CHAPTER ONE

Introduction to Entrepreneurship
1.1 The Concept of Entrepreneurship, Definition And
Historical Development
Entrepreneurship is the symbol of business strength and achievement.
Entrepreneurs are the founders of today's business success; their sense of
opportunity, their drive to innovate and their capacity for accomplishment
have become the standard by which free enterprise is measured.
Entrepreneurs will continue to become critical contributor to the economic
growth through their innovation, research and development effectiveness,
job creation, competitiveness, productivity, and formation of new industry.
The words entrepreneur and entrepreneurship have acquired special
significance in the context of economic growth in rapidly changing socio-
economic and socio-cultural climates both in developed and in developing
countries.

Entrepreneurship is one of the four mainstream economic factors: land,

labor, capital and entrepreneurship. The word which is derived from 17 th
century French word entreprendre, refers to individuals who were
“undertakers”, meaning those who “undertook” the risk of new enterprise.
They were “contractors” who bore the risk of profit or loss, and many early
entrepreneurs were soldiers of fortune, adventurers, builders, merchants etc.
Earlier references to the entrepreneur in the 14 th century spoke about tax
contractors- individuals who paid a fixed sum of money to a government for
the license to collect taxes in their region.

The concept of entrepreneurship varies from country to country as well as

from period to period and the level of economic development thoughts and
perceptions; a concise and universally accepted definition has not yet
emerged.
Example
 In the earliest period: An entrepreneur was viewed as a go- between,
who attempt to establish trade routes and signed contracts with many
persons (forerunners of today's venture capitalist) to sell goods. While the
capitalist was a passive risk bearer, the merchant adventure took the
active role in trading, bearing all the physical and emotional risks.
 In the Middle Ages: The term entrepreneur used to describe a person
managing large production projects. In this case, the person would not
take any risks but would merely manage the project using the resource
provided. In the 18th century, The Irishman named Richard Cantillon, who
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was living in France, credited to being the first to use the term
entrepreneur in the business context. He viewed the entrepreneur as a risk
taker, seeing the merchants, farmers, crafts men, and other sole
proprietors buy products at certain price –therefore, operating at a risk
condition.
Karl Vesper: has researched entrepreneurship and explained that its nature is
a matter of individual perception.
 To an economist: an entrepreneur is one who brings resources; labor,
materials, and other assets in to combination that makes their value
greater than before.
 To a psychologist: such a person is typically driven by behavioral forces
like need to obtain, to experiment, to accomplish something, or
perhaps to escape authority of others.
 To capitalist philosophers: an entrepreneur is the one who creates
wealth for others as well, who finds better ways to utilize resources and
reduce waste and who creates job that others are glad to get.
Fundamentally, entrepreneurship is a human creative act, involved building a
team of people with complementary skills and talents. And there have been
hundreds of definitions in dozens of books. Such definitions include:
 A decision maker whose entire role arises out of his alertness to hitherto unnoticed
opportunities (kirzner-1973).
 Who uses available resources in novel ways (Schumpteter-1934).
  Are action oriented, highly motivated individuals who take risk to
achieve goals.
 Are people who have the ability to see and evaluate business
opportunities, the ability to gather resources to take advantage of
them; and the ability to initiate action to insure success?
 Is someone who always searches for change, responds to it, and
exploits it as an opportunity (Peter Drucker).
The concept entrepreneurship has wide rages of meanings. On one extreme,
an entrepreneur is a person of very high aptitude who pioneers change,
possessing characteristics found in only a very small fraction of population.
On the other extreme of definition, anyone who wants to work for is
considered an entrepreneur.
In almost all of the recent definitions, there is an agreement that we are
talking about a kind of behavior that includes:
 Initiative taking
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 The organizing and reorganizing of social/economic mechanisms to
turn resources to practical account, and
 The acceptance of risk or failure, etc.

In this regard Robert Hisrich (1985), for example, defined entrepreneurship in

a relatively comprehensive way as a process of creating something different
with value by devoting the necessary time, and effort assuming the
accompanying financial, psychological, and social risks, and receiving the
resulting rewards of monetary and personal satisfaction.
1.2. Personality Traits of Successful Entrepreneurs
A common stereotype of the entrepreneur emphasizes such characteristics
as a high need for achievement, willingness to take moderate risk, and
strong self-confidence. Go through the following listed characteristics and
compare them with what you have identified.

A. Need for Achievement:

 David C. McClelland, a Harvard psychologist, discovered a positive
correlation between the need for achievement and entrepreneurial activity.
According to McClelland, those who become entrepreneurs have, on the
average, a higher need for achievement than do members of the general
population. Entrepreneurs are driven by a need to achieve more and more.
B. Willingness to take risk:
The risks that the entrepreneur takes in starting and or operating their own
business are varied. By investing their own money, they assume a financial
risk. If they leave secured jobs, they risk their careers. The stress and time
required in starting and running a business may place their families at risk. In
addition, entrepreneurs who identify closely with particular business venture
assume psychic risk as they face the possibility of business failure.
David C. McClelland discovered in his studies that individuals with a high
need for achievement also have moderate risk taking propensities. Often
enough entrepreneurs are calculated risk takers. They enjoy the excitement
of a challenge

C. Self-Confidence:
Studies show that successful entrepreneurs tend to be confident individuals
who see the problem in launching a new venture but believe in their own
ability to overcome these problems. Some studies of entrepreneurs have
measured the extent to which they are confident of their own abilities.
According to J.B.Rotter, those who believe that their success depends upon 3
their own efforts have an internal locus of control. In contrast, those who feel
that their lives are controlled largely by luck or chance or fate have an
external locus of control. External locus of control believing that one’s life is
controlled more by luck or chance than ones own efforts. Based on research
to date, it appears that entrepreneurs have a higher internal locus of control
than is true of the population in general.
D. Innovation and creativity:
Innovative activity is a hallmark of entrepreneurship. The entrepreneurial
manager is constantly looking for innovations, not by waiting for a flash of
inspirations, but through an organized and continuous search for new ideas.
Entrepreneurship is not so much an art that either you have, or you do not,
but rather a practice, which you constantly follow or you choose to ignore. It
thus can be developed and learned; its core activity is innovation and a
continuous, purposeful search for new ideas, and their practical applications.
Doing things differently is part of entrepreneur's nature. It is how they create
a market opportunity and differentiate themselves from the multitude.
Innovation can be based upon many factors from marketing to technology.
E. Total commitment:
Hard work, energy, and single mindedness are all essential elements in the
entrepreneurial profile.

F. Effective time management:

Entrepreneurs are well aware that time is something that cannot be saved if
every single minute is not used worthy enough. Establishing goals,
determining deadlines, allocating time for each and every important activity
are personality traits entrepreneurs are identified with.

G. An Ability of leadership:
Successful entrepreneurs are successful leaders, whether they lead few
employees or hundreds or thousands. By the very nature of their of their
work , entrepreneurs are leaders because they must seek opportunities ;
initiate business enterprises; gather the physical, financial and human
resources to carry out their enterprise; set goals for themselves and for
others, and direct and guide others to accomplish goals.
To be aware of better ways to accomplish tasks is to be an effective leader. 4
You are likely to be successful leader if you believe in continuous growth,
improved efficiency and the continued success of your organization.

H. An ability of decision making:

Successful entrepreneurs are creative decision makers. Looking matters from
different angles, gathering relevant information for decision making and
consistency are crucial in entrepreneurial decision making.

I. Desire for Independency:

They wish for autonomy believing that independency of action is the only
sure way to get what they need. Note that whilst entrepreneurs may share
some of these characteristics, no one single trait can be said to be secret of
entrepreneurial success.

1.3. Entrepreneurial motivation: why people

consider setting up their own businesses?
Business academics have two classes of theories of how people become
entrepreneurs; supply and demand theories.
In the demand theory, anyone could be recruited by circumstance or
opportunity to become entrepreneur. A more general held theory is that
entrepreneurs emerge from the population on demand, from the combination
of opportunities and people well-positioned to take advantages of them. The
entrepreneur may perceive that they are among the few to recognize or be
able to solve a problem.
Several research studies have shown that entrepreneurs are convinced that
they can command their own destiny. Behavioral scientists express this view
by saying that:
“entrepreneurs perceive the" locus of control" to be themselves”. It is this-
belief, which stimulates the entrepreneur, according to the supply-side
theorists.
In general the factors for business formation can be divided
between "Pull" and" Push" influences.
1.3.1: "pull' Influence
Some individuals are attracted towards business ownership by positive
motives such as:
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  Independence: In several research studies, this feature is
prominently taken as the key motivator. Many studies singled out the
need to gain and keep independence as a distinguished feature of
small business owner managers. A study of female entrepreneurs in
Britain found that women were motivated particularly by the need for
autonomy, which had been frustrated by the individuals’ prior training
and background.
 Market opportunity: The identification of a perceived gap in the
market place through personal observation or experience is also a
common reason for starting a business. Entrepreneurs may seek to
exploit this opportunity through special knowledge, product
development or they may hire the appropriate technology and skills.
 Financial incentives: The promise of long-term financial
independence can clearly be a motive in starting a new firm, although
it is usually not quoted as frequently as other factors.
 Community service: - Sometimes individuals with an entrepreneurial
ability may come across some needs and wants of the community and
they may think that they can provide it with an exchange of value. This
community serving motive may provide an advantage.
1.3.2: "Push" influence
Many people are pushed into founding a new enterprise by variety of factors
including;
 Unemployment: job insecurity and unemployment varies in
significance by region, and by prevailing economic climate. The latest
researches shows that at least 50% of entrepreneurs are pushed in this
way to the entrepreneurial ventures.
 Disagreement with previous employer: Uncomfortable relation at
work has also pushed new entrants into small business.
 Challenge: - a challenge is most of the time a good motive for
success. And only the toughest entrepreneurs come to be successful in
 the ever-challenging environment of the business world. A success
advantage is exploited from the motive to challenge. Overcoming
Challenge gives psychological satisfaction.
The dividing line between those “pulled and those pushed” is often blurred.
Many people, considering an opportunity or having a desire for
independence, still need some form of push to help them make their
decision. What is clear is that the diversity of motivations for starting a
business will influence the owner manager once they have set up.

1.4. Entrepreneurship versus Intapreneurship 6

Intrapreneurship: (Entrepreneurship within an existing business structure).

Sharma and Chrisman describe entrepreneurship as “. . . the process
whereby an individual or a group of individuals, in association with an
existing organization, create a new organization, or instigate renewal or
innovation within that organization” (Sharma and Chrisman; 1999:18).
Intrapreneurship can bridge the gap between science and the market place.
Existing business have the financial resources, skills, and the marketing and
distribution system to successfully commercialize innovation.
Entrepreneurship: Another method for bridging the gap between science
and market place is entrepreneurship. Many entrepreneurs have a difficult
time bridging this gap and creating new ventures. They frequently lack
managerial skills, Marketing capability, and finances. Their innovations are
frequently unrealistic and thus need significant modification to be
marketable. In addition, entrepreneurs often do not know how to interface
with necessary entities such as banks, suppliers, customers, venture
capitalists, distributors, and advertising agencies.

1.7. Benefits and Limitations of Entrepreneurship

People start their own business for a Varity of reasons. Some have a bright
idea that they think will make them rich, others find they unemployed and
start their own business to survive; some only are happy when they are their
own boss; others want to make a particular contribution to their community
and can see no other way of doing it except by setting upon their own
business. Generally, even though people start business for various reasons,
the following are considered as the benefits of entrepreneurship:

1.7.1. Benefits of Entrepreneurship

i. Opportunity to gain control over your destiny: owning a business
provides entrepreneurs with independency and the opportunity to
achieve what is important to them. Entrepreneurs want to "call the
shots" in their live, and they used their business to bring this desire to
life. They reap the intrinsic rewards of knowing they are driving forces
behind their business.
ii. Opportunity to reach your full potential: Too many people find
their work boring, unchallenging, and unexciting. But to most
entrepreneurs there is little difference between work and play. The two
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are synonymous. Entrepreneurs business becomes the instrument for
self-expression and self-actualization. That is his/her talent, energy,
limits entrepreneurs growth and that...means entrepreneurial
situations.

iii. Opportunity to reap unlimited profits: The profits their business

can earn are an important motivating factor in the entrepreneur's
decisions to launch companies. One venture capitalist that has
financed many small companies says, "Starting your own company has
always been the best way to create wealth. And even if you do not get
rich doing it, you will still have more fun.
iv. Opportunity to contribute to society and recognized for your
effort: Often, small business owners are among the most respected
and most trusted members of their communities. Business deals on
trust and mutual respect are the hallmark of many established small
companies. These owners enjoy the trust and recognition they receive
 from the customer whom they have served faithfully over the years.
Playing a vital role in their local business systems and knowing that
their work has a significant impact on how smoothly the nation's
economy functions is yet another reward for small business managers.

v. Opportunity to do what you enjoy: A common sentiment among

small business owners is that their work is no work. Most successful
entrepreneurs choose to enter their particular business fields because
they have an interest in them and enjoy those lines of work. They have
their avocation (hobbies) their vocations (work) and are glad they did
"find a job doing what you love, and you will never have to work a day
in your life".

1.7.2. The potential limitations of entrepreneurship

Although owning a business has many benefits and provides many
opportunities, anyone planning to enter the world of entrepreneurship
should be aware of its potential drawbacks.
1. Uncertainty of income: Opening and running a business provides no
guarantees that an entrepreneur will earn enough money to survive.
Some small business barely earns enough to provide the owner manager
with an adequate income. In businesses early days, the owner often has
trouble meeting financial obligations and may have to live on saving. The
steady income that comes with working for someone else is absent and
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the owner is always the last one to be paid.
2. Risk: Starting or buying a new business involves risk, and the higher the
rewards, the greater the risk entrepreneurs usually face. This is why
entrepreneurs tend to evaluate risk carefully. It should be noted, "People
who successfully innovate and start businesses come in all shapes and
sizes but they do have a few things others do not. In the deepest sense,
they are willing to accept risk for what they believe in”. They have the
ability to cope with a professional life riddled by ambiguity, a consistent
lack of clarity. Most have a drive to put their imprint on whatever they are
creating. And while unbridled ego can be a destructive thing, try to find an
entrepreneur whose ego is not wrapped up in the enterprises.
Entrepreneurs face a number of different types of risk. These can be
grouped in to four basic areas.
A. Financial Risk: In most new ventures, the individual puts a
significant portion of his or her saving or other resources at stake.
This money or resources will, in all likelihood, be lost if the venture
fails. The entrepreneur also may be required to sign personally on
company obligations that far exceed his or her personal
bankruptcy. Many people are unwilling to risk their savings, house,
property and salary to start a new business.
B. Career Risk: a question frequently raised by would-be
entrepreneurs is whether they will be able to find a job and go
back to old job if their ventures fail. This is a major concern to
managers who have a secure organizational job with a high salary
and a good benefit package.
To reduce such risk, starting a part time business is popular
gateway to entrepreneurship. Part-time entrepreneurs have the
best of best worlds; they can ease in to business for themselves
without scarifying the security of a steady paycheck and benefits.
A major advantage of going in to part-time business is the lower
risk in case the venture flops. Many par timers are "testing the
entrepreneurial waters" to see whether their business ideas will
work and whether they enjoy being self-employed. As they grow,
many part-time enterprises absorb more of the entrepreneurs time
until they become full-time business.
C. Family and Social Risk: Starting anew venture uses much of the
entrepreneur's energy and time. Consequently, his or her other
commitments may suffer. Entrepreneurs, who are married, and
especially those with children, expose their families to risk of an 9
incomplete family experience and the possibility of permanent
 emotional scars. In addition, old friends may vanish slowly
because of missed ‘get- together’.
D. Psychic Risk: The greatest risk may to the well being of the
entrepreneur. Money can be replaced, a new house can be built,
children, and friends can be adapted. However, some
entrepreneurs who have suffered financial catastrophes have been
unable to bounce back, at least immediately. The psychological
impact has proven to be too severe for them.
3. Long hours and hard work: Business start-ups often demand that
owners keep nightmarish schedule. In many start-ups, six or seven day
workweeks with no paid vacations are that norm. When the business
closes, the revenue stops coming in and the customers go elsewhere.
Even when you own your own business, you still always are working for
someone else ‘your customer and clients’.

4. Lower quality of life until the business gets established: The long
hour and handwork needed to launch a business can take their toll on the
rest of the entrepreneurs’ life. Business owners always find that their roles
as husband or wives and fathers and mothers take a back seat to their
roles as a business founders. Part of the problem is that most
entrepreneurs launch their business between the age of 25 and 39, just
when they start their families. It is very tough to give the amount of work
that is required to build a company without slighting your family. As a
result, marriages and friendships are too often casualties of small
business ownership.
5. High level of stress: starting and managing a business can be an
incredibly rewarding experience, but it also can be a highly stressful.
Entrepreneurs often have made significant investments in their
companies, have left behind the safety and security of a steady paycheck
and have mortgaged everything they own to get in to businesses. Failure
 may mean total financial run, and that creates intense level of stress and
anxiety.

6. Complete Responsibility: It is great to be the boss, but many

entrepreneurs find that they must make decisions on issues about which
they are not knowledgeable. When there is no one to ask, the pressure
can build quickly. The realization that the decisions they make are the
cause of success or failure has a devastating effect on some people. Small
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business owners discover quickly that they are the business.

Creativity, Innovation and Entrepreneurship

Introduction
The entrepreneurial “secret” for creating value in the marketplace is
applying creativity and innovation to solve problems and to exploit
opportunities that people face every day. Creativity and innovation are
considered to be inseparable from entrepreneurship. By definition, creativity
and innovation involve the creation of something new that “... is central to
the entrepreneurial process. Creativity and innovation are closely related but
different since innovation is using creativity – turning creative ideas into
use as products or as active practices.
Creativity can be defined as “the production of novel and useful ideas” while
innovation refers to the implementation or “transformation of a new idea into
a new product or service. Creativity is thinking new things, and innovation is
doing new things. In short, entrepreneurs succeed by thinking and doing new
things or old things in new ways. Simply having a great new idea is not
enough; transforming the idea into a tangible product, service, or business
venture is the essential next step.

Creativity
• Creativity is the ability to develop new ideas and to discover new
ways of looking at problems and opportunities
• Creativity is the having of new ideas which, in an organization, are
generated or spotted by individuals or teams. It is the production of
novel and useful ideas.
• Creativity can be used for development of better business ideas in
terms of product, process, and market development aspects. Creative
thinking is basically a process of searching, screening & connecting
thoughts. It Relates to how people approach problems and depends on
personality and thinking/working style.
• Research into the operation of the human brain shows that each
hemisphere of the brain processes information differently and that one
side of the brain tends to be dominant over the other.
• The human brain develops asymmetrically, and each hemisphere tends
to specialize in certain functions. 11
 Successful entrepreneurship requires both left- and right-brained
thinking.
 Right brained thinking draws on the power of divergent
reasoning, which is the ability to create a multitude of original,
diverse ideas.
 Left-brain thinking counts on convergent reasoning, the ability to
evaluate multiple ideas and choose the best solution to a given
problem.
• Entrepreneurs need to rely on right-brain thinking to generate
innovative product, service, or business ideas.
• Then, they must use left-brain thinking to judge the market potential of
the ideas they generate.
 • Successful entrepreneurs have learned to coordinate the
complementary functions of each hemisphere of the brain, using their
brain’s full creative power to produce pragmatic innovation.

Barriers to Creativity:
There are a number of obstacles which inhibit creativity. The seven main ones are:

1. Negativity 4. Over-conformance with

2. Fear of failure rules and regulations
3. Lack of quality thinking 5. Making assumptions
6. Applying too much logic
time
7. Thinking I am not creative.

How to Enhance Creativity

A. Enhancing Organizational Creativity
• Creativity doesn’t just happen in organizations; entrepreneurs must
establish an environment in
which creativity can flourish for themselves and for their workers.
• Ensuring that workers have the freedom and the incentive to be creative
is one of the best ways to
achieve innovation.
• Entrepreneurs can stimulate their own creativity and encourage it among
workers by following these suggestions, which are designed to create a
culture of innovation. 1
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1. Include Creativity as a Core Company Value: Entrepreneurs have
the responsibility of establishing an innovative culture in their companies,
and setting a creative tone in an organization begins with the company’s
mission statement.

2. Embracing Diversity: to hire a diverse workforce. Hiring people from

different backgrounds, cultural experiences, hobbies, and interests
provides a company with a crucial raw material needed for creativity.

3. Expecting Creativity: Employees tend to rise—or fall—to the level of

expectations entrepreneurs have of them. One of the best ways to
 communicate the expectation of creativity is to give employees
permission to be creative.

4. Expecting and Tolerating Failure: Creative ideas will produce failures as

well as successes. People who never fail are not being creative.

5. Encouraging Curiosity: Entrepreneurs and their employees

constantly should ask “what if . . .” questions and to take a “may be we
could . . .” attitude. Doing so allows them to break out of assumptions
that limit creativity.

6. Creating a Change of Scenery Periodically: The physical

environment in which people work has an impact on their level of
creativity.

7. Viewing Problems as Challenges: Every problem offers the

opportunity for innovation.

8. Providing Creativity Training: Almost everyone has the capacity to

be creative, but developing that capacity requires training.

9. Providing Support: Entrepreneurs must give employees the tools

and the resources they need to be creative.

10. Developing a Procedure for Capturing Ideas:-Workers in

every organization come up with creative ideas; however, not every
organization is prepared to capture those ideas.

11. Talking with Customers: Innovative companies take the time

to get feedback about how they use the companies’ products or
services, listening for new ideas.

12. 1
Rewarding Creativity: Entrepreneurs can encourage creativity
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by rewarding it when it occurs. Financial rewards can be effective
motivators of creative behavior, but nonmonetary rewards such as
praise, recognition, and celebration, usually offer more powerful
incentives for creativity.
 13. Modeling Creative Behavior: Creativity is “caught” as much
as it is “taught.” Companies that excel at innovation find that the
passion for creativity starts at the top. Entrepreneurs who set
examples of creative behavior, taking chances, and challenging the
status quo will soon find their employees doing the same.

B. Enhancing Individual Creativity

 Entrepreneurs can enhance their own creativity by using the

following techniques:
A. Allow yourself to be creative: one of the biggest obstacles to
creativity occurs when a person believes that he or she is not creative.
Giving yourself the permission to be creative is the first step toward
establishing a pattern of creative thinking.
B. Give your mind fresh input every day: To be creative, your mind
needs stimulation. Do something different each day—listen to a new
radio station, take a walk through a park or a shopping center, pick up a
magazine you never read.
C. Observe the products and services of others companies,
especially those in completely different markets. Creative
entrepreneurs often borrow ideas from companies that are in businesses
totally unrelated to their own.
D. Recognize the creative power of mistakes: Creative people
recognize that even their errors may lead to new ideas, products, and
services.
E. Keep a journal handy to record your thoughts and ideas: Creative
ideas are too valuable to waste, so always keep a journal nearby to
record them as soon as you get them.
F. Listen to other people: No rule of creativity says that an idea
has to be your own. Sometimes the best business ideas come from
someone else, but entrepreneurs are the ones to act on them
G. Listen to customers: Some of the best ideas for new products and
services or new applications of an existing product or service come from
a company’s customers. Entrepreneurs who take the time to listen to

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 their customers often receive ideas they may never have come up with
on their own.
H. Read books on stimulating creativity or take a class on
creativity: Creative thinking is a technique that anyone can learn.
Understanding and applying the principles of creativity can improve
dramatically the ability to develop new and innovative ideas.
I. Take some time off: Relaxation is vital to the creative process.
Getting away from a Problem gives the mind time to reflect on it.

Creative process
Although creative ideas may appear to strike as suddenly as a bolt of lightning, they
are actually the result of the creative process, which involves seven steps:
1. Preparation: involves getting the mind ready for creative
thinking. Preparation might include a formal education, on-the-job
training, work experience, and taking advantage of other learning
opportunities. This training provides a foundation on which to build
creativity and innovation.
2. Investigation: requires one to develop a solid understanding of the
problem, situation, or decision at hand. To create new ideas and concepts
in a particular field, an individual first must study the problem and
understand its basic components
3. Transformation: involves viewing the similarities and the differences
among the information collected. This phase requires two types of
thinking: convergent and divergent.
 Convergent thinking: is the ability to see the similarities and the
connections among various and often diverse data and events
 Divergent thinking: is the ability to see the differences among
various data and events.
4. Incubation: The subconscious needs time to reflect on the information
collected. Incubation occurs while the individual is away from the
problem, often engaging in some totally unrelated activity.
5. Illumination: In the illumination stage, all of the previous stages come
together to produce the creation of the innovative idea.
6. Verification: For entrepreneurs, validating an idea as accurate and useful
may include:
 Conducting experiments
 Running simulations
 Test marketing a product or service
 Establishing small-scale pilot programs 1
 5
Building prototypes, and engaging in many other activities designed
to verify that the new idea will work and is practical to implement.
7. Implementation: The focus of this step is to transform the idea into
reality.
Plenty of people come up with creative idea for promising new products or
services, but most never take them beyond the idea stage. What sets
entrepreneurs apart is that they act on their ideas.
Innovation

• Innovation is the ability to apply creative solutions to those problems and

opportunities to enhance or to enrich people’s lives. Innovation – the creation,
dissemination, and application of knowledge.
It may refer to incremental, radical and revolutionary changes in thinking,
products, processes or organizations.
It refers to the implementation or “transformation of a new idea into a new
product or service, or an improvement in organization or process.

Peter Drucker says, “Innovation is the specific instrument of entrepreneurs,

the means by which they exploit change as an opportunity for a different
business or a different service. Example
 Making existing product better by adding more features
 Modifying the methods to produce product in more cost effective way.
 Substituting raw materials to bring down the cost
 Invention and innovation are not the same:
• Invention is the first occurrence of an idea for a new product or process,
while innovation is the first attempt to carry it out in practice.
A distinction is typically made between invention, an idea made manifest, and
innovation, ideas applied successfully.
Entrepreneurship is the result of a disciplined, systematic process of applying
creativity and innovation to needs and opportunities in the marketplace.
• It involves applying focused strategies to new ideas and new insights to create
a product or a service that satisfies customers’ needs or solves their problems.
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• Millions of people come up with creative ideas for new or different products 6
and services; most of them, however, never do anything with them.
• Thus, successful entrepreneurship is a constant process that relies on
creativity, innovation, and application in the marketplace.
 Ethical issue and Social Responsibility of
Entrepreneurs
An entrepreneur is a person who undertakes business activity with the help
of societal resources. He/she is associated with different groups of the
society like consumer, employees, investors, government etc. With the help
of the exchange with these groups he/she can achieve organizational goal.
So his/her responsibilities towards them should be properly understood.
An entrepreneur receives resources from the society, utilizes in productive
manner and gives some productive output to the society and earns profit.
He/she cannot do anything without the help of society. On the other hand
society is also getting benefits from entrepreneurs. Development of a new
product, improvement in life style is only possible when active efforts
undertaken by entrepreneur. So we can say there is give and take between
entrepreneurs and society. They are debtor as well as creditor of the society.
Their responsibility towards society can be understood as follows.
1. Responsibility for Consumers
In this world of consumerism it is rightly said that consumer is King. Each and
every economic activity is performed to satisfy consumer needs.
Responsibility towards consumers can be better fulfilled by reasonable
Pricing. An entrepreneur should have properly studied market, income, taste
of consumers and accordingly should produce and promote the product.
According to change in the preferences, taste, need etc. entrepreneur should
introduce modification in the product to satisfy their needs. Entrepreneurs
should consult consumer forum and according to their suggestions, decide
the quality and price of the product. An entrepreneur should maintain
business ethics in quality, quantity, design, price of the product and should
not create artificial scarcity of the product to gain abnormal profit.

2. Responsibility for Employees

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Employees are the life blood of the organization. Without them an
entrepreneur cannot achieve the organizational goal. Satisfied employees
are the assets of the business. To satisfy them as per qualification, skill and
experience healthy remuneration should be paid and avoid exploitation.
Motivating incentive scheme should be introduced. The working place should
be neat and clean with proper ventilation and light. For the refreshment,
provide canteen, rest, sanitation etc.
As lot of families is dependent upon the firm, entrepreneur should provide
employees family welfare facilities like fees of their kids, medical allowance
etc.

3. Responsibility for Related Professional Institutes

An entrepreneur is also connected with different organizations, institutes like
chamber of commerce, labor union, mercantile federation, social welfare
institute etc. Entrepreneurs should fulfill their responsibility towards these
organizations and accept the membership of such associations.
4. Responsibility for Local Public
Industrial unit is established in the society. So it becomes responsibility of the
entrepreneur to take care of residing people living nearby. The interest and
lifestyle of the surrounding locality should not be adversely affected. He
should put local people for employment in first priority.
5. Responsibility for the Nation
Entrepreneurs undertake their business activities in the boundaries of any
nation. So it becomes their duty to follow the law and order of any particular
region or nation. The prime duty towards the government is to follow the law
and order of that city, state or nation in which it is situated. It is the duty of
entrepreneur to pay the genuine tax in time. So that government can better
use it for the development of undeveloped locality. The development of any
nation is based on the development of basic industries only. Innovation is the
identity of an entrepreneur. For the development of the society and nation,
new product development is needed. Entrepreneurs should undertake the
research and development and uplift the lifestyle of the nation.
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