Chapter II. Entrepreneurship: A Theoretical Framework

Transcription

1 Chapter II Entrepreneurship: A Theoretical Framework 57

2 Introduction Since the days of the Industrial Revolution, the enterprises and entrepreneurs are in the centre stage of modernisation. Economists, sociologists, psychologists and anthropologists have studied this concept, usually within the frontiers of their respective disciplines. This has led to more divergence than convergence in moving towards the goal of practical conceptualization of entrepreneurship. This chapter presents a theatrical framework of entrepreneurship. At the outset it seeks to present a glimpse of various theoretical approaches and expositions made over time and across disciplines to capture the phenomenon of entrepreneurship. And after familiarizing oneself with the conceptual map, an attempt is made to project a paradigm shift whereby the entrepreneur is recast into a pragmatic mode, keeping in perspective the need to intervene for augmenting and harnessing the entrepreneurial skills. In spite of the fact that entrepreneurship is a significant factor in economic development, no attempts were made by economists for formulating a systematic theory of entrepreneurship with the possible exception of Schumpeter who gave a central place to the innovative role played by entrepreneurs in his theory of economic development. Before reviewing different theories of entrepreneurship, it is imperative to give an account of historical evolution of the concept of entrepreneurship. Evolution of the Concept of Entrepreneur For a long time there was no equivalent for the term entrepreneur in the English language. Three words are commonly used to connote the sense the French term carried: adventurer, undertaker and projector; these were used interchangeably 58

3 and lacked the precision and characteristics of a scientific expression 1. Hence, the term entrepreneur did not find any prominence in the history of economic thought. The earliest attempt to invest the concept with some economic content could be traced to the works of a French writer, Bernard F.de Belidor, in the 18 th century who defines entrepreneurship as buying labour and materials at uncertain prices and selling the resultant output at contracted prices 2. Entrepreneurship as a concept gathered prominence in economic literature mainly through the writings of Richard Cantillon ( ), who assigned the entrepreneur an economic role by emphasizing on risk as prominent entrepreneurial function. The Mercantilist writer Cantillon introduced the term entrepreneur. He defined entrepreneur as the agent who purchases means of production in order to combine them to produce a product to sell at prices that are uncertain at the moment at which he commits himself to his cost. The distinction between the entrepreneur and capitalist was facilitated in the second half of the 19 th century by the fact that changing methods of business finance produced a rapidly increasing number of instances in which capitalists were no entrepreneurs and entrepreneurs were no capitalists 3. Frank H. Knight emphasized the assumption of risk and uncertainty as the main function of entrepreneur 4. Harvey Leibenstein ascribed two more functions to an entrepreneur gap filling and input completing. While the former refers to the discovery and development of markets and creation of other agents to fill-in the existing gaps the latter is associated with procuring the needed inputs either domestically or from abroad 5. 59

4 On the basis of the degree of innovative zeal, propensity to introduce change, and qualities of leadership displayed, entrepreneurs have been classified by Danhof into four distinct types. The first one is innovating entrepreneurship which is aggressive in experimentation and always ready for putting attractive possibilities into practice. The second is imitative entrepreneurship distinguished by preparedness to adopt successful innovations initiated by the innovating entrepreneurs. The third category is Fabian entrepreneurship, characterized by great caution and skepticism, which introduces changes only when the non-introduction leads to loss. The fourth category is the drone entrepreneurship which is characterized by refusal to try new methods even at the risk of loss 6. While the innovative and imitative categories form the active entrepreneurial resource the latter two types the Fabian and drone type, point to potential entrepreneurship which can be activated by designing and implementing a scheme of incentives. Infact, the problem in less developed economies is much more than increasing the supply of innovative or imitative entrepreneurship. In India, while certain industrial centers have long experience of more than a century there are many regions with little or no industrial tradition. It is not feasible to speak of developing innovative entrepreneurship in these regions. The immediate need is to supply the imitative type and to activise the Fabian and Drone types of entrepreneurs. Development of modern small scale industries helps in augmenting the supply of these types of entrepreneurship in these regions. Thus, the word entrepreneur is drawn from the French language where it originally meant to designate an organizer of musical or other entertainments. Oxford English Dictionary (in 1897) also defined an entrepreneur in similar way as the director or a manager of a public musical institution, one who gets-up entertainment, 60

5 especially musical performance 7. In the early 16 th century, it was applied to those who were engaged in military expeditions. It was extended to cover civil engineering activities such construction and fortification in the 17 th century. It was only in the beginning of the 18 th century that the word was used to refer to economic aspects 8. Since then, the term entrepreneur is used in various ways and various views. These are broadly classified into three groups, viz., risk-bearer, organizer and innovator. Entrepreneur as a Risk-Bearer: Richard Cantillon, an Irish man living in France, was the first to introduce the term entrepreneur in the early 18 th century. He defined entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future 9. Knight 10 also described entrepreneur to be a specialized group of persons who bear uncertainty. Thus, entrepreneur is the economic functionary who undertakes such responsibility of uncertainty which by its very nature cannot be insured, or capitalized or salaried too. Entrepreneur as an Organizer: Jean Baptist Say defined an entrepreneur as one who combines the land of one, the labour of another and the capital of yet another, and, thus, produces a product. By selling the product in the market, he pays interest on capital, rent on land and wages to labourers and what remains is his/her profit 11.Thus, Say has made a clear distinction between the role of the capitalist as a financer and the entrepreneur as an organizer. Entrepreneur as an Innovator: Joseph A. Schumpeter, for the first time in 1934, assigned a crucial role of innovation to the entrepreneur in his magnum opus Theory of Economic Development. Schumpeter considered economic development as a discrete dynamic change brought by entrepreneur by instituting new 61

6 combinations of production, i.e., innovations 12. The introduction of new combination of factors of production, according to him, may occur in any one of the following forms: (a) the introduction of a new product in the market, (b) the instituting of a new production technology, (c) the opening of a new market, (d) the discovery of a new source of supply of raw material and (e) the carrying out of the new form of organization of any industry. while, Harbinson 13 enumerates four distinct entrepreneurial functions; such as undertaking or managing of risks and handling of economic uncertainty; planning and innovation; coordinating, administration and control; and routine supervision. Tandon 14 emphasizes that an entrepreneur must possess: a) the capacity to assume risk and self confidence; b) technological knowledge, alertness to new opportunities, willingness to accept change and ability to initiate; c) ability to mobilize resources; and d. ability for organization and administration. Meredith Geoffrey & others 15 have described entrepreneurs as people who have the ability to see and evaluate business opportunities together with the necessary resources to take advantage of them and to ensure success. Arthur Dewing 16 has conceptualized the function of entrepreneur as one that promotes ideas into business. Thus, entrepreneur brings an over all change through innovation for the maximum social good. According to him an entrepreneurs is a visionary with outstanding leadership qualities. Peter Drucker 17 has observed that innovation is the specific tool of entrepreneurs, the means by which they convert changes into opportunities for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, and capable of being practiced. Entrepreneurs need to search purposefully for 62

7 the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principle of successful innovation. Sharma 18 opines that entrepreneurs are those who exhibit qualities of leadership in solving persistent professional problems and demonstrate an eagerness to seize unusual opportunities. Habakkuk 19 has points out that entrepreneurs have certain common characteristics: a flair for identifying and seizing opportunities for profit, an eye for the possibility of new products, unexploited raw material supplies, untapped markets, willingness to take considerable risk; vision, drive and initiative, the ability to devote their whole energies completely to attain their ends. Of late, a new breed of entrepreneurs is coming to the fore in large industrial organizations. They are called intrapreneurs. The intrapreneurs are usually top executives encouraged to catch hold of new ideas to convert them into products. Thus, intrapreneurship serves as a seed-bed for the development of innovative entrepreneurship. ENTREPRENEURSHIP: Concept and background Entrepreneurship is the propensity of mind to take calculated risks with confidence to achieve a pre-determined business or industrial objective. In substance, it is the risk-taking ability of the individual, broadly coupled with correct decision making. The capacity to take risk independently and individually with a view to making profits and seizing opportunity to make more earnings in the market-oriented economy is the dominant characteristic of modern entrepreneurship. However, in countries like India, a new species of entrepreneurs is desirable because here the economic progress has to be brought about along with social justice. 63

8 Entrepreneurship in India therefore, has to sub-serve the national objectives. The apparent conflict between social objectives and economic imperatives has to be resolved first by the individual entrepreneur in his own mind and initiate economic growth which includes industrial development as one of the instruments of attaining the social objectives. Thus, a high sense of social responsibility is an essential attribute of the emerging entrepreneurship in India. In a Conference on Entrepreneurship held in the United States, the term entrepreneurship was defined as the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition 20. In the opinion of A.H. Cole, 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 21. Schumpeter states that entrepreneurship is based on purposeful and systematic innovation. It included not only the independent businessman but also company directors and managers who actually carry out innovative functions 22.Thus, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. THEORIES OF ENTREPRENEURSHIP The concept and theories of entrepreneurship evolved over more than two centuries have undergone major changes. Over the years the social scientists have interpreted the phenomenon of entrepreneurship differently in accordance with their 64

9 perception and economic environment. Infact, the concept of entrepreneurship is complex in its content, and it is influenced by not only economical aspects, but also by sociological, political, psychological, ethical, religious and cultural values. With the above background, some of the important theories of entrepreneurship are presented in the following discussion. a) Schumpeter: The most celebrated theory on entrepreneurship was propounded by Joseph Schumpeter, who in turn brought the conceptual change in the definition and functions of entrepreneur. According to him, entrepreneur is a key functionary of economic development. Further, he said that development implies carrying out of the new combinations and the concept of combination covers the following five cases 23 ; i) the introduction of a new good; ii) the introduction of a new method of production; iii) the opening of a new market; iv) the conquest of a new source of supply of raw materials; and v) the carrying out of the new organization of any industry. Thus, the carrying out of these new combinations, Schumpeter calls enterprise, the individuals who carryout them he calls entrepreneur. b) Max Weber: The core aspect of the Weberian theory of social change consists in his treatment of the protestant ethic and the spirit of capitalism. He said that the inducement of profit results in greater number of business enterprises and a complete re-organization of the industry occur 24. In the Weberian system the entrepreneurial energies are generated by following exogenously supplied religious belief i.e., Protestant ethic. For people who believe in this ethic, hard work in their walks of life is not only to enable them to have their worldly desires met but also to have their spiritual needs satisfied. 65

10 c) Everett.E.Hagen: Hagen makes an attempt to formulate a theory of social change which explains how a traditional society becomes one in which continuous technical progress take place. He supports the idea that economic growth occurs interwoven with political and social change. He rejected the idea that the solution to economic underdevelopment lies in imitating western technology. The reason is that technology is a part of the whole socio-cultural complex and transplantation of it into a different socio-cultural set up may not deliver the goods. He said that it is the social group which experienced withdrawal of status respects that turns to rigorous entrepreneurial activities. They are a group of individuals, creative, alienated from traditional values, driven by burning passion to prove themselves, seek for an area being so far untouched, preferably an area where they can gain more power, etc 25. d) Thomas Cochran: Cochran propounded a sociological theory of entrepreneurial supply. The basic assumption is that fundamental problems of economic development are non-economic, he emphasizes cultural values, role expectations and socialsanctions are the key elements that determine the supply of entrepreneurs. According to him, an entrepreneur is neither a super-normal individual nor a deviant person but represents a society s model personality 26. Thus, the individual s performance as an entrepreneur will be influenced by his own attitude towards his occupation, the role expectations held by sanctioning groups and the operational requirements of the job. e) Frank Young: Frank Young was of the opinion that entrepreneur typically does not work single handed. He said that, entrepreneur is simply the most visible member from an economic point of view of what is typically a cluster of families whose 66

11 activity is mutually reinforcing and co-ordinated by a coherent outlook on the world 27. Young also claims that many entrepreneurial functions are implied in his concept of solidarity. And this solidarity of the entrepreneurial group also avoids many economic problems that crop up in the case of an individual entrepreneur. f) John.H.Kunkel: Kunkel has given a behavioral model which in turn begins with the assumption that man s internal state is beyond the scope of presently available means of measurement and objective analysis, and knowledge of it is largely unnecessary for the explanation and prediction of behavior 28. According to this behavioral model, the determinants of an individual s activities are to be found largely in the conditioning procedures-both deliberate and accidental to which he has been subjected in the past, and in the sets of reinforcing and discriminative stimuli which became part of his behavioral chains and are part of present social context. The relationship between the social environment and the individual is reciprocal. Thus, entrepreneurship is basically an outcome of the society and its expectations. g) David C. McClelland: McClelland was very much concerned with economic growth and the factors responsible for it. He wanted to find the internal factors, i.e., human values and motives that lead man to exploit opportunities, to take advantage of favourable trade conditions 29. He found that the chief inner concern or motive is that of a need for achievement: a desire to do well, not so much for the sake of social recognition of prestige, but for the sake of an inner feeling of personal accomplishment. Infact, it is 67

12 this motive in turn guides the actions of entrepreneurs. He said that the important characteristics of an entrepreneur are, no hard work at routine tasks, avoiding gambling situations, showing interest in finding out results of their decisions, and prefer to work hard at tasks that involve a real challenge. h) Harbison: Harbison did not propound any theory pertaining to entrepreneurship, but made an interesting observation about entrepreneurship as a factor in economic development. In most enterprises, a hierarchy of individuals is required to perform them. Thus, the entrepreneur is in essence an organization which comprises of all the people required to perform entrepreneurial functions 30. He suggested that entrepreneurship should be treated as a resource which has both qualitative attributes and quantitative dimensions. He also said that the effectiveness of business organizations require dynamic and innovative entrepreneurs. A dynamic organization needs ideas, creativity and people who can plan and initiate changes. i) Hoselitz: Hoselitz emphasizes the role of culturally marginal groups, are responsible for promoting economic development. Marginal groups, because of their ambiguous positions from a cultural or social stand point, are peculiarly suited to make creative adjustments in situations of change and in the course of this adjustment process to develop genuine innovations in social behaviour 31. Thus, it is quite interesting to note that the theories discussed so far give prominence to either sociological or psychological factors as determinants of supply of entrepreneurship. Moreover, most of the theories are based on actual experiences of some countries or regions in countries during specific periods, the general 68

13 impression one gets from them is that it is not really possible to build an economic theory of entrepreneurial supply with the given socio-cultural milieu. But for the first time, Peter Kilby attempted to formulate such an economic theory of entrepreneurship using the familiar tools of the economist. j) Kilby: Kilby observed that the psychological drive for pecuniary gain (desire to maximize profits) is an exogenous factor taken to be given which is supposed to be operative in all societies. This profit motive combined with a particular definition of entrepreneurial role provides the highly elastic supply of entrepreneurial services. He said that given a favourable economic setting, the main function of an entrepreneur is to make decisions under uncertainty. Thus, the different theories outlined above involve varied approaches to grapple with the problem of social and economic change, the change agent and nature of its motivation. Some theories represent essentially mental constructs like Schumpeter others are empirical in the sense that they are inspired by social and economic reality as perceived by theorists. Weber s theory draws attention to religious percepts that induce or inhibit the entrepreneurial activity. McClelland s theory gives us two important factors for the policy makers viz., it is necessary to create a climate to enable children to grow with high n-ach. And it is possible to improve the performance of entrepreneurs through proper training and education. Hagen s theory shows that entrepreneurial supply can be expected from groups which experienced status withdrawal. Hoselitz s theory reveals the importance of minority (marginal) groups which in turn display considerable 69

14 entrepreneurial drive. The theories of Cochran, Young and Kunkel provide good insights into the social processes responsible for the development of entrepreneurial skills in the people. Finally, Kilby s model highlights the environmental economic variables present are responsible for the demand side of market for entrepreneurship. Thus, there being multi-faceted dimensions to the problem, no simple theory can prove all the data or conceptual apparatus necessary to develop the haffa lump policy and programme. Planners may take this into account and devise suitable measures to identify the right type of person, give him the right type of training, provide effective institutional support and devise suitable modes of evaluating the impact of such efforts 32.Therefore; it is quintessential to take into account the holistic view of all the theories. Growth of Entrepreneurship in India: Pre-Independence: The evolution of the Indian entrepreneurship can be traced back to even as early as Rig-Veda, when metal handicrafts existed in the society 33. This brings the point home that handicrafts entrepreneurship in India was as old as the human civilization itself, and was nurtured by the craftsmen as a part of their duty towards the society. Then, the village community featured the economic scene in India. The elaborated cast-based diversion of workers consisted of farmers, artisans and religious priests. The majority of the artisans were treated as village servants. Such compact system of village community effectively protecting village artisans from the onslaughts of external competition was one of the important contributing factors to the absence of localization of industry in ancient India

15 Thus, from the immemorial till the earlier years of the eighteenth century, India enjoyed the prestigious status of the queen of the international trade with the help of its handicrafts. Unfortunately, so much prestigious Indian handicraft industry, which was basically a cottage and small sector, declined at the end of the eighteenth century for various reasons 35. These include among other things, disappearance of the Indian Royal Courts, who patronized the crafts earlier; the lukewarm attitude of the British Colonial Government towards the Indian crafts; imposition of heavy duties on the imports; low-priced British-made goods produced on large scale; development of transport which facilitated the easy access of British products; changes in the tastes and habits of the Indians;etc. Some scholars hold the view that manufacturing entrepreneurship in India emerged as the latent and manifest consequence of East India Company s advent in India. Particularly, the Parsis established good rapport with the Company and were much influenced by the Company s commercial operations. The Company established its first ship-building industry in Surat where from 1673 onwards the Parsis built vessels for the Company. The most important was shipwright Lowjee- Nushirvan, who migrated to Bombay around In 1677, Manjee Dhanjee was given a contract for building the first large gunpowder-mill in Bombay for the East India Company. Besides, a Parsi foreman of a gun factory belonging to the company established a steel industry in Bombay in Thus, it can be stated that the East India Company made contribution towards entrepreneurial growth in India. 71

16 However, the actual emergence of manufacturing entrepreneurship can be noticed in the second half of the nineteenth century. Ranchodlal Chotalal, a Nagar Brahman, was the first Indian to think of setting up the textile manufacturing on the modern factory lines in 1847, but failed. In his second attempt, he succeeded in setting up a textile mill in 1861 at Ahmedabad 26.The credit for the expansion of textile industries up to 1915 goes to the Parsis. Out of 96 textile mills existing in 1915, 43% (41) were set up by Parsis, 24 %( 23) by Hindus, 10 %( 10) by Muslims and 23 %( 22) by British citizens 37. Later on Jamshedjee Tata was the first Parsi entrepreneur who established the first steel industry Jamshedpur in Infact, the well-known commercial communities, namely, Jains and Vaishyas, lagged behind in entrepreneurial initiative throughout the nineteenth century. This is due to two factors viz., the improvement of business climate in the countryside during this period resulted in an increase in the quantum of trade which assured quick returns on investments and the conservative attitude to change from commercial entrepreneurship to industrial entrepreneurship 38. Indeed, the Swadeshi campaign, i.e., emphasis on indigenous goods, provided a proper seedbed for inculcating nationalism in the country. Further, the spirit of indigenousness strengthened its roots so much in the country that the Krishna Mills in its advertisement of Tribune of April 13 made the following appeal: Our concern is financed by native capital and us under native management throughout 39. The second wave of entrepreneurial growth in India began after the First World War. The Indian Government agreed to discriminating protection to certain industries, even requiring that companies receiving its benefits should be registered in India with rupee capital and have a proportion of their directors as Indian. The 72

17 advantages of these measures were mostly enjoyed by the Indians. The Europeans failed to harness the protectionist policies to their interests 40. The emergence of Managing Agency System which made its own contribution to the Indian entrepreneurship can be traced back to 1936 when Carr, Tagore & Co. assumed the management of Calcutta Steam Tug Association. The credit for initiation goes to an Indian, Dwarkanath Tagore who encouraged others to form joint-stock companies and invented a distinct method of management in which management remained in the hands of the firm rather than of an individual. Brimmer 41 holds the opinion that Agency Houses emerged to overcome the limitations imposed by a shortage of venture capital and entrepreneurial acumen though all may not agree squarely with this view. Post - Independence: After taking a long sigh of political relief in 1947, the Government of India tried to spell out the priorities to devise a scheme for achieving balanced growth. For this purpose, the Government came forward with the first Industrial Policy, 1948 which was revised from time to time 42. The Government took three important measures in her industrial resolutions: (i) to maintain a proper distribution of economic power between private and public sector; (ii) to encourage the tempo of industrialization by spreading entrepreneurship from the existing centres to other cities, towns and villages, and (iii) to disseminate the entrepreneurship acumen concentrated in a few dominant communities to a large number of industrially potential people of varied social strata

18 To achieve the above objectives, the Government accorded emphasis on the development of small-scale industries in the country. Particularly since the Third Five Year Plan, the Government started to provide various incentives and concessions in the form of capital, technical know-how, markets and land to the potential entrepreneurs to establish industries in the industrially potential areas to remove the regional imbalances in development. Several institutions like Directorate of Industries, Financial Corporations, Small-scale Industries Corporations and Small Industries Service Institute were also established by the Government to facilitate the new entrepreneurs in setting up their enterprises. Expectedly, the small-scale units emerged very rapidly in India witnessing a tremendous increase in their number from 1, 21,619 in 1966 to1,90,727 in 1970 registering an increase of 17,000 units per year during the period under reference 44. However, in the wake of liberalization, privatization and globalization, a new concept has emerged known as international entrepreneurship. In simple words, international entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries. The activities necessary for ascertaining and satisfying the needs and wants of target consumers often take place in more than one country. International entrepreneurship occurs when an entrepreneur executives his or her business in more than one country. Entrepreneurship Development: Entrepreneurship development refers to a programme designed to help a person in strengthening his entrepreneurial motives and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively. The fundamental objective of the entrepreneurship development is to transform the potential entrepreneurs into actual entrepreneurs. 74

19 Entrepreneurship training aims to effect change in the individual in terms of knowledge, attitude and skills relevant to the entrepreneurship function. Persons may be trained for entrepreneurial careers so as to increase the level of confidence and achievement orientation as well as improve management development skill to enable them successfully run their business 45. Further, development of an entrepreneur means inculcating entrepreneurial traits in a person imparting the knowledge, developing the technical, financial, marketing and managerial skills. The process of entrepreneurship development involves equipping a person with the necessary information for enterprise building and sharpening the entrepreneurial skills 46. Many governments in developing countries recognize that small and medium scale industries continue to play an important role in their socio-economic development. There is growing interest in developing programmes for stimulating and encouraging entrepreneurship development in these countries with this the entrepreneur become the focal point in economic activities, especially in developing countries. In fact, the entrepreneurship development should be viewed in the total perspective and should integrate entrepreneurial training, provision of incentives, consultancy services, sectoral development and other essential strategies of intervention. As such, entrepreneurship development is viewed as behavior oriented. One of the factors contributing to the success of this training intervention in entrepreneurship development is that is based on experience. In entrepreneurship training, learning by discovery is usually preferred. Therefore, for any entrepreneurship development programme to succeed, it is important not only to motivate the trainees but also to provide them with all the skills necessary to run their business successfully

20 Entrepreneurship Development Programmes: It is known that an entrepreneur is the person with a vision, with the drive and with ability to bear risk. He is the spark plug who transforms the economic scene. An economy is an effect for which entrepreneurship is the cause. Entrepreneurship development has, therefore, become a matter of great concern in all developed and developing countries all over the world. Entrepreneurship development programmes (EDPs) are deemed to offer the solution to this problem 48. Need: The entrepreneurs possess certain traits or competencies. Traits or competencies are underlying characteristics of the entrepreneurs which result in superior performance 49. Then the crucial question arises is: Whether these characteristics are in born in the entrepreneurs or can be induced and developed? Behavioural scientists have tried to seek answers to these questions. A well known behavioural scientist, David McClelland, professor at Harvard University, USA, made an interesting investigation into why certain societies displayed great creative powers at particular periods of their history? What was the cause of these creative bursts of energy? He found that the need for achievement (nach factor) 50 was the answer to this question. It was a need to achieve to motivate people to work hard. In order to answer the next question whether this need for achievement could be induced, he conducted a five year experimental study in one of the prosperous district of Andhra Pradesh in India in collaboration with Small Industries Extension and Training Institute (SIET), Hyderabad. His this experiment is popularly known as Kakinada Experiment. Under this experiment, young persons were selected and put through a three month training programme and motivated to see fresh goals. One of the significant conclusions of the experiment was that the traditional beliefs did not 76

21 seem to inhibit an entrepreneur and that the suitable training can provide the necessary motivation to the entrepreneurs 51. The achievement motivation had a positive impact on the performance of entrepreneurs. Thus, the Kakinada Experiment could be treated as a precursor to the present day EDP inputs on behavioural aspects. Based on this realization, India embarked in 1971 on a massive programme of entrepreneurship development. Since then, there is no looking back. At present, some 686 all India and State level financial institutions and public sector banks had so far conducted EDPs in hundreds giving training to the candidates in thousands 52. Objectives of EDPs: The important objectives of the Entrepreneurship Development Programmes (EDPs) are to (i) develop and strengthen their entrepreneurial quality, (ii) analyse environmental set up relating to small industry, (iii) select product, (iv) formulate project for the product, (v) understand the process and procedure involved in setting up a small enterprise, (vi) know the sources of help and support available for starting a small scale industries, (vii) acquire the necessary managerial skills required to run a small a enterprises, (viii) know the pros and cons in becoming an entrepreneur, (ix) appreciate the needed entrepreneurial discipline. The course contents of an EDP are selected in line with the objectives of the EDPs. The training programme is usually six weeks duration consisting of general introduction to entrepreneurship, motivation training, management skills, support system and procedure, fundamentals of project feasibility study and plant visits. An entrepreneurship development programme consists of the following three phases: 1. Pre-training Phase, 2. Training Phase, and 3. Post-training Phase (Follow up)

22 1. Pre-training Phase: The activities and preparations required to launch the training programme come under this phase. This phase includes selection of entrepreneurs, arrangement of infrastructure, tie-up of guest faculty for the training purposes, arrangement for inauguration of the programme, selection of necessary tools, techniques to select the suitable entrepreneurs, formation of selection committee for selecting trainees, arrangement for publicity media and campaigning for the programme, development of application form, finalization of training syllabus, and pre-potential survey of opportunities available in the given environmental conditions. 2. Training Phase: The main objective of this phase is to bring desirable change in the behaviour of the trainees i.e., to develop need for achievement. Accordingly, a trainer should see the following changes in the behaviour of the trainees 54. a. Is he/she attitudinally tuned very much towards his/her proposed project idea? b. Is the trainee motivated to plunge into entrepreneurial career and bear risks involved in it? c. Is there any perceptible change in his entrepreneurial attitude, outlook, skill, role, etc.? d. How should he/she behave like an entrepreneur? e. What kinds of entrepreneurial traits the trainee lacks the most? f. Whether the trainee possesses the knowledge of technology, resources and other knowledge related to entrepreneurship? g. Does the trainee possess the required skill in selecting the viable project, mobilizing the required resources at the right time? 3. Post-training Phase (Follow-up): This phase involves assessment to judge how far the objectives of the programmes have been achieved. This indicates our past performance, drawbacks, if any, in our past work and suggests guidelines for framing future policies to improve our performance. 78

23 Evaluation of EDPs: The EDPs have been considered as an effective instrument for developing entrepreneurship in the countryside. Hundreds of EDPs are conducted by some 686 organizations to impart entrepreneurial training to participants in thousands 55. However, there is a need to have a retrospective look into how many participants have actually started their own enterprises after completing the training. This calls for evaluation of EDPs. So far some 16 evaluation studies have been conducted by various organizations and individual researchers. 79 No doubt, these studies vary in their objectives, coverage and content, but one common thread in all of them is the assessment of effectiveness or impact of EDPs, howsoever, loosely defined. One of the earliest attempts in this direction was made by a team of researchers and experts appointed by the Gujarat Corporations to evaluate the effectiveness of EDPs 56. The most recent and nationwide evaluation study on EDPs is one carried out by the Entrepreneurship Development Institute of India, Ahmedabad 57. The bird s eye view on the findings of this study are presented in the following table. Sl.No. Description Number Percentage A. Sample of the Study: 1. EDPs covered (Sample Size) EDP Trainees covered in sample EDPs 1, Sample Trainees Interviewed Sample Trainees Not Available and Non traceable B. Macro Performance of EDPs: 1. number of Units set up by the EDP trainees Trainees actively under process Potential Start ups (1+2) Trainees blocked under process Trainees who gave up Non traceable trainees Trainees not available for interview during survey (i) Start-ups among non-available (ii)non start-ups among non-available Actual start-up Rate (1+7.1) Expected Final Start up Rate (2+8) Source: S.S. Khanka, Entrepreneurial Development, S. Chand & Co., New Delhi, 2006 p.65. It is observed that one out of every four trainees (26 percent) actually started his/her enterprise after undergoing entrepreneurial training. However, the expected

24 final start-up rate is slightly higher around 32 percent. About 10 percent trainees are found blocked due to various reasons at various stages in the process of setting up their enterprises. If not helped effectively, they may join the category of those 29 percent trainees who have already given up the idea of launching their ventures. Out of 430 trainees who could not be contacted personally during the field survey, according to the secondary sources, viz., family, friends and neighbors, 17 percent have given up the idea of venture launching as they are engaged in other activities. However, the performance of EDPs across the States and across the ED organizations has not been uniform. The actual start-up rates are observed to be oscillating between 9 percent and 56 percent, bringing down the overall national startup rate to about 26 percent 58 which cannot be considered as impressive performance. 80

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