ENTREPRENEURSHIP
Chapter -2
Introduction
The role of entrepreneurs in economic development varies from economy to economy, country to country, depending upon its material resources, industrial climate and more importantly, the responsiveness of the political system to the growth of entrepreneurs. Liberalization and the new economic policy have thrown upon the doors for every entrepreneur to seek its own fortunes and thus contribute to the growth of the economy. And entrepreneur is an important input of economic development. He is a catalyst of development.
Only the entrepreneurs create capital, wealth and resources in a country by their inventive and risk-taking behaviour. They are the prime movers of industrial development in a country. Entrepreneurs are found in every economic system and in every type of economic activity. Artisans, traders, importers, engineers, exporters, bankers, industrialists, farmers, forest workers, tribal’s, professionals, politicians, and bureaucrats, any one from these could be entrepreneur. The nature of entrepreneurs differs according to their functions.
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 Denh of 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.
Chapter -2
Introduction
The role of entrepreneurs in economic development varies from economy to economy, country to country, depending upon its material resources, industrial climate and more importantly, the responsiveness of the political system to the growth of entrepreneurs. Liberalization and the new economic policy have thrown upon the doors for every entrepreneur to seek its own fortunes and thus contribute to the growth of the economy. And entrepreneur is an important input of economic development. He is a catalyst of development.
Only the entrepreneurs create capital, wealth and resources in a country by their inventive and risk-taking behaviour. They are the prime movers of industrial development in a country. Entrepreneurs are found in every economic system and in every type of economic activity. Artisans, traders, importers, engineers, exporters, bankers, industrialists, farmers, forest workers, tribal’s, professionals, politicians, and bureaucrats, any one from these could be entrepreneur. The nature of entrepreneurs differs according to their functions.
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 Denh of 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.
