excel others. He is also motivated to influence others by his
achievements to satisfy his ego. This is done through achievement motivation training.
(vi) Enhancing the organization and Managerial abilities
EDPs help the entrepreneurs to enhance their organizing and managerial capabilities to run
their enterprises successfully. This is done through organizing educational, management training
and orientation programmes specialized agencies such as the National Institute for Entrepreneurship
and Small Business Development, New Delhi and Entrepreneurship Development Institute of India
(EDII), Ahmedabad are engaged in entrepreneurial development programmes.
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(vii) Assists in Setting up of the Enterprise
EDP helps an entrepreneur in setting up his enterprise. It is done through various support
services which provide funds, machinery and equipment, scarce raw materials and infrastructural
facilities such as land/shed, power etc.
(viii) Helps in acquainting and appreciating needed social responsibilities
An entrepreneur owes social responsibility towards the society. Earning profit cannot be the
sole objective of an entrepreneur. He should acquaint himself with his social responsibilities
towards, consumers, employees, Government, tax authorities in particular, environment protection,
etc. Not only he should appreciate them but also discharge them honestly. EDP helps him in this
process by identifying his social responsibilities.
(ix) Helps in knowing the pros and cons of being an entrepreneur
An entrepreneur should know the pros and cons of being an entrepreneur so that he can take
a decision as to whether or not he would like to become an entrepreneur. It is particularly essential
for an executive who wants to take a decision to stick to his job or to quit it to start his own
enterprise. Again, an entrepreneur has to properly assess the risk involved in a venture. He should
take only calculated and moderate risk.
(x) Helps in achieving entrepreneurial disciplines
Entrepreneurs also own a responsibility towards the society to observe certain discipline for
ex, he should discharge his liabilities: (i) Pay taxes (ii) observe environmental laws, (iii) maintain
ecology balance, (iv) regard dignity of labour.
2.14 RELEVANCE OF ENTREPRENEURIAL DEVELOPMENT PROGRAMME
An entrepreneurial development programme is relevant only if it proves fruitful to social,
economic, political and legal environment of a country. Various researches conducted in and
outside the country have shown that the countries which have implemented entire preneur
development programmes have attained high economic growth in various fields as compared to
those who have not done so. Economic development of a country never takes place by chance or
accident, it has to be designed. It is a result of constant and positive efforts made by the
Government and its agencies. Entrepreneurial development programmes search potential
entrepreneurs and encourage them to establish business in backward areas which help in balanced
regional growth. EDPs also encourage research and development which helps to establish new
business in and outside the country.
2.15 ACHIEVEMENTS OF ENTREPRENEURIAL DEVELOPMENT PROGRAMME
Entrepreneurial development programmes are the prerequisites for the overall economic
development of a country. EDP is a process in which entrepreneurs are prepared to establish

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develop and expand their business enterprise and face the business risks. Following are the major
achievement of EDPs.
(i) These programmes have played an important role in establishment development and
expansion of the practice oriented development programmes. Training is an integral part of
managerial and technical developments, and is essential for both old and new entrepreneurs.
In India, almost all the training programmes conducted are organized and developed under
EDPs. The steps taken by EDPs in this direction include (a) creation of necessary
infrastructure (b) preparing training syllabus (c) designing tools and techniques for selection
of trainees (d) identification of suitable and viable projects (e) specific training in technical
trades etc.
(ii) Entrepreneurial development programmes have also developed and established various
support systems necessary for the entrepreneurs. They strengthen and coordinate these
support systems. The major support systems are credit service and implementing
institutions.
(iii) Entrepreneurial development programmes have not only created a background for
industrialization but have also given momentum to it.
(iv) These programmes have contributed a lot to solve the problem of unemployment. EDPs
have helped to a great extent in this direction by starting self employment programmes and
by giving momentum to the speed of industrialization.
(v) Another achievement of these programmes is establishment and development of new
enterprises. It is very difficult task to establish and develop new enterprise in today’s
competitive era. EDPs have provided various inputs to establish new enterprises and also
have instructed by developing various entrepreneurial skills and qualities, like
farsightedness, imagination, patience, technical, knowledge etc.
(vi) Entrepreneurial education and training has spread because of entrepreneurial development
programs. This has resulted in increase in the knowledge, imaginative power,
farsightedness, decision making ability and risk taking ability of the entrepreneurs and has
also helped in developing personality.
(vii) Entrepreneurial development programmes have also contributed in project formulation.
Choosing a right type of project is a difficult task as resources are limited. The choice of a
project requires detailed analysis of technical and financial aspects requires detailed analysis
of technical and financial aspects. EDPs have proved very useful in such situation.
(viii) Many entrepreneurship development institutions have been established because of the EDPs
in India and abroad. For example, the major entrepreneurial development institute in India
are: (a) Management development institute (b) National institute for entrepreneurship and
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 small business development (c) entrepreneurial development institute of India (d) small
industry service institutes (e) small industries development organizations etc.
(ix) Entrepreneurial development programmes have helped in balanced regional development by
encouraging people to establish small industries in villages and background areas.
(x) Another important achievement of EDPs is availability of cheap and quality products to the
consumers. Due to EDPs new ventures have been established which have increased
competition and the tendency of open market. As a result of it the products which were out
of the reach of common man have reached him that too at cheaper rates. The standard of
living has improved, national income has increased and the economic power has
decentralized.
2.16 FINANCIAL INSTITUTIONS PROVIDING FINANCE TO ENTREPRENEURSHIPS AT
NATIONAL LEVEL.
Finance is the life blood of any enterprise. An entrepreneur has to assess his actual financial
requirements before the establishment of his enterprise. As the small scale entrepreneurs do not
have adequate amount of funds for establishing and running an enterprise, the Government of India
has set up a number of institutions to provide financial assistance to small scale entrepreneurs. The
various financial institutions which provide finance with the types of assistance to the enterpreneurs
in the country are listed as follows :
(i) Industrial Development Bank of India (IDBI)
(ii) Industrial Finance Corporation of India (IFC1)
(iii) Industrial Credit and Investment Corporation of India (ICICI)
(iv) Life Insurance Corporation of India (LIC)
(v) Unit Trust of India (UTI)
(vi) Small Industries Development Bank of India (SIDBI)
(vii) Industrial Reconstruction Bank of India (IRBI)
(viii) State Financial Corporation (SFC)
(ix) National Bank for Agriculture & Rural Development (NABARD)
(ix) EXPORT - IMPORT Bank (EXIMB)
(x) Regional Rural Banks (RRB)
(xii) National Industrial Development Corporation Ltd. (NIDC)
(xiii) Commercial Banks.
(xiv) Khadi & Village Industries Commission (KVIC).
(i) Industrial Development Bank of India : Established on july 1, 1964 by the Government of
India under the Act of Parliament, acts as the principal financial institution in the country. Initially,

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it was a wholly owned subsidiary of Reserve Bank of India & in feb. 1976 it was made an
autonomous organization & its ownership transferred to the Govt, of India from the RBI.
The objectives and function of IDBI are :
(a) Provides assistance to the small scale sector through its scheme of refinance and bill
rediscounting scheme.
(b) The financial assistance has been indirect in the form of refinancing of loans granted by the
commercial banks and the State Financial Corporations (SFCs)
(c) In order to assist the small scale sector, IDBI has set up Small Industries Development Fund
(SIDF) in may, 1986 aiming at providing a focal point to co-ordinate financial and non-
financial inputs required for growth of small industries sector.
(d) Constitution of National Equity Fund (NEF) to prevail equity type of support to tiny and
small scale units engaged in manufacturing activities in association with the govt, of India
and administered through nationalized banks.
(e) Introduction of the single window assistance scheme for grant of term loan and working
capital assistance to small, tiny & medium scale enterprises.
(f) Setting up of a Voluntary Executive Corporation Cell (VECI) for utilizing the services of
experts professionals for counseling small units and for providing consultancy support in
specified areas.
(g) To undertake market and investment research in connection with the development of
industry,
(h) To provide technical and administrative help for promotion, management and expansion of
industry.
(ii) Industrial Financial Corporation of India :
Established in July 1984 under IFCI Act by the Government of India and brought under
Companies Act, 1956 to provide long term finance to industries is the oldest financial institution
covering large scale industries. It has devised new promotional schemes such as :
(a) Consultancy fees subsidy schemes for assisting small scale entrepreneurs in marketing
sector.
(b) Interest subsidy scheme for unemployed youth, women entrepreneur etc;
(c) Pollution control in small and medium scale enterprises.
(d) Encouraging the modernisation of tiny, small & medium scale industries.
(iii) Industrial Credit and Investment Corporation of India Ltd.:
Established as a private sector development bank by the Govt. of India under the Indian
Companies Act in 1955, it was set up with the objective of providing financial assistance to

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 the small and medium scale sector. It also assists in the creation, expansion & modernization
of private enterprises.
(iv) Life Insurance Corporation of India (LIC) : Established under the LIC Act in 1956, offers
multitude of insurance policies to extend social security to various segments of the society.
As per its investment policy, it invests 75 percent and above in central & state Government's
securities including government guaranteed marketable securities & in the socially oriented
sector. It extends loans-for the following activities also:
(a) Housing,
(b) Rural electrification,
(c) Water supply & sanitation,
(d) Expansion, diversification of industrial ventures,
(e) Modernization of industry etc.
(v) Unit Trust of India : Set up by the Govt. of India in 1964 under an Act of Parliament with
the objective of:
(i) Mobilizing savings of small investors through sale of units and,
(ii) Channelizing these savings towards corporate investment. It also provides financial
assistance to corporate sector in the form of term loans and underwriting direct subscription
to shares and debentures.
(vi) Small Industries Development Bank of India : (SIDBI)
Established in the year 1989 as a subsidiary of IDBI to provide financial assistance to the
units in small sector in the form of indirect assistance and direct assistance. The initial
authorized capital of SIDBI was Rs 250 crores which can be extended upto Rs.1000 crores.
Its main functions include promotion of small scale industries in semi-urban areas to create
more employment opportunities, undertaking technological upgradation & modernization of
existing small scale industries & expansion of channels for marketing the products of SSI
sector on both domestic & international markets.
(vii) Industrial Reconstruction Bank of India : Set up in 1971 under the Indian Companies Act to
act as an agency to rehabilitate the sick units, was renamed as IRB1 (from IRCI-Industrial
Reconstruction Corporation of India) in 1984 by an Act of Parliament, Presently, it acts as a
reconstruction agency to revive, reconstruct & rehabilitate the sick industrial concerns.
(viii) State Financial Corporations : In order to cater to the needs of the small scale units, the
Government of India passed the State Financial Corporation Act in 1951 under which the
State Financial Corporations were set up. State Financial Corporations are managed by a
Managing Director, Board of Directors and the Executive Committee which is headed by a
Chairman. Its main functions includes advancing term loans to small scale & medium scale
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 industrial units, granting loans to industrial concerns repayable within period not exceeding
20 yrs & providing financial assistance to small road transport operators, tour operators,
hoteliers, hospitals & nursing homes etc.
(ix) National Bank of Agriculture and Rural Development (NABARD) : Set up to operate as an
apex bank in agriculture, it meets its loan requirements by drawing funds from the central
government, the World Bank & other agencies. Its main functions include acting as a
refinancing institution to advance loans to agriculture, small scale industries, cottage and
village industries, providing financial assistance to handicrafts sector, rural artisans,
agriculturists, farmers and entrepreneurs engaged in allied non-farm sector activities and
organizing-entrepreneurship development-programme skill-upgradation programmes for
tiny, small & medium scale entrepreneurs, workshops and seminars to promote integrated
rural development both in agriculture & industrial sectors.
(x) EXPORT-IMPORT Bank of India :
Established in the year 1982 by an Act of Parliament it took over the export loans &
guarantee portfolio of IDBI. The important functions of EXIM Bank includes advancing financial
assistance to exporters & importers and to boost India's export promotion strategy. It has also
introduced the following programmes:
(i) Export bills rediscounting.
(ii) Technology & consultancy.
(iii) Financing & relending facility to banks aboard.
(xi) Regional Rural Banks : Inaugurated on 2nd Oct 1976, with the objective of providing
financial credit needs of the small & marginal farmers, rural artisans, agricultural labourers,
small & tiny entrepreneurs. It also provides financial assistance to small entrepreneurs for
development of trade, commerce, industries, agriculture and other allied economic activities
in rural areas.
(xii) National Industrial Development Corporation Ltd. : Established in the year 1954 with the
objective of bringing about a balanced development of industries both in private and public
sectors, also aims to promote small and medium scale industries. Its main functions includes
extension of financial assistance for rehabilitation and modernisation of industries like
cotton textiles, jute industry and machine tools industry & conducting industrial potential
survey and seeks cooperation from private entrepreneurs to establish more industries in
private sector.
(xiii) Commercial Banks : They assist in providing finance to the entrepreneurs. In general,
commercial banks provide short-term loans in the shape of working capital to the small

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 entrepreneurs but with the development of industries, these banks have become more
interested in advancing long-term finance to the entrepreneurs,
(xiv) Khadi & village industries commission : It is a statutory body established by an Act of
Parliament in April, 1957 with the objective of generating employment avenues for rural
unemployed people through its different schemes such as Gramodyog Rojgar Yojana, to
develop entrepreneurship ability among the rural unemployed, mobilizing bank finance for
the entrepreneurs looking to the limited resources of KVIC & bringing about regional
balance in assisting cottage & village industries.
2.17 INSTITUTIONAL SUPPORT TO SMALL ENTREPRENEURS NATIONAL SMALL
INDUSTRIES CORPORATION LTD. (NSIC)
The National Small Industries Corporation Ltd. (NSIC), an enterprise under the Union
Ministry of Industries, was set up in 1955 to promote, aid and foster the growth of small scale
industries in the country. NSIC provides a wide range of services, predominantly promotional in
character to small scale industries. Its main functions are:
• To provide machinery on hire-purchase scheme to small scale industries.
• To provide equipment leasing facility.
• To help in export marketing of the products of small scale industries.
• To participate in bulk purchase programme of the Government.
• To develop prototype of machines and equipments to pass on to small scale industries for
commercial production.
• To distribute basic raw material among small scale industries through raw material depots.
• To help in development and upgradation of technology and implementation of
modernization programmes of small scale industries.
• To impart training in various industrial trades.
• To set up small scale industries in other developing countries on turnkey basis.
• To undertake the construction of industrial estates.
SMALL INDUSTRIES DEVELOPMENT ORGANISATION (SIDO)
Small Industries Development Organisation (SIDO) is a subordinate office of the
Department of SSI & ARI. It is an apex body and nodal agency for formulating, coordinating and
monitoring the policies and programmes for promotion and development of small-scale
industries. Development Commissioner is the head of the SIDO. He is assisted by various
directors and advisers in evolving and implementing various programmes of training and
management consultancy, industrial investigation, possibilities for development of different types
of small-scale industries, development of industrial estates, etc. The main functions of SIDO are

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classified into (i) co-ordination, (ii) industrial development, and (iii) extension. These functions are
performed through a national network of institutions and associated agencies created for specific
functions at present. The SIDO functions through 27 offices, 31 Small Industries Service Institutes
(SISI), 37 Extension Centres, 3 Product-cum-Process Development Centres, and 4 Production
Centres.
All small-scale industries except those falling within the specialised boards and agencies
like KVIC, Coir Boards, Central Silk Board, etc. fall under the purview of the SIDO.
Let us have a look at the main functions performed by the SIDO in each of its three
categories of functions.
FUNCTIONS RELATING TO CO-ORDINATION
• To evolve a national policy for the development of small scale industries,
• To co-ordinate the policies and programmes of various State Governments,
• To maintain a proper liasion with the related Central Ministries, Planning Commission,
State Governments, Financial Institutions, etc., and
• To co-ordinate the programmes for the development of industrial estates.
FUNCTIONS RELATING TO INDUSTRIAL DEVELOPMENT
• To reserve items for production by small-scale industries,
• To collect data on consumer items imported and then encourage the setting of industrial
units to produce these items by giving coordinated assistance,
• To render required support for the development of ancillary units and
• To encourage small scale industries to actively participate in Government Stores Purchase
Programme by giving them necessary guidance, market advice and assistance.
FUNCTIONS RELATING TO EXTENSION
• To make provision of technical services for improving technical process, production
planning, selecting appropriate machinery, preparing factory lay-out and design,
• To provide consultancy and training services to strengthen the competitive ability of small-
scale industries,
• To render marketing assistance to small-scale industries to effectively sell their products,
and
• To provide assistance in economic investigation and information to small-scale industries.
SMALL SCALE INDUSTRIES BOARD (SSIB)
The Government of India constituted a Board, namely, Small Scale Industries Board (SSIB)
in 1954 to advise on development of small scale industries in the country. The SSIB is also known
as Central Small Industries Board. The range of developmental work in small scale industries

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involves several departments/ministries and several organs of the Central/State Government. Hence,
to facilitate co-ordination and inter-institutional languages, the Small Scale Industries Board has
been constituted. It is an apex advisory body constituted to render advice to the Government on all
issues pertaining to the development of small-scale industries.
The Industries Minister of the Government of India is the Chairman of the. SSIB. The SSIB
comprises of 50 members including State Industry Minister, some Members of Parliament,
Secretaries of various Departments of Government of India, financial institutions, public sector
undertakings, industry associations and eminent experts in the field.
STATE SMALL INDUSTRIES DEVELOPMENT CORPORATIONS (SSIDC)
The State Small Industries Development Corporations (SSIDC) were set up in various States
under the Companies Act, 1956, as State Government Undertakings to cater to the primary
developmental needs of the small, tiny and village industries in the State/Union Territories under
their jurisdiction. Incorporation under the Companies Act has provided SSIDCs with greater
operational flexibility and wider scope for undertaking a variety of activities for the benefit of the
small sector.
The important functions performed by the SSIDCs include:
• To procure and distribute scarce raw materials.
• To supply machinery on hire purchase system.
• To provide assistance for marketing of the products of small-scale industries.
• To construct industrial estates/sheds, providing allied infrastructure facilities and their
maintenance.
• To extend seed capital assistance on behalf of the State Government concerned. Provide
management assistance to production units.
SMALL INDUSTRIES SERVICE INSTITUTES (SISIs)
The Small Industries Services Institutes (SISIs) are set up to provide consultancy and
training to small entrepreneurs—both existing and prospective. The activities of SISIs are
coordinated by the Industrial Management Training Division of the DCS office. There are 28 SISIs
and 30 Branch SISIs set up in State capital and other places all over the country.
The main functions of SISIs include:
• To serve as interface between Central and State Governments.
• To render technical support services.
• To conduct Entrepreneurship Development Programmes.
• To initiate promotional programmes.
The SISIs also render assistance in the following areas:

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(i) Economic Consultancy/Information/EDP Consultancy.
(ii) Trade and market information’s.
(iii) Project profiles.
(iv) State industrial potential survey.
(v) District industrial potential surveys.
(vi) Modernisation and in plant studies.
(vii) Workshop facilities.
(viii) Training in various trade/activities.
DISTRICT INDUSTRIES CENTRES (DICS)
The District Industries Centres (DICs) programme was started on may 8, 1978 with a view
to provide integrated administrative framework at the district level for promotion of small-scale
industries in rural areas. The DICs are envisaged as a single window interacting agency with the
entrepreneur at the district level. Services and support to small entrepreneurs are provided under a
single roof through the DICs. They are the implementing arm of the Central and State Governments
of the various schemes and programmes. Registration of small industries is done at the district
industries centres. The SEEUY/PMRY for employment generation is also implemented by the
DICs.
The organizational structure of DICs consists of one General Manager, four Functional
Managers and three Project Managers to provide technical service in the area relevant to needs of
district concerned. Management of the DICs is done by the State Governments. The scheme has
now been transferred to the states and from the year 1993-94, funds will not be provided by the
Central Government to the States for running the DICs.
FUNCTIONS:
The DICs role is mainly promotional and developmental. To attain this, they have to perform
the following main functions:
• To conduct industrial potential surveys keeping in view the availability of resources in terms
of material and human skill, infrastructure, demand for product, etc. To prepare techno-
economic surveys and identify product lines and then to provide investment advice to
entrepreneurs..
• To prepare an action plan to effectively implement the schemes identified
• To guide entrepreneurs in matters relating to selecting the most appropriate machinery and
equipment, sources of its supply and procedure for procuring imported machinery, if
needed, assessing requirements for raw materials etc.
• To appraise the worthiness of the various proposals received from entrepreneurs.

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 • To assist the entrepreneurs in marketing their products and assess the possibilities of
ancillarisation and export promotion of their products.
• To undertake product development work appropriate to small industries.
• To conduct artisan training programmes.
• To function as the technical arms of DRDA in administering IRD and TRYSEM
programmes.
FUNCTIONS OF DIC
• To help the entrepreneurs in clarifying their doubts about the matters of operation of bank
accounts, submission of monthly, quarterly and annual returns to Government Departments.
• To act as the nodal agency for the district for implementing PMRY (Prime Minister Rojagar
Yojana).
• To help the specialized training organizations to conduct entrepreneur development
programmes.
In a nut shall, DICs function as the torch-bearer to the beneficiaries / entrepreneurs in setting
up and running the business enterprise right from the concept to commissioning. So, the role of
DICs in enterprise building and developing small scale sector is of much significance.
INDUSTRIAL ESTATES
Industrial estates are yet another institutional measure to promote industrialization in the
country. In India, industrial estates have been utilized as an effective tool for the promotion and
growth of small-scale industries. They have also been used as an effective tool to decentralize
industrial activity to rural and backward areas. Industrial estates are also known by different names,
e.g., industrial region, industrial park industrial area, industrial zone, etc. Let us consider a few
definitions on industrial estates given by different authors and agencies.
According to RC. Alexander, an industrial estate is a group of factories, constructed on an
economic scale in suitable-sites with facilities of water, transport, electricity, steam, bank, post
office, canteen, watch and ward and first-aid, and provided with special arrangements for technical
guidance and common service facilities.
In the opinion of Bredo, an industrial estate is a tract of land which is sub-divided and
developed according to a comprehensive plan for the use of a community of industrial enterprises.
The United Nations has defined an industrial state as “a planned clustering of enterprises
offering standard factory buildings erected in advance of demand and variety of services and
facilities to the occupants.”
Thus, an industrial estate is a place where the required facilities and factory accommodation
are provided by the Government to the entrepreneurs to establish their industries there.

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TYPES OF INDUSTRIAL ESTATES
Industrial estates are classified on various bases. The prominent ones are:
1. On the Basis of Functions: On the basis of functions, industrial estates are broadly classified
into two types: (i) General type industrial estates, and (ii) Special type industrial estates.
General Type Industrial Estates: These are also called as conventional or composite
industrial estates. These provide accommodation to a wide variety and range of industrial concerns.
The Indian industrial estates are mainly of this type.
Special Type Industrial Estates: This type of industrial estates are constructed for specific
industrial units, which are vertically or horizontally interdependent.
2. On the Basis of Organisational Set-up: On this basis, industrial estates are classified into
following four types:
(i) Government Industrial Estates,
(ii) Private Industrial Estates,
(iii) Co-operative Industrial Estates and
(iv) Municipal Industrial Estates.
3. On the Basis of Other Variants: On the basis of other variants, industrial estates are
classified into following types:
(i) Ancillary Industrial Estates: In such industrial estates, only those small-scale units are
housed which are ancillary to a particular large industry. Examples of such units are like one
attached to the HMT, Bangalore.
(ii) Functional Industrial Estates: Industrial units manufacturing the same product are usually
housed in these industrial estates. These industrial estates also serve as a base for expansion
of small units into larger units.
(iii) The Workshop-bay: Such types of industrial estates are constructed mainly for very small
firms engaged in repair work.
OBJECTIVES OF INDUSTRIAL ESTATES
The main objectives of the establishment of industrial estates are:
(i) To provide infrastructure and accommodation facilities to the entrepreneurs;
(ii) To encourage the development of small-scale industries in the country;
(iii) To decentralize industries to the rural and backward areas;
(iv) To encourage ancillarisation in surrounding major industrial units; and
(v) To develop entrepreneurship by creating a congenial climate to run the industries in these
estates/areas/townships, etc.

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INDUSTRIAL ESTATES IN INDIA
One of the major handicaps faced by small-scale industries in India has been either lack or
insufficient infrastructure facilities. In order to provide small-scale units the readymade
buildings/factory sheds at subsidised rates, infrastructure facilities and the proximity of other
industrial units, the idea of establishing industrial estates was first adopted in India by the Small-
Scale Industries Board (SSIB) at its meeting held in January 1955. As a result, the first industrial
estate in India was set up at Rajkot in Gujarat in September 1955. Since then, there is no looking
back. By now, the number of industrial estates in the country had gone up to more that 650—
making it the largest programme of its kind in the world.
The objectives tagged to the programme included to give a boost to the growth of small-
scale industries in the country, to disperse industry outside the metropolitan towns, to relocate
existing units operating in congested areas, to provide sub-contracting opportunities to small
industry and to improve operational efficiency of small units through common facilities. However,
studies report findings contrary to it. The outside units have performed better than units working
inside the industrial estates. The reasons held responsible for poor performance of industrial units
working inside the industrial estates were:
• Lack of essential infrastructure facilities such as roads, power and water.
• Lack of common facilities such as a tool room, heat treatment, or testing.
• Lack of realistic survey prior to the establishment of the estate.
• Lack of a clear idea about the relevance of products to the area.
• Lack of local involvement and active participation in the programme.
Added to these problems was that the most of the estates were general purpose estates' in
diverse product groups having no organic relationship between them. As such, the possibility of
establishing common production facilities was highly limited. Hence, in order to forge organic
relationship between them, the Industrial Estate Programme was modified on two counts. Firstly,
the estates were set up on a functional basis in specific product areas like electronics, leather and
rubber or as ancillary to a present unit-such as HMT (Bangalore), BHEL (Bhopal) or ECIL
(Hyderabad) etc. Secondly, in the matter of funding, the estates became either co-operatives or the
Government merely developed land and the entrepreneur has to build his shed according to an
approved type design.
Now, how to make this noble programme more effective to boost the growth of small-scale
industry in the country? An industrial estate alone cannot create industry. It is not a magic wand.
The following factors, according to a survey conducted by UNIDO, are essentials to make the
industrial estate programme effective in developing countries including India:

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 • Existence of a large number of small firms or artisan shops in appropriate industrial sectors;
• Entrepreneurs willing and able to take advantage of the facilities offered by the industrial
estates;
• A nucleus of skilled workers;
• Government agencies with skills and funds to plan and administer the programme. Financial
institutions willing to give credit to the units; and
• Availability of adequate infrastructure in terms of water, electricity and transport.
2.18 SPECIALISED INSTITUTIONS
In addition to the above institutions, the Government has also set up the following
specialized institutions to boost the growth of all types of small-scale industries in the country:
(i) Central Institute of Tool Design, Hyderabad
The Central Government set up this Institute in 1968 with the help of UNDP and ILO to
help small-scale industries by imparting specialized training to the personnel working in the design
and manufacture of tools, jigs, fixtures, dies and moulds. The other functions performed by it are:-
(a) To offer consultancy and advisory services and assistance in the design and development of
tools.
(b) To suggest proper measures to improve the standard of tools, tooling elements, jig
components, fixtures, dies etc.
(c) To offer the needed tool room facility.
A governing council which consists of representatives of the Government and industry is
constituted to look after the management of the Institute. The governing council is headed by the
Development Commissioner (SSI).
(ii) Central Tool Room Training Centres
In order to provide tool room services and facilities in design, manufacture and training, the
Government has set up four tool room framing centres located at Bangalore, Calcutta, Ludhiana and
New Delhi.
(iii) Central Institute of Hand Tool, Jalandhar
This institute has been set up with a view to provide improved technology, raw materials,
design and testing for handloom industry. This is the only institute of its kind in the country located
at Jalandhar.
(iv) Institute for Design of Electrical Measuring Instruments (IDEM), Mumbai
This institute was set up in 1969 with the assistance from UNDP. It was set up to provide
technical consultancy services in the matters relating to design and development of electrical and
electronic instruments, tool designing and fabrication and training.

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(v) National Institute of Entrepreneurship and Small Business Development (NISEBUD), New
Delhi
It is an apex national level institute of its kind set up at New Delhi in 1983. Its main
functions are to coordinate research and training in entrepreneurship development and to impart
specialised Iraining to various categories of entrepreneurs. Besides, it also serves as a forum for
interaction and exchange of views between various agencies engaged in activities relating to
entrepreneurial development.
(vi) National Institute of Small Industries Extension Training (NISIET), Hyderabad
This institute was set up in 1956 to develop the required manpower for running small-scale
industries in the country. Accordingly, its main functions are:
(a) To impart training to the persons engaged in small-scale industries.
(b) To undertake research studies relating to development of small-scale industries.
(c) To enter into agreements relating to consultancy services both with national and
international organisations to provide consultancy services to small industries in the country.
The institute conducts courses in business management for the benefit of the entrepreneurs
and semi-managerial personnel of small industries. It is located at Hyderabad,
(vii) Other Institutes
Following are some of the important institutes set up by the Government for development of
small-scale industries:
(a) Electronic Training and Service Institute, Nainital.
(b) Central Machine Tools Limited, Bangalore.
(c) Sports Goods and Leisure Time Equipment, Meerut.
(d) Central Institute of Plastics Engineering and Tools, Madras.
(e) National Institute of Foundary and Forging Technology, Ranchi.
TECHNICAL CONSULTANCY ORGANISATIONS (TCOs)
A network of Technical Consultancy Organizations (TCOs) was established by the all-India
financial institutions in the seventies and the eighties in collaboration with state-level
financial/development institutions and commercial banks to cater to the consultancy needs of small
industries and new entrepreneurs. At present, there are 17 TCOs operating in various states, some of
them covering more than one state. These 17 TCOs are:
1. Andhra Pradesh Industrial and Technical Consultancy Organisation Ltd. (APITCO).
2. Bihar Industrial and Technical Consultancy Organisation Ltd. (BITCO).
3. Gujarat Industrial and Technical Consultancy Organisation Ltd. (GITCO).
4. Haryana-Delhi Industrial Consultants Ltd. (HARDICON).
5. Himachal Consultancy Organisation Ltd. (HIMCO).
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6. Industrial and Technical Consultancy Organisation of Tamil Nadu Ltd. (ITCOT).
7. Jammu and Kashmir Industrial and Technical Consultancy Organisation Ltd. (J&KTTCO).
8. Karnataka Industrial and Technical Consultancy Organisation Ltd. (KITCO).
9. Madhya Pradesh Consultancy Organisation Ltd. (MPCON).
10. Maharashra Industrial and Technical Consultancy Organisation Ltd. (MITCON).
11. North-Eastern Industrial Consultants Ltd. (NECON).
12. North-Eastern Industrial and Technical Consultancy Organisation Ltd. (NEITCO).
13. North-India Technical Consultancy Organisation Ltd. (NITCON).
14. Orissa Industrial and Technical Consultancy Organisation Ltd. (ORITCON).
15. Rajasthan Consultancy Organisation Ltd. (RAJCON).
16. U.P. Industrial Consultants Ltd. (UPICO).
17. West Bengal Consultancy Organisation Ltd. (WEBCON).
FUNCTIONS
Initially, TCOs functions were focused on pre-investment studies for small and medium
scale enterprises. Over the years, they have diversified their functions to include the following:
• To prepare project profiles and feasibility profiles.
• To undertake industrial potential surveys.
• To identify potential entrepreneurs and provide them with technical and management
assistance
• To undertake market research and surveys for specific products.
• To supervise the project and where necessary, render technical and adroinistrative
assistance.
• To undertake export consultancy for export-oriented projects based on modern technology.
• To conduct entrepreneurship development programmes.
• To offer merchant banking services.
2.19 INSTITUTIONAL SUPPORT FOR EDP
The following institutions were set up by the central and state governments.
(a) Institutions set up by Central Government
1. Small Industries Development Organization (SIDO): SIDO was established by the Central
Government in 1954. It has 27 Small Industries Service Institutes, 31 Branch Institutes, 38
Expansion Centres, 4 Regional Training Centres, 20 Local Testing Centres, 4 Product-
coprocess Centres, 2 Shoe Training Centres and 4 production Centres. In addition to provide
services in these area, SIDO is also engaged in providing training to the entrepreneurs.

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2. Management Development Institute (MDI): Management Development Institute is located
at Gurgaon (Haryana). It was established in 1973 and is sponsored by Industrial Finance
Corporation of India with the objective of improving managerial effectiveness in the
industry. It conducts management development programmes in various fields. It also
includes the programmes for the officers of Indian Administrative Services (IAS), Indian
Economic Services (IES) and for the officers of a number of public sector undertakings like
Bharat Heavy Electrical Ltd. (BHEL), Oil and Natural Gas Commission (ONGC), Bharat
Aluminum Company Ltd. (BALCO), Export-Credit Guarantee Corporation of India
(ECOC), Hindustan Zinc Ltd. (HZL), Hindustan Machine Tool Ltd. (HMT) and many
leading PSU's.
3. Entrepreneurship Development Institute of India (EDII) : EDII is sponsored by All India
Financial Institutions and the Government of Gujarat. It conducts research, training and
institution building activities to encourage participation of backward regions and special
target-groups in entrepreneurship. The training programmes of EDII consist of:
(a) Selection of potential entrepreneurs,
(b) Providing achievement motivation training,
(c) Selection of the product and preparation of project report,
(d) Training for business management,
(e) Practical training and work experience,
(f) Support system and follow up.
The programmes of Entrepreneurship Development Institute of India are the oldest, largest,
best organised and most comprehensive in the country.
4. All India Small Scale Industries Board (AISSIB): Established in 1954, the AISSIB
determines the policies and programmes for the development of small industries with a
Central Government Minister as its president and the representatives of various organisation
i.e., Central Government, State Government, National Small Industries Corporation, State
Financial Corporation, Reserve Bank of India, State Bank of India, Indian Small Industries
Board, Non-government members, such as members of Public Service Commission, Trade
and Industries Members.
5. National Institution of Entrepreneurship and Small Business Development (NIESBUD),
New Delhi: It was established in 1983 by the Government of India. It is an apex body to
supervise the activities of various agencies engaged in entrepreneurial development
programmes.
It is a society under Government of India Societies Act of 1860. When there is absence of
organization conducting new EDPs it assumes the task. The major activities of Institute are:
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(a) To evolve effective training strategies and methods,
(b) To formulate scientific selection procedures,
(c) To standardize model syllabi for training,
(d) To develop training aids, tools and manuals,
(e) To provide facilities and other support agencies engaged in EDPs,
(f) To conduct EDPs which are not undertaken by other agencies,
(g) To evaluate the benefits of EDPs and promoting the process of entrepreneurial development,
(h) To conduct workshops, seminars, conferences etc.,
(i) To help and support various Governments and other agencies in executing entrepreneur
development programmes,
(j) To undertake research and development in the field of EDPs.
FUNCTIONS OF THE INSTITUTE
(i) To evolve effective training strategies and methodology,
(ii) To formulate scientific selection procedures,
(iii) To standardize model syllabi for training various target groups,
(iv) To develop training aids, manuals and other tools,
(v) To facilitate and support agencies engaged in entrepreneurship development,
(vi) To conduct such programmes which are not undertaken by other agencies,
(vii) To measure their benefits and accelerating the process of entrepreneurial development,
(viii) To organise all those activities that help and develop entrepreneurship culture in society,
(ix) To undertake documentation and research in the field of entrepreneurship and
small business development,
(x) To conduct workshops, seminars and conferences, etc., for entrepreneurship
development,
(xi) To assist in setting up of regional and state level training institutes for entrepreneurship and
small business development.
6. National Institute of Small Industries Extension Training: It was established in 1960 with its
headquarters at Hyderabad. The main objectives of National Institute of Small Industries
Extension Training are:
(a) Directing and Coordinating syllabi for training of small entrepreneurs,
(b) Advising on managerial and technical aspects,
(c) Organizing seminars for small entrepreneurs and managers,
(d) Providing services regarding research and documentation.
7. National Small Industries Corporation Ltd. (NSIC): The NSIC was established in 1955 by
the Central Government with the objective of assisting the small industries in the
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 Government purchase programmes. The corporation provides a vast-market for the products
of small industries through its marketing network. It also assists the small units in exporting
their products in foreign countries.
8. Risk Capital and Technology Finance Corporation Ltd (RCTFC): RCTFC was established in
1988 with an authorized capital of 15 crore rupees. The main objectives of RCTFC are
provision of risk capital for the extension and expansion of entrepreneurial development and
venture capital for the projects with high techniques for technology development and
transfer.
9. National Research and Development Corporation (NRDC): NRDC was established in 1953
under Department of Science and Industrial Research under Government of India. Its main
objectives are:
(i) Providing assistance in technology transfer,
(ii) Transfer of technology,
(iii) Establishing relations with various technology institutions and collecting various indigenous
techniques developed by them.
At present there are 29 training centres of the Corporation in India.
10. Indian Investment Centre: This is an autonomous organization established by Central
Government. Its main objective is to assist in promoting foreign cooperation with Indian
entrepreneurs and providing necessary information to foreign entrepreneurs. Indian
Investment Centre has also established Entrepreneurship Consultancy Institute with the
objective of identifying useful projects. In addition this Institute helps entrepreneurs in
preparation of project, selection of proper place and necessary financial assistance.
11. Khadi and Village Industries Commission (KVIC): Khadi and Village Industries
Commission was established by an Act of Parliament in 1956. It is a service organization
engaged in promotion and development of Khadi and Village Industries in rural areas. Its
main objectives are:
(i) Providing employment in rural areas
(ii) Improvement of skills
(iii) Rural Industrialization
(iv) Transfer of technology
(v) Building strong rural community base and self reliance among rural people.
12. Indian Institute of Entrepreneurship (IIE) : It was established by the Department of Small
Scale Industries and Agro and Rural Industries in 1953. It is an autonomous organization
with its headquarters at Guwahati. Its main objective is to undertake research, training and
consultancy activities in the field of small industry and entrepreneurship.
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13. National Alliance of Young Entrepreneurs (NAYE) : It has sponsored a number of
entrepreneurial development schemes in collaboration with various public sector banks. The
main object of the scheme is to encourage young entrepreneurs to explore investment and
self-employment opportunities. It arranges for their training and assists them in procuring
necessary finance. In 1975 NAYE also set up a Women's wing. It has been a pioneer in
promotion and development of young entrepreneurs in general and the women entrepreneurs
in particular. To make women self-reliant and to raise their status NAYE has organised a
number of National and International conferences.
14. Centre for Entrepreneurial Development (CED) Ahmedabad : It was sponsored by the
Government of Gujarat and public financial institutions operating in the state. It conducts
entrepreneurial development programmes at various centres. The important features of these
training programmes are:
(i) Training programmes were conducted after a survey for opportunities was made.
(ii) Appropriate linkage was established with supporting agencies supplying finance, factory
sheds, raw materials, etc.
(iii) Behavioural tests were conducted to select the entrepreneurs.
(iv) Training programmes covered theoretical and practical aspects.
(v) Full time project leader took follow up action after the training was over.
15. Institute for Entrepreneurial Development (1ED): It was set up by the IDBI in association
with other financial institutions, public sector banks and the State Governments. The IEDs
were set up to fulfill the entrepreneurial development needs of the industrially backward
states in the country. IEDs have been set up in a few states where IEDs have conducted a
number of EDPs on subjects such as motivation, business opportunities, entrepreneurial
awareness programme and project counselling for women.
16. Technical Consultancy Organization (TCOs) : A network of TCOs has been established by
All India Financial Institutions and State Government throughout the country. These
organizations have been set up with the objective of providing a comprehensive package of
services to entrepreneurs in general and to small business entrepreneurs in particular. Their
main functions include the following:
(a) Identifying potential industrial projects.
(b) Preparing project reports, feasibility reports and pre-investment status.
(c) Identifying potential entrepreneurs.
(d) Providing technical and administrative support.
(e) Conducting techno-economic studies of the projects.
(f) Conducting market research and surveys.
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(g) Acting as industrial management and financial consultant.
(h) Helping entrepreneurs in technology up gradation, modernization and rehabilitation of sick
units.
(i) Maintaining data bank and information cell to provide information for entrepreneurial
development.
(j) Rendering advice to set up laboratories and design centre,
(k) Rendering assistance for setting up and organizing machine tool shops, workshops and
standardization units. The major thrust of TCOs has been in the field of project
identification and project formulation.
The TCOs also take keen interest in marketing and motivation development programmes
for the entrepreneurs.
17. Public Sector Banks: Public sector banks in association with NAYE have been conducting
entrepreneurial development programmes. The main thrust of these banks has been to
identify potential entrepreneurs in rural and backward areas. For example,. Punjab National
Bank started entrepreneurial assistance programme in March 1977 in the states of West
Bengal and Bihar. Similarly, Bank of India started entrepreneurial assistance programme
since August 1972 in the states of Punjab, Rajasthan, Himachal Pradesh, J&K and the Union
Territories of Chandigarh and Delhi.
These banks have been rendering assistance to potential entrepreneurs in various
forms. The important forms of entrepreneurial assistance are:
(i) Identifying potential entrepreneurs.
(ii) Identifying viable projects.
(iii) Assisting in preparation of project profiles.
(iv) Helping in project evaluation.
(v) Arranging practical training.
(vi) Assisting in the procurement of machinery and equipment.
(vii) Financing the projects.
18. Miscellaneous Organizations: In addition to above, various organizations at all India level
are assisting and are engaged in entrepreneurship development. These include ICICI, IFCI,
IDBI, UTI, IDBI, IIBI etc.
(b) Institution set up at State Level
There are a number of institutes established at state level for organizing, developing,
assisting and making successful entrepreneurial development programmes. Prominent among these
are :

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1. Small Industries Service Institutes (SISI),
2. State Financial Corporations (SFC),.
3. State Small Industries Corporations (SSIC),
4. District Industries Centres (DIC),
5. Technical Consulting Organization Ltd. (TCO),
6. Industries Directorates,
7. Commercial and Cooperative Banks,
8. State Industrial Development Corporations,
9. Industrial Estates,
2.20 SUMMARY
Entrepreneurship environment refers to the various positive and negative constraints within
which various enterprises are required to operate. The environment especially the external
environment is highly dynamic. It keeps on changing and affects different organizations to a
varying extent.
Entrepreneurial development programme plays very important role in the development of
business and industry. EDPs are based on the thinking that the attitude of people can be changed by
developing their skill, so that they can convert their ideas into an organization.
The process of industrial development require the participation of large number of people
engaged in various innovative entrepreneurial activities. One of the obstacles in such development
is finance which becomes the primary duty of the govt, to provide. Such finance is made available
by setting up financial instructions all over the country.
Entrepreneurs play an important role in the economic growth of a nation. Entrepreneurs act
as innovator, generator of employment, supplement and complement of economic growth and bring
social stability.
2.21 SELF ASSESSMENT QUESTIONS
1. Define Entrepreneurial Environment
2. Discuss various Environmental factors
3. Discuss socio-economic environment in the emergency of entrepreneurship.
4. Explain entrepreneurial development programme.
5. What are the problems in the conduct of EDP?
6. Define role, relevance & achievement of entrepreneurial development programme.
7. What are the institutional support to EDP?
8. What are the financial institutions established to provide finance to the entrepreneurship in
national level?
9. What are the suggestions to move EDP successful?
10. What are the needs for EDP?

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