Role of Entrepreneur in Economic Development Slide

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Role of Entrepreneur in EconomicRole of Entrepreneur in EconomicDDevelopmentevelopment



Economic development depends on two factors:

a) Gross domestic product (G.D.P),i.e. is amount

of goods and service product in a year.

b) Standard of living of the people, that is

consumption of comfort and luxuries.

An entrepreneur by setting new businessorganizations helps to increase GDP and

ensure better standard of living of its people.



y Setting up of new industries result in

production of more and more goods.y Industries also provide more jobs to the

people, which increase their income level.

y The increased income helps people to buy

more goods and services, in particular

comforts and luxuries.

y This will increase their standard of living.

y These factors helps for economic

development of a nation.



The role and importance of an entrepreneur ineconomic development of a nation can

understand from following point :assumption of risk :

y Economist development depends on starting of more and more business organisations.

y Setting up business unit involves risk.

y Entrepreneur by assuming risks of starting aventure helps for economic development.

Organization of resources:y An entrepreneur by collecting necessary

resources to start a business helps for economicdevelopment .



Arrangement of capital:

y Capital is an important factor to start and

manage any business.

y Entrepreneur collects capital from financial

institution.

y Entrepreneur raises required capital by givingconfidence of safety of investment and

adequate returns on such investment.

y Accumulation of adequate capital helps tostart new business units and leads to

economic growth.



Encouragement to innovation:

y Entrepreneur takes the risk of manufacturing

the new products on a large scale by starting

new business units.

y By producing and marketing these new

products on a large scale he gives

encouragement and support to scientist toundertake new inventions.



Better standard of living:

y Entrepreneur helps for better standard of

living of people by starting industries that

produce varieties of goods and services.

y Industries also provide more jobs, that will

increase income level of people.

y When peoples income level increase they

consume more comforts and luxuries, thatresults in increase in there standard of living.



Balanced economic growth:

y Entrepreneur helps for balanced economic

growth of a nation by starting industries ineconomically backward regions.

y Government gives various subsidies andincentives for starting industries in backward

regions.y These backward area will provide cheap labour

and natural resources.

y Entrepreneur makes use of these facilities by

establishing industries in these areas.

y These lead to economic prosperity of theseregions.



Export promotion:

y Economic prosperity of a nation depends on its

exports.y Exports helps to earn foreign currency , which in

turn helps to import foreign technology.

y This will give stability and strength to economy.

Efficient utilization of resources:

y Resources should be wasted, as these resourcesare precious.

y

Efficient use of resources also helps to controlcost production.

y It can ensure better quality of goods atreasonable price.



Entrepreneur as imitators:

y

Entrepreneur of developing economy aredescribed as imitative entrepreneurs.

y They imitate technology of developed

countries and produce goods that are

produced in advance countries through such

imitation.

y His act imitation reduces gap between

developed and developing countries byproducing and marketing foreign goods in

domestic market.



Entrepreneur as a social reformer:

y Entrepreneur produces variety of goods and

services, particularly the goods and services,

which have reasonable price.

y By producing and making available such goods

to rich as well as poor, he brings social equityin the society.



EntrepreneurshipEntrepreneurship

Entrepreneurship is an activity or process that isundertaken by an individual or group to establisha business organization.

it is a profession that is undertaken by the

people who have knowledge and experience of promoting new business units.

Definition:

A.H cole: entrepreneurship is defined as ́purposeful activity of an individual or group of

individual undertaken to initiate, maintain ororganize a profit oriented business unit for theproduction or distribution of economic goods asservices.µ



Relationship between Entrepreneur,Relationship between Entrepreneur,

Entrepreneurship and EnterpriseEntrepreneurship and EnterpriseEntrepreneur

Is a person or group of persons who promotes abusiness.

Who have necessary skills, qualities and capacity

to organize necessary factors in order to start abusiness.

Entrepreneurship

Its include all the activities that are necessary tostart a business.

These activities include planning, organizing,necessary resources, arrangement of finance ,selection of right persons to ensure that businessstarts functioning.



Enterprise

is the firm or organization or venturethat has specific objective.

The common objective of a business

enterprise is to make profit.

The objective of enterprise depends on

entrepreneurs entrepreneurship.

Entrepreneurs should make use of

skills of entrepreneurship to achieve thedesired results.



Distinction between EntrepreneurDistinction between Entrepreneur

and Entrepreneurshipand Entrepreneurship Entrepreneur is a person who undertakes the

process of entrepreneurship that is organizing

of necessary factors to start a business.

Entrepreneurship is a process or set of activities that are to be undertaken to start a

business.

Entrepreneur is a creator of new organization.

Entrepreneurship is an art of creation of an

organization.

Entrepreneur is a risk taker, he assume risk of

starting a new business.



Entrepreneurship is the task of taking risk

of investing capital in a business with an

object of earning profit.

Entrepreneur is a initiator, he personally

takes interest in starting a business.

Entrepreneurship is initiative of

entrepreneur in promoting and takingnecessary step to promote business.



Theories of EntrepreneurshipTheories of Entrepreneurship

Opinions regarding concept of

entrepreneurship and emergence of

entrepreneur differ.

There are different school of thoughts.Experts belonging to these different schools

have given different meaning to the concept of

entrepreneurship and entrepreneur.

These schools of thought can be

classified into three theories.



These schools of thought can be classified intothree theories.

I. Psychological theory.

II. Sociological theory and

III. Economic view.

psychological theories:

Contributors to the psychological theory of entrepreneur say that people with strongpsychological features will becomes entrepreneurs,like.

A person mentally tough.

A person who has personal features like creativeness,innovativeness , motivation etc. will becomesuccessful entrepreneur.



Experts of this school of thought say that

family and society plays and important

role in the development and growth of

entrepreneur. A person inherits the

features and characteristic of family,

thats why a business persons sonbecomes a businessmen, because

qualities of businessmen come him by

birth. Society also play an important role

in the growth of this kind

entrepreneurship.



According to john kunkals, theory of

entrepreneurship supply.

As per this theory supply of entrepreneur

depends on conducive environment in the

society. Such environment should provide

incentives and awards for entrepreneurship.A person is attracted by such incentives, he

develops his behavior and personality to

overcome an entrepreneur. Incentives and

benefits attract a person towardsentrepreneurship. Supply of

entrepreneurship depends on these factors.



Sociological theory on entrepreneurship:

Society plays an important role

in the growth of a person in general and of entrepreneurs in particulars.

y Family background, education and

environment in the society play animportant role in the growth of entrepreneurship.

y

Entrepreneurship needs certain qualitieslike risk taking, organization skill, dynamism,courage etc.



y These qualities are in born they come to

a person by heredity.

y That is the reason, we see a

businessmen·s son also becoming a

business men. As per this view point anentrepreneur is born.



T homas Cochran theory of cultural

values:

As per the theory growth of

entrepreneurship depends on value

system and cultural prevailing in the

society. Family background, educationgiven in the school and conducive

environment in the society can help

for growth of entrepreneurs.



Economic view point:

Economic factors like demand and

supply, profits, equilibrium determineentrepreneurship and drive a person tobecome entrepreneur.

Society always expects new goods andservices. An innovation personunderstands the needs of society and hestarts a business that are needed by the

society. Disequilibrium is another factorthat offers profitability opportunities tostart business.



Mark cassons economic theory:

This theory explains entrepreneurship

in terms of demand and supply. The

theory says, society always expects supply

of new goods and services.

This creates new opportunities of business entrepreneur exploits such

business opportunity by starting those

business units that deliver goodsexpected by the society .



Supply of entrepreneurs depends on

availability of entrepreneur with necessary

skill and qualities. This theory identifiesimagination as an important skill that an

entrepreneur should posses.

The character of imagination aninnovation help an entrepreneur to start

a business that delivers the goods

expected by the society.



Indian EntrepreneursIndian Entrepreneurs

T.V.S Group

T. V. Sundaram Iyengar (1877²1955).

Bharti Enterprises

Sunil Mittal (1957- ).

Kingfisher Airlines

Vijay Mallya (1955- ).

Air DeccanCapt. G.R Gopinath (1923-)



Problem of Developing Entrepreneur inProblem of Developing Entrepreneur in

IndiaIndia

Development of entrepreneur in country is

not taking place to the desired extent.

The problems that are faced in

development of entrepreneurship can beclassified as follows:

y Economic factors/ causes.

y Social factors/ causes.y Psychological factors / causes.



Economic factors:

1. Inadequate finance:y

Finance is the basic factor to start andmanage any enterprise.

� Adequate and timely supply of finance atreasonable cost can ensure progress of industries.

� Entrepreneurs in India come from poor andmiddle class families.

� They depends on these financial institutions.

� There are numerous financial agencies inIndia to finance industries and they havemany schemes of finance but they are notgiving adequate financial support toupcoming entrepreneurs.



y There are numerous financial agencies inIndia to finance industries and they havemany schemes of finance but they are not

giving adequate financial support toupcoming entrepreneurs.

Poor infrastructure:y Infrastructure facilities in India are not well

developed.y Government has not given adequate

importance for the development of thesefacilities.

y

Like uninterrupted supply of power, waterfacility , better road etc. non availability of these facilities is affecting the growth of entrepreneurship.



y Like uninterrupted supply of power, water facility ,better road etc. non availability of these facilities

is affecting the growth of entrepreneurship.Lack of institutional support:

Growth of entrepreneurship depends on stronginstitutional support. Such institutions include:

y

Educational and training institutions that educateand train entrepreneurs.

y Entrepreneurial Development Programs (EDP·s).

y Research and development (R&D).

yFinancial institutions.

y Entrepreneurship is not gettingencouragement support from these institutions



y Research and development (R&D).

y Financial institutions.

Entrepreneurship is not getting

encouragement support from these

institutions.

Poor implementation of economic policies :y Government has given many incentives,

concessions and supporting facilities for

the growth of entrepreneurship throughvarious economic policies from time to

time. These economic policies are not

implemented.



Social factors:

1. Family Background:

y It is said that entrepreneurs are born,that means birth of a entrepreneurdepends on environment in the family.

y

Joint family system and culture in Indiado not help for development of entrepreneurship.

y Dependence of the family members on

one another, shifting the responsibility onothers is the important features of jointfamilies.



y These families are traditional bound.

These factors do not help for the

development of qualities like independent

thinking, dynamism, courage leadershipetc.



y Culture:

1. prevailing culture, customs and

traditions are too pious in nature.

2. A persons who is doing business may

not be a gentlemen, he is a greedy

persons, always in search of profitableopportunities.

3. Such thought and attitude of the society

do not encourage for development of entrepreneurship.



Scientific temper:

y Pandit Jawaharlal Nehru has called the

industries as modern temples.

y The devotion that is shown in our prayer,

the dedication that is shown in temple

should also be shown in an enterprise.y This calls for development of scientific

temper.

y

Such scientific temper comes byreasoning, rational thinking etc.



y Psychological factors:

y An entrepreneur must have strong

psychological features.

y He must be mentally tough to face

difficulties and uncertainties of business.

He must have courage to accept the risk of promoting a business.

y He should be a dynamic and self

motivated person to start a innovativebusiness. This can developed in schools

and training institutions.



y Environment in Indian society is not

conducive for the growth of these

qualities and entrepreneurship.Factors which are affecting entrepreneurial

growth are as follows:

He should be a dynamic and self motivated person to start a innovative

business.

This can developed in schools and traininginstitutions.



Society:

y Attitude of society also plays an

important role in the development of

entrepreneurship.

y Entrepreneur should be given better

status in the society.y Contributions made by the

entrepreneurship must be recognized and

awarded.



Government policies:

Government can play an important role

by providing incentives that can motivate

the people to accept entrepreneurship.

Role of Entrepreneur in Economic Development Slide

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