Topic 2

CHARACTERISTICS, PROCESSES, FUNCTIONS AND TYPES OF AN ENTREPRENEUR

Objectives

After completing this topic, you shall be able to:

1. Understand the various characteristics of a successful
entrepreneur.
2. Classify different types of entrepreneurs on various
bases.
3. Describes the various functions of entrepreneurs.

Introduction

As early as the 1950s, researchers began looking for personality factors that determine the
potential of a person to be an entrepreneur. What makes the entrepreneurs successful?
Whether they had anything common in their personal characteristics? The scanning of their
personal characteristics shows that there are certain characteristics of entrepreneurs which are
found usually prominent in them.

Although it seems logical to look at personality and socio-cultural variables to determine the
likelihood of entrepreneurial success, studies based on these premises have been able to
explain only a small percentage of entrepreneurial successes and failures. In other words
researchers have invested a great deal of time and effort over the last few decades trying to
paint a clear picture of “the entrepreneurial personality.” Although these studies have identified
several characteristics entrepreneurs tend to exhibit, none of them has isolated a set of traits
required for success.

6. CHARACTERISTICS OF AN ENTREPRENEUR

The characteristics or features or nature or qualities of entrepreneur as an individual are

essential to contribute to the success of an enterprise.

1. Innovator: Within the constraints of available resources that society or a nation offers,
entrepreneurs make the best use of them. Entrepreneurs have a creative vision to recognise a
business opportunity. An entrepreneur should have creative thinking and be able to engage in
the analysis of various problems and situations in order to deal with them. An entrepreneur
introduces new products, new technologies and new economic activities. He creates new
demands and new aspirations and new methods to fulfil them. Entrepreneur should anticipate
changes and must be able to study various situations in which decisions may have to be made.
Drucker Writes, “Entrepreneur create something new, something different, they change or
transmute values”.
2. Motivation towards Achievement: A successful entrepreneur should have a strong motivation
towards the achievement of a task and must be able to exert considerable efforts in getting
things done by others. He has strong urge to achieve. He has a more aggressive level of
entrepreneurial venturing, and need achievement.

3. Ability to Handle Uncertainty: The ability to handle uncertainty is critical because these
business builders constantly make decisions using new, sometimes conflicting information
gleaned from a variety of unfamiliar sources. Based on his research, entrepreneurial expert
Amar Bhide says that entrepreneurs exhibit “a willingness to jump into things when it’s hard to
even imagine what the possible set of outcomes will be.”

4. Moderate Risk Taker: Entrepreneurs are not wild risk takers but are instead calculating risk
takers. Unlike “high-rolling, riverboat” gamblers, entrepreneurs rarely gamble. Their goals may
appear to be high-even impossible-in others’ eyes, but entrepreneurs see the situation from a
different perspective and believe that their goals are realistic and attainable. They usu-ally spot
opportunities in areas that reflect their knowledge, backgrounds, and experi-ences, which
increase their probability of success. Entrepreneurs prepare themselves to anticipate problems,
create ways to share those problems with suppliers, creditors etc. and minimise the risk by
creating likely-to-be successful ventures. In other words, successful entrepreneurs are not as
much risk takers as they are risk eliminators, removing as many obstacles to the successful
launch of their ventures as possible. One of the most successful ways of eliminating risks is to
build a solid busi-ness plan for a venture.

5. Skill for Organizing: A true entrepreneur is one who has the ability to mobilise resources in the
best possible manner for achieving the business objectives. Entrepreneurs know how to put the
right people together to accomplish a task. Effectively combining people and jobs enables
entrepreneurs to transform their vision into reality.

6. Goal Oriented: Entrepreneurs are highly goal-oriented and specifically aim at producing goods
and services that represent unmet needs of consumers. He adopts a ‘hands-on’ approach.
Entrepreneur is planer and doer, dreamer and action-taker. He implements what he visualises.
An entrepreneur must be able to set realistic but challenging goals for him as well as for others
in the organisation.

7. Desire for Responsibility: Entrepreneurs feel a deep sense of personal responsibility for the
outcome of ventures they start. They prefer to be in control of their resources, and they use
those resources to achieve self-determined goals.

8. Emotional Stability and Self-control: Emotional health is a must for entrepreneurs to meet the
challenges of exploiting a new business opportunity. Successful entrepreneurs believe in control
being exercised from within. They believe in imposing control on themselves and their
enterprises rather than leaving their success to fate.

9. Communication Ability: This ability pertains to communicate effectively. As a leader an

entrepreneur communicates effectively with all concerned such as financiers, employees,
customers, suppliers, creditors and all who are concerned with the new enterprise.

10. Future Orientation: Entrepreneurs look ahead and are less concerned with what they did
yesterday than with what they might do tomorrow. Not satisfied to sit back and revel in their
success, real
entrepreneurs stay focused on the future. Whereas traditional managers are concerned with
managing available resources, entrepreneurs are more interested in spotting and capitalizing on
opportunities.

11. Commitment and Dedication: Entrepreneurs must work with dedication and commitment to
launch successful business enterprises. The commitment from the entrepreneur for longer
period may be 5 to 10 years is necessary for conceptualisation, building and running an
enterprise. Entrepreneurship is hard work, and launching a company successfully requires total
commitment from an entrepreneur. Most entrepreneurs have to overcome seemingly
insurmountable barriers to launch a company and to keep it growing. That requires commitment.

12. High Level of Energy: Entrepreneurs are more energetic than the average person. Managing
resources and running an enterprise calls for long hours of work for longer period of time and
hence an entrepreneur is a man of high energy level.

13. Flexibility: One hallmark of true entrepreneurs is their ability to adapt to the changing
demands of their customers and their businesses. In this rapidly changing global economy,
rigidity often leads to failure. As our society, its people, and their tastes change, entrepreneurs
also must be willing to adapt their business to meet those changes. When their ideas fail to live
up to their expectations, successful entrepreneurs change them.

14. Technical Knowledge: An entrepreneur must have a reasonable level of technical

knowledge. This is the one ability that most people are able to acquire if they try hard enough.
The entrepreneur should have a keen desire to change and adopt new industrial or commercial
technology available in the market.

15. Mental Ability: An entrepreneur will be a man of high level intelligence, creative, thinking and
decision maker. He must be able to engage in the analysis of various problems and situations in
order to deal with them. The entrepreneur should anticipate changes and must be able to study
the various situations under which decision have to be made.

16. More than a Manager: An entrepreneur is more a true leader and less a manager. An
entrepreneur builds up his team, educates them, keeps high level of motivation and also
provides an environment for creative and focused to work culture. He is the leader of the team.
He inspires loyalty and hard work to raise productivity ad efficiency. He has the ability to
become market leader.

17. Problem Solver and a Decision Maker: In the initial phases of an enterprise many teething
problems do occur and an entrepreneur should be a creative problem solver to turn difficulties
into advantages. Entrepreneurs face lots of problems right from the conception of an idea to its
implementation. Entrepreneurs who are decisive arrive at the right solution to the problem by
spending the least possible time and money. Lack of ability to solve problems will result in most
of the problems remaining unresolved.

18. Desire for Immediate Feedback: Entrepreneurs enjoy the challenge of running a business,
and they like to know how they are doing and are constantly looking for feedback.

19. Human Relation Ability: Tactful and warm human relation is an important factor which brings
success to an entrepreneur. An entrepreneur who maintains good relations with customers,
employees,
suppliers, creditors and the community is much more likely to succeed in his business than the
individual who does not invest in maintaining these relations.

What conclusion can we draw from the above discussion on the entrepreneurial personality?
Entrepreneurs are not of one mold; no one set of characteristics can predict who will become
entrepreneurs and whether or not they will succeed. Indeed, diversity seems to be a central
characteristic of entrepreneurs.

Source: Entrepreneurship & Small Scale Businesses by Chairman Prof. (Dr.) Naresh Dadhich of
Vardhaman Mahaveer Open University, Kota.pdf

7. ENTREPRENEURIAL PROCESS

Entrepreneurial process is a leadership function which centres round the dynamics of

entrepreneurial growth and change. It is a process comprising several distinct stages. From
exploring the various aspects of the entrepreneurial context to identifying opportunities, to
starting and managing the entrepreneurial venture, choosing the competitive strategy in action.
Let’s look at each of these decisions and activities in figure 3.5:
 Source: Entrepreneurship & Small Scale Businesses by Chairman Prof. (Dr.) Naresh Dadhich of
Vardhaman Mahaveer Open University, Kota.pdf

1. Exploring the Entrepreneurial Context:

Why is it important to look at the entrepreneurial context? Because the context
determines the “rule” of the game and what decisions are likely to be successful. The
context includes the realities of the new economy, society’s laws and regulations that
compose the legal environment, and the realities of the changing world of work.
Entrepreneurs should be aware of the context within which entrepreneurial decision are
made. Only through exploring the context can entrepreneurs discover the untapped
opportunities and competitive advantage(s) that may lead to the development of a potentially
successful entrepreneurial venture.
2. Identifying Opportunities:
A crucial aspect of entrepreneurial process is identifying opportunities. What are
opportunities? These opportunities are positive external trends or changes that provide
unique and distinct possibilities for innovating and creating value. There are thousands of
opportunities available to an entrepreneur. Some of them are not real opportunities with high
potentials. Some opportunities have growth prospects. Entrepreneurs make search for
profitable ones and then selects an attractive business opportunity.
However, just identifying an opportunity isn’t enough. The entrepreneurial process also involves
pinpointing a possible competitive advantage. A competitive advantage is what sets an
organization apart; it’s an organization’s competitive edge. Having a competitive advantage is
crucial for an organization’s long-term success and survival.

3. Starting the Venture: Once entrepreneurs have explored the external context and identified
possible opportunities and competitive advantage(s), they must look at the issues involved with
actually starting up their entrepreneurial venture. Included in this phase of the entrepreneurial
process are the following activities; researching the feasibility of the venture, planning the
venture, organizing the venture and launching the venture. Financial, physical and managerial
resources must be collected to launch the venture.

4. Managing the Venture: Once the entrepreneurial venture is up and running the next step in
the entrepreneurial process is managing the venture. An entrepreneur also must effectively
manage the venture by managing processes, managing people and managing growth. This
requires the talents of leading, decision making, executing, controlling and various managerial
skill.

5. Choosing the Competitive Strategy: One the entrepreneurial venture is up and running, the
last step is to choose competitive strategy. Peter Drucker mentions following specific
entrepreneurial strategies. These are:

 Being fastest with the most.

 Creative imitation.
 Entrepreneurial judo.
 Finding and occupying a specialized ecological niche.
 Changing values and characteristics by creating utility, by delivering what represents true
value to the customer, by adoption to the customer’s social and economic reality, by
appropriate pricing.

8. FUNCTIONS OF ENTREPRENEURS

Entrepreneur is an opportunity seeker and organizer and coordinator of the factor of production.
He not only perceives the business opportunities but also mobilizes the other resources like –
man, money, machine, materials and methods. According to some economists, the functions of
an entrepreneur are establishing coordination. In business enterprise, risk-taking, controlling the
enterprise, innovation for change, motivation and other related activities. In reality, an
entrepreneur has to carry out a combination of these functions in keeping with time and
environment. Truly, he has to consider new ideas, demands and exploit the opportunities, and
thereby contribute to technical progress. A successful entrepreneur recognizes the potential of a
product or service, design operating policies in marketing, production, product development and
the organisational structure. He carries out the whole set of activities of the business. He has a
high capacity for taking calculated risks and has faith in his own capabilities. An entrepreneur
performs all the necessary functions which are essential from the point of view of operation and
expansion of the enterprise. We can explain this through the flow diagram described in figure
4.2:
 Source: Entrepreneurship & Small Scale Businesses by Chairman Prof. (Dr.) Naresh Dadhich of
Vardhaman Mahaveer Open University, Kota.pdf

Kilby identify thirteen functions of an entrepreneur, which included some of the managerial
functions also. Kilby has classified these functions into four groups. These are as follows:

A. Exchange Relationship:
1. Perceiving market opportunities.
2. Gaining command over scarce resources.
3. Purchasing inputs.
4. Marketing of the products and responding to competition.
B. Political Administration:
1. Dealing with the public bureaucracy (concession, licenses & taxes)
2. Managing human relation within the firm.
3. Managing customer and supplier relations.
C. Management Control:
1. Managing finance
2. Managing production
D. Technology:
1. Acquiring and overseeing assembly of the factory.
2. Industrial engineering
3. Upgrading process and product quality.
4. Introducing new production techniques and products.

Kilby suggested these functions may vary according to the size, type and setting of an enterprise
and could be augmented through training and education. By summing up we can say that
Entrepreneurs perform the following functions:

1. Innovation: A very important function performed by entrepreneur is that of innovation. They

analyze the existing state of company’s affairs and try to reach a new level of equilibrium by
trying new and productive combinations of existing resources. They think of creative ideas and
use their managerial and innovative skills to put those ideas into reality. They combine the
productive factors, bring them together and help in the economic development of a nation.

According to Schumpeter, innovation can occur in the following forms:

 Introduction of new goods ;

 The use of new method of production ;
 The opening of a new market ;
 The conquest of a new source of supply of raw materials ; and
 The reorganization of any industry.

According to Robert Wilken entrepreneurs contribute change that can be categorized into five
types:

1. Initial Expansion: the original production of goods.

2. Subsequent Expansion: the subsequent change in the amount of goods
produced. 3. Factor Innovation: the increase in supply or productivity of the
factors of production. (a) Financial: the procurement of capital from new sources
or in new form.
(b) Labour: the procurement of labour from a new source or of a new type; the upgrading
of existing labour.
(c) Material: the procurement of old material from a new source or the use of a new material.

4. Production Innovations: changes in the production process.

(a) Technological: the use of a new production technique.
(b) Organizational: change in the form of structure of relationships among

people. 5. Market Innovation: changes in the size or composition of the

market.

(a) Product: the production of a new good or the change in quality or cost of existing
goods. (b) Market: the discovery of a new market. Innovation involves imagination and
 creativity. It is so basic that a person cannot be called an entrepreneur unless’ he
creates something new and something different in his venture.
2. Assumption of Risk: An idea that is put to reality does not guarantee success. Entrepreneurs
assume the risk of success or failure of the enterprise that they wish to launch. Such risks are
not insurable. If they materialize, the entrepreneur has to bear the loss himself. Thus, risk-
bearing or uncertainty-bearing still remains the most important function of an entrepreneur which
he tries to reduce by his initiative, skill and good judgement.

3. Idea Generation: Entrepreneurs do not immediately think of ideas and put them into practice.
Ideas can be generated through environmental scanning and market survey. It is the function of
the entrepreneurs to generate as many ideas as he can for the purpose of selecting the best
business opportunities which can subsequently be taken up by him as a commercially - viable
business venture. They think of a variety of ideas, apply quantitative techniques to test their
applicability, supplement them with empirical findings, arrive at the best alternative and apply it
in practice. The selection of an idea, thus, involves the application of research methodology by
the entrepreneurs, vision, insight, observation, experience, education, training and exposure of
the entrepreneur. Idea generation precisely implies product selection and project identification.

4. Organizing and Management: An entrepreneur brings together various resources of

production, organizes them properly and converts them into a productive unit. As regards the
proposed projects, an entrepreneur manages the following activities:
 Scanning of the business environment (SWOT Analysis)
 Measuring the suitability of business idea.
 Market Research and Selection of Product Line: The next important function of the
entrepreneur is market research and product market research is the systematic collection
of data regarding the product which the entrepreneur wants to manufacture.
Entrepreneur has to undertake market research persistently in order to know the details
of the intending product, i.e., the demand for the product, selection of product line, the
price of the substitute product, the size of the customer, etc. while starting an enterprise.
 Studying the government rules, regulation and policies.
 Performing government formalities.
 Determination of Objectives: The next function of the entrepreneur is to determine and lay
down the mission, vision, objectives and goals of the business, which should be spelt out
on clear terms. In other words, entrepreneur should be very much clear about future
prospect of the venture.
 Determination of Form of the Venture: The function of an entrepreneur in determining the
form of enterprise is also important. Entrepreneur has to decide the form of enterprise
based upon the nature of the product, volume of investment, nature of activities, types of
product, quality of product, quality of human resources, etc. The major forms of
ownership organizations are sole proprietorship, partnership, joint stock company and
cooperative society.
 Managing of Funds: Fund raising is the most important function of an entrepreneur. All the
activities of a business depend upon the finance and its proper management. It is the
responsibility of the entrepreneur to raise funds internally as well as externally.  Selection
of Location:
 Procurement of Raw Material Entrepreneur has to identify the cheap and regular sources
of supply of raw materials, which will help him to reduce the cost of production and face
the competition.
 Procurement of Machinery: The next function of the entrepreneurs is to procure the
machineries and equipment’s for establishment of the venture. While procuring the
 machineries, he should specify the following details:
(a) The details of technology
(b) Installed capacity of the machines
(c) After sales service facilities
 Recruitment Selection and Placement of Manpower : Entrepreneur has to perform the
following activities while undertaking this function :
(a) Estimating manpower need of the organization
(b) Laying down of selection procedure
(c) Placing the employee

Another important function of entrepreneur is ‘financial planning’, which translates all other
activities into monetary terms. Though an entrepreneur is more than a manager, he combines in
him some managerial functions. He deals with day-to-day affairs of a going concern by directing
and controlling the employees.

5. Decision Making: Arther H. Cole has described the entrepreneur as a ‘decision maker’. He
takes various decisions regarding following matters:

 The determination of these objectives of the enterprise and the change of those
objectives as conditions required or made advantageous;
 The development of an organisation, including efficient relations with subordinates
and all employees;
 Securing adequate financial resources, and maintaining good relations with the
existing and potential investors ;
 The requisition of efficient technological equipment and the revision of it as new
machinery appeared ;
 The development of a market for the products and the devising of new products to
meet or anticipate consumer’s demand: and
 The maintenance of good relations with public authorities and with the society at large.

6. Leading: As an entrepreneurial venture florish, an entrepreneur takes on a new role of a

leader. He acts as a visionary leader. The entrepreneur’s leading function is drawing the best
out of his human resources. He must create teamwork, motivation among employees. As a
leader, entrepreneurs must shift from the command-and-control style of managing to a
coach-and-collaboration style.

7. Managing Growth: The entrepreneur must manage the enterprise’s growth. It includes such
activities as developing and designing appropriate growth strategies, dealing with crises,
exploring various ways for financing growth and placing a value on the venture.

8. Support to Social Environment: Social environment is characterized by social customs,

culture, values and beliefs. Changes are not easily acceptable in a given socio-economic
environment of a country. Entrepreneurs discover new sources of materials, new markets, and
new opportunities and establish new and more lucrative forms of organizations. This is a
reflection of their will power, enthusiasm and energy and helps in overcoming the society’s
resistance to change.
9. Economic Development: Entrepreneurs play an important role in accelerating the rate of
economic development of developed and under-developed countries. They exploit the country’s
resources (land, labour, capital and technology) and optimize their utilization to result in
development of that country.

`
Source: Entrepreneurship & Small Scale Businesses by Chairman course development committe Prof. (Dr.)
Naresh Dadhich of Vardhaman Mahaveer Open University, Kota.pdf

An entrepreneur performs many useful functions. He undertakes a venture, assumes risk and
earns profit. He is the man having a strong motivation to achieve success. He is self-confident
in his entrepreneurial abilities. He exploits opportunities wherever and whenever they arise.

As you can tell from the above descriptions, being an entrepreneur is an exciting proposition!
Entrepreneurs do a variety of things and deal with a multitude of challenges. In fact, we can say
that entrepreneurial behaviour is complex, intentional, and passionate. Yet, it’s primarily
because or these qualities that it is prudent for you to know, from the start, the rewards and
challenges of being an entrepreneur.

The Rewards and Challenges of Being an Entrepreneur

Rewards:

 High degree of independence

 freedom from constraints
 Get to use a variety of skills and talents
 Freedom to make decisions
 Accountable to only yourself
 Opportunity to tackle challenges
 Feeling of achievement and pride
 Potential for greater financial rewards
Challenges:

 Must be comfortable with change and uncertainty

 Must make a bewildering number of decisions
  May face tough economic choices
 Must be comfortable with taking risks
 Need many different skills and talents
 Must be comfortable with the potential of failure

9. TYPES OF ENTREPRENEUR

Researchers who have studied entrepreneurial behaviour suggest that there are different types
of entrepreneurs. Classifying entrepreneurs into various categories is a tricky issue. The
taxonomy of entrepreneurs can be carried out in various ways. Entrepreneurs can be classified
on various basis. Clarence Denhof Classifies entrepreneurs on the basis of stage of economic
development: some others have classified on the basis of their functions and characteristics. In
the initial stages of economic development, entrepreneurs tend to have less initiative and drive.
As development proceeds, they become more innovating and enthusiastic. The various types of
entrepreneurs are classified on certain parameters. Some important classifications are
described below:

1. On the Basis of Economic Development: Clarence Danhof classified entrepreneurs into four
groups on the basis of economic development.

A. Innovating Entrepreneurs: This type of entrepreneurship is characterized by

aggressive assemblage of information and the analysis of results deriving from novel
combination of factors of production. Entrepreneurs falling in this class are generally aggressive
in experimentation and exhibited shrewdness in putting attractive possibilities into practice.
They are the entrepreneurs who have creative and innovative ideas of starting a new business.
An innovating entrepreneur sees the opportunity for introducing a new technique or a new
product or a new market. He may raise money to launch an enterprise, assemble the various
factors, and choose top executives and the set the organization going. Schumpeter’s
entrepreneur was of this type. Innovative entrepreneurs thus, results in the creation of
something new. They are the contributors to the economic development of a country. Innovating
entrepreneurs are very commonly frond in undeveloped countries. There is dearth of such
entrepreneurs in developed countries. Innovating entrepreneurs played the key role in the rise of
modern capitalism, through their enterprising sprit, hope of moneymaking, ability to recognize
and exploit opportunities, etc.

B. Adoptive or Imitative Entrepreneur: There is a second group of entrepreneurs

generally referred as imitative entrepreneurs. The imitative entrepreneurs copy or adopt suitable
innovations made by the innovative entrepreneurs. They does not innovate the changes himself.
They only imitates technology innovated by others. Such entrepreneurs are particularly
important in developing courtiers because they contribute significantly to the development of
such economies. Imitative entrepreneurs are most suitable for the developing regions because
in such countries people prefer to imitate the technology, knowledge and skill already available
in more advanced countries. In highly backward countries there is shortage of imitative
entrepreneurs also. People who can imitate the technologies and products to the particular
conditions prevailing in these countries are needed. Sometimes, there is a need to adjust and
adopt the new technologies to their special conditions. Imitative entrepreneurs help to transform
the system with the limited resources available. However; these entrepreneurs face lesser
risks and uncertainty then innovative entrepreneurs. While innovative entrepreneurs are
creative, imitative entrepreneurs are adoptive.
 C. Fabian Entrepreneur: The third type is Fabian entrepreneur. By nature these
entrepreneurs are shy and lazy. This type of entrepreneurs have neither will to introduce new
changes nor desire to adopt new methods of production innovated by the most entrepreneurs.
They follow the set procedures, customs, traditions and religions. They are not much interested
in taking risk and they try to follow the footsteps of their predecessors. Usually they are second
generation entrepreneur in a business family enterprise.

D. Drone Entrepreneur: The fourth type is Drone entrepreneurs who refuse to copy or
use opportunities that come on their way. They are conventional in their approach and stick to
their set practices products, production methods and ideas. They struggle to survive not to
grow. They may be termed as Laggards. In such cases the organization looses market, their
operations become uneconomical and they may be pushed out of the market.

2. On the Basis of Type of Business: Under this category we can classify entrepreneurs as
described below:

A. Business Entrepreneurs: They are the entrepreneurs who conceive an idea for a new
product or service and then create a business to materialize their idea into reality. They tap the
entire factor of production to develop a new business opportunity. They may set up a big
enterprise or a small scale business. When they establish small business units they are called
small business entrepreneurs. In a majority of cases, entrepreneurs are found in small trading
and manufacturing business.

B. Trading Entrepreneur: There entrepreneurs undertake trading activities and are not
concerned with the manufacturing work. They identifies potentiality of their product in markets,
stimulates demand for their product line among buyers. They may go for both domestic and
overseas trade. These entrepreneurs demonstrated their ability in pushing many ideas ahead
which promoted their business.

C. Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer who

identifies the needs of customers and creates products or services to serve them. He is product-
oriented who starts through an industrial unit to create a product like electronic industry, textile
unit, machine tools.

D. Corporate Entrepreneur: These entrepreneurs used his innovative skill in organizing

and managing a corporate undertaking. A corporate undertaking is a form of business
organisation which is registered under some statute or Act like a trust registered under the Trust
Act, or a company registered under the Companies Act. These corporate work as separate legal
entity. He is thus an individual who plans, develops and manages a corporate body.

E. Agricultural Entrepreneur: Agricultural entrepreneurs are those who undertake

agricultural activities as through mechanization, irrigation and application of technologies to
produce the crop. They cover a broad spectrum of the agricultural sector and include agriculture
and allied occupations.

3. According to the Use of Technology: The application of new technology in various sectors of
the national economy is essential for the future growth of business. We may broadly classify
these entrepreneurs on the basis of the use of technology as follows:
A. Technical Entrepreneurs: With the decline of joint family business and the rise of
scientific and technical institutions, technically qualified persons have entered the field of
business. These entrepreneurs may enter business to commercially exploit their inventions and
discoveries. Their main asset is technical expertise. They raise the necessary capital and
employ experts in financial, legal
marketing and other areas of business. Their success depends upon how they start production
and on the acceptance of their products in the market.

B. Non-technical Entrepreneur: Non-technical entrepreneurs are those who are not

concerned with the technical aspects of the product or service in which they deal. They are
concerned only with developing alternative marketing and promotional strategies for their
product or service.

C. Professional Entrepreneur: Professional entrepreneur is an entrepreneur who is

interested in establishing a business but does not have interest in managing it after
establishment. A professional entrepreneur sells out the existing business on good returns and
starts another business with a new idea. Such an entrepreneur is dynamic and conceives new
ideas to develop alternative projects.

4. According to Motivation: Motivation is the main force that promotes the efforts of the
entrepreneur to achieve his goals. An entrepreneur is motivated to achieve or prove his
excellence in their performance. According to motivation we can classify entrepreneur as:.

A. Pure Entrepreneur: A pure entrepreneur is the one who is motivated by psychological

economical, ethical considerations. He undertakes an entrepreneurial activity for his personal
satisfaction in work, ego or status.

B. Induced Entrepreneur: This type of entrepreneur is one who induced to take up an

entrepreneurial task due to the policy reforms of the government that provides assistance,
incentives, concessions and other facilities to start a venture. Most of the small scale
entrepreneurs belong to this category and enter business due to financial, technical and several
other facilities provided to them by the various agency of Govt. to promote entrepreneurship.
Today, import restrictions and allocation of production quotas to small units have induced many
people to start a small scale unit.

C. Motivated Entrepreneur: New entrepreneurs are motivated by the desire for self-
fulfillment. They come into being because of the possibility of making and marketing some new
products for the use of consumers. They are motivated through reward like profit.

5. According to Growth: The industrial units are identified as high growth, medium growth and
low growth industries and as such we have ‘Growth Entrepreneur’ and ‘Super Growth
Entrepreneur.’

A. Growth Entrepreneur: He necessarily takes up a high growth industry and chooses an

industry which has sustained growth prospects. Growth entrepreneurs have both the desire and
ability to grow as fast as large as possible.

B. Super-Growth Entrepreneur: This category of entrepreneurs is those who have shown

enormous growth of performance in their venture. The growth performance is identified by the
high turnover of sales, liquidity of funds, and profitability.
6. According to Entrepreneurial Activity: Based on entrepreneurial activity, entrepreneurs are
classified as novice, serial, and portfolio entrepreneur.
A. Novice Entrepreneur: A novice is someone who has started his/her first
entrepreneurial venture. A novice entrepreneur is an individual who has no prior business
ownership experience as a business founder, inheritor of a business, or a purchaser of a
business. It is not similar to early starter; a novice can also be a 50 year old with over 25 years
of experience in the industry.

B. A Serial Entrepreneur: A Serial Entrepreneur is someone who is devoted to one

venture at a time but ultimately starts many. It is the process of starting that excites the starter.
Once the business is established, the serial entrepreneur may lose interest and think of selling
and moving on.

C. Portfolio Entrepreneur: A portfolio entrepreneur is an individual who retains an original

business and builds a portfolio of additional businesses through inheriting, establishing, or
purchasing them. A portfolio entrepreneur starts and runs a number of businesses. It may be a
strategy of spreading risk or it may be that the entrepreneur is simultaneously excited by a
variety of opportunities. Also, the entrepreneur may see some synergies between the ventures.

7. Other Entrepreneurs:

A. First-Generation Entrepreneurs: This category consists of those entrepreneurs whose

parents or family had not been into business and was into salaried service. The booming
economy of has led to a multitude of business opportunities, and with deregulation, it has
become easier to set up businesses. Also, with a change in the mindset of the middle class, it is
now more acceptable to become an entrepreneur. A first-generation entrepreneur is one who
starts an industrial unit by means of an innovative skill. He is essentially an innovator,
combining different technologies to produce a marketable product or service.

B. Modern Entrepreneur: A modern entrepreneur is one who undertakes those

businesses which go well along with the changing scenario in the market and suits the current
marketing needs.

C. Women Entrepreneurs: Women as entrepreneurs have been a recent phenomenon.

The social norms had made it difficult for women to have a professional life. Now this has
changed. Progressive laws and other incentives have also boosted the presence of women in
entrepreneurial activity in diverse fields. In 1988, for the first time, the definition of Women
Entrepreneurs’ enterprise was evolved that termed an SSI unit/industry-related service or
business enterprise, managed by one or more women entrepreneurs in proprietary concerns, or
in which she/they individually or jointly have a share capital of not less than 51 per cent as
partners / shareholders / directors of a private limited company / members of a cooperative
society, as a Woman Enterprise.

D. Nascent Entrepreneur: A nascent entrepreneur is an individual who is in the process

of starting a new business.

E. Habitual Entrepreneur: A habitual entrepreneur is an individual who has prior business

ownership experience. The nascent entrepreneur can either be a novice or a habitual
entrepreneur.
 F. Lifestyle Entrepreneurs: Lifestyle entrepreneurs have developed an enterprise that fits
their individual circumstances and style of life. Their basic intention is to ear an income for
themselves and their families.
G. Copreneurs: It is related to the married couples working together in a business. When
a married couple share ownership, commitment and responsibility for a’ business, they are
called “copreneurs”. As copreneurs, couples struggle in ventures to establish equality in. their
relationships. Such couples represent the dynamic interaction of the systems of love and work.

H. IT Entrepreneurs: IT entrepreneurs are creating a new business platform that takes

them straight to the top. They are confident, ambitious innovative and acquired creativity in the
competitive global environment and created a niche of their self. They are the brave new bunch
of entrepreneurs who are raring to take on the world of information technology.

I. Social Entrepreneur: Social entrepreneur is one who recognizes the part of society
which is stuck and provides new ways to get it unstuck. Be it dedicated efforts for child
upliftment, fighting for the conservation of Assam’s rainforests, working for the betterment of the
blind or initiatives to empower women, the entrepreneur’s passion is very strong. Freedom,
wealth, exposure, social mobility and greater individual confidence are driving this huge wave of
social innovation and entrepreneurship. After all are tired with the Inefficiency of governments
and the indifference of corporate, and want to make a change and this is the case everywhere.

J. Forced Entrepreneurs: The money-lenders of yesterday, who are thrown out of their
family business because of govern-ment legislation, the neo-rich returning from abroad and the
educated unemployed seeking self-employment form this class of entrepreneurs.

K. Individual and Institutional Entrepreneurs: In the small scale sector individual

entrepreneurs are dominant. Small enterprises outnumber the large ones in every country. Such
entrepreneurs have the advantage of flexibility, quick decision making. But a single individual
can establish, operate and control an organization up to a limit. Thereafter, it becomes
necessary to institutionalize entrepreneurship. The business will have to acquire a number of
new entrepreneurial skills through a corporate body. A group of entrepreneurs has to be
developed to handle the increasingly complex network of decision making. The central function
of the entrepreneur remains the same but the basic decisions like the line of business, the
amount of capital employed, etc. are taken collectively by the promoters at the helm of affairs.
Thus, individual entrepreneur and institutional entrepreneur coexist and support each other.
Corporate sector the symbol of institutionalized entrepreneurship.

L. Entrepreneurs by Inheritance: At times, people become entrepreneurs when they

inherit the family business. There are a large number of family controlled business houses.
Firms in these houses are passed from one generation to another.
 Source: Entrepreneurship & Small Scale Businesses by Chairman course development committe Prof. (Dr.)
Naresh Dadhich of Vardhaman Mahaveer Open University, Kota.pdf

10. ROLE OF Entrepreneurs

Entrepreneurs play a significant role in economic development of a country. He promotes the

prosperity of a nation by his innovation and dynamic leadership Skills. He creates wealth, opens
up employment opportunities and fosters the other segments. According to Harbison,
entrepreneurs are prime movers of innovation, growth and as such, entrepreneurship is a
dynamic force. The role and significance of an entrepreneur are explained below :

1. Bringing Economic Growth and Prosperity: Entrepreneur bring economic growth and
prosperity in the country through generation of employment opportunities, capital and wealth
creation, increasing per capita income and GDP, improvement in quality of life by raising the
standard of living, growth of infrastructural facilities, forward and backward linkages in society,
development of backward regions, economic independence. George gilder observes, “The
‘heroic creativity of entrepreneur came to seem essential to our economic well-being in a global
economy”. Baumback and Mancuso write, “In
underdeveloped nations, entrepreneurs often hold the key to economic growth for a whole
society. So entrepreneur is not a dirty word or a fast buck opportunist, but, rather the backbone
of the capitalist system”.

2. Brining Social Stability and Balanced Regional Development: Entrepreneurs play a crucial and
unique role in bringing about social stability and balanced regional development through
absorption of workforce in industries, removal of poverty, improving health and education
facilities, creating fair competition, equitable distribution of income, creation of social
infrastructures, empowering women and weaker sections of the society and supply of qualitative
goods and services Although entrepreneurs are criticized as self interested exploiters, Adam
Smith, while recognizing that they do some good for society, partly reflected this view when he
wrote in The Wealth of Nations: “In spite of their natural selfishness and rapacity, though they
mean only their convenience, though the sole end which they propose from the labours of all the
thousands they employ be the gratification of their own vain and insatiable desires they are led
by a hidden hand, and without intending it, without knowing it, advance the interest of society”.

3. Innovator in Economic Growth: by bringing new ideas, combinations, products techniques,

organizations, new markets, making full use of technical knowledge, balanced growth,
systematic innovation, technological advancement, implementation of mechanical skills, an
entrepreneur play very crucial role in encouraging entrepreneurship and economic
development. Peter Drucker writes, “Just as management has become the specific organ of all
contemporary institutions and the integrating organ of our society of organizations, so
innovation and entrepreneurship have to become an integral life
sustaining activity in our organizations, our economy, and our society”. He further says that the
emergence of a truly entrepreneurial economy is the most significant and hopeful event that
have occurred in recent economic and social history.

4. Creation of Employment Opportunities: Entrepreneurs play a significant role in generation of

employment opportunities by establishing new units in manufacturing, trading and service
sectors, laying emphasis on small scale industries, utilizing the surplus labour force in varied
industrial and/or service activities, upholding self-employment as a core objective. Entrepreneur
integrates resources and technologies into profitable business ventures and creates job
opportunities.

5. Increase Productivity with Modern Production System: Play an important role in raising
productivity. John Keudrick writes, “Higher productivity is chiefly a matter of improving
production techniques, and this task is the entrepreneurial function par excellence”. Two keys to
higher productivity are research and development and investment in new plant and machinery.
But there is a close link between R & D and investment programmes, with a higher
entrepreneurial input into both”.

George Gilder in The Spirit of Enterprise said that: “Entrepreneurs are innovators who evoke
demand’. They are makers of markets, creators of capital, and developers of opportunity and
producers of new technology. They seek the unique product, the marketing breakthrough, the
startling new, feature or the novel design. They change technical frontiers and reshape public
desires. They create wealth and employment. They take exception to the received view that
companies should be market led. They lead the market”.

6. Export Promotion and Import Substitution: Liberalization, privatization and globalization [LPG]
has opened the arena of export promotion and import substitution to entrepreneurs by
establishing
industries producing import substitution goods, establish new industries, especially for export,
products, exploration of new global markets, earning foreign exchange reserves, utilizing the
available productive resources, achieving self-reliance in production of as many goods as
possible, entrepreneur, are playing a pivot role in export promotion and import substitution.

7. Entrepreneur Plays a Role of Catalytic Agent: As Joseph Schumpeter says, entrepreneur’s

task is “creative destruction”. He destroys to create new things. He changes and transmutes
values. He searches change and responds to it. He is a change creator. Ralph Harwitz writes in
his book Realities of Profitability’, “The entrepreneur makes a happening, wants piece of action,
is the growth man. Without him there is no happening, no action, and no growth”.

8. Augmenting and Meeting Local Demands: Entrepreneurs also play a significant role in
augmenting local demands and meeting them satisfactorily. Towards this entrepreneurs focus
their attention to manufacture service through indigenous technology, skill, resources and
experiences.

Source: Entrepreneurship & Small Scale Businesses by Chairman course development committe Prof. (Dr.)
Naresh Dadhich of Vardhaman Mahaveer Open University, Kota.pdf
9. Reinventing Entrepreneurial Venture: An entrepreneur work to reinvent his entrepreneurial
venture. He knows that change and innovation is good for his organization. Paul Wilken
observes, “Entrepreneurship is a discontinuous phenomenon, appearing to initiate
changes in the production process and then disappearing until it reappears to initiate
another change”. Zoltan Acs writes, “Entrepreneurs stir up the waters of competition in
the market place. They are ‘agents of change in a market economy”.