introduction and history, theory of entrepreneurship, types

1. ENTREPRENEURSH
IP
DEVELOPMENT
(UNIT – I)

2.  Entrepreneurship is the process of designing, launching and
running a new business, which is often initially a small business.
The people who create these businesses are called entrepreneurs.
 Entrepreneurship has been described as the "capacity and
willingness to develop, organize and manage a business venture
along with any of its risks in order to make a profit".
 Entrepreneurship is the process by which either an individual or a
team identifies a business opportunity and acquires and deploys
the necessary resources required for its exploitation.
ENTREPRENEURSHIP

3.  An Entrepreneur is an entity which has the ability to
find and act upon opportunities to translate inventions
or technology into new products.
 "The entrepreneur is able to recognize the commercial
potential of the invention and organize the capital,
talent, and other resources that turn an invention into a
commercially viable innovation.
 Entrepreneur is the owner or manager of a business
enterprise who, by risk and initiative, attempts to make
profits and oversee the launch and growth of an
enterprise.
ENTREPRENEUR

4. ENTREPRENEUR VS.
ENTREPRENEURSHIP

5. BASIS FOR COMPARISON BUSINESSMAN ENTREPRENEUR
Meaning A businessman is someone who
sets up a business with an
existing idea offering products
and services to the customers.
An entrepreneur is a person who
starts an enterprise with a new
idea or concept, undertaking
commercial activities.
Market Position Market Player Market Leader
Nature Calculative Intuitive
Market Creates place in existing markets Creates new market
Risk factor Less Comparatively high
Methods applied for doing
things
Conventional Unconventional
Approach Holistic Atomistic
Orientation Profit People
Competition Very high Low
BUSINESS VS. ENTREPRENEUR

6. Economic
activity
Related to
innovation
Profit
potential
Risk
bearing
Skillful
management
Accepting
challenges
Goal-
oriented
Activity
Value
Creation
Dynamic
Process
Uniqueness
Interest and
Vision
Risk and
Rewards
CHARACTERISTICS OF
ENTREPRENEURSHIP

7. Development of
managerial
capabilities
Creation of
organizations
Improving
standards of
living
Means of
economic
development
It offers business
avenues to
women and
minorities.
Dispersal of economic
activities to different
sectors of economy
and identifying new
avenues of growth.
Improvement of the
standard of living of
different weaker
sections in the
society.
Bring socio
political change in
the society.
Develop
technological
know-how.
Improve culture of
business and expand
commercial
activities.
Exploitation of
economy’s resources,
such as labor, capital
and technology to the
fullest extent.
IMPORTANCE OF
ENTREPRENEURSHIP

8. Individual
factors
Need
achievement
Personality
factors
Withdrawal of
status report
initiative
motive
Environmental
factors
Political
Political
system
Economic
policies
Social factors
Family
background
Education
Cultural values
Caste
Economic
factor
Capital
Labor
Raw material
Market
Infrastructure
Factors Affecting
Entrepreneurship

9. DIFFERENT TYPES OF
ENTREPRENEURS

10.  Innovative : he is one who launches new products, discovers new
markets, establishes new methods of production and restructures
the enterprise.
 Imitative or adoptive : they adopt victorious innovations launched
by the innovative entrepreneurs. They duplicate the technology and
techniques innovated by others and they are suitable for
underdeveloped countries.
 Fabian : They are exemplified by great caution and skepticism in
experimenting any change in the organization. They imitate only in
situations where it becomes necessary to do so.
 Drone : they suffer losses, as they refuse to make any
modifications in the existing production methods. They are
characterized by a refusal to adopt opportunities to make changes
in production formulae even at the cost of severely reduced returns.
A) BASED ON FUNCTIONAL
CHARACTERISTICS

11.  Prime mover: This entrepreneur sets in motion a powerful
sequence of development , expansion and diversification of
business.
 Manager: Such an entrepreneur does not initiate expansion and is
content just staying in business.
 Minor innovator: This entrepreneur contributes to economic
progress by finding better use for existing resources.
 Satellite: This entrepreneur assumes a supplier’s role and slowly
moves towards a productive enterprise.
 Local trading: Such an entrepreneur limits his enterprise to the
local market.
B) BASED ON DEVELOPMENTAL ANGLE:

12.  Manufacturing: An entrepreneur who runs such a business
actually produces the products that can be sold using resources
and supplies.
 Wholesaling : An entrepreneur with such a business sells
products to the middle Man.
 Retailing : An entrepreneur with such a business sells products
directly to the people who consume them.
 Service : An entrepreneur in this business sells services rather
than products.
C) BASED ON TYPES OF
ENTREPRENEURIAL BUSINESS

13.  The Improver : They have an unwavering ability to run their
business with high integrity and ethics.
 The Advisor :This business personality type will provide an
extremely high level of assistance and advice to customers.
 The Superstar : Here the business is centered on the charisma and
high energy of the Superstar CEO.
 The Artist :This business personality is the reserved but a highly
creative type. Often found in businesses demanding creativity such
as web design and ad agencies .
 The Visionary : A business built by a Visionary will often be based
on the future vision and thoughts of the founder . You will have a
high degree of curiosity to understand the world around you and
will set up plan to avoid the land mines.
D) BASED ON THE NINE PERSONALITY
TYPES OF ENTREPRENEURS

14.  The Analyst: If you run a business as an analyst, your company focus
is on fixing problems in a systematic way . Often the basis for science
,engineering or computer firms, Analyst companies excel at problem
solving.
 The Fireball : A business owned and operated by a Fireball is full of
life, energy and optimism. Your company is life-energizing and makes
customers feel the company has a get it done attitude in a fun playful
manner.
 The Hero : You have an incredible will and ability to lead the world
and your business through any challenge. You are the essence of
entrepreneurship and can assemble great companies.
 The Healer: If you are a Healer, you provide nurturing and harmony to
your business.
CONT.…

15. THEORIES OF
ENTREPRENEURSHIP
1. Innovation Theory of Schumpeter
2. Need for Achievement Theory of McClelland
3. Leibenstein’s X-efficiency Theory
4. Risk Bearing Theory of knight.
5. Hagen’s Theory of Entrepreneurship
6. Economic Theory of Entrepreneurship

16.  The theory was advanced by one famous scholar, Schumpeter, in
1991.
 Schumpeter believes that creativity or innovation is the key factor
in any entrepreneur’s field of specialization.
 He viewed innovation along with knowledge as the main catalysts
of successful entrepreneurship.
 He is the first major theorist to put the human agent at the center
of the process of economic development.
 He makes a distinction between an innovator and an inventor:
An inventor discovers new methods and new materials. On the
contrary, an innovator is one who utilizes or applies inventions and
discoveries in order to make new combinations.
INNOVATION THEORY BY
SCHUMPETER

17.  The entrepreneur is the prime mover in economic development;
his function, to innovate or carry out new combinations.
 The concept of innovation and its corollary development
embraces five functions:
1) The introduction of a new product or of a new quality of an
existing product,
2) The introduction of new method of production,
3) The opening of new market,
4) Conquest of a new source of supply of raw material and
5) The carrying out of the new organization of any industry.
CONT.

18.  According to McClelland the characteristics of entrepreneur has two
features – first doing things in a new and better way and second
decision making under uncertainty.
 According to David McClelland, regardless of culture or gender,
people are driven by three motives:
 Achievement,
 Affiliation
 Power
 Need for Achievement: A drive to excel, advance and grow.
 Need for Affiliation: A drive for friendly and close inter-personal
relationships.
 Need for Power: A drive to dominate or influence others and
situations.
NEED FOR ACHIEVEMENT THEORY
OF MCCLELLAND

19.  In economics, x-efficiency is the effectiveness with which a
given set of inputs are used to produce outputs
 According to Leibenstein, When an input is not used effectively
the difference between the actual output and the maximum output
attributable to that input is a measure of the degree of X-
efficiency.
 Leibenstein identifies two main roles for the entrepreneur:
(i) a gap filler and (ii) an input completer.
 According to him there are two types of entrepreneurship.
(i)Routine entrepreneurship – deals with normal business
functions like coordinating the business activities.
(ii) Innovative entrepreneurship – wherein an entrepreneur is
innovative in his approach.
X-EFFICIENCY THEORY BY
LEIBENSTEIN

20.  This theory is propounded by Knight.
 According to this theory, profit is reward for bearing uncertainty.
Uncertainty is due to unforeseeable or non-insurable risk.
 Some important features of this theory are as follows:
1) Risk creates Profit: According to the risk-bearing theory, the
entrepreneur earns profits because he undertakes risks.
2) More Risk More Gain: The risk theory proposes that the more risky the
nature of business, the greater must be the profit earned by it.
3) Profit as Reward and Cost: Profit is the reward of entrepreneur for
assuming risks. Hence, it is also treated as a part of the normal cost of
production.
4) Entrepreneur’s Income is Uncertain: He identifies uncertainty with a
situation where the probabilities of alternative outcomes cannot be
determined either by a priori reasoning or by statistical inference.
THEORY OF PROFIT BY
KNIGHT

21.  Theory of entrepreneurial behavior has been propounded by
Hagen, which is referred to as the withdrawal of status respect.
 Hagen considers the withdrawal of status, of respect, as the
trigger mechanism for changes in personality formation.
 Hagen postulates four types of events, which can produce status
withdrawal:
1) Displacement of a traditional elite group from its previous status
by another traditional supply physical force.
2) Denigration of valued symbols through some change in the
attitude of the superior group.
3) Inconsistency of status symbols with a changing distribution of
economic power.
4) Non-acceptance of expected status on migration to a new
society.
HAGEN’S THEORY OF
ENTREPRENEURSHIP

22.  Hagen further postulates that withdrawal of status respect would
give to four possible reactions and create four different
personality types:
1) Retreatist: Entrepreneur who continues to work in society but
remains indifferent to his work or status.
2) Ritualist: One who works as per the norms in the society but
with no hope of improvement in the working conditions or his
status.
3) Reformist: One who is a rebellion and tries to bring in new
ways of working and new society.
4) Innovator: An entrepreneur who is creative and try to achieve
his goals set by himself.
CONT.

23.  The main advocates of this theory were Papanek and Harris.
According to them economic incentives are the main forces for
entrepreneurial activities in any country.
 A lot of economic factors which promote or demote
entrepreneurship in a country :
(a) The availability of bank credit
(b) High capital formation with a good flow of savings and
investments
(c) Supply for loanable funds with a lower rate of interest.
(d) Increased demand for consumer goods ad services
(e) Availability of productive resources.
(f) Efficient economic policies like fiscal and monetary policies
(g) Communication and transportation facilities
ECONOMIC THEORY OF
ENTREPRENEURSHIP

24. Emergence and development of entrepreneurial class
can be divided into two parts….
 Development of entrepreneurial class in other
developed countries.
 Development of entrepreneurial class in India.
EMERGENCE OF THE ENTREPRENEURIAL CLASS

25.  In Britain in 17th-18th century Industrial Revolution has taken place.
Because of this production at a large scale was possible but what about
selling? This has given birth to the new class of entrepreneurs who
undertake the risk and sell the product in the market. So in England new
product development has played very important role.
 Following the footsteps of industrial revolution in UK, in the other
neighbor countries like France and Germany also industrial revolution
took place after 1870. And a new class of entrepreneurs developed there
also.
 While Japan till 1868 was an isolated country, but afterwards in
governance of prince Meigie, some revolutionary steps were taken. As
private sector was lacking initiative, government started industries at
state level just to encourage the private sector entrepreneurs. After
establishing them successfully they were handed over to private sectors.
DEVELOPMENT OF ENTREPRENEURIAL CLASS IN OTHER DEVELOPED
COUNTRIES

26.  Till 1861 there was rule of autocratic in Russia. They exploited
all three sectors of economy badly. Over exploitation by the
autocrat Czar compelled him to frame the law of liberty in 1861.
During this period industrialists were given financial assistance
for export and also tax liberalized policy that motivates
industries. Development of a new entrepreneurial class took
place. Till First World War it continued.
 In US after civil war from 1860 industrial revolution took place.
Government support in form of patent policy motivated
entrepreneurs to innovate and market. Newly appointed president
Roosevelt adopted price rise policy of industrial products. The
purpose was to increase the profit margin and thereby increasing
income and demand of the economy.
CONT.

27. DEVELOPMENT OF ENTREPRENEURIAL CLASS IN INDIA

28. CONT.

29. CONT.

30. CONT.

31. CONT.