Chapter 4: Entrepreneur: Types and Functions

Objectives
• Classify different types of entrepreneurs on various bases.
• Look at the reasons for entrepreneurial failure.
• Describe the various functions of entrepreneurs.
• Understand the role and significance of entrepreneur in economic development
• Establish a relationship between entrepreneur and entrepreneurship.
• Come across the rewards and challenges of being an entrepreneur.
Types of entrepreneurs
Entrepreneurs can be classified on various bases:
1. On the Basis of Economic Development:
Innovating Entrepreneurs. 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.
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.
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 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.
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Drone Entrepreneur: These 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. 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
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.
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.
Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer who identifies the
needs of customers and creates products or services to serve them.
Agricultural Entrepreneur: Agricultural entrepreneurs are those who undertake agricultural
activities as through mechanization, irrigation and application of technologies to produce the crop.
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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.
3.On the basis of Use of Technology
Technical Entrepreneurs. 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.
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.
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.
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4. On the basis of Motivation

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.
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.
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.
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5. On the basis of Growth:
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.
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
Novice Entrepreneur: A novice is someone who has started his/her first entrepreneurial
venture.
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.
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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.

Other Entrepreneurs:
• First-Generation Entrepreneurs: This category consists of those entrepreneurs whose parents
or family had not been into business and was into salaried service.
• Women Entrepreneurs:
• Nascent Entrepreneur: A nascent entrepreneur is an individual who is in the process of
starting a new business.
• Lifestyle Entrepreneurs:
Functions of Entrepreneurs
Kilby has classified these functions into four groups.
A. Exchange Relationship:
• Perceiving market opportunities.
• Gaining command over scarce resources.
• Purchasing inputs.
• Marketing of the products and responding to competition.
B. Political Administration:
• Dealing with the public bureaucracy (concession, licenses & taxes)
• Managing human relation within the firm.
• Managing customer and supplier relations.
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C. Management Control:
• Managing finance
• Managing production
D. Technology:
• Acquiring and overseeing assembly of the factory.
• Industrial engineering
• Upgrading process and product quality.
• Introducing new production techniques and products
Functions of an entrepreneur
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.
Assumption of Risk: Entrepreneurs assume the risk of success or failure of the enterprise that
they wish to launch. 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.
Idea Generation: 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.
Organizing and Management: An entrepreneur brings together various resources of
production, organizes them properly and converts them into a productive unit.
Decision Making: An entrepreneur is a ‘decision maker’. He takes various decisions regarding
several matters
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Leading: 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.
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.
Support to Social Environment: Social environment is characterized by social customs,
culture, values and beliefs.
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.
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
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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
 The role and significance of an entrepreneur
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.
Brining Social Stability and Balanced Regional Development: Entrepreneurs play a crucial
and unique role in bringing about social stability and balanced regional development through
removal of poverty, improving health and education facilities, creating fair competition,
equitable distribution of income.
Innovator in Economic Growth: An entrepreneur plays a very crucial role in encouraging
entrepreneurship and economic development by bringing new ideas, combinations, products
techniques, organizations, new markets, making full use of technical knowledge.
Creation of Employment Opportunities: Entrepreneurs play a significant role in generation
of employment opportunities by establishing new units in manufacturing, trading and service
sectors.
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Increase Productivity with Modern Production System: Play an important role in raising
productivity. Two keys to higher productivity are research and development and investment in
new plant and machinery.
Export Promotion and Import Substitution. Entrepreneurs establish industries producing
import substitution goods, establish new industries, especially for export products.
Entrepreneur Plays a Role of Catalytic Agent. As Joseph Schumpeter says, entrepreneur’s
task is “creative destruction”. He destroys to create new things.
Augmenting and Meeting Local Demands: Entrepreneurs also play a significant role in
augmenting local demands and meeting them satisfactorily.
Reinventing Entrepreneurial Venture: An entrepreneur work to reinvent his entrepreneurial
venture. He knows that change and innovation is good for his organization.
Entrepreneur vs. Entrepreneurship
Entrepreneurial Failure
There are a number of reasons for failure of a new venture. Below are some of them:
Inadequate Management of Finance: Due to a lot of operational issues sometimes, financial
management is likely to get neglected. Sometimes entrepreneurs are more concerned about
raising the fund, they are less concerned about utilization of funds. Common errors in financial
improper cash management, unproductive investments, and poor budgeting decisions.
Lack of Professional and Experienced Management Team: One of the main problems faced
by new enterprises in that the management team is usually very new to their role. Even in some
rare cases, when the management has some individuals who have led a company in the past,
they are now faced with a situation where the company itself has no previous track record.
Weak Promotional Efforts: Entrepreneurial firms are very reluctant to spend on promotional
activities. Sometimes entrepreneurs thinks that investing in this campaign is not going to give
assured returns.
Unplanned Rapid Growth: Unplanned growth is not always a desirable situation. Higher
growth will put greater stress on production facilities, manpower, and distribution and working
capacity of Venture.
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Shortage Trained or Experienced Manpower: Shortage of skilled and experienced
manpower. Most people prefer to work with a well-established organization employing
hundreds of employees and having a stable track record and experienced manpower and are less
interested to work with new venture. New ventures are also reluctant to invest in training and
development. Lack of experienced and skilled manpower can lead to a general dropping
productivity and quality of output.
Lack of Appropriate Information: The quality of information available to large corporations
is superior than the information available to new small entrepreneurial ventures. Quality
information is always have some cost and small ventures may not be able to invest so much in
getting the high-quality information.
Improper Price Management. But improper management of price creates a lot problem to
enterprise as price is directly associated with the volume of sales. There are many sophisticated
pricing policies a new venture can adopt, taking into account its cost structure, productivity
level, nature of demand, and extent of competition.
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Lack of Strong Business Relationship: Relationships with vendors, creditor, venture
capitalist, customers, and others is a huge advantage to established businesses. A new venture
will have to establish new relationships and work hard at strengthening them.
Less Concerned about Management: Improper inventory management can lead to tough
problems. Production can be halted due to insufficient inventory, whereas excess inventory can
lead to wastages and financial loss. In case of perishable goods, high inventory can lead to
expiration of stock.
Narrow Vision: In a crisis, the management of the venture focuses on surviving the
immediate crisis and resolving the conflict and soon the long-term vision and strategy of the
firm are forgotten. If this continues for long, the danger is that long-term plans and strategies
are discarded as impractical or irrelevant. Ultimately, the firm acquires a shape very different
from what was originally envisaged by the entrepreneur.