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8/6/2019 Role of Entrepreneur in Economic Development Slide
http://slidepdf.com/reader/full/role-of-entrepreneur-in-economic-development-slide 1/40
Role of Entrepreneur in EconomicRole of Entrepreneur in EconomicDDevelopmentevelopment
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Economic development depends on two factors:
a) Gross domestic product (G.D.P),i.e. is amount
of goods and service product in a year.
b) Standard of living of the people, that is
consumption of comfort and luxuries.
An entrepreneur by setting new businessorganizations helps to increase GDP and
ensure better standard of living of its people.
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y Setting up of new industries result in
production of more and more goods.y Industries also provide more jobs to the
people, which increase their income level.
y The increased income helps people to buy
more goods and services, in particular
comforts and luxuries.
y This will increase their standard of living.
y These factors helps for economic
development of a nation.
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The role and importance of an entrepreneur ineconomic development of a nation can
understand from following point :assumption of risk :
y Economist development depends on starting of more and more business organisations.
y Setting up business unit involves risk.
y Entrepreneur by assuming risks of starting aventure helps for economic development.
Organization of resources:y An entrepreneur by collecting necessary
resources to start a business helps for economicdevelopment .
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Arrangement of capital:
y Capital is an important factor to start and
manage any business.
y Entrepreneur collects capital from financial
institution.
y Entrepreneur raises required capital by givingconfidence of safety of investment and
adequate returns on such investment.
y Accumulation of adequate capital helps tostart new business units and leads to
economic growth.
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Encouragement to innovation:
y Entrepreneur takes the risk of manufacturing
the new products on a large scale by starting
new business units.
y By producing and marketing these new
products on a large scale he gives
encouragement and support to scientist toundertake new inventions.
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Better standard of living:
y Entrepreneur helps for better standard of
living of people by starting industries that
produce varieties of goods and services.
y Industries also provide more jobs, that will
increase income level of people.
y When peoples income level increase they
consume more comforts and luxuries, thatresults in increase in there standard of living.
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Balanced economic growth:
y Entrepreneur helps for balanced economic
growth of a nation by starting industries ineconomically backward regions.
y Government gives various subsidies andincentives for starting industries in backward
regions.y These backward area will provide cheap labour
and natural resources.
y Entrepreneur makes use of these facilities by
establishing industries in these areas.
y These lead to economic prosperity of theseregions.
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Export promotion:
y Economic prosperity of a nation depends on its
exports.y Exports helps to earn foreign currency , which in
turn helps to import foreign technology.
y This will give stability and strength to economy.
Efficient utilization of resources:
y Resources should be wasted, as these resourcesare precious.
y
Efficient use of resources also helps to controlcost production.
y It can ensure better quality of goods atreasonable price.
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Entrepreneur as imitators:
y
Entrepreneur of developing economy aredescribed as imitative entrepreneurs.
y They imitate technology of developed
countries and produce goods that are
produced in advance countries through such
imitation.
y His act imitation reduces gap between
developed and developing countries byproducing and marketing foreign goods in
domestic market.
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Entrepreneur as a social reformer:
y Entrepreneur produces variety of goods and
services, particularly the goods and services,
which have reasonable price.
y By producing and making available such goods
to rich as well as poor, he brings social equityin the society.
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EntrepreneurshipEntrepreneurship
Entrepreneurship is an activity or process that isundertaken by an individual or group to establisha business organization.
it is a profession that is undertaken by the
people who have knowledge and experience of promoting new business units.
Definition:
A.H cole: entrepreneurship is defined as ́purposeful activity of an individual or group of
individual undertaken to initiate, maintain ororganize a profit oriented business unit for theproduction or distribution of economic goods asservices.µ
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Relationship between Entrepreneur,Relationship between Entrepreneur,
Entrepreneurship and EnterpriseEntrepreneurship and EnterpriseEntrepreneur
Is a person or group of persons who promotes abusiness.
Who have necessary skills, qualities and capacity
to organize necessary factors in order to start abusiness.
Entrepreneurship
Its include all the activities that are necessary tostart a business.
These activities include planning, organizing,necessary resources, arrangement of finance ,selection of right persons to ensure that businessstarts functioning.
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Enterprise
is the firm or organization or venturethat has specific objective.
The common objective of a business
enterprise is to make profit.
The objective of enterprise depends on
entrepreneurs entrepreneurship.
Entrepreneurs should make use of
skills of entrepreneurship to achieve thedesired results.
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Distinction between EntrepreneurDistinction between Entrepreneur
and Entrepreneurshipand Entrepreneurship Entrepreneur is a person who undertakes the
process of entrepreneurship that is organizing
of necessary factors to start a business.
Entrepreneurship is a process or set of activities that are to be undertaken to start a
business.
Entrepreneur is a creator of new organization.
Entrepreneurship is an art of creation of an
organization.
Entrepreneur is a risk taker, he assume risk of
starting a new business.
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Entrepreneurship is the task of taking risk
of investing capital in a business with an
object of earning profit.
Entrepreneur is a initiator, he personally
takes interest in starting a business.
Entrepreneurship is initiative of
entrepreneur in promoting and takingnecessary step to promote business.
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Theories of EntrepreneurshipTheories of Entrepreneurship
Opinions regarding concept of
entrepreneurship and emergence of
entrepreneur differ.
There are different school of thoughts.Experts belonging to these different schools
have given different meaning to the concept of
entrepreneurship and entrepreneur.
These schools of thought can be
classified into three theories.
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These schools of thought can be classified intothree theories.
I. Psychological theory.
II. Sociological theory and
III. Economic view.
psychological theories:
Contributors to the psychological theory of entrepreneur say that people with strongpsychological features will becomes entrepreneurs,like.
A person mentally tough.
A person who has personal features like creativeness,innovativeness , motivation etc. will becomesuccessful entrepreneur.
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Experts of this school of thought say that
family and society plays and important
role in the development and growth of
entrepreneur. A person inherits the
features and characteristic of family,
thats why a business persons sonbecomes a businessmen, because
qualities of businessmen come him by
birth. Society also play an important role
in the growth of this kind
entrepreneurship.
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According to john kunkals, theory of
entrepreneurship supply.
As per this theory supply of entrepreneur
depends on conducive environment in the
society. Such environment should provide
incentives and awards for entrepreneurship.A person is attracted by such incentives, he
develops his behavior and personality to
overcome an entrepreneur. Incentives and
benefits attract a person towardsentrepreneurship. Supply of
entrepreneurship depends on these factors.
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Sociological theory on entrepreneurship:
Society plays an important role
in the growth of a person in general and of entrepreneurs in particulars.
y Family background, education and
environment in the society play animportant role in the growth of entrepreneurship.
y
Entrepreneurship needs certain qualitieslike risk taking, organization skill, dynamism,courage etc.
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y These qualities are in born they come to
a person by heredity.
y That is the reason, we see a
businessmen·s son also becoming a
business men. As per this view point anentrepreneur is born.
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T homas Cochran theory of cultural
values:
As per the theory growth of
entrepreneurship depends on value
system and cultural prevailing in the
society. Family background, educationgiven in the school and conducive
environment in the society can help
for growth of entrepreneurs.
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Economic view point:
Economic factors like demand and
supply, profits, equilibrium determineentrepreneurship and drive a person tobecome entrepreneur.
Society always expects new goods andservices. An innovation personunderstands the needs of society and hestarts a business that are needed by the
society. Disequilibrium is another factorthat offers profitability opportunities tostart business.
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Mark cassons economic theory:
This theory explains entrepreneurship
in terms of demand and supply. The
theory says, society always expects supply
of new goods and services.
This creates new opportunities of business entrepreneur exploits such
business opportunity by starting those
business units that deliver goodsexpected by the society .
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Supply of entrepreneurs depends on
availability of entrepreneur with necessary
skill and qualities. This theory identifiesimagination as an important skill that an
entrepreneur should posses.
The character of imagination aninnovation help an entrepreneur to start
a business that delivers the goods
expected by the society.
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Indian EntrepreneursIndian Entrepreneurs
T.V.S Group
T. V. Sundaram Iyengar (1877²1955).
Bharti Enterprises
Sunil Mittal (1957- ).
Kingfisher Airlines
Vijay Mallya (1955- ).
Air DeccanCapt. G.R Gopinath (1923-)
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Problem of Developing Entrepreneur inProblem of Developing Entrepreneur in
IndiaIndia
Development of entrepreneur in country is
not taking place to the desired extent.
The problems that are faced in
development of entrepreneurship can beclassified as follows:
y Economic factors/ causes.
y Social factors/ causes.y Psychological factors / causes.
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Economic factors:
1. Inadequate finance:y
Finance is the basic factor to start andmanage any enterprise.
� Adequate and timely supply of finance atreasonable cost can ensure progress of industries.
� Entrepreneurs in India come from poor andmiddle class families.
� They depends on these financial institutions.
� There are numerous financial agencies inIndia to finance industries and they havemany schemes of finance but they are notgiving adequate financial support toupcoming entrepreneurs.
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y There are numerous financial agencies inIndia to finance industries and they havemany schemes of finance but they are not
giving adequate financial support toupcoming entrepreneurs.
Poor infrastructure:y Infrastructure facilities in India are not well
developed.y Government has not given adequate
importance for the development of thesefacilities.
y
Like uninterrupted supply of power, waterfacility , better road etc. non availability of these facilities is affecting the growth of entrepreneurship.
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y Like uninterrupted supply of power, water facility ,better road etc. non availability of these facilities
is affecting the growth of entrepreneurship.Lack of institutional support:
Growth of entrepreneurship depends on stronginstitutional support. Such institutions include:
y
Educational and training institutions that educateand train entrepreneurs.
y Entrepreneurial Development Programs (EDP·s).
y Research and development (R&D).
yFinancial institutions.
y Entrepreneurship is not gettingencouragement support from these institutions
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y Research and development (R&D).
y Financial institutions.
Entrepreneurship is not getting
encouragement support from these
institutions.
Poor implementation of economic policies :y Government has given many incentives,
concessions and supporting facilities for
the growth of entrepreneurship throughvarious economic policies from time to
time. These economic policies are not
implemented.
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Social factors:
1. Family Background:
y It is said that entrepreneurs are born,that means birth of a entrepreneurdepends on environment in the family.
y
Joint family system and culture in Indiado not help for development of entrepreneurship.
y Dependence of the family members on
one another, shifting the responsibility onothers is the important features of jointfamilies.
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y These families are traditional bound.
These factors do not help for the
development of qualities like independent
thinking, dynamism, courage leadershipetc.
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y Culture:
1. prevailing culture, customs and
traditions are too pious in nature.
2. A persons who is doing business may
not be a gentlemen, he is a greedy
persons, always in search of profitableopportunities.
3. Such thought and attitude of the society
do not encourage for development of entrepreneurship.
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Scientific temper:
y Pandit Jawaharlal Nehru has called the
industries as modern temples.
y The devotion that is shown in our prayer,
the dedication that is shown in temple
should also be shown in an enterprise.y This calls for development of scientific
temper.
y
Such scientific temper comes byreasoning, rational thinking etc.
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y Psychological factors:
y An entrepreneur must have strong
psychological features.
y He must be mentally tough to face
difficulties and uncertainties of business.
He must have courage to accept the risk of promoting a business.
y He should be a dynamic and self
motivated person to start a innovativebusiness. This can developed in schools
and training institutions.
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y Environment in Indian society is not
conducive for the growth of these
qualities and entrepreneurship.Factors which are affecting entrepreneurial
growth are as follows:
He should be a dynamic and self motivated person to start a innovative
business.
This can developed in schools and traininginstitutions.
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Society:
y Attitude of society also plays an
important role in the development of
entrepreneurship.
y Entrepreneur should be given better
status in the society.y Contributions made by the
entrepreneurship must be recognized and
awarded.