KYAMBOGO UNIVERSITY

FACULTY OF ARTS AND SOCIAL SCIENCES

DEPARTMENT OF ECONOMICS AND STATISTICS

B.A EDUC/BASS/BAA YEAR THREE SEMESTER ONE

EC 3103 ENTREPRENEURSHIP

BY
ORICHOM GERESEM
MBA (MUK), BMF (KYU)
TEL: 0783957534/0703509206
Email: ogeresem@gmail.com/gorichom@kyu.ac.ug

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COURSE NAME: EC 3103 ENTREPRENEURSHIP

COURSE LEVEL: UNDER GRAUATE YEAR THREE

CREDIT UNITS: 3CU

CONTACT HOURS: 45

COURSE DESCRIPTION:
This course looks at sources of entrepreneurship (Different theories);
Individual Entrepreneurs and Corporate Entrepreneurship. The course also
deals with the environment under which entrepreneurship can thrive and
the role of entrepreneurship in poverty reduction and employment
generation and challenges to entrepreneurship development.

COURSE OBJECTIVES:
By the end of this course, students are able to:
(i) Explain different theories of entrepreneurship.
(ii) Explain the role of an entrepreneur in economic development.
(iii) Identify factors responsible for entrepreneurial development.
(iv) Identify challenges affecting entrepreneurial development in
developing countries.
(v) Suggest policies and programmes that can promote entrepreneurship.

COURSE CONTENT
1. Meaning of entrepreneurship and Entrepreneur as a factor of production
(2 hours)
2. The theories that govern the emergence of entrepreneurs (4 hours)
3. Individual and corporate entrepreneur (2 hours)
4. Factors responsible for entrepreneurial development (Facilitating and
compelling factors) (2 hours)
5. Importance of entrepreneurial development in poverty alleviation and
employment generation (4 hours)
6. Policies and programmes that can promote entrepreneurship

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  The enabling environment, Tax waivers, Soft loans
 Training programmes in business management
 Credit management, customer care and management and market
research
(4 hours)
7. Entrepreneurship process
 Identifying of business opportunities,
 Conducting market research,
 Actualization,
 Monitoring and evaluation.
8. Entrepreneurship traits (2 hours)
9. Business management-Functions of a business manager both small and
medium size (2 hours)
10. Identification of business opportunity- Scouting the business
environment through P.E.S.T and S.W.O.T analysis.
11. Developing the business ideas into a plan through costing and
projecting the revenue, calculating break even, net present value, return on
capital, payback period, and internal rate of return. (4 hours)
12. Factoring in the risk component and taking stock of it. Different types of
risks and how they can be managed. (2 hours)
13. Business management skills
 Record keeping-Basic accounts
 Networking, customer care, credit management
 Financial analysis –Ratio analysis
13. Planning expansion
Phasing, horizontal, vertical, massive recruitment, accessing credit for
expansion and calculating the cost of credit (2 hours)
14. The changing business environment and strategies for adjustment to
competitive advantage (3 hours)

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Methods of instruction

1. Lecture method
2. Case study
3. Group discussions
4. Project method
5. Tutorials

Mode of assessment

Course work -10%

Test - 15%
Tutorial - 5%
Examination 70%
Total - 100%

References
1. Sivopolis, Entrepreneurship and Small Business Management.
2. David H. Holt, Entrepreneurship, New Venture Creation, 1st Edition.
3. C.B. Gupta and N.P. Srinivasan, Entrepreneurial Development, 6th
Edition, 2007.
4. Kolter Philip, Principles of Marketing, 9th Edition.
5. I. Mpandy, Financia,l Management, 8th Edition.

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TOPIC 1: MEANING OF ENTREPRENEURSHIP AND ENTREPRENEUR AS
A FACTOR OF PRODUCTION

(I) MEANING OF ENTREPRENEURSHIP

The concept of entrepreneurship is understood in different manners by
different scholars and authors. There is no one consensual definition of the
term among the experts. Different dimensions have been used to explain the
term. The definitions also vary with the passes of time.
Therefore, a chronological description of the movement path of the
definitional changes of the entrepreneurship would make the understanding
clear to the readers. So, look at and read carefully the following description.
1. ―Entrepreneurship entails bearing the risk of buying at a certain price
and selling at uncertain prices.‖- Ricardo Cantillon. The concept focuses
on the trading of goods and bearing of its associated risk as to the act of
entrepreneurship.
2. ―Entrepreneurship is any kind of innovative function that could have a
bearing on the welfare of an entrepreneur.‖-Joseph A. Schumpeter
(1934). Schumpeter recognizes entrepreneurship as a rewarding activity
that involves any form of innovation. Innovation is doing things in a new
and better way. It adds utility to existing operations or products.
3. ―Entrepreneurship is that form of social decision making performed by
economic innovators.‖ -Robert K. Lamb (1952). Lamb describes
entrepreneurship as an act of economic activity engaged in innovation He
also points out the social orientation of entrepreneurship as it is involved
with social good and welfare.
4. ―Entrepreneurship is the purposeful activity of an individual or a group of
associated individuals, undertaken to initiate, maintain or aggrandize
profit by production or distribution of economic goods and services.‖ –
A.H.Cole (1959). The definition recognizes entrepreneurship as a
deliberate human activity for earning profit through economic activities of
production and or distribution of goods and services. It may be an
individual or a group activity. But the central focus is profit-making. That
is. to initiate, maintain or increase profit, entrepreneurship is undertaken

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5. ―Entrepreneurship is the dynamic process of creating incremental
wealth.‖ – Robert C. Ronstadt (1984). Ronstadt explains that wealth is
created by individuals who assume the major risks in terms of equity,
time, and/or career commitment or provide value for some product or
service. The product or service may or may not be new or unique but the
entrepreneur must somehow infuse value by receiving and locating the
necessary skills and resources.
6. The Robert D. Hisrich and Michael P. Peters (1998) said,
―Entrepreneurship is the process of creating something new with value
by devoting the necessary time and effort, assuming the accompanying
financial, psychic and social risks and receiving the resulting rewards of
monetary and personal satisfaction and independence.‖ The writers
conceive entrepreneurship as the devoted efforts of individuals for
creating something of value to the people of society. They also believe
that entrepreneurship is a rewarding activity. It gives not only financial
rewards but also freedom and personal satisfaction that are of immense
reinforcement for the furtherance of entrepreneurial action.
Entrepreneurship, in their view, is also a risk hearing activity. Three
types of risks are involved with it the financial, psychic and social risks.
Entrepreneurship takes these risks and devoted efforts to having rewards
by giving mankind something of value. Therefore, entrepreneurship
entails missionary efforts that involve risks to innovate something of
value from which the entrepreneur will get financial and psychic rewards.

From the above definitions, it should therefore be concluded that;

Entrepreneurship is the process/ccapacity or ability of identifying
business opportunities from the environment, gathering or organizing the
necessary resources and using them to start up/initiate an enterprise
and organize production of goods and services and marketing them,
covering risks with an aim of making profits.

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Origin of Entrepreneurship
The term entrepreneurship is derived from a French word ‗Entreprendre‘
which means ‗to undertake‘, ‗to pursue opportunities‘, or ‗to fulfill needs and
wants through innovation and starring businesses‘. The word first appeared
in the French dictionary in 1723.

It is believed that the Irish Banker operating in France, Ricardo Cantillon

(Kent, 1984) was the first person who used the word ‗entreprendre‘ in
economics as ―an agent who assembles material/inputs for producing goods
at a specific price and through coordination of those inputs produces goods
whose sales price is uncertain in comparison with production cost‖.

It is also believed that the Frenchman J.B. Say (1824) first used the term
‗entrepreneur‘ as an economic agent who brought together the factors of
production in such a way that new wealth can be created.

Oxford English dictionary adopted the word ‗entreprendre‘ as ―entrepreneur‖

in 1897 and meant; ―director or manager of a public musical institution; one
who gets up entertainments, especially musical performance‖.

Webster‘s Third New International Dictionary (1961) takes it as; ‗an

organizer of an economic venture, especially one who organizes, owns,
manages, and assumes the risk of a business‘.

The Oxford English dictionary has revised the meaning of entrepreneur in /

1933 and meant ‗a contractor acting as an intermediary between capital and
labour‖.

Today, entrepreneurship is used with different meanings such as

innovating, risk-bearing, adventurism, wealth creation, thrill-seeking, etc.

Skills Required in Entrepreneurship

(i) Technical Skills: Oral Communication, ability to organise, productive
ability, technical business management, coaching, network building,

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 monitoring environment, ability to spot new trends, active listening,
writing and interpersonal skills.

(ii) Business Management Skills: Forecasting, planning, budgeting,

decision making, negotiation, goal setting, human relations, marketing,
finance, etc.

(iii) Personal Skills: Ability to manage change, leadership, persistence,

self-reliance, foresightedness, innovativeness, risk taking, self-reflection,
discipline, self-confidence, honesty, patience, intelligence, tactfulness,
emotional stability, etc.

Types of Entrepreneurship
Entrepreneurship is classified into the following types:
(i) Social Entrepreneurship: Social entrepreneurship is the use of the
by start-up companies and other entrepreneurs to develop, fund and
implement solutions to social, cultural, or environmental issues. This
concept may be applied to a variety of organizations with different sizes,
aims, and beliefs. For-profit entrepreneurs typically measure
performance using business metrics like profit, revenues and increases
in stock prices, but social entrepreneurs are either non-profits or blend
for-profit goals with generating a positive "return to society" and therefore
must use different metrics. Social entrepreneurship typically attempts to
further broad social, cultural, and environmental goals often associated
with the voluntary sector in areas such as poverty alleviation, health
care and community development. At times, profit-making social
enterprises may be established to support the social or cultural goals of
the organization but not as an end in itself. For example, an organization
that aims to provide housing and employment to the homeless may
operate a restaurant, both to raise money and to provide employment for
the homeless people. This type of entrepreneurship focuses on producing
product and services that resolve social needs and problems. Their only
motto and goal is to work for society and not make any profits.
(ii) Cultural entrepreneurship: According to Christopher Rea and Nicolai
Volland, cultural entrepreneurship is "practices of individual and

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 collective agency characterized by mobility between cultural professions
and modes of cultural production", which refers to creative industry
activities and sectors. In their book The Business of Culture (2015), Rea
and Volland identify three types of cultural entrepreneur: "cultural
personalities", defined as "individuals who build their own personal
brand of creativity as a cultural authority and leverage it to create and
sustain various cultural enterprises"; "tycoons", defined as
"entrepreneurs who build substantial clout in the cultural sphere by
forging synergies between their industrial, cultural, political, and
philanthropic interests"; and "collective enterprises", organizations which
may engage in cultural production for profit or not-for-profit purposes. In
the 2000s, story-telling has emerged as a field of study in cultural
entrepreneurship. Some have argued that entrepreneurs should be
considered ―skilled cultural operators‖ that use stories to build
legitimacy, and seize market opportunities and new capital. Others have
concluded that we need to speak of a ‗narrative turn‘ in cultural
entrepreneurship research.
(iii) Strategic entrepreneurship: Some scholars have constructed an
operational definition of a more specific subcategory called "Strategic
Entrepreneurship". Closely tied with principles of strategic management,
this form of entrepreneurship is "concerned about growth, creating value
for customers and subsequently creating wealth for owners". A 2011
article for the Academy of Management provided a three-step, "Input-
Process-Output" model of strategic entrepreneurship. The model's three
steps entail the collection of different resources, the process of
orchestrating them in the necessary manner and the subsequent creation
of competitive advantage, value for customers, wealth and other benefits.
Through the proper use of strategic management/leadership techniques
and the implementation of risk-bearing entrepreneurial thinking, the
strategic entrepreneur is, therefore, able to align resources to create
value and wealth.
(iv) Small Business Entrepreneurship: These businesses are a
hairdresser, grocery store, travel agent, consultant, carpenter, plumber,

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 electrician, etc. These people run or own their own business and hire
family members or local employee. For them, the profit would be able to
feed their family and not making 100 million business or taking over an
industry. They fund their business by taking small business loans or
loans from friends and family.
(v) Scalable Startup Entrepreneurship: The start-up entrepreneur starts a
business knowing that their vision can change the world. They attract
investors who think and encourage people who think out of the box. The
research focuses on a scalable business and experimental models, so,
they hire the best and the brightest employees. They require more
venture capital to fuel and back their project or business.
(vi) Large Company Entrepreneurship: These huge companies have
defined life-cycle. Most of these companies grow and sustain by offering
new and innovative products that revolve around their main products.
The change in technology, customer preferences, new competition, etc.,
build pressure for large companies to create an innovative product and
sell it to the new set of customers in the new market. To cope with the
rapid technological changes, the existing organisations either buy
innovation enterprises or attempt to construct the product internally.
(vii) Ethnic entrepreneurship: The term "ethnic entrepreneurship" refers
to a form of entrepreneurship characterized by self-employed business
owners who belong to racial or ethnic minority groups in a
country/continent or world in general. A long tradition of academic
research explores the experiences and strategies of ethnic entrepreneurs
as they strive to integrate economically into mainstream U.S. or
European society. Classic cases include Jewish merchants and
tradespeople in large U.S. cities in the 19th and early 20th centuries as
well as Chinese and Japanese small business owners (restaurants,
farmers, shop owners) on the West Coast. In the 2010s, ethnic
entrepreneurship has been studied in the case of Cuban business owners
in Miami, Indian motel owners of the U.S. and Chinese business owners
in Chinatowns across the United States. While entrepreneurship offers
these groups many opportunities for economic advancement, self-

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 employment and business ownership in the United States remain
unevenly distributed along racial/ethnic lines. Despite numerous
success stories of Asian entrepreneurs, a recent statistical analysis of
U.S. census data shows that whites are more likely than Asians, African-
Americans and Latinos to be self-employed in high prestige, lucrative
industries.

(viii) Institutional entrepreneurship: Institutional entrepreneurship

occurs when a person or group of people work to drastically change an
institution, and in the process form a new institution. Institutional
entrepreneurs think and act strategically by doing things like presenting
research, gathering resources and people and thinking outside of the
box. The American-born British economist Edith Penrose has highlighted
the collective nature of entrepreneurship. She mentions that in modern
organizations, human resources need to be combined to better capture
and create business opportunities. The sociologist Paul
DiMaggio (1988:14) has expanded this view to say that "new institutions
arise when organized actors with sufficient resources [institutional
entrepreneurs] see in them an opportunity to realize interests that they
value highly". The notion has been widely applied.

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(II) ENTREPRENEUR AS A FACTOR OF PRODUCTION

The entrepreneur is defined as someone who has the ability and desire to
establish, administer and succeed in a startup venture along with risk
entitled to it, to make profits. The best example of entrepreneurship is the
starting of a new business venture. The entrepreneurs are often known as a
source of new ideas or innovators, and bring new ideas in the market by
replacing old with a new invention.

It can be classified into small or home business to multinational companies.

In economics, the profits that an entrepreneur makes is with a combination
of land, natural resources, labour and capital.

In a nutshell, anyone who has the will and determination to start a new
company and deals with all the risks that go with it can become an
Entrepreneur.

The word entrepreneur is derived from the French Word ‗Entreprendre‘

which means to undertake and is therefore used to mean a person who
takes the risk of starting a new organization or introducing a new idea,
product or service to society.

Scholarly definition of an entrepreneur

1. According to J.B. say, ―An entrepreneur is the economic agent who unites
all means of production; Land of one, Labour of another and Capital for yet
another and this produces a product. By selling the product in the market,
he pays rent of Land, wages to Labour, interest on capital and what remains
is his profit.

2. According to Richard Cantillon (1751), in his book Essays on the nature

of commerce, ―An entrepreneur is the agent who buys factors of production
at certain prices in order to cursive them into a product with a view of
selling it at certain prices in the future.‖

3. According to Joseph Schumpeter (1994), in his book. The theory of

economic development; ―An entrepreneur an advanced economy is an
Individual who introduces something new in the economy, a method of

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production not yet tested by experience in the branch of manufacture
concerned, a product with which consumers are not yet familiar, a new
source of raw materials or of new markets and the like‖

4. According to Peter Drucker (1986), Entrepreneurs are people who always

search for change, respond to it and exploit it as an opportunity.

An entrepreneur can be any person who:

 Observes the economic, social and natural environment.

 Identifies opportunities in the business or non-business environment.
 Gathers the necessary resources for the activity.
 Implements the activity.
 Receives functional or social rewards.
 Is concerned about possible damages to the natural and social
environment.
An entrepreneur therefore is a person who has the ability to see and
evaluate business opportunities from the environment, gathers the
necessary resources and uses them to initiate and successfully manage the
identified business, taking risks in the business with an aim of making
profits. He perceives the needs of society and brings together man power,
materials and capital required to satisfy that need. An entrepreneur either
initiates anew enterprise or takes ownership and carries out production
changes in an already existing enterprise.

How a person becomes an Entrepreneur.

Any person who assumes risks of any business and therefore owns the
business enterprise is an entrepreneur irrespective of the size and made of
operation of the business. A person can become an entrepreneur in the
following ways;

(a) Initiating or starting up his/her own enterprise.

(b) Initiating an already existing business and therefore assuming its risks.

(c) Buying an already existing business and therefore assuming its risks.

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(d) Buying shares in an already existing business and therefore assuming
ownership and risks in that business, this is common in joint stock
companies where shares are sold to the profit.

Functions/Roles of an entrepreneur

The entrepreneur performs a variety of functions in the enterprise right from

the initiation stage throughout the whole life span of the business. These
functions include the following:
 Planning: The entrepreneurial function planning involves, identifying
and evaluation of the business idea, selecting the product line,
determination of the business type (sole, partnership or cooperate),
estimation of the resources needed and identifying their resources. It also
involves making a feasibility study about the business project and
preparing a business plan, together with conducting of a market survey.
 Organization: The entrepreneur brings together the varies factors of
production that is Labour , land, and Capital, directs, coordinates and
supervises them to ensure optimum resource utilization and efficient
production of goods and services. The purpose of organization is to
allocate resources efficiently to minimize losses and reduce costs thereby
increasing profits.
 Decision making: The entrepreneur makes decisions in the enterprise
regarding determination of business objectives gathering, organization
and allocations of resources, production techniques to use, productions
changes and management marketing strategies for his product and
builds internal and external relations.
 Management: The entrepreneur as a manager directs and supervises the
day-to-day operations and activities for the enterprise. He directs and
supervises human resources (workers), financial resources (money), Land
and fixed capital assets to ensure optimum and efficient resource
allocation and utilization.
 Innovation: Innovation means improving on already existing production
techniques and products to come up with something new and better

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 thinking creating and experiment of new combinations. The entrepreneur
may come up either with a new product or production method or even
new markets and raw materials sources. This function therefore includes
upgrading of the production process and product quality.
 Risk bearing: Risk bearing means assuming responsibility for loss that
may occur due to unexpected future circumstances. The entrepreneur
calculates risks involved in the business venture and takes them when
manageable or considers other alternatives of not manageable. An
entrepreneur guarantees wages to this worker, interest to his creditors
and rent to his Landlords expecting to earn more than his expenses. He
is therefore responsible for the loss that may arise due to risks and
uncertainties (unforeseen circumstances).
 Marketing: This function of the entrepreneur involves promotion,
distribution and selling of goods and services that satisfy the needs and
requirement of customers. The entrepreneur carries out a market survey
to identify the customers, needs that he seeks to satisfy through
production distribution and selling of goods and services.
 Monitoring and controlling business performance: This function of the
entrepreneur involves ensuring that business activities are carried out as
planned and the set business goals and objectives are achieved and
correcting any discrepancy in case actual business performance diverges
from the planned performance.
 Setting the organizational frame work or structure: The function
involves the entrepreneur designing and establishing a frame work
around which the business or organization is to be managed and
operated. It for example involves designing an organization chart sharing
the different department and positions of responsibility from top to
bottom that will be involved in the management and operation of the
business.

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Behaviours/Characteristics/qualities/traits of an entrepreneur
These are the aggregate of peculiar characteristics that constitutes personal
individuality. Traits take time to develop and are not easily changed or
acquire. These are qualities than an entrepreneur needs to have and develop
in order to successful start – up nurture and grow an enterprise.

The entrepreneur is commonly seen as an innovator—a designer of new

ideas and business processes. Management skills and strong team building
abilities are often perceived as essential leadership attributes for successful
entrepreneurs. Political economist Robert Reich considers leadership,
management ability and team-building to be essential qualities of
entrepreneurs. The qualities of successful entrepreneurs therefore include
the following:

 Opportunity oriented. This enables and entrepreneur to see and identify

new business opportunities, seizes them and convert them into realistic
achievable goals e.g. opportunities for obtaining the necessary resources
like equipment, land, etc. which will enable him/her implement his/her
business ideas. Entrepreneurs are often overconfident, exhibit illusion of
control, when they are opening/expanding business or new
products/services.
 Self-confidence: This is having a strong belief in one self and his/ her
ability to achieve the set goals regardless of the challenges.
 Hard working: This is putting in extra effort, commitment, resources and
times in order to achieve the set goals in the set period of time.
 Goal oriented: This is the ability to set goals that are SMART i.e. specific
measurable, achievable given the available resources, realistic and time
bound and also to work with determination towards achieving them.
 Persistent: This is the strong desire to do something consistently and
continuously until the set goals are achieved despite the various
problems and disappointments in business.
 Profit oriented; this means having a strong interest and direction
towards operating profits in business. This can be achieved through
maximizing sales and minimizing costs of operation.

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 Builds for the future: Most successful entrepreneurs aim at creating
long term enterprises that can even outline them and hence provide a
secure job and income for themselves and improved welfare and wealth
for their families.
 Commitment ;Success in business demand total commitment by the
entrepreneur in terms of time , money and lifestyle and the business has
to be the major priority in the entrepreneur‘s life.
 Reliability and integrity; Success in business requires honesty, fairness
and reliability in terms of doing what the entrepreneur has promised,
fulfilling contracts with customers.
 Risk taking; Successful entrepreneurs are those who assess risks before
committing their resources to identified business ventures and then take
calculated risks which can be foreseen by shifting them to insurance
companies.
 Copes with failure; Successful entrepreneurs are those who recognize
their failures, learn from them and seek new opportunities.
 Willingness to listen; Success in business requires one to be willing to
seek and listen to advise and information from others e.g. customers,
bankers, business advisors etc.
 Demonstrate initiative; Successful entrepreneurs take initiative and
put themselves in positions of being responsible for success or failure.
 Setting own standards; success in business requires setting standards
i.e. about sale, quality, income and output and working to achieve them.
 Responding to feed back; Successful entrepreneurs constantly monitor
how well they are doing and keeping track of their performance and then
constructively use the feedback obtained to improve performance.
 Coping with uncertainty; Entrepreneurship and self-employment
involve more uncertainty than wage employment e.g. about sales, profit,
prices, support services, etc.
 Coping with changes; Success in business requires ability to
understand, appreciate and adopt or cope with change because change is
inevitable in every organization.

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 Innovation. This is an entrepreneur‘s ability to tackle the unknown and
do things in a new and better way or different way, change old ideas into
new ideas etc.
 Creativity. Entrepreneurs need creativity to deal with their everyday
situation that involves creating new products, services and processes.
Even when they imitate others, creativity is needed to adapt the
imitations to the markets.
 Build on strengths. Successful business people base their work upon
the strength(s) they have, such as manual skills, interpersonal skills,
selling skills, organizational skills, writing skills, knowledge of a
particular product or service etc.

 Effective communication skills: Entrepreneurs need to practice

effective communication both within their firm and with external partners
and investors to launch and grow a venture and enable it to survive. An
entrepreneur needs a communication system that links the staff of her
firm and connects the firm to outside firms and clients. Entrepreneurs
should be charismatic leaders, so they can communicate
a vision effectively to their team and help to create a strong team.
Communicating a vision to followers may be the most important act of
the transformational leader. Compelling visions provide employees with a
sense of purpose and encourage commitment.. Entrepreneurial leaders
must speak and listen to articulate their vision to others. Communication
is pivotal in the role of entrepreneurship because it enables leaders to
convince potential investors, partners and employees about the feasibility
of a venture. Entrepreneurs need to communicate effectively to
shareholders. Nonverbal elements in speech such as the tone of voice,
the look in the sender's eyes, body language, hand gestures and state of
emotions are also important communication tools.

 Phychological make up: Studies show that the psychological

propensities for male and female entrepreneurs are more similar than
different. Empirical studies suggest that female entrepreneurs possess
strong negotiating skills and consensus-forming abilities. Sørensen

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 discovered a correlation between working with former entrepreneurs and
how often these individuals become entrepreneurs themselves, compared
to those who did not work with entrepreneurs. Social composition can
influence entrepreneurialism in peers by demonstrating the possibility for
success, stimulating a "He can do it, why can't I?" attitude.

 Reliable and has Integrity. This involves honesty, fair dealing and
reliability in terms of doing what one has promised to do.

 "Coachability" and advice taking: The ability of entrepreneurs to work

closely with and take advice from early investors and other partners (i.e.
their coachability) has long been considered a critical factor in
entrepreneurial success. At the same time, economists have argued that
entrepreneurs should not simply act on all advice given to them, even
when that advice comes from well-informed sources, because
entrepreneurs possess far deeper and richer local knowledge about their
own firm than any outsider. Indeed, measures of coachability are not
actually predictive of entrepreneurial success (e.g. measured as success
in subsequent funding rounds, acquisitions, pivots and firm survival).
This research also shows that older and larger founding teams,
presumably those with more subject expertise, are less coachable than
younger and smaller founding teams.

 Possess strategies: Strategies that entrepreneurs may use include:

Innovation of new products, services or processes; continuous process
improvement (CPI); exploration of new business models; Use of
technology; use of business intelligence; use of economic strategies;
development of future products and services; optimized talent
management and entrepreneurial marketing strategies for interactive and
innovative networking.

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Types/classification of entrepreneurs

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Literature on entrepreneurship is paying greater attention to the diversity of
entrepreneurs. Certain characteristics of the firms and the entrepreneurs
who own them can be more easily and clearly understood if we group and
classify certain types of entrepreneurs differently. The following are some of
the distinctions that can be used to classify entrepreneurs

Classification according to motivation to engage in entrepreneurial

activity:
1. Push (Forced). Push entrepreneurs are those whose dissatisfaction with
their current position for reasons unrelated to their entrepreneurial
characteristics pushes them to start an entrepreneurial venture.
2. Pull entrepreneurs. Are those who are lured by their new venture idea
and initiate venture activity because of the attractiveness of the business
idea and its personal implications.
3. “Push” and „pull‟ Entrepreneurs. Are combinations of the above two.
They are normally more motivated and thus outperform other types of
entrepreneurs. However, ―push‖ entrepreneurs were found to be more
successful than ‗pull‘ entrepreneurs. They are more determined and
persistent because they normally have nothing to fall back to.

Classification according to the levels of creativity and innovation:

Innovative entrepreneur assemble a large variety of information and
combine a range of factors experimentally to produce new possibilities in
terms of markets, techniques, or products. Countries with a very
underdeveloped industrial base hardly produce this type of entrepreneur,
because of lack of the necessary infrastructure.
5. Imitative (Adoptive) entrepreneurs. These imitate and adopt the
technology and techniques innovated by others. They are particularly
important in underdeveloped countries although not highly regarded in
more developed economies. However, imitative entrepreneurs also need to be
creative in order to modify innovations to suit their special conditions.
6. Opportunistic Entrepreneurs: These constantly look for and exploit
serial opportunities because of their wide skills and knowledge accumulated

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from a wider educational background, experience or exposure. They start by
exploiting small opportunities seeking and exploiting a series of, often
varied, opportunities as they grow.
7. Visionary Entrepreneurs: These have almost similar characteristics to
the opportunistic Entrepreneurs however, while ―opportunistic‖
entrepreneurs pursue several business opportunities, the ―Visionary‖
entrepreneurs, concentrate on the unwavering pursuit of a single, powerful
opportunity
8. Craftsman entrepreneurs: These own the businesses in which they
operate, but tend to restrict their business to their individual skills and
experiences usually accumulated from limited education and exposure.
These have minimal growth ambitions, keeping their enterprises small as a
means of maintaining control.
9. Drone Entrepreneurs: At some instant in their business, craftsman
entrepreneurs are so comfortable with their achievements that they decide
not to tamper with what they consider a winning formula. Those
entrepreneurs that will not change under any circumstances are referred to
as drone entrepreneurs. Slowly but surely, this entrepreneur will be forced
to close.
10. Fabian Entrepreneurs: Are also reluctant to change, but are sometimes
forced by circumstances to change. They respond very slowly to changes in
the market, and this affects their growth and competitiveness.
11. Solo entrepreneurs: At the level of organization, these are
entrepreneurs who developed their business ideas on their own. The solo
entrepreneur is limited to his means and capabilities.
12. Network entrepreneurs: These are entrepreneurs who get their ideas
from the social networks, and develop them suing the networks are found.
These network entrepreneurs can draw from the means and capabilities
within the network to supplement his individual means and capabilities. The
network entrepreneur is therefore more likely to grow better and faster.
13. Co-preneurs: Are entrepreneurial couples that work together as co-
owners of an enterprise. Although some scholars consider business co-
ownership a recipe for divorce, some researchers have described it as an

22
exciting proposition that involves nurturing and growing, a business with
someone you love – much like raising a child. It is important, however, to
first build a successful relationship before launching the enterprise.
14. Individual and Institutional entrepreneurs: Most start-up firms are
dominated by entrepreneurs acting individually, or coming together
individually. However as the business grows and becomes more complex, it
becomes imperative to develop the entrepreneurial skills through a
corporate body.
15. Part time entrepreneurs: Starting business on a part time basis is a
popular gateway to Entrepreneurship that allows one to get the best of both
worlds by getting the benefits of Entrepreneurship and the security of a
regular salary.
16. Corporate cast off and dropouts: Are produced by retrenched and
retiring employees and have become an important source of entrepreneurial
activity. Armed with adequate experience, severance packages, knowledge of
the industry, and a network of connections; these former employees will
normally have better start up options and a higher chance of
entrepreneurial success.

Under further study of entrepreneurship, entrepreneurs have also been

classified according to:
(i) Male entrepreneurs: These are the entrepreneurs purely of the male sex.
(ii) Female entrepreneurs: These are the entrepreneurs purely of the female
sex.
(iii) Rural entrepreneurs: These are the entrepreneurs purely operate
their businesses in rural settings.
(iv) Urban entrepreneurs: These are the entrepreneurs purely operate
their businesses in urban settings.
(v) First generation entrepreneurs: These are the entrepreneurs who
operate their businesses in a primitive way using conservative methods
and in most cases they do not have modern methods of production and
modern ways of doing things

23
(vi) Second generation entrepreneurs: These are the entrepreneurs who
operate their businesses using both conservative methods and modern
methods of production, these try so much to adopt new changes in their
production ventures.
(vii) Third generation entrepreneurs: These are the entrepreneurs who
operate their businesses using new modern methods of production and
in most cases they are updated with new market changes and try so
much to discover new ways of doing things in order to capture the
market.
(viii) Public entrepreneurs: These are the enterprises set up and owned by
the government. In most cases they are non-profit making ventures
aimed at providing goods and services to the public cheaply and job
opportunities.
(ix) Small scale entrepreneurs: These are the entrepreneurs who operate
their businesses on a small scale and in most cases employ little capital
and few workers.
(x) Large scale entrepreneurs: These are the entrepreneurs who operate
their businesses on a large scale and in most cases employ large
amounts of capital and many workers.
(xi) Individual and institutional entrepreneurs. Most startup firms are
dominated by entrepreneurs acting individually or coming together
individually, however as the business grows and become more complex, it
becomes imperative to develop the entrepreneurial skills through a
corporate body.
(xii) Part time entrepreneurs. Start business on a part time basis is a
popular gateway to entrepreneurship. That allows one to get the best
world by getting the benefits of entrepreneurship and the security of a
regular salary.
(xiii) Corporate cast offs and drop outs. Are produced by retrenched and
retiring employees and have become an important source of
entrepreneurial activity.
(xiv) First generation entrepreneurs: These are the entrepreneurs who
operate their businesses in a primitive way using conservative methods

24
 and in most cases they do not have modern methods of production and
modern ways of doing things.
(xv) Second generation entrepreneurs: These are the entrepreneurs who
operate their businesses using both conservative methods and modern
methods of production; these try so much to adopt new changes in their
production ventures.
(xvi) Third generation entrepreneurs: These are the entrepreneurs who
operate their businesses using new modern methods of production and
in most cases they are updated with new market changes and try so
much to discover new ways of doing things in order to capture the
market.
(xvii) Millennial entrepreneurs: The term "millennial entrepreneur" refers
to a business owner who is affiliated with millennials (also known as
Generation Y), those people born from approximately 1981 to 1996. The
offspring of baby boomers and early Gen Xers, this generation was
brought up using digital technology and mass media. Millennial business
owners are well-equipped with knowledge of new technology and new
business models and have a strong grasp of its business applications.
There have been many breakthrough businesses that have come from
millennial entrepreneurs such as Mark Zuckerberg, who
created Facebook. Despite the expectation of millennial success, there
have been recent studies that have proven this to not be the case. The
comparison between millennials who are self-employed and those who
are not self-employed shows that the latter is higher. The reason for this
is because they have grown up in a different generation and attitude than
their elders. Some of the barriers to entry for entrepreneurs are the
economy, debt from schooling and the challenges of regulatory
compliance.
(xviii) Feminist entrepreneurs: A feminist entrepreneur is an individual
who applies feminist values and approaches through entrepreneurship,
with the goal of improving the quality of life and well-being of girls and
women. Many are doing so by creating "for women, by women"
enterprises. Feminist entrepreneurs are motivated to enter commercial

25
 markets by desire to create wealth and social change, based on the ethics
of cooperation, equality and mutual respect.
(xix) A nascent entrepreneur: A nascent entrepreneur is someone in the
process of establishing a business venture. In this observation, the
nascent entrepreneur can be seen as pursuing an opportunity, i.e. a
possibility to introduce new services or products, serve new markets, or
develop more efficient production methods in a profitable manner. But
before such a venture is actually established, the opportunity is just a
venture idea. In other words, the pursued opportunity is perceptual in
nature, propped by the nascent entrepreneur's personal beliefs about the
feasibility of the venturing outcomes that the nascent entrepreneur seeks
to achieve. Nascent entrepreneurship that emphasizes the series of
activities involved in new venture emergence, rather than the solitary act
of exploiting an opportunity.
(xx) Project-based: Project based entrepreneurs are individuals who are
engaged in the repeated assembly or creation of temporary
organizations. These are organizations that have limited lifespans which
are devoted to producing a singular objective or goal and get disbanded
rapidly when the project ends. Industries where project-based enterprises
are widespread include: sound recording, film production, software
development, television production, new media and construction. What
makes project-entrepreneurs distinctive from a theoretical standpoint is
that they have to "rewire" these temporary ventures and modify them to
suit the needs of new project opportunities that emerge.

26
Rewards/Benefits for Being an Entrepreneur
 It leads to feeling of freedom and independence e.g. in terms of decision
making.
 It leads to increased income. People in the business society earn income
which in turn improves their standards of living.
 It encourages the development of self-confidence due to the high levels of
independence that exists i.e. the owner is the leader of him/herself.
 It enables one to invest his/her resources and skills fully and
productivity. This leads to self-employment.
 It allows one to become creative and innovative as he/she can come up
with the new ideas and implement them for the success for his/her
business.
 It leads to respect and recognition by the society.
 It ensures maximum job security.

Challenges/Costs/Disadvantages of Being an Entrepreneur

 It makes an entrepreneur work for long and irregular hours with a lot of
hard work so as to succeed. This leads to fatigue and exhaustion.
 It leads to uncertainty of the income i.e. business is associated with both
profits and losses.
 It is associated with low life style as a result of working for long and
irregular hours especially at the beginning.
 It is associated with a lot of risks. The entrepreneurs face all the risks of
his business alone.
 It ensures personal responsibility for the business failures i.e. in case of
failure of the business. The entrepreneur stands personally liable for
such failure.

27
TOPIC 2: THEORIES THAT EXPLAIN THE EMERGENCE OF
ENTREPRENEURS
There are four (4) important Theories that explain the emergence of
entrepreneurs. These include:
(i) Cultural Theories,
(ii) Economic Theories,
(iii) Psychological Theories and
(iv) Sociological Theories.
―He loves practice without theory is like the sailor who boards ship without a
rudder and compass and never knows where he may case.‖ – Leonardo Da
Vinci
There are four factors of production i.e., land, labour, capital and
organization. Organization is the coordinating factor that brings together the
other three factors and entrepreneurship is the element that powers and
strengthens the organization. Many of the economists believe that
entrepreneurship is itself the fourth factors of production that is the most
important in driving a successful economy.
Entrepreneurs are defined by their risk taking abilities and their intentions
to fill in the void because of the existing lack of knowledge about a product.
According to them, the entrepreneur ventures are carried out where there is
a gap in the development of a product. The entrepreneurs work to fill the
gap by introducing something that increases the effectiveness of the already
existing product.
The field of entrepreneurship continues to struggle with the development of
a modern theory of entrepreneurship. In the past 20 years development of
the current theories of entrepreneurship have centered on either opportunity
recognition or the individual entrepreneur.
At the same time many theoretical insights have come from economics,
including a rediscovery of the work of Schumpeter. However because there is
a lack of clarity about the theoretical assumptions that entrepreneurship
scholars use in their work, assumptions from both individual opportunity
recognition and economics, have been used as if they are interchangeable.

28
This lack of theoretical distinction has hampered theory development in the
field of entrepreneurship.
Throughout the theoretical history of entrepreneurship, scholars from
multiple disciplines in the social sciences have grappled with a diverse set of
interpretations and definitions to conceptualize this abstract idea.
Entrepreneurship is an evolved thing. With the advancement of science and
technology it has undergone metamorphosis change and emerged as a
critical input for socio-economic development.
Various writers have developed variety theories on entrepreneurship and
popularized the concept among the common people. The theories of
entrepreneurship that are propounded by many eminent theorists have been
grouped under four categories.
They are:
I. Cultural Theories:
1. Theory of Imitating – Hoselitz
2. Theory of Social Culture – Stokes
II. Economic Theories:
1. Theory of Functional Behaviour – Casson
2. Theory of Economic Incentives – Papanek and Harris
3. Theory of Adjustment of Price – Kirzner
4. Theory of X-Efficiency-Leibenstein
5. Theory of Innovations-Schumpeter
6. Theory of Harvard School
7. Theory of High Achievement – McClelland
8. Theory of Profit-Knight
9. Theory of Market Equilibrium-Hayek
III. Psychological Theories:
1. Theory of Psychology-Kunkal
2. Theory of Personal Resourcefulness
IV. Sociological Theories:
1. Theory of Entrepreneurial Supply – Cochran
2. Theory of Religious Belief – Weber
3. Theory of Social Change – Hagen

29
I. CULTURAL THEORIES
Cultural theories pointed out that entrepreneurship is the product of the
culture. Entrepreneurial talents come from cultural values and cultural
systems embedded into the cultural environment.
This theory supports two other theories i.e.:
(i) Theory of Imitating (Bert F. Hoselitz‟s theory)
According to Bert F. Hoselitz‘s theory, supply of entrepreneurship is
governed by cultural factors and culturally minority groups are the spark-
plugs of entrepreneurial and economic development. In many countries,
entrepreneurs have emerged from a particular socio-economic class. Hoselitz
reveals that in several countries entrepreneurial talents are found in
persons having particular socio-economic background.
He emphasized the role of culturally marginally groups like Jews and the
Greeks in medieval Europe, the Chinese in South Africa and Indians in East
Africa in promoting economic developments. Further he has emphasized on
the theory through examples of Christians contributes to entrepreneurship
in Lebanon, Halai Memon industrialists in Pakistan and Marwaris in India.
(ii) Theory of Social Culture (David Stoke‟s theory)
According to David Stoke‘s theory, entrepreneurship is likely to emerge
under specific social sanctions, social culture and economic action.
According to Stokes, personal and societal opportunities and the presence of
requisite psychological distributions may be seen as conditions for an
individual movement to get changed into industrial entrepreneurship.

2. ECONOMIC THEORIES
According to these theories, entrepreneurship and economic growth take
place when the economic conditions are favourable.
Economic development takes place when a country is real rational income
increases overall period of time wherein the role of entrepreneurs is an
integral part. Economic incentives are the main motivators for
entrepreneurial activities. Economic incentives include taxation policy,

30
industrial policy, sources of finance and raw materials, infrastructure
availability, investment and marketing opportunities, access to information
about market conditions, technology etc.
These include:
(i) Theory of Functional Behaviour (Mark Christopher Casson theory)
According to Mark Christopher Casson theory, entrepreneurship can provide
a synthetic theory of the business firm that provides an integrated
framework for many partial theories of the firm. His theory deals with the
functional behavior of entrepreneur and his qualities which are crucial for
his success.
Drawing on an institutional approach to entrepreneurship, it is argued that
economic insights can combine with managerial perspectives to clarify and
synthesize many strategic issues of firms. Four dimensions of environmental
shock lead to different forms of entrepreneurship that leads, in turn, to
different sizes and structures for firms.
Entrepreneurs create firms that identify and monitor sources of volatility
and channel information to key decision makers in the firm; entrepreneurial
firms are located at nodes of information networks. The standard rational
action model of neoclassical economics is generalized to an uncertain world
of volatility and differential access to information, which generates differing
perceptions of the business environment.
(ii) Theory of Economic Incentives (G.F.Papanek and J.R.Harris
Theory)
According to G.F.Papanek and J.R.Harris Theory, economic incentives are
the integral factors that have induced entrepreneurial initiatives. Main
features of this theory are- (i) Economic incentives, (ii) Link between
economic gains and the inner urge and (iii) Economic gain.
(iii) Theory of Adjustment of Price (M. Kirzner theory)
According to M. Kirzner, the chief role of entrepreneur is based upon the
adjustment of price in the market. The buyer may pay higher price or seller
may accept a lower price, which gives rise to opportunities for profit. Further
if different prices prevail in the same market, there in an opportunity for
profitable arbitrage between two segments.

31
(iv) Theory of X-Efficiency (Leibenstein‟s Theory)
Harvey Leibenstein propounded the theory of X-efficiency which is popularly
called Gap Filling Theory. According to Leibenstein, entrepreneurial
functions are determined by the X-efficiency which means the degree of
inefficiency on the use of resources within the firm.
It includes routine entrepreneur, new entrepreneurship, and twin roles of
entrepreneur, gap filling, input completing and X-efficiency factor. An
example of Leibenstein‘s Theory is Lalu Prasad Yadav, who is an
entrepreneur for Indian Railways. He had turned around the Indian
Railways by improving efficiency and innovation.
(v) Theory of Innovation (Joseph Schumpeter)
This theory is developed by Joseph Schumpeter, who believes that
entrepreneur helps the process of development in an economy.
Schumpeter‘s theory of entrepreneurship is a pioneering work of economic
development. Development in his sense implies that carrying out of new
combinations of entrepreneurship is basically a creative activity. According
to Schumpeter an entrepreneur is one who perceives the opportunities to
innovate, i.e., to carry out new combinations of enterprises. He says that an
entrepreneur is one who is innovative, creative and has a foresight.
According to him, innovation occurs when the entrepreneur:
 Introduces a new product
 Introduces a new methods of production
 Opens new market
 Conquests of new source of supply of raw material
 Carrying out new organization.
The theory emphasizes on innovation, ignoring the risk taking and
organizing abilities of an entrepreneur. Schumpeter‘s entrepreneur is a large
scale businessman, who is rarely found in developing countries, where
entrepreneurs are small scale businessmen who need to imitate rather than
innovate.

In view of the above, Schumpeterian theory of entrepreneurship has got the

following features:

32
 Distinction between invention and innovation – Schumpeter makes a
distinction between innovation and invention. Invention means creation
of new things and innovation means application of new things onto
practical use.
 Emphasis on entrepreneurial function – Schumpeter has given emphasis
on the role or entrepreneurial functions in economic development. In his
views development means basic transformation of the economy that is
brought about by entrepreneurial functions.
 Presentation of disequilibrium situation through entrepreneurial
activity – The entrepreneurial activity represents a disequilibrium
situation, a dynamic phenomenon and a break from the routine or a
circular flow towards equilibrium.
Critical Evaluation: Schumpeter‟s theory of innovation is criticized on
the following ground:
 The theory has the scope of entrepreneurism in the sense that it has
included the individual businessman along with the directors and
managers of the company.
 Schumpeter‘s innovating entrepreneurs represents the enterprise with
the R&D and innovative character. But developing countries lack these
characters.
 The theory emphasizes on innovation and excludes the risk taking and
organizing aspects.
 Schumpeter‘s entrepreneurs are large scale businessman who introduces
new technology, method of production.
 Schumpeter remained silent about as to why some economists had more
entrepreneurial talent than others.
However, despite the above criticisms, this theory is regarded as one of the
best theories in the history of entrepreneurial development.
(vi) Theory of Harvard School
Harvard school contemplated that entrepreneurship involves any deliberate
activity that initiates, maintains and grows a profit-oriented enterprise for
production or distribution of economic goods or services, which is
inconsistent with internal and external forces. Internal forces refer to the

33
internal qualities of the individual such as intelligence, skill, knowledge
experience, intuition, exposure, etc.
These forces influence the entrepreneurial activities of an individual to a
great extent. On the other hand external forces refer to the economic,
political, social, cultural and legal factors which influence origin and growth
of entrepreneurship in an economy.
This theory emphasizes on two types of entrepreneurial activities i.e.- (i)
Entrepreneurial functions like organization and combination of resources for
creating viable enterprises, and (ii) The responsiveness to the environmental
condition that influences decision making function besides the above
mentioned activities.
Harvard School also emphasizes on following points:
 To search and evaluate economic opportunities,
 To master the process of mobilizing resources to accomplish the goal,
 To interconnect the different market segments for creating an absolutely
ideal marketing environment,
 To create or expand the firm or business enterprise,

(vii) Theory of High Achievement (David McClelland)

This theory is developed by David McClelland.
According to him entrepreneurship has been identified with two
characteristics such as:
(i) Doing things in a new and better way, and
(ii) Decision making under uncertainty.
He stressed that people with high achievement oriented (need to succeed)
were more likely to become entrepreneurs. Such people are not influenced
by money or external incentives. They consider profit to be a measure of
success and competence.
According to McClelland, a person has three types of needs at any
given time, which are:
 Need for achievement (get success with one‘s one efforts)
 Need for power (to dominate, influence others)
 Need for affiliation (maintain friendly relations with others)

34
(viii) Theory of Profit (Knight, Frank H theory)
This theory is developed by Knight, Frank H. He points out that
entrepreneurs are specialized group of persons who bears risk and deals
with uncertainty. Main features of this theory are pure profit, situation of
uncertainty, risk bearing capability, guarantee of specified sum,
identification of socio economic and psychological factors, use of
consolidation techniques to reduce business risks.
(ix)Theory of Market Equilibrium (Hayek theory)
According to Hayek, the absence of entrepreneurs in Neo-classical
economics is intimately associated with the assumption of market
equilibrium. The elasticity of bank credit causes a disparity between the
natural and market rate of interest. According to this theory, the postulate
presupposes the fact that there is no need for further information to modify
the decision.

3. PSYCHOLOGICAL THEORIES
According to this theory, entrepreneurship is a psychological process and
concept. According to this concept, psychological factors are the primary
source of entrepreneurship development. When there are sufficient numbers
of persons having the same psychological characteristics in the society, then
there are bright chances of development of entrepreneurship.
The entrepreneurship is termed as psychological concept and process.
According to this theory, psychological factors are the primary source of
entrepreneurship development. Few authors like Schumpeter, McClelland,
Hagen and John Kunkell have expressed their opinion about psychological
factors affecting entrepreneurship.
According to this theory, an entrepreneurship is important to emerge when
the society has sufficient supply of individuals possessing particular
psychological elements.

The main psychological theories are as follows:

(i) Joseph A. Schumpeter Theory
(ii) David C. McClelland Theory

35
(iii) Everret E. Hagen‘s Theory
(iv) John Kunkell Theory.

The brief description of each theory are as follows:

(i) Joseph Alois Schumpeter Theory of innovation
According to Joseph A. Schumpeter, the effective function of an entre-
preneur is to start innovation in venture. This theory is also called
innovation theory or dynamic theory. According to this theory, the
entrepreneurs emerges because of individuals having certain psychological
elements i.e., will power, self-intuitions, tolerance capacity. The
entrepreneur is a person who has creative nature.
He regarded the entrepreneurship as a catalyst who checks the static
conditions of the economy, there by initiates and thrusts a process of
economic development i.e., innovation. He carries economy to new height of
development.
This innovation includes:
 Introduction of new goods,
 Introduction of new methods of production,
 Opening of a new market,
 Discovering a new source of raw materials,
 Carrying out a new source of an organisation.
Although, this theory also included other characteristics i.e., risk taking,
superintendence and coordination, he emphasised that these attributes
without the ability to innovate will not make an individual as an
entrepreneur.

According to him, the following characteristics that appear in the behaviour

of an entrepreneur are as follows:
 An institutional capacity to see the things in a way which afterwards
proves to be true.
 Energy of will and mind to overcome static habits, desires and emotions.
 The capacity to withstand social opposition.

36
According to him, an entrepreneur is an innovator who desires to earn profit
through innovation. An entrepreneur is neither technical man nor a
capitalist but simply an innovator. He introduces something new in the
economy. He is motivated by establishing his psychological power. An entre-
preneurship is formed for establishing his industrial empire. He has burning
desires for creative activities.
He makes a distinction between innovator and inventor. An inventor
discovers new methods and new material whereas an innovator is one who
utilises or applies inventions and discovers to produce better quality goods
that give greater satisfaction to customer and high profit to entrepreneurs.
In this way, an entrepreneur is an innovator.
Schumpeter made it clear that an entrepreneur doesn‘t have a single person
but equal to an organisation. ―What matter is the behaviour not the actor?‖
He emphasised more on technological innovations rather than on orga-
nisational innovations. ―Entrepreneurs are certainly not economic men in
the theoretical sense.‖

Critical Evaluation of J. A. Schumpeter Theory:

In this theory, the main theme is the innovation. He makes a distinction
between an innovator and an inventor. According to him, an inventor
discovers new methods and new materials. But an innovator is one who
applies inventions and discovers in order to make new combination.
With the help of new combination, he produces newer and better goods
which yields satisfaction as well as profits. Schumpeter‘s concept of
entrepreneurship is quite broad based. It includes not only the independent
businessmen but also executives and managers who actually undertake
innovative functions.
(ii) Need for achievement theory (David C. McClelland‟s Theory)
David C. McClelland has given a particular concept of entrepreneurship.
According to him, needs for high achievement is an essential feature of
entrepreneurial behaviour. According to McClelland, ―Burning desire of need
for achievement attracts an entrepreneur for activities.‖

37
The primary basis of the development of an entrepreneurship is achievement
orientation. The capacity of becoming an entrepreneur develops due to
desire of reaching heights of excellence and specific performance.
For achieving heights of excellence and specific performances, an entre-
preneur needs rational thinking, new combinations, deep thinking, power
etc. The achievement motive is uncalculated through child rearing practices,
which stress standards of excellences, material warmth, self-reliance
training a low, further dominance. Individuals with high achievement motive
tend to take keen interest in situation of high risk desire for responsibility
and a desire for a Concrete measure of task performance.

His views can be expressed by means of the following points:

 Ideological Values,
 Family Socialisation,
 Need for Achievement,
 Entrepreneurial Behaviour.
The following elements which are focused by McClelland are as follows:
 Achievement Orientation,
 Height of Excellence,
 Imagination Power,
 New Combination.
According to McClelland, needs for high achievement drives individual
towards entrepreneurial activities. High achievement need can be developed
through child rearing and schooling practices. People with high achievement
need are not motivated by monetary rewards only, such people regard profit
as a measure of success whereas people with low achievement needs are
motivated by monetary rewards.
People with a high need for achievement derive satisfaction from achieving
goals. High achievers want immediate feedback on their power
performances. He has been able to establish the desirability of high need for
achievement for entrepreneurial success in the economic development of
country.

38
A drive to influence others and situations. It refers to one‘s desire to
influence and dominate other through use of authority. Goal‘s achievement
is less important than the means by which goals are achieved. McClelland
and his associates have found that people with high power needs have a
great concern for exercising influence and control.
McClelland theory is not free from criticism:
 There is strong evidence to indicate from politics and religion that adult
behaviour can be moulded or drastically altered in a relatively short time.
 The contention that needs are permanently acquired.
Inspite of the above discussion, this theory highlights the importance of
matching the individual and the job. People with high achievement needs
success on work i.e., challenging, satisfying, stimulating and complexing.
People with low achievement needs stability security and predictability.

Critical Evaluation of David McClelland‟s Theory:

The psychological roots of entrepreneurship reveal that high achievement
orientation ensures the success of entrepreneurs. But the empirical tools of
concept used by McClelland are found to be highly suspect.

Empirical investigation also need the following:

(1) It is necessary to create a climate to enable the children to grow and
become individuals with high achievement.
(2) It is possible to improve the performance of existing entrepreneur
through imparting proper training and education.

(iii) Status withdrawal theory (Everett E. Hagen‟s Theory):

Everett E. Hagen has also given a particular concept about an entre-
preneurship. He has developed the theory of withdrawal of status. Hagen
says, ―Entrepreneurship is a function of status withdrawal.‖ ―Creativeness of
disadvantaged minority group is the main source of entrepreneurship.‖ -
Everett E. Hagen
Hagen considers ―withdrawal of status respect as the trigger mechanism of
change in personality formation‖ as entrepreneurship status withdrawal is

39
the act of seeing on the part of some social group. The origin of this concept
of psychological theory of entrepreneurship is based on Samurai community
of Japan.
According to Hagen‘s concept status withdrawal as fall of status of social
group is the primary cause of personality development. Hagen identifies the
following four types of events that can produce status withdrawal and
prestige fall.
(1) Displacement of valued symbols.
(2) Denigrations of status symbols with a changing distribution of economic
power.
(3) Inconsistency of status symbols with a changing distribution of economic
power.
(4) No acceptance of expected status on migration to a new society.
Hagen opined that creative innovation or change is the basic feature of
economic growth. He describes an entrepreneur as a creative problem
shooter interested in things in the practical and technological realm. Such
type of individual feels a sense of increased pleasure when facing a problem
and tolerates disorder without discomfort. In traditional societies, position of
authority are granted on the basis of status, rather than individual ability.
That is why he visualised an innovative personality.

There are 4 responses:

(1) One who combines to work in the society but remains indifferent to work
and position is called Retreatist.
(2) One who adopts a kind of defensive behaviour and acts in the ways
accepted and approved in his society but with hopes on of improving his
position is called Ritualist.
(3) One who forms a rebellion and attempts to establish a new society is
called Reformist.
(4) A creative individual who is likely to be an entrepreneur is called
Innovator.
Innovation requires creative and such creative individuals cause economic
growth. Whenever there is a withdrawal of status respect, it would give rise

40
to birth of innovation of a creative individual who is likely to be an
entrepreneur.
Critical Evaluation of E. Hagen‟s Theory:
This theory acts as distinction between entrepreneurship and
intrapreneurship. There are different factors within the organisation which
motivate the executives and professionals to do some innovative behaviour
leading to new product and services.
Actually, they are not governed by status withdrawal. The theory only
suggests that the people who had enjoyed social standing at some stage in
their histories fall into a retreatist phase with an urge to regain the lost
status and emerge as an entrepreneurship personality.
(iv) Theory of social behaviour (John H. Kunkel‟s Theory)
John H. Kunkel has also given a particular concept about entrepreneurship.
He has presented a theory of entrepreneurial behaviour in connection to the
development of entrepreneurship. Kunkel‘s theory is concerned with the
expressed activities of individuals and their relations to the previous and
present surroundings, social structures, physical conditions and
behavioural patterns determined by reinforcing and opposing present in the
context.
Hence, entrepreneurial behaviour is a function of surrounding and social
structures, both past and present and can be readily influenced by the
manipulative economic and social incentives.
Kunkel, ―The supply and development of an entrepreneur depends upon the
existence and extensiveness of four structure i.e., limitation structure,
demand structure, opportunity structure, and labour structure.‖

He has given stress on the following four types of structure for the deve-
lopment of entrepreneurship:
 Demand structure,
 Opportunity structure,
 Labour structure,
 Limitation structure.

41
The description of each point is given as follows:
 Demand Structure- The demand structure is of economic nature. This
structure is changing day by day according to economic progress and
government policies. The behaviour of individual can be made
enterprising by affecting the main elements of demand structure.
 Opportunity structure- The opportunity structure is formed by
combination of supply of capital, managerial and technical skill
production methods, labour and market, training opportunity
establishment of an enterprise and conducting different activities.
 Labour structure- The labour structure is directed by several factors
such as source of livelihood, traditional outlook and life ambitions. The
quality of labour influences the emergence and growth of
entrepreneurship. Rather than capital intensive, labour intensive will
serve our interest in a better manner. The problem of labour immobility
can be solved by providing infrastructural facilities including efficient
transportation wherever an entrepreneurship is promoted.
 Limitation structure- We can say that the limitation structure is social
and cultural. This structure affects the development of an entrepreneur.

Critical Evaluation of Kunkel Theory:

The theory assumes the ideal structures for the supply of entrepreneur. But
generally there is discrepancy between objectives, structures and the actual
incidence of entrepreneurs. It is due to the fact that there are inadequate or
incorrect perception. In practice, entrepreneurship is also governed by the
specific combination of circumstances which are generally not available in
the environment.
At last but not the least, we conclude that all the authors i.e., J. A.
Schumpeter, David C. McClelland, Everett E. Hagen and John H. Kunkel
have given their own opinion on concept of psychological theory of
entrepreneurship. This theory presents the certain psychological motives
that are responsible for the evolution of entrepreneurship.
Schumpeter‘s theory is one of the most important concepts of entre-
preneurship which is richer and relevant. He has laid emphasis on

42
innovativeness or creativity of an individual which makes him an
entrepreneur.
McClelland theory has numerous practical implications. The person with
high need achievement needs great concern for exercising influence and
control.
Hagen‘s theory laid more stress on technological changes which is the result
as individual‘s creativity. His concept depended upon withdrawal of status.
John H. Kunkel theory laid more stress on types of structure i.e., demand,
opportunity, labour and limitation. All the structure affects development of
an entrepreneur.
The main point which is focussed on all the theories is on the individual and
his personality inference by environment factors in general and internal
values in particulars.

Entrepreneurship gets a boost when society has sufficient supply of

individuals with necessary psychological characteristics. The psychological
characteristics include need for high achievement, a vision or foresight and
ability to face opposition. These characteristics are formed during the
individual‘s upbringing which stress on standards of excellence, self-reliance
and low father dominance.

Theory of Psychology (John H. Kunkel‟s theory)

This theory is developed by John H. Kunkel. According to him psychological
and sociological variables are the main determinants for the emergence of
entrepreneurs. According to him, entrepreneurship can be dependent upon
the following structures in the economy, i.e. (i) Demand Structure (ii)
Limitation Structure (iii) Labour Structure and (iv) Opportunity structure.
Beginning with the premise that fundamental problems of economic
development are non-economic, he emphasizes on the cultural values, role
expectation and social sanctions as the key elements that determine the
supply of entrepreneurs. As a society‘s model personality, entrepreneur is
neither a supernormal individual nor a deviant person but is a role model of
the society representing model personality.

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Model personality as a derivative of social conditioning, the role is partly
shaped by the model personality that is a derivative of social conditioning of
his generation. Further, innovation and invention go together with the type
of conditioning in the society.
Role expectations and entrepreneurial role: Primary cultural factor operating
on the personality of the executive and the defining of his role by those
involved must accommodate to some degree to the necessities of the
operation to be carried out.

(v) Theory of Personal Resourcefulness

According to this theory, the root of entrepreneurial process can be traced to
the initiative taken by some individuals to go beyond the existing way of life.
The emphasis is on initiative rather than reaction, although events in the
environment may have provided the trigger for the person to express
initiative. This aspect seems to have been subsumed within ‗innovation‘
which has been studied more as the ‗change‘ or ‗newness‘ associated with
the term rather ‗pro-activeness‘.

4. SOCIOLOGICAL THEORIES
According to these theories, entrepreneurship is a sociological concept
and process. According to this concept, the sociological factors are the
secondary source of entrepreneurship development. As such, the social
factors like social attitudes, values and institutions significantly influences
the entrepreneurial supply in a society.
According to this theory, an entrepreneur executes all activities due to
economic incentives. The main aim of this theory is profit motive.

The supporters of sociological theory says that the entrepreneurial activities

is affected from social status hierarchy and values. Individuals‘ position,
tradition, cultural values, mobility and social status etc. are thoroughly
effected to entrepreneurship development. The sociological theories depend
on this concept.
The main sociological theories are as follows:

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(i) Frank W. Young Theory
(ii) B.F. Hoselitz Theory
(iii) Max Weber Theory
(iv) Cochran Theory
(v) Stocke‘s Theory.
The description of each theory are as follows:
(i) Frank W. Young Model/Theory (With changes in group level pattern)
Frank W. Young is not the supporter of role of individual in entre-
preneurship development. They think that only group entrepreneurs have
the capacity of extension of entrepreneurial activities due to the character of
capacity to react. He believes on the concept of changeable society.
A group comes in reactive status when the following circumstances happen
at one attempt.
 When group experiences minority situation in society.
 When group do not make approach upto effective social machinery.
 When group is having sound and more institutional resources rather
than other groups.
Overall, when a group sees their lower positional conditions & experience,
they grow an entrepreneurial tendency due to reactive capacity. According to
this theory, set of supporting instructions are the primary determinant
factors of entrepreneurship development.
(ii) B. F. Hoselitz Theory (With emphasis in marginal groups)
According to Hoselitz, ―The development of industrial entrepreneur is based
on only which type of society are there.‖
 Social process is not static.
 Sufficient employment pattern is available.
 Encourage to entrepreneurs for personality development.
Hoeslitz says, ―Culturally marginal groups plays an important role in
encouraging the economic development of any nation.‖
He think that the marginal persons are more able in making creative
adjustment in changed situations and during the adjustment process they
make efforts in bringing real innovations in social behaviour. In addition to

45
this, he emphasised on development of personal qualities for entrepreneurial
development.
According to Hoselitz, ―Managerial skill and leadership qualities are
important factors for entrepreneurship. Besides this, education, training,
social values, behaviour and social behaviour/institutions play a crucial role
in personality development.‖

Highlighted Points:
 Entrepreneurship development is based on social progress and
employment patterns.
 Personality development is an essential quality for entrepreneurship
development.
 Culturally marginal groups are important characters for development
process.
 Marginal groups are having the ability of innovation.
 Managerial ability and leadership quality is must for entrepreneurship
development.
(iii) Max Weber Theory (Theory of religious beliefs)
Max Weber has propounded the theory of religious belief. According to him,
entrepreneurism is a function of religious beliefs and impact of religion
shapes the entrepreneurial culture. He emphasized that entrepreneurial
energies are exogenous supplied by means of religious beliefs.
The important elements of Weber‟s theory are described further:
 Spirit of capitalism. In the Webbrian theory, spirit of capitalism is
highlighted. We all know that capitalism is an economic system in which
economic freedom and private enterprise are glorified, so also the
entrepreneurial culture.
 Adventurous spirit – Webber also made a distinction between spirit of
capitalism and adventurous spirit. According to him, the former is
influenced by the strict discipline whereas the latter is affected by free
force of impulse. Entrepreneurship culture is influenced by both these
factors.

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 Protestant ethic – According to Max Webber the spirit of capitalism can
be grown only when the mental attitude in the society is favourable to
capitalism
 Inducement of profit – Webber introduced the new businessman into the
picture of tranquil routine. The spirit of capitalism intertwined with the
motive of profit resulting in creation of greater number of business
enterprises.
(iv) Thomas Cochran Theory
According to Cochran‘s, ‗cultural values, role expectation and social
acceptance plays prominent role in entrepreneurship development and
entrepreneur is a model of personality.‖
The success of an entrepreneur is basically affected from the following
factors:
 The social attitude of the person towards his occupation.
 The role expectations of the sanctioning group.
 The operational requirements of the job.
Thus, the social attitude of the person and the role expectations are deter-
mined by the society‘s values as well as sanctioning groups that determine
the success and failure of entrepreneurship. Overall entrepreneurship
development is associated with social environment.
At last but not the least, we conclude that all the authors i.e., Frank Young,
B. F. Hoselitz, Max Weber, Cochran has given their own opinion on the
concept of sociological theory. All the theories depend upon the social
factors.
Frank Young‘s theory says about the concept of changeable society. Reactive
status transforms the group into an entrepreneur.
B. F. Hoselitz has given the importance to social factor. Under this theory,
the marginal persons are more able in making creative adjustment in
changed situations.
Max Weber theory says that those persons who are related with religious,
community etc., follow the rules and regulations of that community only.
Cochran theory says that the entrepreneur is the model personality of the
society.

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(v) Theory of Social Change (Everett E. Hagen theory)
This theory is developed by Everett E. Hagen. It explains how a traditional
society becomes one in which continuing technical progress takes place. It
exhorts certain elements which presume the entrepreneur‘s creativity as the
key element of social transformation and economic growth. It reveals a
general model of the society which considers interrelationship among
physical environment, social culture, personality etc.
According to Hagen, most of the economic theories of underdevelopment are
inadequate. Hagen insisted that the follower‘s syndrome on the part of the
entrepreneur is discouraged. This is because the technology is an integral
part of socio cultural-complex, and super-imposition of the same into
different socio-cultural set-up may not deliver the goods.
The Kakinada Experiment:
Conducted by McClelland in America, Mexico and Mumbai. Under this
experiment, young adults were selected and put through a three month
training programme. The training aimed at inducing the achievement
motivation.
The course contents were:
i. Trainees were asked to control their thinking and talk to themselves,
positively.
ii. They imagined themselves in need of challenges and success for which
they had to set planned and achievable goals.
iii. They strived to get concrete and frequent feedback
iv. They tried to imitate their role models those who performed well.
Conclusions of the Experiment:
(i) Traditional beliefs do not inhibit an entrepreneur
(ii) Suitable training can provide necessary motivation to an entrepreneur.
(iii) The achievement motivation had a positive impact on the performance of
the participants.
It was the Kakinada experiment that made people realize the importance of
EDP, (Entrepreneurial Development Programme), to induce motivation and
competence in young, prospective entrepreneurs.

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TOPIC 3: INDIVIDUAL ENTREPRENEUR AND CORPORATE
ENTREPRENEUR

(I) INDIVIDUAL ENTREPRENEUR

The concept of the individual entrepreneur, also known as autonomic or
individual company is a natural person who is engaged in an economic or
professional activity on his own account.

By the definition of individual entrepreneur we understand that there is no

fragmentation at the legal or juridical level of what the owner and the
business are.

In addition, to reaffirm it, one of the characteristics of the individual

entrepreneur is that the entrepreneur is solely responsible for the debts of
the business and who will be in charge of managing the entire company,
both strictly related to economic activity and records.

Most startup firms are dominated by entrepreneurs acting individually or

coming together individually, however as the business grows and become
more complex, it becomes imperative to develop the entrepreneurial skills
through a corporate body

Features of individual entrepreneurs

 They are engaged in an economic or professional activity on his own
account.
 They make all business decisions
 They enjoy all the profits or suffer all the losses of the business alone.
 They are legally responsible for the debts of the business
 Usually, there are no legal registration formalities and no complicated
documentation in case they operate on a small scale
 They need little capital for operation in case of small scale operation
 They are commonly found in retailing, farming and in businesses offering
personal services.

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 They contribute their capital alone. They cannot appeal to the public at
large to subscribe for shares.

Entrepreneurial competences required for successful operation of

individual entrepreneurs
There are three major competences for successful entrepreneurship. These
include:
 A body of knowledge
 A set of skills
 Cluster of traits

(A) Knowledge: This is a set/body of information stored by a person which

may be recalled at an appropriate time to enable a person do what is
needed to achieve a purpose. Examples of knowledge include:
 Information about the market for goods and services.
 Information about customers like who they are, where they are, their age
bracket, their tastes and preferences, etc.
 Information relating to business opportunity identified after doing market
research.
 Information about production process like knowing which materials to
use, knowing how to transform the materials into finished goods.
 Information on business management like how to manage workers
successfully.
 Information about technical matters like how to operate the machines.
 Information about competitors like knowing their strength, weaknesses,
opportunities and weaknesses.
 Information about the sources of capital.
 Information about sources of various inputs like machinery, labour, raw
 Materials, etc.
 Information about government policies that affect business activities.

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(B) Skills: This is the ability to apply knowledge and can be acquired
through practice. In business context it is possible to distinguish
between skills of technical and managerial in nature, some example are
listed below
(i) Technical skills: These include: Engineering, Computing, Sewing,
Carpentry, Painting, Mechanics, Catering, Video coverage and editing,
Hair dressing and Pottery skills.
(ii) Managerial skills: These include:
 Marketing skills (including selling). An ability to see past the firm‘s
offerings and their features, to be able to see how they satisfy the
customer‘s needs and why the customers find them attractive.
 Time management skills. An ability to use time productive, to be able to
prioritize important jobs and to get things done to schedule.
 Financial management skills. An ability to manage money, to be able
not only to keep expenditure and to monitor cash flow, but also to assess
investments in terms of potential and their skills.
 Organisation skills. An ability to mobilize and direct different resources
to a right direct for the success of a venture.
 Planning skill: An ability to consider what the future might offer, how it
will impact the business and what needs to be done to prepare for it now.
 Leadership skills. An ability to inspire people to work in a specific way
and to understand the tasks that are necessary for the success of the
venture.
 Delegation skills. An ability to allocate tasks to different people. It
demands a understanding of the skills that people possess, how they use
them and how they might develop to fulfill future needs.
 Communication skills. Ability to use spoken and written language to
express ideas and inform others.
 Negotiation skills. An ability to understand what is wanted from a
situation, what is motivating others in that situation and recognize the
possibilities of maximizing outcomes for all parties.

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(C) Traits, these are the aggregate/total of peculiar qualities that constitute
personal individuality. Traits take time to develop and are not easily
changed or acquired. These traits include:
 Being passionate: Highly successful entrepreneurs choose to do what
they love to do or what they are passionate about.
 Being disciplined. Highly successful entrepreneur have the quality of
high self-control and have the habits of obedience to effectively manage
their time and other resources to achieve success.
 Being an effective planner: Highly successful entrepreneurs do proper
planning.
 Having ability to forecast the future: Successful entrepreneurs know
what their businesses will be in the next 5 years because they are always
planning and they are ready to give it their best.
 Being persistent: Successful entrepreneurs are highly consistent in their
endeavours.
 Being professional: Successful entrepreneurs highly believe in the power
of being professional or the importance of proper packaging of the
business. They know how to present their business or idea in a way that
will attract the right people who need them.
 Being aggressive: This is the ability to have confidence to move forward
without fearing any resistance.
 Being ambitious: This is the ability to have strong desire towards
something.
NB: It is mostly likely that a person who does not have all the three
competences in his/her business will encounter difficulties in operating
the venture successfully.

Advantages of individual entrepreneurs

Because it is similar to a sole proprietorship, the advantages and
disadvantages of the individual entrepreneur are determined by their
commercial nature and depend directly on their responsibility and the
nature of this type of company. These are some of the particular advantages
and disadvantages of this type of company:

52
 Easy and relatively cheap to set up a business. The business is easy to
set up or establish because of small capital required.
 Quick decision making. Decision making is quick since the individual
entrepreneur does not consult anybody.
 Losses and wastage of resources are minimal. This is because the
individual entrepreneur personally supervises over every aspect of his
business.
 There is confidentiality. Privacy of the business is maintained as the
internal affairs of the business such as the accounts are not publicized
and published by the individual entrepreneur
 There is direct contact with customers. Direct contact with customers
is possible and this makes it easy for the individual entrepreneur to
satisfy his needs.
 Flexibility is high. The individual entrepreneur is flexible since he has
the ability to adjust from one line of business to another in order to meet
changes in the conditions of demand.
 There is personal interest and hard work. Being an individual
entrepreneur promotes high interest and hard work since losses and
profits are a responsibility of the owner and he shares them with no one
else.
 There are no much dangers of labour disputes. This is because in most
cases the individual entrepreneurs employ few employees especially those
who operate on a small scale.
 The individual entrepreneur enjoys all profits alone. This enables him
to expand his business and to improve his standard of living.
 It is an easy-to-build company. This is because an individual
entrepreneur has full power to make decisions.

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Disadvantages of individual entrepreneurs
 There is Limited access to credit facilities. Accessibility to credit is
limited by his lack of collateral security. This majorly applies to small
scale individual entrepreneurs.
 All costs and investment will always be assumed by the individual
entrepreneur and not by third parties. This is because an individual
entrepreneur acts like a sole proprietor in his business since he is the
only one who contributes capital to the business.
 The social responsibility of this type of entrepreneurs is unlimited:
Therefore the individual entrepreneur will be the only one who will have
to face the debts and always respond for the entity
 Unlimited liability. The individual entrepreneur faces unlimited liability
that is when the business becomes insolvent; personal property is used
to settle the claims of his creditors.
 Uncertainty of continuity exists. There is uncertainty about the
continuity of the business in case the individual entrepreneur dies.
 There is insufficient capital. This is because all capital is raised by only
one person who may not have enough capital needed for research and
expansion keeps the business small and profits low.
 The individual entrepreneur bears all the risks and losses of his
business alone. He is personally held responsible for the failure of his
business.
 Long hours of work. The individual entrepreneur over works himself
because he is the organizer, the worker and controller of the business.
Even though he employs other workers, he still remains the only one
performing the roles and duties of an entrepreneur.
 There is no enjoyment of economies of scale. The individual
entrepreneur does not enjoy economies of scale especially in case the
scale of operation of his business is small.
 Poor decisions may be made. This is because it is only one person who
is the individual entrepreneur who is responsible for making decisions
and may not have any one to consult.

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 The business depends on the life of the owner. The life of the business
depends on the life of the individual entrepreneur. That is, the death of
the individual entrepreneur in most cases brings about the end of the
business.
 There is inefficiency. The individual entrepreneur may sometimes be
inefficient as he/she may not be always available for his customers. In
addition he may be lacking the qualities of successful entrepreneurs.
 There is lack of managerial skills. Most individual entrepreneurs lack
essential business skills like budgeting, good communication or keeping
financial records and this makes their businesses to collapse.
 There are low discounts given to individual entrepreneurs. In most
cases, individual entrepreneurs don‘t receive useful discounts when
purchasing materials or goods for resale. This is because they mainly
operate on a small scale unlike larger organizations; they cannot buy in
larger quantities.

(II) CORPORATE ENTREPRENEUR/INTRAPRENEUR

Corporate Entrepreneurship is a process used to develop new businesses,

products, services, or processes inside an existing organization that creates
value and generates new revenue growth through entrepreneurial thought
and action. It is the act of behaving like an entrepreneur while working
within a large organisation.

A corporate entrepreneur is a person who focuses on innovation and

creativity and who transforms a dream or an idea into a profitable venture
by operating within the organizational environment
OR
A corporate entrepreneur is a person who does not own a business but uses
the entrepreneurial skills in an existing business where he/she works to
identify opportunities and create profits for the business from the
opportunity

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An intrapreneur is an inside entrepreneur, or an entrepreneur within a large
firm, who uses entrepreneurial skills without incurring the risks associated
with those activities.

Corporate entrepreneurs (Intrapreneurs) are usually employees within a

company who are assigned to work on a special idea or project, and they are
instructed to develop the project like an entrepreneur would. Intrapreneurs
usually have the resources and capabilities of the firm at their disposal.

A corporate entrepreneur (Intrapreneur) is an inside entrepreneur, or an

entrepreneur within a large firm, who uses entrepreneurial skills without
incurring the risks associated with those activities. Intrapreneurs are
usually employees within a company who are assigned to work on a special
idea or project, and they are instructed to develop the project like an
entrepreneur would. Intrapreneurs usually have the resources and
capabilities of the firm at their disposal.
Entrepreneurs and intrapreneurs vary in their level of focus. Whereas an
entrepreneur envisions a company from start to finish, an intrapreneur has
a much broader vision for an established company. Because the
intrapreneur works on solving bigger issues within the business, he/she
typically has more directly applicable skills for given tasks and takes more
risks within the context of his/her job.

The word intrapreneur is coined in 1980s by a management consultant

Gifford Pincho. Companies that are in great need of new innovative ideas
use intrapreneurs.

Today, instead of waiting until the company is in a bind, most companies try
to create an environment where employees are free to explore ideas. If the
ideas look profitable, the person behind it is given an opportunity to become
an intrapreneur.

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Intrapreneur (in-tra-pre-neur) is a person within a large corporation who
takes direct responsibility for turning an idea into a profitable finished
product through assertive risk – taking and innovation.

Types of Corporate entrepreneurs

The entrepreneurs may be classified as follows:
(i) The Creator corporate entrepreneur (Intrapreneur): Intrapreneur:
(ii) He/she is the person with the innovative ideas. Creators may be easier to
spot. They are the idea generation people, mostly in the discovery phase.
They see possibilities. They are high on learning and love change. They
are always looking for ways to do things better. They are big-picture
thinkers and often are able to see the gestalt. They are independent and
prefer to work in less structured environments. On the downside they
can get bored easily and find it difficult to stay focused on the details
because they are always thinking of the next idea. Creators develop the
ideas that fuel innovation.
(iii) Doers corporate entrepreneurs (Intrapreneurs): These persons are
focused on achieving objectives. They are the task-oriented individuals
mostly in the incubation phase. They understand the big picture and can
get involved in the details when they need to. They are assertive and take
responsibility for their actions. They have good communication skills and
are effective in instructing others. They are not afraid to stand up to
authority or challenge the status quo. They are less concerned about
structure and organizational obstacles that get in the way. They know
what needs to be get done. They just go it. Doers are task-oriented and
dedicated to their work.
(iv) Implementers‟ corporate entrepreneurs (Intrapreneurs): They are
the individuals who make things happen. They are focused on closer and
are mostly involved in the execution phase. They know how to get things
done or figure out how to get them done. They are goal-oriented, creative,
and competitive. They have good planning and negotiating skills. They
work well in high-pressure situations. They are good at taking the

57
 initiative, negotiating, and motivating others. They have the execution
skills required to drive projects to completion.
(v) Administrative corporate entrepreneurs (intrapreneurs): These are
the ones formed when the company forms an administrative arm
normally called the research and development (R &D Team) to spearhead
and encourage greater creativity and innovation among employees.
(vi) Opportunistic corporate entrepreneurs (intrapreneurs): These are
employees who pursue opportunities both internally and externally with
the company using its resources to exploit the new innovations it finds
attractive.
(vii) Imitative corporate entrepreneurs (intrapreneurs): These copy and
take advantage of other firms‘ innovations, and employ their corporate
muscle and superior resources to control the market for the new product
or service.
(viii) Incubative corporate entrepreneurs (intrapreneurs): These are the
ones created by the company itself. In this case, the company creates
new firms as semi-autonomous new venture development units, provides
them with seed capital and allows them independent action to develop an
idea from inception to commercialization. The company can then
reintegrate the innovation into its mainstream operations once market
viability has been proven.

Characteristics of Corporate Entrepreneurs

It is important to recognize that as a company, you don‘t create corporate
entrepreneurs, as they are already present within the organisation. What
you must do is identify them, then support and encourage them. Spotting
them is a matter of looking for the right characteristics. Although successful
corporate entrepreneurs come in many shapes and sizes, they tend to share
the following common characteristics:
 Courageous: They are not afraid to challenge the status quo and are
prepared to take risks to pursue an idea that they believe in.

58
 Curious and open minded: They are open to new ideas and not
blinkered by existing successful products in the company. Their curiosity
leads them to always search for new opportunities.
 Not driven by financial motives: They are rarely driven by personal
financial gain, but rather by pursuing something that they are
passionate about. They want to make the company better and improve
the lives of its customers.
 Resilient: They must be able to handle the rejection or failure of ideas to
be able to keep moving forward and producing new ideas.
 Creates new ventures: Giving birth to new businesses within the
existing organizations is the typical characteristic of an intrapreneur.
 Innovates products/services: A tendency towards technological
leadership by way of continual innovation of products/services is
desirable on part of an intrapreneur.
 Innovates a process: Under fiercely competitive business landscape,
business processes need to be reinvented time and again by the
intrapreneurs for better efficiency, productivity, and quality.
 Proactive – Intrapreneurs attempt to lead rather than follow the
competitors through their pro-activeness.
 Risk-taking: Corporate entrepreneurs have a risk-taking attitude with
regard to investment decisions and strategic actions under situations of
uncertainty.
 Renews organizations: An intrapreneur is expected to transform the
organizations through renewal of key ideas on which they are built.
 Competitively aggressive: An intrapreneur has the propensity to
directly and intensely challenge his organization‘s competitors to achieve
entry or to improve position.
 A person capable of establishing a new venture in an existing
company has to be a visionary leader. He ought to have great dreams
to be converted into reality. He has the ability to dream great things and
communicate these to his colleagues in such a fashion that they would
like to be a part of the dream. An intrapreneur is a leader, with dreams,
who overcomes all obstacles in selling and achieving the same. To be able

59
 to have his vision shared by others he needs a thorough understanding
of the environment. This requires a high level of creativity and the same
is lacking in larger organisations. Intrapreneurs challenge the beliefs and
assumptions of their organisations and this creates an opportunity of
doing something new. Creativity and understanding of the internal
environment of the organisation and external business environment help
in setting up the intrapreneurial ventures.
 Intrapreneurs are flexible and open to change: This characteristic
helps them in creating various management options that lead to new
business activities. They have an ability of encouraging ream work. Any
new venture needs multi-disciplinary skills ranging from finance,
operations to marketing and legal. Intrapreneurs prefer creating multi-
disciplinary teams where open discussions are supported.
 Openness: The degree openness in the team depends upon the openness
of the intrapreneurs. This openness helps in establishing a strong group
of supporters within the organisation. The intrapreneurs are required to
take extra pains in building this support base by continuously
encouraging the team members. As the usual motivators of career path
and job security are absent in intrapreneurial ventures, a good
intrapreneurs makes everyone a hero and thus survives by cultivating a
base of supporters.
 Persistence. One is most likely to face obstacles and frustrations in
intrapreneurial activity of starting something new. Only the persistence
of a leader will take you through.

Benefits of corporate entrepreneurs

Innovation is the lifeblood of a company; without it, the company will die.
But many larger organisations struggle to innovate successfully due to their
structures, bureaucracy and culture. Implementing a corporate
entrepreneurship program provides companies with a systematic way of
increasing their innovation capabilities, the benefits of which can be huge:
 Lead to organization growth: Successful corporate entrepreneurship
ensures a consistent stream of new innovations in the product and

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 service pipeline, which in turn leads to future revenues and growth for
the organisation.
 Increased productivity and employee morale: Corporate
entrepreneurship programs allow employees to tackle new
opportunities, immersing them in work which they find to be both
challenging and interesting. When employees are engaged and feel
that their contributions are valued by the company, productivity goes
up.
 Source of competitive advantage: Employees are an organisation‘s
greatest asset when it comes to identifying opportunities and threats in
the market. They can provide insights not available to competitors, and
are a valuable source of ongoing competitive advantage.
 Employee recruitment and retention: Allowing employees to pursue
their ideas and opportunities for the business leads to higher levels of job
satisfaction. A result of this is lower levels of staff turnover. In addition,
companies that are known for encouraging corporate entrepreneurship
will in turn attract other talented, entrepreneurially minded employees,
creating a positive cycle.

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 Corporate entrepreneurs help an organisation to out compete its rival
firms by introducing new products in the market.
 They help an organisation to develop success from failures by introducing
new products that can enable the organisation to gain new markets and
generate high profits.
 Innovation by corporate entrepreneurs (intrapreneurs) acts as the critical
element in creating wealth in the future for the organisation.
 Their activities lead to greater remuneration (pay Raises, bonuses and/or
Incentives) for those employees whose new ventures are profitable.
 Leads to improved employee confidence & status within the company
since they will be rewarded, promoted and assured of continuing with
their innovations.
 Corporate entrepreneurs (iintrapreneurs) help in increasing the speed
and cost-effectiveness of technology transfer from research and
development to the marketplace help efficient production.
 Corporate entrepreneurs (intrapreneurs) as inventors come up with new
products hence increasing customer choice and the marketability of the
products since in most cases they are of quality.
 Corporate entrepreneurs (iintrapreneurs) come up with new processes
that get that product to market. Part of the reason they are considered
similar to inventors is that they are creative and are risk-takers in the
sense that they are stepping out of their traditional role within the
business.

Factors limiting corporate entrepreneurs‟ activities

There are definite reasons why large corporations have trouble staying
entrepreneurial.
 The Inherent Nature of Large Organisations: As a company grows
larger addition layers of management are added in order to keep the
organisation manageable. Once the entrepreneur loses contact with
workers, it is difficult to ensure that appropriate level of
entrepreneurship exists within the organisation. Multiple layers of
management also create too many levels of approval between the
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 innovator and the person in charge of resources. Each level has the
potential to kill the project before it gets funded. As the business grows,
need to control performance also grows and rules and standards become
more important than entrepreneurial behaviour. Another problem is the
corporate culture. The guiding principles in a traditional corporate
culture are – Fallow the instructions given; do not make any mistakes; do
not fail; do not take initiative but wait for instructions and stay within
your turf. This restrictive environment is, of course not conducive to
creativity, flexibility, independence and risk taking which are essential for
intrapreneuring.
 Need for Short-Run Profits: Apart from those characteristics inherent to
large corporations that make entrepreneurship difficult is the need of
most publically held ventures to show short-run profits. Established
corporations thrive on short-run profits, they are an organisation‘s
measures of success. Corporations must also secure short- turn profits
in order to keep stock prices up and attract investors. Thus there is
constant pressure on top management to devise strategies for short-run
performance rather than long-run investment. Entrepreneurial ventures,
on the other hand, may lose money for some time. Their key to survival is
cash-flow. They need to attract money into the venture without
guaranteeing the investors a sure return.
 Lack of Entrepreneurial Talent: There are very few true entrepreneurs
in large organisations. Typically, they are not attracted to large
organisations in the first place. Large organisations do not encourage
them. They see the entrepreneur as loner rather than a team player and
as an eccentric who is interested in pet projects rather than in getting
corporate work done. Entrepreneurs are often viewed as cynics, as rebels,
or as free spirits, who are late and do sloppy work that does not conform
to standards set by the corporations. This forces the entrepreneurial
person to leave the big corporations and look for alternatives.
 Inappropriate Compensation Methods: Most organisations have few
methods to compensate creative employees. Wages for the employees are
based on productivity by input/output measures rather than by

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 innovation in products or processes. Even though monitory rewards may
not be especially important to entrepreneurial individuals, some
mechanism of rewarding innovation must be evident if innovation is to be
continued. Non-monetary rewards are also typically missing from
corporate structures.
 High costs of failure. The costs of failure are too high whenever a new
intrapreneurial venture becomes unprofitable, in most cases; such
employees are charged and layed off.

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 Low rewards attached to success. The rewards of success are too low
and yet intrapreneurs always put too much effort and time to ensure the
success of new ventures expecting high rewards and failure to do so
discourages intrapreneurship. A lot of companies talk about
intrapreneurship and ask people to take risks, but if those people
succeed they get nothing more than a small bonus, and if they fail they
get fired. You can't create wealth unless you are willing to share it.
 Rigid systems/Inertia caused by established systems that no-one is
willing to change. Most organizations are governed by implicit and
explicit systems, and in many cases people are reluctant to change them.
Intrapreneurs are told that this is the way we have always done it around
here.
 Bureaucratic tendencies/Long procedures within the organisation.
Organizational hierarchies are what create the need to ask for
permission. The deeper the hierarchy, that harder it is to get permission
for anything new. Hierarchies also tend to create narrow career paths
and myopic thinking, further stifling creativity and innovation. People
with innovative skills are dis-empowered through having to ask
permission, eventually developing the "victim mentality" that retards
intrapreneurship.
 Limited resources required to carry out intrapreneurship. Most
organizations have inadequate resources like financial resources,
computers/Technology, equipment which are a requirement for any
innovation and intrapreneurship.
 Lack of support from top management. There is no intrapreneurial
venture that can succeed without top management‘s support. At times
top officials with their selfish reasons object to approve proposals from
those employees intending to become intrapreneurs / to create new
ventures in an existing organisation.
 Limited market. Sometimes the products from intrapreneurial ventures
fail to get market and without promotional strategies these ventures end
up failing hence retarding intrapreneurship.

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 Lack of intrapreneurship cultures and systems that support
intrapreneurship. Most organizations do not have such cultures that
support intrapreneurship and intrapreneurs find it difficult to operate or
to practice their innovations in such organizations.
 Limited intrapreneurial skills. Many employees do not possess skills
needed for them to create and innovate new ventures within the
organizations where they work hence a barrier to intrapreneurship.
 Retrenchment of employees with intrapreneurial skills. At times
those intrapreneurs with intrapreneurship skills are layed off and the
innovative ventures they started are left in the hands of those who have
no skills in running such ventures hence their failure.

Ways of promoting corporate entrepreneurs in an organization

Existing companies will enjoy an advantage in new-business creation only if
they build on their strengths; otherwise, they will be no better off than start-
ups that must begin with a clean slate.
 Inspire and reward entrepreneurial thinking: Entrepreneurial thinking
at work is about giving team members the freedom and support to
envision new ways to improve the business and stay innovative. This
could be better ways of servicing customers, developing new product
ideas, improving operations, or coming up with new strategic directions.
Some employees are born self-starters and embrace the opportunity to
have a more active role in contributing to the company‘s direction, while
others may need a little bit more time to break out of their traditional
work boundaries and routines. The best way to inspire entrepreneurial
thinking is to weave it into the fabric of the company culture.
Entrepreneurial thinking needs to become an intrinsic part of the daily
work. This can be done by giving team members more autonomy to
pursue ideas that contribute to the company‘s mission and customer
value creation as part of their job. Provide regular opportunities to share
and collaborate on ideas that drive research and product development.
We have seen great success with company-wide and team competitions
for new product or service ideas.

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 Embrace collaboration: Yes, it‘s a competitive world and companies
need to protect their intellectual property, but at the same time,
innovation does not happen in a box. Innovation is teamwork.
Collaboration goes beyond department and company borders. Research
has shown that innovative companies have structures in place that
support entrepreneurial thinking and are connected with external
partners, including universities, research institutions, startups, and
other companies, to drive research and development. You can start by
tapping your colleagues and network for ideas and know-how.
 Corporate Strategy should Aim at Developing Intrapreneurial
Confidence: The corporate strategies should be formulated so as to
inspire confidence in the employees to undertake innovative and
entrepreneurial activities. If employees have to feel comfortable in taking
initiative and acting independently, they should have shared values and
a common purpose. Having the clear picture of corporate objectives and
strategies gives employees a confidence to drive towards their ideas. It
ensures that they are creating value for the organisation and thus feel
comfortable in taking appropriate risk. The familiarity with the common
purpose and value system gives general direction and confidence to the
intrapreneurial leaders. In developing the corporate strategy and shared
values an intrapreneurial leader involves employees and ensures that the
strategy is properly communicated to all concerned. Using their everyday
experiences employees gather information about the market place and
thus help in responding to events at a faster speed. So employers at all
levels are encouraged to provide inputs to strategic process.
 Delegation of authority: It is the responsibility of the leader to delegate
authority to encourage this type of initiative, and thus providing freedom
to managers to think and act like entrepreneurs. Large organisations are
often broken down to smaller units by dividing their constituent
businesses. This promotes the key managers to the lop positions in the
subdivided businesses and it is the greatest incentives to make them
perform with greater zeal. ABB has incorporated some 1400 units as
companies in their own right.

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 Assure employees that intrapreneurship is valued: Intrapreneurial
organisations create an environment that assures the employees that
intrapreneurship is appreciated and valued. They should be convinced
that intrapreneurial behaviour does not carry a very high risk. The
organisations, in their value system, should inspire a desire for change, a
mindset of break through thinking and a culture of creativity and
innovation. The performance appraisal and reward system should be
modified to include intrapreneurial activities. Many companies have
introduces an appraisal system that includes change and innovation as a
key element. They have built measures of innovation along with financial
and market results. It is equally important how this change is
communicated to the concerned employees.
 Encourage diverse thinking: Intrapreneurial culture becomes-more
creative and innovative when the organisation has people with diverse
viewpoints, perspectives and experience. It is a proven fact that diversity
of thought enhances creativity and ability to generate not only a larger
number of solutions but even better solutions. In an organisation people,
who are continuously dissatisfied with the way the company is running,
add to the diverse thinking and are hence a valuable asset?
Organisations must recognise and protect these germs of dissatisfaction,
as they are source of continuous improvement.
 Innovate to scale means knowing your numbers: Every idea needs
market validation and, if promising, a business plan. Knowing budgeting
and financial metrics seems to be a basic requirement, but it is also still
a common stumbling block for bringing an idea to market. Every day, I
check balance sheets and key metrics to know the latest about sales,
profit, expenses, cash flow, profit margin, and customer acquisition
costs. Understanding budget requirements and financial metrics are
equally as important as ideas, passion, and drive. It‘s the foundation for
turning your ideas into a viable business model that can scale. Another
key criterion is scalability. Can the product idea scale nationwide –or
globally, and if so, what investment, infrastructure, and team size are
required?

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 Staff new ventures with “mature turks.” Companies often put young,
hard-charging mavericks in command of start-up ventures. Frequently,
those executives are new to the company or haven‘t grown up in the
business. Such people, runs the argument, are less constrained by
companies‘ current ways of working. Unfortunately, they‘re also less likely
to know which corporate resources are available or have the credibility to
draw upon them.
 Change veterans‟ thinking. Employees will seldom embrace a new
business unless companies presell them the idea. Smart companies place
division chiefs and group heads on the oversight committees or boards of
promising start-up efforts. They expect familiarity to lead to
understanding, and understanding to breed acceptance. Companies can
also foster shared understanding by getting executives to envisage the
future through exercises such as scenario planning. For years, Bill Gates
took Microsoft‘s senior team on weeklong retreats, where discussion
revolved around emerging technological trends and competitive threats. To
reinforce the message, companies may sometimes need to alter incentives
and promotion criteria, particularly when existing values are deeply rooted
in organizations.
 Develop some capabilities, but acquire others. Leaders of new
businesses often feel that they must build every capability from the
ground up. Not all skills are best developed from scratch, though; some
can be purchased. The make-or-buy decision hinges on the availability of
skills in the open market, the time needed for internal development, and
the ease with which outside capabilities can be integrated into the
organization.
 Share responsibility for operating decisions. New businesses prefer
complete control over their destinies. However, it‘s easy to lose perspective.
Stanford‘s Robert Burgelman, in Strategy Is Destiny, quotes the head of
one of Intel‘s start-up businesses as saying: ―We created a very
entrepreneurial culture that prided itself on being different from the rest of
Intel. Some of this was justified. We have a different business
model….However, when we really looked at it; we found that we were being

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 different for difference‘s sake.‖ When corporations force new and old
businesses to share responsibility for critical choices, the former become
more accepting of established practices and more successful at leveraging
existing strengths.
 Integrate with autonomy. A new business needs help from the parent
company as it strives to develop an independent identity. That assistance
usually takes the form of protection, sponsorship, and other types of
support from the corporation‘s senior-most executives. Organizationally,
the company gives the new business a direct reporting line to a respected
leader, who becomes responsible for providing oversight, allocating
resources, offering strategic guidance, and ensuring that its managers
aren‘t hog-tied by the parent‘s rules. The leader treats the new business as
an exception, free from the usual controls, performance standards, and
review processes demanded of the company‘s mature businesses. This
approach works well—until it becomes necessary to hand the new
business, which has outgrown the leader‘s ability to manage it as an
exception, over to an existing business group. That‘s when resistance sets
in and battles break out
 Assign corporate and operating sponsors. Corporate sponsors, who can
be either line or staff executives, bring credibility and clout to new
ventures, while operating sponsors, who are drawn from particular
businesses, divisions, or groups, contribute organizational savvy and
foster acceptance. Together, they are likely to give the right mix of freedom
and discipline to new businesses, and to balance identity with integration.
 Establish criteria for handoffs. Unless there are pre-established
standards for handoffs from corporate oversight to divisional ownership,
companies will make those shifts very slowly. Most new businesses prefer
to stay under the protective corporate umbrella, where they enjoy
privileged treatment and special status, controls are frequently looser, and
resources are easier to obtain. The criteria for handoffs can be quantitative
(revenue or size thresholds, number of customers, market share targets) or
qualitative (clarity of strategy, stability and experience of the leadership

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 team, competitive superiority), but everyone in the company must know
and agree to them in advance.
 Employ hybrid organizational forms. Companies must also balance
identity and integration by using innovative organizational structures.
Such structures often consist of creative combinations of dotted-line and
solid-line reporting relationships that mix formal authority with informal
oversight.
 Providing support: It is important to foster a culture that makes
employees feel supported and valued. They should feel able to freely
share ideas, and further down the line should be provided with the
resources and guidance they need to increase the chances of producing
successful innovations.
 Take a step back: Managers need to give employees the space to come
up with solutions independently, rather than sticking to traditional
methods. In addition, bureaucracy needs to be relaxed to allow the
emergence of ideas that make sense for the business, not just those
which fit within existing structures and procedures.
 Use effective communication: Managers should be conscious to
develop a culture of open communication where ideas can flow freely
within the organisation, as well as with experts external to the
organisation.
 Support from ownership and top management. This support should
not simply consist of passive approval of innovative ways of thinking.
Ideally, it should also take the form of active support, such as mentoring
and monitoring.
 Rewarding intrapreneurs. All in all, intrapreneurs tend to be creative,
dedicated, and talented in a variety of areas. They are thus of significant
value even to companies that do not feature particularly innovative
environments. Their importance is paramount and since they are such
important resources, they should be rewarded accordingly (both in
financial and emotional terms).
 Allowing intrapreneurs to follow through themselves. Intrapreneurs
who think of a new approach or process deserve to be allowed to

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 maintain their involvement on the project, rather than have it be handed
off to some other person or task force.
 Through organizing trainings: Encourage employees to develop new
innovations within an organization through training programs.

Characteristics of a good Intrapreneurial Climate

 Intrapreneurial organisations have a climate of encouraging new
ideas. As research and development is the key source of new products,
such organisations often operate on the frontiers of technology. Most
organisations, looking after high sales volumes and growth in return on
investment, discourage new ideas as these tend to hinder immediate
increase in sales and ROI. However intrapreneurial climate supports or
rather encourages new product and process ideas.
 Such organisations encourage trial and error and experimentation. It
is expected that any new product will require sufficient amount of trial
and errors. A new product is rarely a success at the first attempt hence
experimentation is encouraged and in the process failures tolerated.
Intrapreneurial climate allows mistakes and failures in implementing
innovative ideas. Such failures do not have a serious impact on the
career prospects of intrapreneurial managers as failures are considered a
part and parcel of establishing successful new products or ventures.
 The organisation should not insist on any pre-conceived initial
parameters, as this inhibits creativity for developing new products or
processes. Protecting various turfs in an organisation may frustrate the
potential intrapreneurs to establish new ventures. Consider a case when
a manager‘s initiative for a new product is rejected on the ground that
the said project falls under the preview of a different department or a
subsidiary.
 The organisation should be able to allocate sufficient resources to
the new projects without much of red tape. The resources should not
only be available for intrapreneurial activities, but the same should be
easily accessible. Allocation of insufficient resource for a new venture is
the sure way of killing the same. Even when the resources are available

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 sometimes the reporting requirement become obstacle in obtaining them
and it can be a very frustrating experience.
 Intrapreneurial environment encourages multi-disciplinary team
approach. Cross functional teams facilitate efforts to integrate activities
associated with different organisational functions, such as – design,
manufacturing and marketing. In addition, new product development
processes can be completed more quickly and the products more easily
commercialised when cross-functional team work effectively.
 Using cross-functional teams: Product development stages are grouped
into parallel or overlapping processes to allow the firms to tailor its
product development efforts to its unique core competencies and to the
needs of the market. Team leaders are encouraged to include members
with different background of knowledge and skills. An employee‘s
contribution in different multi-disciplinary teams is considered as an
asset and valued favourably for promotions and career advancement.
 The corporate environment must establish long term time horizon
for evaluating the success of the overall program as well as the
success of each individual venture. The company should be willing to
commit funds for a longer period of 5 to 7 years for setting up
intrapreneurial ventures. Intrapreneurial investment by the corporate
has the same time horizon as that of venture capital in a startup project
or any other risk financer of an entrepreneurial venture.
 Spirit of intrapreneurship comes voluntarily and cannot be forced
upon the employees. There is a difference between a corporate leader
and an intrapreneurial leader. One cannot be a substitute for another. It
may be difficult to select an intrapreneurial manager based upon his
performance as a traditional manager.
 Organisations should allow the intrapreneurs to emerge by a self-
selection process and allow them the latitude to carry a project
through its completion. Instead of delegating responsibility to different
specialists for different stages of a product, an intrapreneur who has
fallen in love with his newly created internal venture is, supported by the

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 multi-disciplinary team of specialists, and allowed to carry on with the
project.
 The organisational reward system has to be different from that of a
traditional organisation. It should be one that explicitly supports
innovation. Intrapreneurs need to be appropriately rewarded for their
extra effort and risk taking in setting up new ventures. The reward
should be explicitly based on achieving the pre-determined goals.
 The corporate climate that encourages intrapreneurs has sponsors
and champions in the organisation who support the creativity and
resulting failures. They also provide flexibility in planning to such an
extent that if needed the organisational objectives are modified or new
ones added. Normal corporate cultures evaluate managers on their ability
to come close to the corporate objectives while intrapreneurial climate
allows them the flexibility of changing the corporate objectives to include
the proposed new ventures.
 Last but not the least is that any intrapreneurial activity must be whole
heartedly supported by the top management.

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