CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

1. Evolution of the Concept of Entrepreneur

Evolution of the Concept of Entrepreneur

The concept of entrepreneurship has evolved significantly over centuries, reflecting

changes in economic, social, and technological landscapes worldwide.

Early History:

1. Mercantilism (16th to 18th centuries): During the era of mercantilism,

entrepreneurs were primarily merchants who engaged in trade across borders,
often supported by colonial expansions. They played a crucial role in the
development of global trade routes and the exchange of goods.
2. Industrial Revolution (18th to 19th centuries): The Industrial Revolution
marked a significant shift as entrepreneurs began to emerge as innovators and
industrialists. With advancements in manufacturing technology and the rise of
factories, entrepreneurs such as James Watt (inventor of the steam engine) and
Richard Arkwright (inventor of the water frame) transformed industries and
created wealth through innovation and scale.

Modern Era:

3. Early 20th Century: The early 20th century saw the rise of entrepreneurial giants
such as Henry Ford, who revolutionized mass production with the assembly line,
and Thomas Edison, known for his numerous patents and inventions. These
figures epitomized the innovative spirit and risk-taking inherent in
entrepreneurship.
4. Post-World War II (Mid-20th Century): The aftermath of World War II
brought economic reconstruction and the rise of small and medium enterprises
(SMEs) globally. Governments began to support entrepreneurship through
policies aimed at fostering economic growth, job creation, and innovation.
5. Late 20th Century to Present:
o Technology and Innovation: The late 20th century witnessed the rise of
technology entrepreneurs such as Bill Gates (Microsoft), Steve Jobs
(Apple), and Mark Zuckerberg (Facebook). These individuals transformed
industries through digital innovations and disrupted traditional business
models.
o Globalization: The advent of globalization facilitated the growth of
multinational corporations (MNCs) and international entrepreneurship.
Entrepreneurs began to explore global markets, leveraging digital
platforms and supply chain networks.
6. Entrepreneurship Ecosystem: In recent decades, there has been a growing
recognition of the importance of entrepreneurship ecosystems. These ecosystems
encompass various stakeholders such as incubators, accelerators, venture
capitalists, and government agencies that support entrepreneurs with funding,
mentorship, and networking opportunities.

Development Worldwide:

Prepared by I.D.Paul DBATU-1

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

 Government Policies: Many countries have implemented policies to promote

entrepreneurship, including tax incentives, regulatory reforms, and funding
schemes. For example, Silicon Valley in the United States is renowned for its
supportive ecosystem that encourages innovation and risk-taking.
 Education and Research: Universities and research institutions play a vital role
in fostering entrepreneurship through education programs, research
commercialization, and startup incubation centers.
 Social Impact: Social entrepreneurship has emerged as a significant trend,
focusing on addressing social and environmental challenges through innovative
business models. Examples include organizations like Grameen Bank
(microfinance) and TOMS Shoes (one-for-one business model).

2. Functions of an Entrepreneur

The following points highlight the top five functions of an entrepreneur. The
functions are:

• Decision Making

• Management Control

• Division of Income

• Risk-Taking and Uncertainty-Bearing

• Innovation.

1. Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An

entrepreneur is to determine what to produce, how much to produce, how to produce,
where to produce, how to sell and so forth. Moreover, he is to decide the scale of
production and the proportion in which he combines the different factors he employs.
In brief, he is to make vital business decisions relating to the purchase of productive
factors and to the sale of the finished goods or services.

2. Management Control:

Earlier writers used to consider the management control one of the chief functions of
the entrepreneur. Management and control of the business are conducted by the
entrepreneur himself. So, the latter must possess a high degree of management ability
to select the right type of persons to work with him. But, the importance of this
function has declined, as business nowadays is managed more and more by paid man-
agers.

3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the
division of total income among the different factors of production employed by him.

Prepared by I.D.Paul DBATU-2

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

Even if there is a loss in the business, he is to pay rent, interest, wages and other
contractual incomes out of the realised sale proceeds.

4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern

production is very risky as an entrepreneur is required to produce goods or services in
anticipation of their future demand. Broadly, there are two kinds of risk which he has
to face. Firstly, there are some risks, such as risks of fire, loss of goods in transit,
theft, etc., which can be insured against. These are known as measurable and
insurable risks. Secondly, some risks, however, cannot be insured against because
their probability cannot be calculated accurately. These constitute what is called
uncertainty (e.g., competitive risk, technical risk, etc.). The entrepreneur undertakes
both these risks in production.

5. Innovation:

Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is

to make frequent inventions — invention of new products, new techniques and
discovering new markets — to improve his competitive position, and to increase
earnings.

3. Characteristics of an Entrepreneur

People may lack the personality and skills necessary for successful entrepreneurship.
There are some general characteristics and skills that many successful entrepreneurs have:
Problem-solving: Entrepreneurs often start their businesses after identifying a problem
and then coming up with a way to address it. Entrepreneurs are also able to figure out
how to solve problems that will occur during the development of the business.
Innovation: Entrepreneurs are innovators, and are often engaged continuously in the
process of conceiving new products and services, renewing and improving current
offerings, and developing new business processes.

Risk-taking: Entrepreneurs are not risk-averse. They are willing to risk their time, money
and even their reputation to get the business started and take their products or services to
market. Entrepreneurs are also willing to take risks even after they establish a business,
developing new products and approaches that can grow their businesses.

Contrariness: Entrepreneurs are often people who are eager to question why and how
things are being done – even if these processes are clearly "industry-standard." This
doesn't mean an entrepreneur should ignore industry best practices, but the entrepreneur is
also willing to challenge these practices if she believes that there is a better way to do
them.

Persistence: Entrepreneurs are persistent. They aren't easily discouraged and are willing
to work through discouragement and challenges. Entrepreneurs are willing to attend trade
shows, meet with bankers, call on clients and do what it takes to get the business started,
and then to make it successful.

Prepared by I.D.Paul DBATU-3

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

Leadership: Successful entrepreneurs are strong leaders. Leadership is an essential

entrepreneurial skill, as the entrepreneur will need to be able to cultivate trust and support
from the people who join his business as managers and workers. Many new businesses
are cash-poor and experience significant challenges – but a good leader can inspire
loyalty in workers who may not yet be receiving high wages, as well as in employees who
are facing roadblocks in their efforts to build the company.

4. Types of Entrepreneur

Innovative Entrepreneurs:

 Focus on introducing new products, services, or processes. They are often

involved in high-tech industries or start-ups.

Imitative Entrepreneurs:

 These entrepreneurs copy or adapt existing products or services, making them

more accessible or affordable.

Fabian Entrepreneurs:

 They are cautious and skeptical, adopting innovations only when it is clear that
failure to do so might lead to significant losses.

Drone Entrepreneurs:

 Resistant to change, they stick to traditional methods and products, often leading
to stagnation.

Social Entrepreneurs:

 Aim to address social issues and create positive societal impact alongside
economic gains.

Serial Entrepreneurs:

 These individuals repeatedly start new businesses, often moving on once the
enterprise is established.

Corporate Entrepreneurs (Intrapreneurs):

 Operate within larger companies, driving innovation and new business ventures
from within the organization.

Classic entrepreneurs: The so-called "classic" entrepreneur is someone who observes a

gap in the market or takes note of a business or consumer need, and develops a company
that addresses the deficit or the need. In some cases, the entrepreneur may also be an
inventor, although some classic entrepreneurs will team up with someone who has
invented a product. In many cases, the classic entrepreneur starts the business and
continues to own and manage it for many years.

Prepared by I.D.Paul DBATU-4

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

Serial entrepreneurs: A serial entrepreneur enjoys getting businesses started, and then
sells the business to another person or company. This type of entrepreneur is typically
somebody who is excited about starting something new and taking risks. Once the
business is doing well, however, this entrepreneur wants to move on to another new and
different challenge.

Social entrepreneurs: Social entrepreneurs incorporate social conscience with business.

While their businesses may still be for-profit, there is typically a strong mission statement
connecting the business with a social cause. For example, a social entrepreneur may
import fair trade goods for resale while also educating the public about the importance of
activism in the area of sustainably and responsibly sourcing products.

5. Concept of Entrepreneurship

Definition:

 Entrepreneurship is the process of designing, launching, and running a new

business, typically starting as a small business or startup.

Economic Role:

 Entrepreneurs drive economic growth by introducing new products and services,

creating jobs, and fostering competition.

Innovation:

 Central to entrepreneurship is innovation, which involves creating new solutions

to problems and improving existing processes.

Opportunity Recognition:

 Entrepreneurs identify and exploit opportunities in the market, turning ideas into
viable business ventures.

Risk Management:

 Entrepreneurship involves managing various risks, including financial, market,

and operational risks, to achieve business success.

Value Creation:

 The ultimate goal of entrepreneurship is to create value for customers,

stakeholders, and society at large.

6. Growth of Entrepreneurship

Historical Context:

Prepared by I.D.Paul DBATU-5

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

 The growth of entrepreneurship can be traced back to the Industrial Revolution,

which provided the technological and economic foundations for entrepreneurial
activities.

Technological Advancements:

 Innovations in technology have continually opened new opportunities for

entrepreneurs, from the rise of the internet to advancements in AI and biotech.

Globalization:

 Increased global connectivity has expanded markets and access to resources,

enabling entrepreneurs to scale their businesses internationally.

Supportive Ecosystems:

 The development of supportive ecosystems, including venture capital, incubators,

accelerators, and government policies, has fostered entrepreneurial growth.

Cultural Shifts:

 Societal attitudes towards entrepreneurship have become more favorable, with

greater emphasis on innovation, creativity, and self-employment.

7. Barriers of Entrepreneurship

Financial Constraints:

 Access to capital is a significant barrier, especially for early-stage startups and

small businesses.

Regulatory Hurdles:

 Complex and burdensome regulations can impede the ease of starting and running
a business.

Market Competition:

 Intense competition in the market can be a significant challenge, especially for

new entrants.

Lack of Experience:

 Entrepreneurs often face a steep learning curve and may lack the necessary
business acumen and experience.

Cultural and Social Barriers:

 Societal norms and cultural attitudes towards entrepreneurship can either

encourage or discourage entrepreneurial activities.

Prepared by I.D.Paul DBATU-6

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

Infrastructure and Support:

 Inadequate infrastructure and lack of access to support services can hinder

business operations and growth.

8. Role of Entrepreneurship in India

Economic Growth:

 Entrepreneurs contribute significantly to India's GDP by creating jobs, driving

innovation, and enhancing productivity.

Employment Generation:

 Startups and small businesses are major sources of employment, particularly in

rural and semi-urban areas.

Rural Development:

 Entrepreneurship fosters rural development by promoting local industries and

improving livelihoods.

Innovation and Competitiveness:

 Indian entrepreneurs drive innovation and enhance the country’s global

competitiveness through new technologies and business models.

Social Impact:

 Social entrepreneurs in India address pressing societal issues, such as healthcare,

education, and poverty alleviation.

Government Initiatives:

 Initiatives like Startup India and Make in India have created a conducive
environment for entrepreneurship, providing financial support, mentorship, and
regulatory ease.

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

Entrepreneurs initiate and sustain the process of economic development in the following
ways:

1. Capital Formation:

Entrepreneurs mobilize the idle savings of the public through the issues of industrial
securities. Investment of public savings in industry results in productive utilization of
national resources. Rate of capital formation increases which is essential for rapid
economic growth. Thus, an entrepreneur is the creator of wealth.

Prepared by I.D.Paul DBATU-7

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

2. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and idle resources
like land, labour and capital into national income and wealth in the form of goods and
services. They help to increase net national product and per capita income in the country,
which are important yardsticks for measuring economic growth.

3. Generation of Employment:

Entrepreneurs generate employment both directly and indirectly. Directly, self-

employment as an entrepreneur offers the best way for independent and honorable life.
Indirectly, by setting up large and small scale business units they offer jobs to millions.
Thus, entrepreneurship helps to reduce the unemployment problem in the country.

4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in
economic development. They set up industries in backward areas to avail various
concessions and subsidies offered by the central and state governments. Public sector
steel plants and private sector industries by Modis, Tatas, Birlas and others have put the
hitherto unknown places on the international map.

5. Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and

introduce new products. Production of goods on mass scale and manufacture of
handicrafts, etc., in the small scale sector help to improve the standards of life of a
common man. These offer goods at lower costs and increase variety in consumption.

6. Economic Independence:

Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture

indigenous substitutes of hitherto imported products thereby reducing dependence on
foreign countries. Businessmen also export goods and services on a large scale and
thereby earn the scarce foreign exchange for the country. Such import substitution and
export promotion help to ensure the economic independence of the country without which
political independence has little meaning.

7. Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise

has several backward and forward linkages. For example- the establishment of a steel
plant generates several ancillary units and expands the demand for iron ore, coal, etc.
These are backward linkages. By increasing the supply of steel, the plant facilitates the
growth of machine building, tube making, utensil manufacturing and such other units.
Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose. They
give an organization its momentum. Entrepreneurial behavior is critical to the long term
vitality of every economy. The practice of entrepreneurship is as important to established
firms as it is to new ones.

Prepared by I.D.Paul DBATU-8

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

9. Entrepreneurial Motivation

Intrinsic Motivation:

 Passion for creating something new and making a difference drives many
entrepreneurs.

Need for Achievement:

 A strong desire to achieve and accomplish goals is a key motivator.

Independence and Autonomy:

 The aspiration to be one’s own boss and have control over one's work is a
significant motivational factor.

Financial Rewards:

 The potential for financial gain and wealth creation motivates many entrepreneurs.

Social and Personal Recognition:

 Entrepreneurs often seek recognition and respect from peers, society, and the
market.

10. Major Entrepreneurial Competencies

Opportunity Recognition:

 The ability to identify and exploit market opportunities is a critical competency.

Strategic Thinking:

 Entrepreneurs need to think strategically, planning for long-term growth and

adapting to changing market conditions.

Leadership Skills:

 Effective leadership and the ability to inspire and manage a team are essential.

Financial Acumen:

 Understanding financial management, including budgeting, accounting, and

investment, is crucial for business success.

Innovation and Creativity:

 The ability to innovate and think creatively helps entrepreneurs to develop unique
solutions and stay competitive.

Prepared by I.D.Paul DBATU-9

 CGPA Pattern UNIT –I INTRODUCTION TO ENTREPRENEURSHIP

Networking:

 Building and leveraging professional networks can provide valuable resources,

advice, and opportunities.

Resilience and Adaptability:

 Entrepreneurs must be resilient and adaptable, capable of bouncing back from

setbacks and adjusting to new challenges.

Prepared by I.D.Paul DBATU-10