Entreprenurial Development

1. PES Institute of Advanced Management Studies,
PG Department of Commerce.
NH-206 Sagar Road, Shimoga, Karnataka.
Topic: Entrepreneurship- meaning, need, scope, entrepreneurial
competencies, factors, motivation, types, differences between entrepreneur
and intrapreneur, MSMEs- meaning, problems, scope and rehabiliation.
Prepared by :
Ayesha Siddiqua,
Assistant Professor,
PESIAMS.

2. Meaning: 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 to
make a profit." While definitions of entrepreneurship typically focus on the
launching and running of businesses, due to the high risks involved in
launching a start-up, a significant proportion of start-up businesses have to
close due to "lack of funding, bad business decisions, an economic crisis, lack
of market demand, or a combination of all of these."
Definition: Entrepreneurship refers to the process of creating a new
enterprise and bearing any of its risks, with the view of making the profit.

4. Need for Entrepreneurship:
1. Growth of Entrepreneurship
Entrepreneurship the advent of new venture particularly small ventures to
materialize the innovative ideas of the entrepreneurs.
Thus, the growth or establishment of small enterprises ii the specific contribution
of entrepreneurship in every economy of the world.
The statistics reveal that in USA economy nearly half a million small enterprise is
established every year.
2. Creation of job opportunities
Entrepreneurship firms contributed a large share of new jobs. It provides entry-
level jobs so necessary fur training or gaining experience for unskilled workers.
The small enterprises are the only sector that generates a large portion of total
employment every year.
Moreover, entrepreneurial ventures prepare and supply experienced labor to large
industries.

5. 3. Innovation
Entrepreneurship is the incubator of innovation. Innovation creates
disequilibria in the present state of order.
It goes beyond discovery and does implementation and commercialization,
of innovations.
Thus, entrepreneurship nurses innovation that provides new ventures,
products, technology, market, quality of good, etc. to the economy that
increases Gross Domestic Products and standard of living of the people.
4. Impact on community development
A community is better off if its employment base is diversified among
many small entrepreneurial firms.
It promotes abundant retail facilities, a higher level of homeownership,
fewer slums, better, sanitation standards and higher expenditure on
education, recreation, and religious activities.
Thus, entrepreneurship leads to more stability and a higher quality of
community life.

6. 5. The consequence of business failure
The collapse of the large industry almost has irresistible damage to the
development of the state and the state of the economy and the financial
condition of the relevant persons.
The incumbents lost their jobs: suppliers and financial institutions face a
crisis of recovery.
Customers are deprived of goods, services, and government losses taxes.
This could not happen in the case of failure of entrepreneurship.
There shall be no measurable effect upon the economy and no political
repercussions too.
6. Political and economic integration of outsiders
Entrepreneurship is the most effective way of integrating those who feel
disposed of and alienated into the economy.
Minorities, migrants, and women are safely integrated into
entrepreneurship that will help to develop a well-composed plural
society.

7. 7. Spawns entrepreneurship
Entrepreneurship is the nursing ground for new inexperienced adventurists.
It is the field where a person can start his/her idea of the venture, which may be ended
up in a giant enterprise. All the large industrial ventures started as a small
entrepreneurial enterprise.
Therefore, entrepreneurship provides a wide spectrum of ventures and entrepreneurs in
every economy. The vast open arena of entrepreneurship thus acts as an incubator to
entrepreneurs.
8. Enhances the standard of living
The standard of living is a concept built on an increase in the amount of consumption
of a variety of goods and services over a particular period by a household.
So it depends on the availability of diversified products in the market. Entrepreneurship
provides enormous kinds of a product of various natures by their innovation.
Besides, it increases the income of the people who are employed in entrepreneurial
enterprises.
That also capable employed persons to consume more goods and services. In effect,
entrepreneurship enhances the standard of living of the people of a country.

8. 9. Promotes research and development
Entrepreneurship is innovation and hence the innovated ideas of goods and
services have to be tested by experimentation.
Therefore, entrepreneurship provides funds for research and development with
universities and research institutions. This promotes the general development,
research, and development in the economy.
Entrepreneurship is the pioneering zeal that provides events in our civilization.
We are indebted to it for having prosperity in every arena of human life-
economic, technological and cultural.

41. Factors affecting Entrepreneurship Development
I) Economic Factors
Economic environment exercises the most direct and immediate influence on
entrepreneurship. This is likely because people become entrepreneurs due to
necessity when there are no other jobs or because of opportunity.
The economic factors that affect the growth of entrepreneurship are the following:

42. 1. Capital
Capital is one of the most important factors of production for the establishment of an
enterprise. Increase in capital investment in viable projects results 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.
Availability of capital facilitates for the entrepreneur to bring together the land of one,
machine of another and raw material of yet another to combine them to produce
goods. Capital is therefore, regarded as lubricant to the process of production.

43. 2. Labor
Easy availability of right type of workers also effect entrepreneurship. The quality
rather than quantity of labor influences the emergence and growth of
entrepreneurship. The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.
The quality rather quantity of labor is another factor which influences the
emergence of entrepreneurship. Most less developed countries are labor rich
nations owing to a dense and even increasing population. But entrepreneurship is
encouraged if there is a mobile and flexible labor force. And, the potential
advantages of low-cost labor are regulated by the deleterious effects of labor
immobility. The considerations of economic and emotional security inhibit labor
mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labor.

44. 3. Raw Materials
The necessity of raw materials hardly needs any emphasis for establishing any industrial
activity and its influence in the emergence of entrepreneurship. In the absence of raw
materials, neither any enterprise can be established nor can an entrepreneur be
emerged
It is one of the basic ingredients 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 to is adversely
affected.
In fact, the supply of raw materials is not influenced by themselves but becomes
influential depending upon other opportunity conditions. The more favorable these
conditions are, the more likely is the raw material to have its influence of entrepreneurial
emergence.

45. 4. Market
The role and importance of market and marketing is very important for the
growth of entrepreneurship. In modern competitive world no entrepreneur can
think of surviving in the absence of latest knowledge about market and various
marketing techniques.
The size and composition of market both influence entrepreneurship in their
own ways. Practically, monopoly in a particular product in a market becomes
more influential for entrepreneurship than a competitive market. However, the
disadvantage of a competitive market can be cancelled to some extent by
improvement in transportation system facilitating the movement of raw
material and finished goods, and increasing the demand for producer goods.

46. 5. Infrastructure
Expansion of entrepreneurship presupposes properly developed communication
and transportation facilities. It not only helps to enlarge the market, but expand the
horizons of business too. Take for instance, the establishment of post and telegraph
system and construction of roads and highways in India. It helped considerable
entrepreneurial activities which took place in the 1850s.
Apart from the above factors, institutions like trade/ business associations, business
schools, libraries, etc. also make valuable contribution towards promoting and
sustaining entrepreneurship’ in the economy. You can gather all the information you
want from these bodies. They also act as a forum for communication and joint
action.

47. II) Social Factors
Social factors can go a long way in encouraging entrepreneurship. In fact it was
the highly helpful society that made the industrial revolution a glorious success in
Europe. Strongly affect the entrepreneurial behavior, which contribute to
entrepreneurial growth. The social setting in which the people grow, shapes their
basic beliefs, values and norms.
The main components of social environment are as follows:

48. 1. Caste Factor
There are certain cultural practices and values in every society which influence the’
actions of individuals. These practices and value have evolved over hundred of years.
For instance, consider the caste system (the varna system) among the Hindus in India.
It has divided the population on the basis of caste into four division. The Brahmana
(priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also
defined limits to the social mobility of individuals.
By social mobility’ we mean the freedom to move from one caste to another. The caste
system does not permit an individual who is born a Shridra to move to a higher caste.
Thus, commercial activities were the monopoly of the Vaishyas. Members of the three
other Hindu Varnas did not become interested in trade and commence, even when
India had extensive commercial inter-relations with many foreign countries. Dominance
of certain ethnical groups in entrepreneurship is a global phenomenon

49. 2. Family Background
This factor includes size of family, type of family and economic status of family.
Background of a family in manufacturing provided a source of industrial
entrepreneurship. Occupational and social status of the family influenced mobility.
There are certain circumstances where very few people would have to be
venturesome. For example in a society where the joint family system is in vogue,
those members of joint family who gain wealth by their hard work denied the
opportunity to enjoy the fruits of their labor because they have to share their
wealth with the other members of the family.

50. 3. Education
Education enables one to understand the outside world and equips him with the basic
knowledge and skills to deal with day-to-day problems. In any society, the system of
education has a significant role to play in inculcating entrepreneurial values.
In India, the system of education prior to the 20th century was based on religion. In
this rigid system, critical and questioning attitudes towards society were discouraged.
The caste system and the resultant occupational structure were reinforced by such
education. It promoted the idea that business is not a respectable occupation. Later,
when the British came to our country, they introduced an education system, just to
produce clerks and accountants for the East India Company, The base of such a
system, as you can well see, is very anti-entrepreneurial.
Our educational methods have not changed much even today. The emphasis is till on
preparing students for standard jobs, rather than marking them capable enough to
stand on their feet.

51. 4. Attitude of the Society
A related aspect to these is the attitude of the society towards
entrepreneurship. Certain societies encourage innovations and novelties, and
thus approve entrepreneurs’ actions and rewards like profits. Certain others do
not tolerate changes and in such circumstances, entrepreneurship cannot take
root and grow. Similarly, some societies have an inherent dislike for any
money-making activity. It is said, that in Russia, in the nineteenth century, the
upper classes did not like entrepreneurs. For them, cultivating the land meant
a good life. They believed that rand belongs to God and the produce of the
land was nothing but god’s blessing. Russian folk-tales, proverbs and songs
during this period carried the message that making wealth through business
was not right.

52. 5. Cultural Value
Motives impel men to action. Entrepreneurial growth requires proper
motives like profit-making, acquisition of prestige and attainment of social
status. Ambitious and talented men would take risks and innovate if these
motives are strong. The strength of these motives depends upon the culture
of the society. If the culture is economically or monetarily oriented,
entrepreneurship would be applauded and praised; wealth accumulation as a
way of life would be appreciated. In the less developed countries, people are
not economically motivated. Monetary incentives have relatively less
attraction. People have ample opportunities of attaining social distinction by
non-economic pursuits. Men with organizational abilities are, therefore, not
dragged into business. They use their talents for non-economic end.

53. III) Psychological Factors
Many entrepreneurial theorists have propounded theories of entrepreneurship
that concentrate especially upon psychological factors. These are as follows :

54. 1. Need Achievement
The most important psychological theories of entrepreneurship was put forward in
the early) 1960s by David McClelland. According to McClelland ‘need achievement’
is social motive to excel that tends to characterise successful entrepreneurs,
especially when reinforced by cultural factors. He found that certain kinds of people,
especially those who became entrepreneurs, had this characteristic. Moreover, some
societies tend to reproduce a larger percentage of people with high ‘need
achievement’ than other societies. McClelland attributed this to sociological factors.
Differences among societies and individuals accounted for ‘need achievement’ being
greater in some societies and less in certain others.
The theory states that people with high need-achievement are distinctive in several
ways. They like to take risks and these risks stimulate them to greater effort. The
theory identifies the factors that produce such people. Initially McClelland attributed
the role of parents, specially the mother, in mustering her son or daughter to be
masterful and self-reliant. Later he put less emphasis on the parent-child
relationship and gave more importance to social and cultural factors. He concluded
that the ‘need achievement’ is conditioned more by social and cultural
reinforcement rather than by parental influence and such related factors.

55. 2. Withdrawal of Status Respect
There are several other researchers who have tried to understand the
psychological roots of entrepreneurship. One such individual is Everett Hagen who
stresses the-psychological consequences of social change. Hagen says, at some
point many social groups experience a radical loss of status. Hagen attributed the
withdrawal of status respect of a group to the genesis of entrepreneurship.
Hages believes that the initial condition leading to eventual entrepreneurial
behavior is the loss of status by a group. He postulates that four types of events
can produce status withdrawal:
i. The group may be displaced by force;
ii. It may have its valued symbols denigrated;
iii. It may drift into a situation of status inconsistency; and
iv. It may not be accepted the expected status on migration in a new society.

56. 3. Motives
Other psychological theories of entrepreneurship stress the motives or goals of the
entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power,
prestige, security and service to society. Stepanek points particularly to non-
monetary aspects such as independence, persons’ self-esteem, power and regard of
the society.
On the same subject, Evans distinguishes motive by three kinds of entrepreneurs
Managing entrepreneurs whose chief motive is security.
Innovating entrepreneurs, who are interested only in excitement.
Controlling entrepreneurs, who above all otter motives, want power and authority.
Finally, Rostow has examined inter gradational changes in the families of
entrepreneurs. He believes that the first generation seeks wealth, the second
prestige and the third art and beauty.

57. 4. Others
Thomas Begley and David P. Boyd studied in detail the psychological roots of
entrepreneurship in the mid-1980s. They came to the conclusion that entrepreneurial
attitudes based on psychological considerations have five dimensions:
1. First came ‘need-achievement’ as described by McClelland. In all studies of successful
entrepreneurs a high achievement orientation is invariably present.
2. The second dimension that Begley and Boyd call ‘locus of control’ This means that the
entrepreneur follows the idea that he can control his own life and is not influenced by
factors like luck, fate and so on. Need-achievement logically implies that people can
control their own lives and are not influenced by external forces.
3. The third dimension is the willingness to take risks. These two researchers have come
to the conclusion that entrepreneurs who take moderate risks earn higher returns on
their assets than those who take no risks at all or who take extravagant risks.
4. Tolerance is the next dimension of this study. Very few decisions are made with
complete information. So all business executives must, have a certain amount of
tolerance for ambiguity.
5. Finally, here is what psychologists call ‘Type A’ behavior. This is nothing but “a chronic,
incessant struggle to achieve more and more in less and less of time” Entrepreneurs are
characterize by the presence of ‘Type A’ behavior in all their endeavors.

58. Entrepreneurial motivation:
Entrepreneurial motivation is the process of transforming an ordinary individual
to a powerful businessman, who can create opportunities and helps in maximizing
wealth and economic development. It is defined as various factors stimulate
desires and activates enthusiasm in entrepreneurs which make them attain a
particular goal. Entrepreneurship is the process of identifying strengths and
opportunities which help in the realization of one’s dreams for designing,
developing and running a new business by facing threats and risks effectively.

59. Motivation activates innate strengths to achieve a particular goal, many
questions arise during knowing this concept such as why can’t all the
human beings become leader or entrepreneurs even though they face
same motivation during his/her lifetime? Who can become effective
motivators? What type of motivation can influence one’s behavior? Is the
extent of motivation decides the power of externalized behavior? Etc,
Entrepreneurial motivation is a psychological process in which all the
motives may not influence with the same intensity, it varies with the
perception levels of the individuals and factors responsible for the
motivation. Sometimes a single motive can influence to become strong and
powerful entrepreneurs, these motives may come from various factors as
follows.
Internal factors
External factors

60. I) Internal factors
1. Need for self-actualization
It is explained by Maslow and it is the top level need refers to the desire for self-
fulfillment. Need for freedom and self-fulfillment makes the individuals or employees of
the organization make them become powerful leaders or entrepreneurs.
2.Optimism
Individuals having positive mindset get motivated by finding opportunities during
critical situations also. Positive attitude and perception motivate an individual to work
out for the best even during unfavorable and tough situations also.
3. Positive attitude
The positive attitude is the most important factor which motivates the individuals to
become successful entrepreneurs. Habituating positive attitude can lead an individual
to develop constructive thinking; it motivates them to become powerful
entrepreneurs, finally, the positive attitude can prove that how valuable they are.

61. 4. Self-motivation
Most of the successful and powerful entrepreneurs are self-motivated; here they
fulfill the desired objectives by motivating themselves. Though many individuals
have ideas but they cannot put those for business development; however self-
motivated people can take decisions to implement ideas.
5. Enthusiasm
Enthusiasm motivates in finding better solutions, finally, it stabilizes the ideas and
makes them become creators and innovators which result in successful
entrepreneurs.
6. Commitment
Commitment towards a goal can make to achieve success. It motivates
entrepreneurs by inspiring and developing emotional attachment towards an
objective.

62. 7. Education
Education is the most important factor it motivates a person to innovate and create
new products, this result in establishing an organization or a new business venture.
The knowledge acquired during the course of time and innate skills highly motivates a
person to become a successful entrepreneur.
8. Background
Family background, occupational background and a person’s own experience in a job
motivates him/her to become an entrepreneur. Having entrepreneurial background
acts as a clear path to becoming a successful and powerful entrepreneur.
9. Financial background
Finance is the scarce resource which motivates and enables a person to become an
entrepreneur. Money can make many things it is the major thing in deciding one’s
status and development, strong financial background facilitates to start a business.

63. II) External factors
1. Influence
Influence of family members, friends, and society motivates the individuals to
become entrepreneurs. The extent of influence shows an effect on the character,
behavior, and development, it comes from the external environment. Here people
get influenced by seeing successful entrepreneurs or by the words of others.
2. Availability of resources
Resource availability motivates at a high extent to become entrepreneurs,
availability of land, labor, money, machinery, and materials make individual to
start a new business. Though there is creativity, intelligence, commitment and
enthusiasm in the individuals, but the unavailability of resources becomes an
obstacle for new entrants or entrepreneurs.

64. 3. Product’s demand
Higher demand for a particular product motivate entrepreneurs to produce
innovative and value added products, here product’s demand motivates the
individuals to become entrepreneurs. The hope of success makes them produce
innovative products or substitute products, some entrepreneurs fulfill the market
demand by producing complementary goods also. So the increase in products
demand highly motivates to become entrepreneurs.
4. Government policies
Subsidies and benefits given by the government motivate entrepreneurs to
produce new products or motivates individual to become entrepreneurs.
Government policies show higher influence on establishing new firms and it leads
to economic development. In the case of small scale industries, rural people are
encouraged by the various training programs, financial support, and subsidies; it is
one of the main reasons for the establishment of new firms and arrival of new
entrants.

65. 5. Information availability
Market knowledge and information motivate individuals to enter into the
markets and to become entrepreneurs. If there is abundant information then it
automatically creates interest in the minds of enthusiastic people to become
entrepreneurs. Availability of information facilitates research and producing
innovative and value added products, and it creates a scope to become
entrepreneurs.
6. Technological advancement
Technological advancement acts as a path to transform ideas into products,
feasibility in production and expected success rate highly motivates to become
entrepreneurs. It reduces errors and cost of production and maximizes success
rate, this is the reason why people are interested in becoming entrepreneurs with
the increase in technology.

66. 7. Changing tastes and preferences
Changing tastes and preferences of the customers maximizes the chance to
produce substitute and complementary goods, it creates a scope to innovation
and establishment of the new ventures.

67. Definition of Entrepreneur
An entrepreneur is an individual who conceives the idea of starting a new
venture, take all types of risks, not only to put the product or service
into reality but also to make it an extremely demanding one.
Definition of Intrapreneur
An intrapreneur is nothing but an entrepreneur within the boundaries of
the organisation. An intrapreneur is an employee of a large organisation,
who has the authority of initiating creativity and innovation in the
company’s products, services and projects, redesigning the processes,
workflows and system with the objective of transforming them into a
successful venture of the enterprise.
Differences Between Entrepreneur and Intrapreneur

68. BASIS FOR COMPARISON ENTREPRENEUR INTRAPRENEUR
Meaning Entrepreneur refers to a person
who set up his own business
with a new idea or concept.
Intrapreneur refers to an
employee of the organization
who is in charge of undertaking
innovations in product, service,
process etc.
Approach Intuitive Restorative
Resources Uses own resources. Use resources provided by the
company.
Capital Raised by him. Financed by the company.
Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur
himself.
Taken by the company.
Works for Creating a leading position in
the market.
Change and renew the existing
organizational system and
culture.

69. The important distinguishing points between entrepreneur and intrapreneur, are given in
the following points:
1. An entrepreneur is defined as a person who establishes a new business with an
innovative idea or concept. An employee of the organisation who is authorised to
undertake innovations in product, service, process, system, etc. is known as
Intrapreneur.
2. An entrepreneur is intuitive in nature, whereas an intrapreneur is restorative in
nature.
3. An entrepreneur uses his own resources, i.e. man, machine, money, etc. while in the
case of an intrapreneur the resources are readily available, as they are provided to him
by the company.
4. An entrepreneur raises capital himself. Conversely, an intrapreneur does not need to
raise funds himself; rather it is provided by the company.

70. 5. An entrepreneur works in a newly established company. On the other hand, an
intrapreneur is a part of an existing organisation.
6. An entrepreneur is his own boss, so he is independent to take decisions. As opposed to
intrapreneur, who works for the organisation, he cannot take independent decisions.
7. This is one of the salient features of an entrepreneur; he is capable of bearing risks and
uncertainties of the business. Unlike intrapreneur, in which the company bears all the
risks.
8. The entrepreneur works hard to enter the market successfully and create a place
subsequently. In contrast to Intrapreneur, who works for organization-wide change to
bring innovation, creativity and productivity.

71. CLASSIFICATION AND TYPES OF ENTREPRENEURS.
I) Entrepreneurs according to the type of business.
Entrepreneurs are found in various types of business occupations of varying
size, we may broadly classify them as follows:
1. Business entrepreneur: Business entrepreneurs are individuals who
conceive an idea for a new product or service and then create a business to
materialize their idea into reality. They may set up a big establishment or a
small business unit. They are called small business entrepreneurs when found
in small business units such as printing press, textile processing house,
advertising agency, readymade garments or confectionery.
2. Trading Entrepreneur: The trading entrepreneur is one who undertakes
trading activities and is not concerned with the manufacturing work. He
identifies potential markets, stimulates demand for his product line and
creates a desire and interest among buyers to go in for his product line. He is
engaged in both domestic and overseas trade.

72. 3. Industrial Entrepreneurs: Industrial entrepreneur is essentially a manufacturer
who identifies the potential needs of customers and tailors a product or service to
meet the marketing needs. He is product- oriented man who starts in an industrial
unit because of the possibility of some new product.
4. Corporate Entrepreneur: Corporate entrepreneur is a person who demonstrates
his innovative skill in organizing and managing corporate undertaking. A corporate
undertaking is a form of business organization which is registered under some
statute or act which gives it a separate legal entity. A trust registered under Trust act
or company registered under the companies act is examples of corporate
undertakings. A corporate entrepreneur is thus an individual who plans, develops and
manages a corporate body.
5. Agricultural Entrepreneur: Agricultural entrepreneur are those entrepreneurs who
undertake agricultural activities as raising and marketing of crops, fertilizers and other
inputs of agriculture. They are motivated to raise agricultural through mechanization,
irrigation and application of technologies for dry land agriculture products.

73. II) Entrepreneurs in technology
We may broadly classify these entrepreneurs on the basis of use of technology as
follows:
1. Technical entrepreneur: A technical entrepreneur is essentially compared to a crafts
man. He develops improved quality of goods because of the craftsmanship. He
concentrates more on production than marketing.
2. Non technical entrepreneur: These are people who are not concerned with the
technical aspects of the product in which they deal. They are concerned only with
developing alternative marketing and distribution strategies to promote their business.
3. Professional entrepreneurs: Professional entrepreneurs are a person who is
interested in establishing a business but does not have interest in managing or
operating it once it is established. A professional entrepreneur sells out the running
business and starts another venture with the sales proceeds.

74. III) Entrepreneurs and motivation
1. Pure entrepreneur: A pure entrepreneur is an individual who is motivated by
psychological and economic rewards. He undertakes an entrepreneurial activity for his
personal satisfaction in work, ego, and status.
2. Induced Entrepreneur: He is the person who is induced to take up an entrepreneurial
task due to the policy measures of the government that provides assistance, incentives,
concessions, and necessary overhead facilities to start the venture. Most of the induced
entrepreneurs enter entrepreneurship due to financial, technical and several other
facilities provided to them by the state agencies to promote entrepreneurship.
3. Motivated entrepreneur: New entrepreneurs are motivated by the desire for
fulfillment. They come into being because of the possibility of making and marketing
some new product for the use of customers. If the product is developed to saleable stage,
the entrepreneur is further motivated by reward in terms of profit.
4. Spontaneous Entrepreneur: These entrepreneurs start their business because of their
natural talents. They are persons with initiative, boldness and confidence in their ability
which motivate them to undertake entrepreneurial activity. Such entrepreneurs have a
strong conviction and confidence in their inborn ability.

75. IV) Growth and Entrepreneurs
1. Growth Entrepreneur: Growth entrepreneurs are those who necessarily take up
high growth industry which has substantial growth prospects.
2. Super Growth Entrepreneurs: Super growth entrepreneurs are those who have
shown enormous growth of performance in their venture. The growth performance is
identified by the liquidity of funds, profitability and gearing.

76. V) Entrepreneurs and stages of Development:
Entrepreneurs may also be classified as the first generation entrepreneur, modern
entrepreneur and classical entrepreneur depending upon the stage of development.
They are explained below:
1. First-generation entrepreneur: A first generation entrepreneur is one who starts an
industrial unit by innovative skills. He is essentially an innovator, combining different
technologies to produce a marketable product or service.
2. Modern entrepreneur: A modern entrepreneur is one who undertakes those
ventures which go well along with the changing demand in the market. They undertake
those ventures which suit the current marketing needs.
3. Classical entrepreneur: A classical entrepreneur is one who is concerned with the
customers and marketing needs through the development of the self supporting
venture. He is a stereotype entrepreneur whose aim is to maximize his economic
returns at a level consistent with the survival of the firm with or without an element of
growth.

77. VI) Others
1. Innovating Entrepreneurs: Men and women in this group are generally aggressive in
experimentation who exhibit cleverness in putting attractive possibilities into practice.
One need not invent but convert even old established products or services by changing
their utility, their value, and their economic characteristics into something new,
attractive and utilitarian. This is the secret of these people.
2. Imitative entrepreneurs: These people are characterized by readiness to adopt
successful innovations by entrepreneurs. They imitate techniques and technology
innovated by others. They are adoptive and more flexible.
By western standards, an imitative entrepreneur may be a pedestrian figure, an adopter
an imitator rather than a true innovator. He is more an organizer of factors of production
than a creator. But in a poor country attempting to industrialize, he is nevertheless a
potent change producing figure. He can set in motion the chain reaction which leads to
cumulative progress.

78. 3. Fabian Entrepreneurs:
They are the second generation Entrepreneur and they are very skeptic about
taking a step unless and until they are definite, it would be a loss, if not steps are
not taken in time. They only imitate if they see fit and have a clear and broad
picture of things. They are do not prefer to take risk, are very rigid and fundamental
in there thinking to take risks. They mostly follow the traditional method and do not
prefer to change.
4. Drone Entrepreneurs:
They are stubborn to the changes, even if they have to bear a certain amount of
decrease in the profits. They prefer to run the enterprise the way it is regardless of the
change in demand and the trend in the market.

79. MSME stands for Micro, Small, and Medium Enterprises. In accordance with
the Micro, Small, and Medium Enterprises Development (MSMED) Act in
2006, the enterprises are classified into two divisions.
Manufacturing enterprises – engaged in the manufacturing or production of
goods in any industry
Service enterprises – engaged in providing or rendering services
MSME definition based on investment, MSMED Act, 2006

80. The Government of India has enacted the Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 in terms of which the
definition of micro, small and medium enterprises is as under:
Enterprises engaged in the manufacture or production, processing or
preservation of goods as specified below:
•A micro enterprise is an enterprise where investment in plant and
machinery does not exceed Rs. 25 lakh;
•A small enterprise is an enterprise where the investment in plant and
machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore;
•A medium enterprise is an enterprise where the investment in plant
and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.

81. Enterprises engaged in providing or rendering of services and whose investment
in equipment (original cost excluding land and building and furniture, fittings and
other items not directly related to the service rendered or as may be notified
under the MSMED Act, 2006 are specified below.
•A micro enterprise is an enterprise where the investment in equipment does not
exceed Rs. 10 lakh;
•A small enterprise is an enterprise where the investment in equipment is more
than Rs.10 lakh but does not exceed Rs. 2 crore;
•A medium enterprise is an enterprise where the investment in equipment is
more than Rs. 2 crore but does not exceed Rs. 5 crore.

83. Problems of MSMEs
Despite its commendable contribution to the Nation's economy, MSME Sector
does not get the required support from the concerned Government departments,
banking sector, financial institutions and corporate sector, which is a handicap in
becoming more competitive in the national and international markets and which
needs to be taken up for immediate and proper redressal. MSME sector faces a
number of problems - absence of adequate and timely banking finance, limited
knowledge and non-availability of suitable technology, low production capacity,
follow up with various agencies in solving regular activities and lack of interaction
with government agencies on various matters.

84. i) Financial Problems :
The financial problem of MSMEs is the root cause for all the other problems
faced by the sector. The small and medium industrialists are generally poor and
there are no facilities for cheap credit. They fall into the clutches of money
lender who charges very high rates of interest, or else they borrow from the
dealers of their goods, who exploit them by completing them to sell their
products at very low price. After the nationalization of 14 major Indian Banks in
July 1969, the Commercial banks have been providing only a small proportion of
MSMEs financial requirements. Credit to the SME sector continues to be non-
commensurate with its contribution to the total industrial output. As against the
share of the village and MSMEs at 40 per cent in the industrial output, its share
in total credit to the industrial sector is only about 30 per cent.

85. ii) Raw Material Problem:
This difficulty is experienced in a very pronounced form. The quantity,
quality and regularity of the supply of raw materials are not satisfactory.
There are no quantity discounts, since they are purchased in small
quantities and hence charged, higher prices by suppliers. Difficulty is also
experienced in procuring semi- manufactured materials. Financial weakness
stands in the way of securing raw materials in bulk in a competitive market.

86. iii) Production Problem:
MSME units suffer from inadequate workspace, power, lighting and
ventilation, and safety measures etc. These shortcomings have tend
endanger the health of workers and have adversely affected the rate of
production. Many units are following conventional methods of production.
Adoption of modern techniques is either disliked by the entrepreneurs is not
feasible. Wage rates and service conditions of small industries are not
attractive to skilled labour.

87. iv) Technological Problem:
Today technology is changing at a very fast phase; it becomes difficult for
MSMEs to cope up with changing technology. Technology up gradation and the
frequent need to renew the equipment has emerged as a big problem.
v) Marketing problem:
As marketing is not properly organized, the helpless artisans are completely at
the mercy of intermediary. The potential demand for their goods remains under
developed. The MSMEs have to face the competitions from large-scale units in
marketing their products. It causes damage to the growth and stability of
MSMEs. MSMEs cannot afford to spend lavishly for advertisement to promote
their sales.

88. vi) Managerial problem
Small-scale industries in our country have suffered from the lack of
entrepreneurial ability to develop initiative and undertake risks in the
unexplored industrial fields. The inefficiency of management comes first
among managerial problems. The entrepreneurial ability of promoters of
cottage industries and MSMEs are handicapped by technical knowhow in
the areas of production, finance, accounting and marketing management.
vii) Sickness:
A serious problem, which is hampering Micro, Small and Medium Sector,
has been sickness. Many small units have fallen sick due to one problem or
the other. Sickness is caused by two sets of factors, Internal and external
factors. High rate of capital gearing, inadequacy of finance, short of raw
materials, out-dated plant and machinery, low labour productivity etc.

89. COMMON CHARACTERISTICS OF MSMEs
(i) Born Out of Individual Initiatives and Skill SME start-ups tend to evolve along a
single entrepreneur or a small group of entrepreneurs in many cases leveraging
on a skill set. There are other SMEs being set up purely as a means of earning
livelihood. These include many trading and retail establishments while
continuing SMEs as to manufacturing services, others adopt a broader
definition and include retailing as well.
(ii) Greater Operational Flexibility The direct involvement of owner(s), coupled with
flat hierarchical structures and less number of people ensure that there is
greater operational flexibility. Decision making such as changes in price mix or
product mix in response to market conditions is possible to the MSMEs in a
speedy manner.
(iii)Low Cost of Production SMEs have lower overheads. This translates to lower
cost of production, least upto limited volumes.
(iv) High Propensity to Adopt Technology Traditionally MSMEs have shown a
propensity of being able to adopt and internalize the technology being used by
them.

90. (v) High Capacity to Innovate Export MSMEs skill in innovation, improvisation and
reverse engineering are legendary. By being able to meet niche requirements,
they are also able to capture export markets where volumes are not huge.
(vi) High Employment Orientation MSMEs are usually the prime drives of jobs, in
some cases creating up to 80 per cent jobs. MSMEs tend to be labour intensive
per se and are able to generate more jobs for every unit of investment, compared
to their bigger counterparts.
(vii) Reduction of Regional Imbalances Unlike large industries where divisibility of
operations is more difficult, MSMEs enjoy the flexibility of location. Thus, MSMEs
can be found spread virtually right across, even though some specific location s
emerge as ‘clusters’.

91. THE RELATIONSHIP BETWEEN SMALL AND BIG BUSINESS
Small businesses powerfully effected by developments within the big business sector this
relationship serves
the interest of general economic disequilibria. Small business is less affected by economi
c disruptions and is
more or less self-
adjusting. It tends to act as cushion for economy .The nature of interlink age between
small and medium business is as under
1: Job subcontracting i.e. the large business provides materials and components to small
units who process
the same into finished goods
2: purchase subcontracting i.e. in this case the material is procured
by small unit who manufactures a
specific part or component needed by a particular large unit
3: Complementary: in
this case the product manufactured by small company is purchased by a big unit as
accessory like plastic dust covers for video recorders, electronic passive components, pac
kaging etc.

92. 4: Merchandising or commercial trading: in
this case the small units manufacture the goods and big units on
the strength of their financial
power market it with their own brands like fans, washing machines,
refrigerators etc.
5: Maintenance and repair services: many large enterprises give
the operation and maintenance contract to
the small companies due to being more economical and helpful
6: Social benefits: employment generation, decentralization
of industrial benefits etc

93. Objectives of MSMEs:
1. To generate immediate and large scale employment
opportunities with relatively low investment.
2. To eradicate unemployment problem from the country
3. To encourage dispersal of industries to all over country
covering small towns, villages and economically lagging regions.
4. To bring backward areas too in the mainstream of national
development.
5. To promote balanced regional development in the whole
country.
6. To ensure more equitable distribution of national income.
7. To encourage effective mobilisation of country’s untapped
resources.
8. To improve the level of living of people in the country.

94. Scope:
In fact, the scope for micro and small enterprises is quite vast covering
a wide range of activities requiring less sophisticated technology. In
consonance with its distinct characteristics, the activities which are
found particularly amenable to and can be successfully operated in
micro and small sector are too many to mention.
Among them, the important ones are:
a. Manufacturing activities
b. Servicing/repairing activities
c. Retailing activities
d. Financial activities
e. Whole-sale business
f. Construction activities
g. Infrastructural activities like transportation, communication and
other public utilities.

95. In order to strengthen the scope for micro enterprise development in
the country, the Government of India has, along with its other assistance
programmes, announced its reservation policy for small sector mainly
consisting of micro enterprises in the country. The reservation policy was
initiated in 1967 when only 47 items were reserved for exclusive
manufacture in the small-scale sector. By 1983, the reserve list included
836 items for exclusive production in the small-scale sector.
Later, the Abid Hussain Committee de-reserved 12 items and, thus, there
are still 824 items reserved for exclusive production in small sector. The
main objective of the reservation policy has been to insulate the small
sector, or say, micro and small enterprises from unequal competition of
large- scale industrial establishments, so that the sector can grow
through expansion of existing units and the entry of new firms.

96. The important industries reserved for exclusive development in the
micro and small sector are:
Food and Allied Industries; Textile Products; Leather and Leather
Products, including Foot-wears; Rubber Products; Plastic Products;
Chemical and Chemical Products; Natural Essential Oils; Organic
Chemicals and Chemical Products; Glass and Ceramics; Mechanical
Engineering Transport Equipment; Metal Cabinets of all Types;
Pressure Stove; Electrical Appliances; Electronic Equipment’s and
Components; Boats and Truck Body Buildings; Auto Parts
Components; Ancillary and Garage Equipment; Bicycle Parts, Try-
cycles and Perambulators; Miscellaneous Transport Equipment’s;
Mathematical and Survey Instruments; Sports Goods; Stationery
items, Clocks and watches, etc.

97. Contribution of MSMEs to Indian Economy:
The Indian MSME sector is the backbone of the national economic structure and has
unremittingly acted as the bulwark for the Indian economy, providing it resilience to
ward off global economic shocks and adversities.
• With around 63.4 million units throughout the geographical expanse of the
country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of
the GDP from service activities as well as 33.4% of India's manufacturing output.
•They have been able to provide employment to around 120 million persons and
contribute around 45% of the overall exports from India.
•The sector has consistently maintained a growth rate of over 10%.
•About 20% of the MSMEs are based out of rural areas, which indicates the
deployment of significant rural workforce in the MSME sector and is an exhibit to
the importance of these enterprises in promoting sustainable and inclusive
development as well as generating large scale employment, especially in the rural
areas.

98. •The MSMEs have played a great role in ensuring the socialistic goals like
equality of income and balance regional development as envisaged by the
planners soon after the independence.
•With the meagre investment in comparison to the various large scale private
and public enterprises, the MSMEs are found to be more efficient providing
more employment opportunities at relatively lower cost.
•The employment intensity of MSMEs is estimated to be four times greater
than that of large enterprises.
•Currently, around 36 million SMEs are generating 80 million employment
opportunities, contributing 8% of the GDP, 45% of total manufacturing
output and 40% of the total exports from the country.
• MSMEs account for more than 80% of the total industrial enterprises in
India creating more than 8000 value added products.

99. •The most important contribution of SMEs in India is promoting the balanced
economic development.
• The trickle down effects of large enterprises is very limited in contrast to
small industries where fruits of percolation of economic growth are more
visible. While the large enterprises largely created the islands of prosperity in
the ocean of poverty, small enterprises have succeeded in fulfilling the
socialistic goals of providing equitable growth.
•It had also helped in industrialization of rural and backward areas, thereby,
reducing regional imbalances, assuring more equitable distribution of national
income.Urban area with around 857,000 enterprises accounted for 54.77% of
the total working enterprises in Registered MSME sector whereas in rural
areas around 707,000 enterprises (45.23% of the working enterprises) are
located.
• Small industries also help the large in industries by supplying them ancillary
products.

100. Some of the MSME schemes launched by the Government are:
1. Udyog Aadhaar memorandum
Aadhaar card is a 12 digit number given to all individuals by the government. In this, the
Aadhaar card is a mandatory requirement. The benefit of registering in this scheme is
ease in availing credit, loans, and subsidies from the government. Registration can be
done both ways in the online mode or the offline mode.
2. Zero Defect Zero Effect
In this model, goods that are manufactured for export have to adhere to a certain
standard so that they are not rejected or sent back to India. To achieve this the
government has launched this scheme. In this, if the goods are exported these are
eligible for some rebates and concessions.

101. 3. Quality Management Standards & Quality technology Tools
Registering in this scheme will help the micro, small and medium enterprises to
understand and implement the quality standards that are required to be
maintained along with the new technology. In this scheme, activities are
conducted to sensitize the businesses about the new technology available through
various seminars, campaigns, activities etc.
4. Grievance Monitoring System
Registering under this scheme is beneficial in terms of getting the complaints of
the business owners addressed. In this, the business owners can check the status
of their complaints, open them if they are not satisfied with the outcome.

102. 5. Incubation
This scheme helps innovators with the implementation of their new design,
ideas or products. Under this from 75% to 80% of the project cost can be
financed by the government. This scheme promotes new ideas, designs,
products etc.
6. Credit Linked Capital Subsidy Scheme
Under this scheme, new technology is provided to the business owners to
replace their old and obsolete technology. The capital subsidy is given to the
business to upgrade and have better means to do their business. These small,
micro and medium enterprises can directly approach the banks for these
subsidies.

103. 7 Women Entrepreneurship
This scheme is especially started for women who want to start their own
business. The government provides capital, counseling, training and delivery
techniques to these women so that they manage their business and expand
it.
The government has launched a number of more schemes and support
system for these enterprises, to know more about the MSME schemes the
following link of the government can be checked.