Technological Innovation Management And Entrepreneurship-3.pdf

Dr. Tanuja P Dr. Ambedkar Institute of Technology, Bengaluru 1
UNIT-3 Social Responsibility and
Business
Prepared by
Dr. TANUJA P B.Tech, M.tech, PhD, Post Doc
Email-Id: tanujaharish13@gmail.com/tanujapatgar.ec@drait.edu.in
https://vidwan.inflibnet.ac.in/profile/156217 ,
Orcid Id0000-0002-2130-5167 Scopus Id88126521564 ,
Researcher IdBBU-4356-2020, Google Scholar dVhDTUWAAAAAJ
Department of Electronics and Communication Engineering
Dr. Ambedkar Institute of Technology, Bangalore
(An Autonomous institution, Affiliated to VTU, Belgaum and Aided by Government of Karnataka)
Near Jnana Bharathi campus, Bangalore -560056

Social Responsibility
Social responsibility is a doctrine that claims that an entity, whether it is state,
government, corporation, organization or individual, has a responsibility to
society. Many people, particularly libertarians, assert that there is no “social
responsibility” to do anything. They argue that social responsibility only exists
to the extent that an individual or business should not initiate physical force,
threat of force or fraud against another. According to Keith Davis, the term
social responsibility refers to two types of business obligations: Social
responsibility is an imprecise idea and hence is defined in various ways.
Adolph Berle has defined social responsibility as the manager’s responsiveness
to public consensus. This means that social responsibilities are bound to differ
and would not remain the same for all countries at the same time. These would
be determined and would vary from case to case according to the customs,
religions, traditions, level of industrialization and a host of other norms and
standards about which there is a public consensus at any given time in a given
society.

1. The socio-economic obligation 2. The socio-human obligation
The socio-human obligation of every business is to nurture and develop human
values (such as morale, cooperation, motivation and self-realization in work.
Every business firm is conglomerate of economic and political systems with an
inevitable space for foreign relations. It is at the center of a network of
relationships to persons, groups and things. The businessman should,
therefore, consider the impact of his actions on all to which he is related.
Business should be carried out in such a manner that it becomes a profitable
venture for everyone from the employees, investors, consumers, to the
government and the general public. His task is to mediate among these
interests, to ensure that each gets a square deal and that nobody’s interests
are unduly sacrificed to those of others.
Social responsibilities refer to the businessman’s decisions and actions taken
to reasons at least partially beyond the firm’s direct economic or technical
interest.” This is a broad definition of SR and prescribes actions not related to
the interests of the organization. Andrews have suggested still broader view
when he says that: “By social responsibility, we mean the intelligent and
objective concern for the welfare of society that restrains individual and
corporate behavior from ultimately destructive activities, no matter how
immediately profitable and leads in the direction of positive contributions to
human betterment, variously as the latter may be defined.”
Both of these definitions prescribe some actions by managers for the
betterment of the society but do not prescribe the actions precisely. Therefore,
most business managers prefer words other than SR because these words to
them con note a fixed obligation. They prefer such synonyms as social concern,
social programs, social challenge, social commitment or concern with public
problems. However, the term SR has been widely recognized and its operational
definition may be as follows: Social responsibility contends that management is

responsible to the organization itself and to all the interest groups with which it
interacts.
Features of Social Responsibility
Based on this definition, following features of SR can be identified:
1. Social responsibility contains three types of behaviour- positive, neutral and
negative. The negative and neutral aspects of behaviour areas important as
positive.
2. Every person in the society has a social obligation to fulfil. However, the
emphasis is on social responsibility of management as a group because it is in
a position to use the resources of the society in the way it likes. Therefore, it
must be conscious about its SR.
3. Social responsibility involves fulfilling obligations to various parties
concerned with the functioning of an organisation. Some of these parties are
concerned directly. Others may be concerned indirectly.
4. The standards fixed for fulfilling obligations to various parties are to be
decided according to social norms and expectations. Therefore, these
obligations may vary from society to society.
Social Responsibilities of Business towards Different Groups
Social responsibility requires the identification of several interest groups, which
have the potential to affect the functioning of a business organization and may
be affected by its functioning. Normally various groups associated with a
business organization are shareholders, workers, customers, creditors,
suppliers.

Share Holders
The first responsibility of management is to protect the interest of
shareholders. The interests of majority of shareholders and large minority of
shareholders are generally well protected through either direct participation in
the management actions or they have real power to intervene, if necessary.
However, large numbers of minority shareholders are not in such a position.
Therefore, management is expected to use the resources provided by them
effectively and to protect their interests. They should be informed about the
functioning of the organisation adequately and timely. Though the provisions of
the Companies Act provide safeguard to the investment made by shareholders,
whether minority or otherwise, management can find loopholes in these.
Therefore, management has a responsibility to provide proper safeguard to the
money invested by shareholders.
Workers
Workers have a direct interest in an organization because by working there,
they satisfy their needs. Here there is a fair barter system. The worker lends
his skills in return for a financial remuneration. The traditional economic
concept of organizational functioning does not give workers their proper share
in the distribution of income. The owners and managers have too much power
under the economic state of affairs. Thus, it is the management’s responsibility

to protect the interest of workers in the organization. The management can do
this in the following ways:
1. The management should treat workers as another wheel of the cart.
2. The management should develop administrative process in such a way that
promotes cooperative endeavor between employers and employees.
3. The management should adopt a liberal labour policy based on recognition
of genuine trade union rights- involvement of workers in management, creating
a sense of belongingness, improving their work and living conditions.
4. The management should pay fair and reasonable wages and provide other
financial benefits to workers from time to time.
Customers
A customer may broadly be defined as a person who has a favorable impression
of a company and its products and services. Thus, a person may be categorized
as customer even though he may not have committed the act of buying; he may
be only a potential customer. Management owes a primary obligation to give a
fair deal to customers. This can be done in the following ways:
1. Customers should be charged a fair and reasonable price.
2. The supply of goods and services should be of uniform standard and of
reasonable quality.
3. The distribution of goods and services should be widespread so that
customers do not face any problems in procuring them.
4. Management should not indulge in profiteering, hoarding or creating
artificial scarcity.
5. Management should not lure customers by false, misleading and
exaggerated advertisements.
Creditors, Suppliers and Others

Creditors, suppliers and other groups affect the organization in numerous
ways. Therefore, the management is accountable to them and must fulfill its
obligations. This can be done in the following ways:
1. Management should create healthy and cooperative inter-business
relationship between different businesses.
2. Management should provide accurate and relevant information to creditors
and suppliers.
3. Payments of price of materials, interest on borrowings, other charges should
be prompt.
Government
The Government is very closely related with the business system of the
country. It provides various facilities for the development of business. No
doubt, the government exercises controls over business, but these controls are
meant for overall development of business. The management can discharge its
obligation to government in the following ways:
1. The Management should be law-abiding.
2. The management should pay taxes and other dues fully, timely and
honestly.
3. It should not corrupt public servants and democratic process.
4. It should not buy political favour by any means.
Society
Organisations exist within a social structure and get amenities from the
system. Therefore, they owe responsibility to the society as a whole. It is the
obligation of management to protect the interest of society because
management process is determining the life in the society. In this context,
management should have in the following ways.
1. Management should maintain reasonable business policies and practices.

2. It should set up socially desirable standards of living and avoid ostentation
and wasteful expenditure.
3. It should play proper role in civic affairs.
4. It should provide and promote general amenities and help in creating better
living conditions in general.
Social Audit
A social audit is a systematic study and evaluation of the organization’s social
performance as distinguished from its economic performance. The term "social
performance" refers to any organizational activity that affects the general
welfare of society.
Advantages
1. It supplies data for comparison with the organization’s social policies and
standards. The management can determine how well it is living up to its social
objectives.
2. It develops a sense of social awareness among all employees. In the process
of preparing reports and responding to evaluations, employees become more
aware of the social implications of their actions.
3. It provides data for comparing the effectiveness of different types of
programmes.

4. It provides data about the cost of social programmes, so that the
management can relate this data to budgets, available resources, company
objectives, etc.
5. It provides information for effective response to external groups which make
demands on the organization.
Disadvantages
A social audit is a process audit rather than an audit of results. This means
that a social audit determines only what an organization is doing in social
areas and not the amount of social good that results from these activities. An
audit of social results is not made because:
1. They are difficult to measure.
2. Their classification under "good" or "bad" is not universally accepted. In
other words, the same social result may be classed as "good" according to one
opinion, and as "bad" according to an-other.
3. Most of them occur outside the organization, making it difficult for the
organisation to secure data from these outside sources.
Even though social results cannot be proved, an audit of what is being done is
still considered desirable, because it shows the amount of effort that a
business is making in area deemed beneficial to society. Further, if effort can
be measured, then informed judgments can be made about potential results.
Social audits can be made either by internal experts, outside consultants, or a
combination of the two. The internal auditor has the advantage of familiarity
with the business, but his judgments may be influenced by company loyalties.
An outside consultant has the advantage of an outsider's view, but he lacks
familiarity with organizational activities, so he may overlook significant data. In
any case, if audit information is to be released to the public, the outside
auditor has more credibility.

There is a difference of opinion on the issue whether social audit should be
made public by means of a social performance report or not. Some say that
these reports are too vague and in-concrete to satisfy the public and anyone
can find reasons for criticizing a firm's performance, which can increase social
conflict. But some others assert that these reports contribute to public
understanding for they replace rhetoric with facts.
Business Ethics and Corporate Governance
Business ethics is the application of moral principles to business problems.
However, ethics extend beyond the question of legality and involve the
goodness or badness of an act. Therefore, an action may be legally right but
ethically wrong. For example, a small village community located twenty miles
from the closest urban shopping area has a single grocer's shop. The owner of
the shop can charge any exorbitant price for his product though legally but not
ethically.
Sexual harassment, discrimination in pay and promotion and the right to
privacy are some other issues especially relevant to the study of ethics. The
negative aspects of sexual harassment are: costly lawsuits, decreased
productivity, increased absenteeism, lower morale and higher staff turnover.
Discrimination against women in pay and promotion opportunities is also
unethical, which continues to exist despite there being the Equal
Remuneration Act, 1976.
Employees' right to privacy raises several questions, some of which are: "Can a
company refuse to hire smokers and/or make current smokers quit smoking"?
and "Can a company conduct drug tests on its prospective employees"? It
should be remembered that the corporate "shield" which protects a company's

management from unlimited legal liability does not protect it against unlimited
public condemnation for its unethical and immoral actions. The credibility of a
business depends on its high business ethics and integrity.
How does a manager decide what is ethical or unethical? There are four
important factors which affect his decision.
• Government legislation.
• Business codes. (But being voluntary in nature these codes, though pointed
to with pride, are usually ignored in practice.)
• Pressure groups. (For example, in recent years Indian carpet industry has
been facing consumer boycott from the west for employing child labor.)
• Personal values of the manager himself. But a manager with strong personal
values mostly finds himself in a dilemma when an unethical course of action
becomes his only choice to achieve the company's goal. This has prompted
many major business houses, to teach executives the importance of remaining
true to their convictions, whether rooted in organized religion or personal
morality, amid the conflicting demands and temptations they confront when
taking decisions.

Corporate Governance
The term "corporate governance" is used to denote the extent to which
companies run in an open and honest manner in the best interest of all stake-
holders. The key elements of good corporate governance are transparency and
accountability projected through a code which incorporates a system of checks
and balances between all key players, viz., board of directors, auditors and
stake-holders. In Britain, following corporate scandals in the early Major
recommendations of corporate committee are as under:
• Non-executive directors whose most important role is to bring an independent
judgment to bear on issues of strategy, performance, resources, etc. should be
picked through a formal selection process on merits.
• Companies should have remuneration committees consisting wholly or
mainly of non-executive directors which should recommend to the board
executive directors' emoluments. Companies should have audit committees
consisting of minimum 3 non-executive directors to report on any matter
relating to financial management.
• Audit partners should be rotated and there should be fuller disclosure of non-
audit work.

Benefits of Good Corporate Governance
I. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.
5. It limits the liability of top management by carefully articulating the
decision-making process.
6. It improves strategic thinking at the top by inducting independent directors
who bring a wealth of experience and a host of new ideas
Entrepreneur
The term "Entrepreneur" is defined in variety of ways. It varies from country to
country, time to time and the level of economic development. The word
"entrepreneur" is derived from the French verb "entreprendre" which means "to
undertake". In 16th century, the Frenchmen who organized and led military
expeditions were referred to as "entrepreneurs".
In early 18th century, French economist Richard Cantillon used the word
entrepreneur to business. Since then the word entrepreneur is used to one who
takes the risk of stating new organization or business or introducing a new
idea, product or service to society. According to Joseph Schumpeter "An
entrepreneur in an advanced economy, is an individual who introduces
something new in the economy a method of 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 life”.
Entrepreneurship is a process undertaken by an entrepreneur to augment his
business interests. Some authors define it as "Entrepreneurship is the
indivisible process flourishes. The interlinked dimensions of entrepreneurship

are individual psychological entrepreneurship, entrepreneur traits, social
encouragement, business opportunities, Government policies, availability of
resources and opportunities coverage towards the common development of
society and economy. Entrepreneurship lies more in the ability to minimize the
use of resources and to put them to maximum advantage. Above all,
entrepreneurship in today's context is the product of teamwork and the ability
to create, build and work as a team.
Entrepreneurship is the process of identifying opportunities in the market
place, arranging the resources required to pursue these opportunities and
inverting the resources to exploit the opportunities for better gains. Higgins
defined entrepreneurship as "the function of foreseeing investment and
production opportunities, organizing an enterprise to undertake a new
production process, raising capital, Hiring labor, arranging the supply of raw
materials, finding site, introducing new technique, discovering new source of
raw materials and selecting top managers for day-to-day operation. Cole's
definition for entrepreneurship is "the purposeful activity of an individual or a
group of associated individuals undertaken to initiate, maintain or organize
profit by production or distributing of economic goods and services"
Importance of Entrepreneur
Entrepreneurship is the dynamic process of creating incremental wealth and
innovating things of value that have a bearing on the welfare of an
entrepreneur. It provides civilization with enormous amount of goods and
services and enhances the growth of social welfare. The man behind the
entrepreneurship is an action oriented and highly motivated individual who is
ready to achieve goals. M. Kirzner (1973) observes entrepreneurs as; “one who
perceives what others have not seen and acts upon that perception”. Thus,
entrepreneurs take the economy and the society that is the whole civilization to

the state of progress and prosperity. Taking this into consideration we can
describe the Significance or importance of entrepreneurs which is stated below
1. Growth of Entrepreneurship
Entrepreneurship is the advent of new venture particularly small ventures in
order to materialize the innovative ideas of the entrepreneurs. Thus, growth or
establishment of small enterprises is the specific contribution of
entrepreneurship in in every economy of the world.
2. A Creation of job opportunities
Entrepreneurship firms contributed a large share of new jobs. It provides
entry-level jobs so necessary fur training or gaining experience for unskilled
workers. The small enterprises arc the only sector that generates large portion
of total employment every year. Moreover, entrepreneurial ventures prepare
and supply experienced labor to the large industries.
3. Innovation
Entrepreneurship is the incubator of the innovation. Innovation creates
disequilibria in the present state of order. It goes beyond discovery and does
implementation and commercialization, of innovations. “Leap frog” innovation,
research, and development are being contributed by entrepreneurship. Thus,
entrepreneurship nurses innovation that provides new ventures, product,

technology , market, quality of good etc. to the economy that increase Gross
Domestic Products and standard of living of the people.
4. Impact on community development
A community is better off if its employment base is diversified among many
small entrepreneurial firms. It promotes abundant retail facilities, a higher
level of home ownership, fewer slums, better, sanitation standards and higher
expenditure of education, recreation and religious activities. Thus,
entrepreneurship leads to more stability and a higher quality of community life.
5. Consequence of business failure
The collapse of large industry almost has irresistible damage to the
development of state and to the state of economy and to the financial condition
of the relevant persons. The incumbents lost their jobs: suppliers and financial
institutions face a crisis of recovery. Customers are deprived from goods,
services, and the government losses taxes. This could not happen in the case of
failure of entrepreneurship. There shall be no measurable effect upon the
economy and no political repercussions too.
6. Political and economic integration of outsiders
Entrepreneurship is the most effective way of integrating those who feel
disposed and alienated into the economy. Minorities, migrants and women are
safely integrated into entrepreneurship that will help lo develop a well-
composed plural society.
7. Spawns entrepreneurship
Entrepreneurship is the nursing ground for new inexperienced adventurists. It
is the field where a person can start his/her idea of venture, which may be
ended up in a giant enterprise. All the large industrial ventures started as a
small entrepreneurial enterprise. Therefore, entrepreneurship provides wide

spectrum of ventures and entrepreneurs in every economy. The vast open
arena of entrepreneurship thus, acts as incubator to entrepreneurs.
8. Enhances standard of living
Standard of living is a concept built on increasing amount of consumption of
variety of goods and services over a particular period by a household. So it
depends on availability of diversified products in the market. Entrepreneurship
provides enormous kinds product of various natures by their innovation.
Besides, it increases the income of the people who are employed in the
entrepreneurial enterprises. That also capable employed persons to consumer
more goods and services. In effect entrepreneurship enhances the standard of
living of the people of a country.
9. Promotes research and development
Entrepreneurship is innovation and hence the innovated ideas of goods and
services have to be tested by experimentation. Therefore, entrepreneurship
provides funds for research and development with universities and research
institutions. This promotes the general development of research and
development in the economy. Entrepreneurship is the pioneer zeal that
provides events in our civilization. We are indebted to it for having prosperity in
every arena of human life- economic, technological and cultural.
Characteristics of Successful Entrepreneurship:
The process of entrepreneurship is a complex one having multidimensional
characteristics. The following are some of the commonly accepted
characteristics suggested by experts.

(i) Innovation
Entrepreneurship involves innovation of new things to effect dynamic changes
and good success in economy. It should create conditions for growth of the
economy.
(II) Risk-taking
Risk is a inbuilt element of any business. Entrepreneurship should be risk
bearing to cater uncertainty of future.
(iii) Skillful management
Entrepreneurship brings together various functions of the management —
planning, organizing, staffing, directing, controlling and leading.
(Iv) Organization
It brings together various facilities of production for an efficient and economical
use.
(v) Decision making
Decision-making is a very vital characteristic of an entrepreneurship. Taking
decisions at all levels and stages of an entrepreneurship is a routine task.
(vi) Making the enterprise a success
Entrepreneurship is mainly an economic activity as it deals with creating and
operating an enterprise. it involves in satisfying the needs of customers with
the help of production and distribution of goods and services. This makes the
enterprise a success.
Classification of Entrepreneurs
Entrepreneurs in business can be broadly classified based on criteria like -
stages of economic development, types of business, use of technology, area,
age, gender and so on:

1. Innovative Entrepreneur
An innovative entrepreneur is one who introduces a new product or a new
technique or a new market and can re-organize the enterprise if needed. They
are generally aggressive in experimentation and seize opportunities. - They are
capable of converting attractive possibilities into practice. They raise money to
start an enterprise, assemble the various factors, choose the right employees
and set the organization going. Innovative entrepreneurs are more commonly
found in developed countries. This is because such entrepreneurs can work
only when a certain level of development is already achieved.
2. Imitative Entrepreneur or Adoptive entrepreneur -
Imitative entrepreneurs are those who adopt or copy successful innovations
created by innovative entrepreneurs. They do not innovate the changes
themselves, but only imitate techniques and technology innovated by others.
Imitative entrepreneurs are more commonly found in developing countries
because people there prefer to imitate products, technology, knowledge and
skill already available in more advanced countries. They are nevertheless
important for the development of poor countries.

3. Fabian Entrepreneur
Fabian Entrepreneurs are those who are very cautious and are skeptical about
any changes. They have neither the will to introduce any new changes nor the
desire to adopt new methods innovated by others, unless pushed to the wall.
They are generally driven by custom, religion, tradition and past practices.
They imitate or bring in changes only when it is a question of survival.
4. Drone Entrepreneurs
Drone entrepreneurs are those who are highly resistant to changes. They
refuse to adopt, imitate or make changes in production methods, come what
may. They choose to sink rather than imitate or bring in changes. They may

even suffer from losses but prefer to stick to traditional ways. Such (old
fashioned) entrepreneurs are found plenty in India.
Myths of Entrepreneurship
Entrepreneurship is a career which is gaining popularity worldwide but still
isn’t very well understood which is why there are so many myths regarding this
career option. A lot of people believe these myths to be true which is why they
don’t pursue their ambition of being an entrepreneur despite having a great
idea. So, if you’re still confused, don’t worry, we’ve got the most common myths
debunked for you.
1. Entrepreneurs are born, not made
This is the most common myth that deters people from becoming
entrepreneurs. However, this is completely untrue. A normal person with an
idea which solves a problem the society is dealing with can become an
entrepreneur if he works on certain skills. If one is ready to develop on
leadership and managerial skills and isn’t scared to take risks, one can aim to
become a successful entrepreneur.

2. All you need is money
This myth is not completely justified because you may have great investors
pumping in a lot of money into your venture but if you’re idea doesn’t appeal to
the people, they will not buy your product or service. Thus, money might be
important but it is more important to use the money wisely in places where it is
required.
3. Entrepreneurs are usually college drop-outs
This is a common disbelieve because great people like Mark Zuckerberg,
Mukesh Ambani and Steve Jobs have managed to become successful
entrepreneurs without a college degree. However, a formal and educated
background only helps an entrepreneur to understand concepts and the
business better. An entrepreneur becomes one because of his idea and
developed skills set and not his college degree.
4. You need an out of the box idea to start up
This is another myth about entrepreneurship which needs to be debunked. It is
true that you need an idea to develop on but the idea doesn’t need to be a
completely new or innovative one. Running a restaurant, school or any kind of
a business or adding value to an already existing idea which solves problems of
the society can also serve as a great base for entrepreneurship.
5. Having no boss the best feeling
A lot of people consider entrepreneurship because they believe they will get to
set their own terms at work and lead a team. However, this might not be a
favorable scenario for every venture. With ideas like leadership coaches
catching up, it is proved that even entrepreneurs who lead a team require help
from superiors in order to succeed.
6. You need the perfect timing
People often comment saying that it is actually luck which will make you a
successful entrepreneur. They believe that it is important that the time is right
and destiny is in your favor. However, the history of entrepreneurs has proved
this to be absolute rubbish as successful people like Reid Hoffman, the founder
of LinkedIn, got success only later in their life in spite of a brilliant idea.

7. Starting a business isn’t that difficult
A lot of entrepreneurs we see aren’t college pass outs which have led to the
common belief that entrepreneurship isn’t very difficult to achieve. Instead of
attending rigorous classes, they concentrated on developing a skills set and an
idea which they’ve grown only due to their hard work. A typical entrepreneur
fails many times before s/he can succeed and defeating failure isn’t everyone’s
cup of tea.
Entrepreneurial Development Models
The models for the development of the entrepreneurship fall in the following
categories
1. Psychological models
McClelland in 1961 has given a Signification of determinants of
entrepreneurship. In this model he ascribes importance to the achievement
motives which earlier related ‘’child rearing practices” But D.G Winter in his
model has ascribed it has intrinsic determinant of the achievement motive Now
change in motivation is seen primarily as a result of the ideological arousal of
the talent need for achievements among the adults.
McClelland Suggest motivation-Training Programme as policy measure which
will make the entrepreneurs really willing and the eager to exploit the new
opportunities provided. Everett Hagen’s theory of Social Change Lays emphasis
on “Creative Personality” as causal link in entrepreneurial behavior and “Status
withdrawal” as determinant of creative Personality. Hagen elaborately explains
the casual Sequence Entrepreneurial behavior. But his model of
Entrepreneurship fails to give any positive variable for the development of the
entrepreneurship “status withdrawal” would occur in the natural Evolutionary
process of the society and not by any deliberate attempt. John Kunkel in 1965
considered Entrepreneurial supply by suggesting a behaviorist model. His

model Suggest that Entrepreneurial behavior is the function of the surrounding
of Social Structure, Both Past and the Present, and can really be influenced by
manipulating economic and social incentives. Kunels Model is based upon
Experimental Psychology, which identifies sociological variables as the
determinant of Entrepreneurial supply.
2. Sociological Model
Frank W Young’s theory of Entrepreneurship is a theory of change based upon
the societies in Corporation of relative sub- group. The relativeness of Sub
group which as a low status in a larger Society will lead to entrepreneurial
behavior. If the group has better institutional resources than others in the
Society at the same level. Young’s model of entrepreneurship suggests the
creation of supporting institution in Society as the determinant of
Entrepreneurship.
3. Integrated model
T.V Rao in 1975 “Entrepreneurial disposition” has included the following
factors
1. Need for motive is the dynamic which for the prospective entrepreneur, has
greatest possibility of achieving the goals if one performs those activities.
2. Long term involvement is the goal either at thinking level or at the activity
level, in Entrepreneurial activity that is viewed as target to be fulfilled.
3. Personal, Social and material resources which he thinks are related to entry
and Success in the area of Entrepreneurial activity
4. Soci-political system to be perceived as suitable for establishment and
development his enterprise.

Entrepreneurial Development Cycle
Entrepreneurs are not just born, they can be developed and trained to
undertake ventures. However, everybody does not have the potential to become
an entrepreneur. Entrepreneurial development is essentially an educational
process and an endeavor in human resource development. It is a process in
which persons are injected with motivational drives of achievement and
situations especially in business/enterprise undertakings.
In many developing countries and especially in certain backward areas of these
countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that
entrepreneurs have originated from all strata of society, but entrepreneurial
abilities/ talents have remained latent and hence, a lot depends on activating
these talents. It is, therefore, necessary to identify, motivate, strengthen and
support people possessing these talents.

In many developing countries and especially in certain backward areas of these
countries, the socio-economic environment has not been conducive to the
emergence of entrepreneurial talents. It has been experienced that
entrepreneurs have originated from all strata of society, but entrepreneurial
abilities/ talents have remained latent and hence, a lot depends on activating
these talents. It is, therefore, necessary to identify, motivate, strengthen and
support people possessing these talents.
In order to accelerate formation of indigenous enterprises, imaginative
development programmes and policies backed up by sound institutional
support are necessary, as it has been recognized that, entrepreneurs do not
respond spontaneously to available business opportunities despite various
inducements, schemes and programmes to promote and assist them. It is
necessary to have an effective mechanism, once they are identified.
Entrepreneurship requires an environment in which an entrepreneur can learn
and discharge necessary functions. For an entrepreneurial development,
intelligence, motivation, knowledge, stimulation, sustained efforts, human
factor, government assistance and support and opportunity are the pre-
equisites, as entrepreneurship cannot grow in vacuum. The process of
entrepreneurial development emphasis on training, education, reorientation

and creation of conducive and healthy environment for the growth of
enterprises Entrepreneurship Development incorporates four basic issues':
a. The availability of material resources,
b. The selection of real entrepreneurs,
c. The formation of industrial units, and
d. The policy formulation for the development of the regions.
Entrepreneurial skills can be developed through inculcating entrepreneurial
traits, imparting the required knowledge, developing the technical, financial,
marketing and managerial skills, and building the entrepreneurial attitude.
The process of entrepreneurial development involves equipping a person with
the information necessary for enterprise building and sharpening his
entrepreneurial skills.
The objective of entrepreneurial development is to motivate a person for
entrepreneurial career and to make him capable of perceiving and exploiting
successfully, the opportunities for enterprise. Thus, it is regarded as a tool of
industrialization and a solution to unemployment problem. One trained
entrepreneur can guide other on how to start their own enterprises. The figure
shows entrepreneurial development cycle" consisting of simulatory, support
and sustaining aspects for entrepreneurship development.

1.Simulatory
1. Entrepreneurial education
2. Planned publicity for entrepreneurial opportunities
3. Identification of potential entrepreneurs through scientific method
4. Motivational training to new entrepreneurs
5. Help and guidance in selecting products and preparing project reports
6. Making available techno-economic information and products profiles
7. Evolving locally suitable new products and processes
8. Availability of local agencies with trained personnel for counseling and
promotions
9. Creating entrepreneurial forum
10. Recognition of entrepreneur
2. Support
1. Registration of unit
2. Arranging finance
3. Providing land, shed, power, water ,etc.
4. Guidance for selecting and obtaining machinery

5. Supply of scarce raw materials
6. Getting licenses / import licenses
7. Providing common facilities
8. Granting tax relief or other subsidy
9. Offering management consultancy
10. Help marketing product
11. Providing information
3.Sustaining
1. Help modernization
2. Help diversification / expansion / substitute production
3. Additional financing for full capacity utilization
4. Deferring repayment / interest
5. Diagnostic industrial extension / consultancy source
6. Production units legislations / policy change
7. Product reservation / creating new avenues for marketing
8. Quality testing and improving services
9. Need-based common facility centre
Problems Faced by Entrepreneurs
Entrepreneurs face a number of problems in the promotion of units and during
production, marketing, distribution, procurement of raw material, and availing
of incentives offered by the State government.
The problems of entrepreneurs may be divided into two groups-external and
internal. External problems are those, which result from factors beyond the
control of entrepreneurs while internal problems are those, which are not
influenced by external factors. The problems of industries, whether in the small
sector or in organized sector are almost identical. However, given that the
organized industry is financially very strong and its resources large, it can
therefore, face its problems more effectively. Owing to its weak financial

structure, the resources of the small sector are limited. While the large sector
can employ trained and experienced managers, in the small industry, its
proprietor or partners or if the unit is a company, its director or directors
themselves have to take care of all the problems. The large sector can influence
its raw material suppliers, its customers and at times even the government in
framing its policies, but the small entrepreneur is helpless in this respect.
I. Internal Problems of Entrepreneurs
1. Planning
a) Technical feasibility
• Inadequate technical know-how.
• Locational disadvantage
• Outdated production process
b) Economic viability
• High cost of input.
• Break-even point too high
• Uneconomic size of project
• Choice of idea
• Feeble structure

• Faulty planning
• Poor project implementation
• Lack of strategies
• Lack of vision
• Inadequate connections
• Lack of motivation
• Underestimation of financial requirements
• Unduly large investment in fixed assets
• Overestimation of demand
2. Implementation
Cost over-runs resulting from delays in getting licenses, sanctions and so on
and inadequate mobilization of finance.
3. Production
a) Production management
• Inappropriate product mix
• Poor quality control
• Poor capacity utilization
• High cost of production
• Poor inventory maintenance and replacement
• Lack of timely and adequate modernization and so on
• High wastage
• Poor production
b) Labor management
• Excising high wage structure
• Inefficient handling of labor problems
• Excessive manpower

• Poor Labor productivity
• Poor labor relations
• Lack of trained skilled labor or technically competent personnel
c) Marketing Management
• Dependence on a single customer or a limited number of customers/single or
a limited number of products.
• Poor sales realization
• Defective pricing policy
• Booking of large orders at fixed prices in an inflationary market
• Weak market organization
• Lack of market feedback and market research
• Unscrupulous sale purchase practices
d) Financial management
• Poor resource management and financial planning
• Faulty costing
• Dividend policy
• General financial indiscipline and application of funds for unauthorized
purposes
• Deficiency of funds
e) Administrative management
• Over centralization
• Lack of professionalism
• Lack of feedback to management (management Information System)
• Lack of timely diversification
• Excessive expenditure on R&D
II. External Problems of Entrepreneurs

a) Infrastructure
• Location
• Power
• Water
• Post Office and so on
• Communication
• Non-availability or irregular supply of critical raw materials or other inputs
• Transport bottlenecks
(b)Financial
• Capital
• Working capital
• Long term funds
• Recovery
• Marketing Taxation
• Raw material
• Industrial and financial regulations
• Inspections
• Technology
• Government policy Administrative hurdles
• Rampant corruption
• Lack of direction
• Competitive and volatile environment
Capacity Building For Strong Entrepreneurship
To be a successful entrepreneur, individuals must build capacities in four key
strategic areas– Operational, Management, Financial Management, and
Personal capacities. Entrepreneur capacity building involves developing the
combination of all four capacity elements, to provide the ingredients for a great
entrepreneurial success soup.

Some of these capacities are gained through experience throughout your
career, while others are learned through educational avenues. Some successful
entrepreneurs are born with strong personality traits, and some behaviors are
strengthened through learned responses in the business environment.
Here are the four key categories of capacity building leading to the development
of successful entrepreneurs.
Operational Capacity Building
Having a brilliant understanding of an industry and business at ground level
builds operational capacity. This of course involves working in a variety of
business operations for a period of time prior to diving into entrepreneurship.
This is where you gain valuable insight into what makes businesses tick.
Understanding the dynamics on the floor, in the cubicles, in the field and out
on the road, gives you the perspective on how to lead, organize and plan for
operations.
Management Capacity Building
Taking operational experience one more step, gaining management experience
in a field or business will be directly applicable to managing your own
business. The valuable experience you gain managing operations, resources
and people will give you the applicable tools for your own business. With a few
years of management experience, you will gain management capacity and an

understanding of responsibilities and accountabilities at that level… all
precursors to managing your own company.
Financial Management Capacity Building
Through a combination of work experience and education, you need to be well-
grounded and versed in managing finances. You need to be able to accurately
estimate and build financial statements and to understand them. With gained
skills, you will need to be able to analyze financial statements, looking at
trends and indicators and what those all mean to your business. Financial
reports provide key indicators and information on the business’ financial
health…there is a wealth of information in the financial statements. Other
parties, partners and financial institutions will be looking at you and your
organization’s ability to manage finances.
Personal Capacity Building
Of extreme importance, if you don’t have some key personal, entrepreneurial
traits you may be closing up shop fast. Some people are born with strong traits
while other behaviors can be picked up along the development pathway.
Demonstrating strong traits and behaviors such as dedication, perseverance,
ambition, determination, strong-will, openness, honesty, transparency,
fairness, etc may move you along the pathway to become a successful
entrepreneur.

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