UNIT - I

ENTREPRENEUR

A person who sets up a business or businesses, taking on financial risks in the hope of profit. An
entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying
most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas,
goods, services, and business/or procedures.
CHARACTERISTICS OF ENTREPRENEURS

People may lack the personality and skills necessary for successful entrepreneurship. There are
some general characteristics and skills that many successful entrepreneurs have:

Problem-solving: Entrepreneurs often start their businesses after identifying a problem and then
coming up with a way to address it. Entrepreneurs are also able to figure out how to solve
problems that will occur during the development of the business.

Innovation: Entrepreneurs are innovators, and are often engaged continuously in the process of
conceiving new products and services, renewing and improving current offerings, and
developing new business

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

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

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

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

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

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

• Decision Making

• Management Control

• Division of Income

• Risk-Taking and Uncertainty-Bearing

• Innovation.

1. Decision Making:

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

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

2. Management Control:

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

3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the division of
total income among the different factors of production employed by him. Even if there is a loss
in the business, he is to pay rent, interest, wages and other contractual incomes out of the realised
sale proceeds.

4. Risk-Taking and Uncertainty-Bearing:

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

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

5. Innovation:

Another distinguishing function of the entrepreneur, as emphasized by Schumpeter, is to make

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

Types of Entrepreneurship

Classic entrepreneurs: The so-called "classic" entrepreneur is someone who observes a gap in
the market or takes note of a business or consumer need, and develops a company that addresses
the deficit or the need. In some cases, the entrepreneur may also be an inventory.

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

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

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

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

1. Capital Formation:

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

2. Improvement in Per Capita Income:

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

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

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

4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional disparities in economic
development. They set up industries in backward areas to avail various concessions and subsidies
offered by the central and state governments.

5. Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential commodities and introduce
new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the
small scale sector help to improve the standards of life of a common man. These offer goods at
lower costs and increase variety in consumption.

6. Economic Independence:

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

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

7. Backward and Forward Linkages:

An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has
several backward and forward linkages. For example- the establishment of a steel plant generates
several ancillary units and expands the demand for iron ore, coal, etc.

These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of
machine building, tube making, utensil manufacturing and such other units. Entrepreneurs create
an atmosphere of enthusiasm and convey a sense of purpose. They give an organization its
momentum. Entrepreneurial behavior is critical to the long term vitality of every economy. The
practice of entrepreneurship is as important to established firms as it is to new ones.