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UGC NET MBA Unit-10

Entrepreneurship Development, Innovation, and Small Business Management

1. ENTREPRENEURSHIP DEVELOPMENT – CONCEPT & NATURE

A. Concept

Entrepreneurship is the process of identifying opportunities, mobilizing resources, and creating value through the establishment of new ventures or transformation of existing businesses.

An Entrepreneur is a person who takes initiative, bears risk, and innovates to convert ideas into commercially viable activities.

B. Characteristics of Entrepreneurship

  1. Innovation: Introduction of new products, processes, or markets.

  2. Risk-taking: Managing uncertainty for potential rewards.

  3. Proactiveness: Taking initiative before competitors.

  4. Decision-making: Rational yet creative judgment.

  5. Vision and leadership: Long-term strategic orientation.

C. Importance of Entrepreneurship

  • Promotes economic growth and employment.

  • Encourages innovation and competitiveness.

  • Mobilizes savings and capital formation.

  • Reduces regional disparities through local enterprises.

  • Enhances exports and foreign exchange earnings.

🟩 2. TYPES OF ENTREPRENEURSHIP

Type Meaning / Features
Innovative Entrepreneur Introduces new ideas or technology.
Imitative / Adoptive Entrepreneur

Copies or adapts successful innovations.
Fabian Entrepreneur

Skeptical and changes only when necessary.
Drone Entrepreneur Resists change despite losses.
Social Entrepreneur

Works for social goals using entrepreneurial methods.
Serial Entrepreneur Starts multiple ventures sequentially.
Intrapreneur

Innovates within an existing organization.
Women / Rural Entrepreneur Operates in specific demographic or regional contexts.

🟩 3. THEORIES OF ENTREPRENEURSHIP

A. Economic Theories

  1. Richard Cantillon (Risk-Bearing Theory):
    Entrepreneur = risk-bearer who buys inputs at known costs and sells at uncertain prices.

  2. J.B. Say (Coordination Theory):
    Entrepreneur combines factors of production for productivity.

  3. Schumpeter (Innovation Theory):
    Entrepreneur as “creative destroyer” — introducing new combinations:

    • New product

    • New method

    • New market

    • New source of supply

    • New organization

  4. Knight (Uncertainty-Bearing Theory):
    Profit is a reward for bearing uninsurable uncertainty.

  5. Kirzner (Alertness Theory):
    Entrepreneur discovers unnoticed opportunities and arbitrage gaps.

B. Sociological and Psychological Theories

Theory Proponent Focus
Need for Achievement Theory David McClelland High “nAch” motivates entrepreneurship.
Status Withdrawal Theory Hagen

Entrepreneurship as reaction to social frustration.
Cultural Theory Max Weber Protestant work ethic promotes enterprise.

C. Integrated Approach

Entrepreneurship arises from the interaction of economic, social, psychological, and environmental factors — not one single determinant.

🟩 4. PROCESS OF ENTREPRENEURSHIP DEVELOPMENT

  1. Opportunity Identification:
    Spotting unmet needs, trends, and market gaps.

  2. Feasibility Analysis:
    Technical, financial, and market viability study.

  3. Business Plan Preparation:
    Structured plan for operations, marketing, finance, HR, and growth.

  4. Resource Mobilization:
    Arranging finance, manpower, and materials.

  5. Implementation:
    Establishing the enterprise and commencing operations.

  6. Growth and Sustainability:
    Scaling operations, diversification, innovation.

Entrepreneurial Competencies

A set of knowledge, skills, and behaviors enabling success:

  • Initiative & perseverance

  • Risk management

  • Goal orientation

  • Networking ability

  • Problem-solving

  • Self-confidence

🟩 5. INTRAPRENEURSHIP – CONCEPT & PROCESS

A. Concept

Intrapreneurship = Entrepreneurship within an existing organization.
It involves employees acting like entrepreneurs to develop new products, improve processes, or enter new markets — without owning the firm.

B. Process

  1. Idea generation within firm.

  2. Top management support.

  3. Resource allocation & team formation.

  4. Pilot testing & commercialization.

  5. Reward and recognition.

C. Barriers

  • Bureaucratic culture

  • Risk aversion

  • Lack of autonomy

  • Inadequate reward systems

D. Advantages

  • Continuous innovation

  • Employee motivation

  • Competitive advantage

  • Organizational renewal

🟩 6. WOMEN ENTREPRENEURSHIP

A. Concept

A woman entrepreneur is one who individually or jointly owns and manages an enterprise.

B. Challenges

  • Limited access to finance and training

  • Cultural and social barriers

  • Balancing family and work responsibilities

  • Market access issues

C. Government Support Schemes

  • STEP: Support to Training and Employment Programme for Women

  • Mahila Coir Yojana

  • TREAD: Trade Related Entrepreneurship Assistance and Development

  • Stand-Up India Scheme (2016): Loans for women and SC/ST entrepreneurs.

🟩 7. RURAL ENTREPRENEURSHIP

A. Concept

Entrepreneurial activities in rural or semi-urban areas, utilizing local resources and skills.

B. Features

  • Labour-intensive

  • Based on agriculture and handicrafts

  • Local market orientation

C. Types

  1. Agro-based industries: Dairy, food processing.

  2. Handicrafts & village industries: Pottery, weaving.

  3. Service enterprises: Transport, repair shops.

  4. Social entrepreneurship: Rural healthcare, education.

D. Challenges

  • Poor infrastructure

  • Lack of credit and training

  • Market access limitations

E. Remedies

  • Rural industrial clusters

  • Government and NGO support

  • Cooperative models

  • Microfinance linkages

🟩 8. INNOVATION IN BUSINESS

A. Concept

Innovation = “Application of new ideas to improve products, processes, or services.”
(As per Schumpeter — “creative destruction”).

B. Types of Innovation

Type Example
Product Innovation New goods/services (smartphones)
Process Innovation

Improved production or delivery (automation)
Marketing Innovation

Novel pricing or packaging (Paytm cashback model)
Organizational Innovation

New management practices (flat hierarchy)
Business Model Innovation Redefining value creation (Airbnb, Uber)

C. Opportunity Identification

  • Market trends and customer pain points

  • Technological shifts

  • Government policies and incentives

  • Global best practices

D. Screening of Business Ideas

  1. Assessing feasibility (technical, financial, legal).

  2. Evaluating risk and profitability.

  3. Considering fit with entrepreneur’s competencies.

  4. Selecting the most viable idea for business planning.

🟩 9. BUSINESS PLAN AND FEASIBILITY ANALYSIS

A. Business Plan – Meaning

A written document outlining the goals, strategies, target market, financial projections, and operations of a proposed business.

B. Contents of a Business Plan

  1. Executive summary

  2. Product/service description

  3. Market analysis

  4. Marketing & sales strategy

  5. Management team

  6. Financial projections (income, cash flow, balance sheet)

  7. Risk assessment

  8. Funding requirements

C. Feasibility Analysis

Type Key Question Focus
Technical Feasibility Can we make it? Technology, inputs, process
Market Feasibility Can we sell it?

Demand, competition, pricing
Financial Feasibility Can we afford it? Cost, capital, profitability

D. Importance

  • Reduces risk and uncertainty

  • Attracts investors and lenders

  • Guides implementation

🟩 10. MICRO, SMALL & MEDIUM ENTERPRISES (MSMEs) IN INDIA

A. Definition (As per MSMED Act, 2006 – revised 2020)

Category Investment + Turnover (₹)
Micro Enterprise Investment ≤ ₹1 Cr & Turnover ≤ ₹5 Cr
Small Enterprise

Investment ≤ ₹10 Cr & Turnover ≤ ₹50 Cr
Medium Enterprise Investment ≤ ₹50 Cr & Turnover ≤ ₹250 Cr

B. Role of MSMEs

  • Contribute ~30% to India’s GDP.

  • Employ ~11 crore people.

  • Account for ~40% of exports.

  • Encourage regional development.

C. Government Initiatives

  • Udyam Registration Portal (replacing Udyog Aadhaar).

  • PMEGP: Prime Minister’s Employment Generation Programme.

  • Cluster Development Programme.

  • Make in India and Startup India initiatives.

🟩 11. SICKNESS IN SMALL INDUSTRIES

A. Meaning

A sick unit is one that fails to generate internal surplus and cannot meet financial obligations.

B. Causes

  1. Poor management or planning

  2. Obsolete technology

  3. Delayed payments and credit crunch

  4. Marketing and raw material problems

  5. Infrastructure bottlenecks

C. Rehabilitation Measures

  • Financial restructuring by banks

  • Technical modernization

  • Managerial and marketing assistance

  • Government revival packages (e.g., SIDBI schemes)

🟩 12. INSTITUTIONAL FINANCE TO SMALL INDUSTRIES

A. Major Financial Institutions

Institution Role / Function
SIDBI (Small Industries Development Bank of India) Apex institution for financing and promoting MSMEs.
NSIC (National Small Industries Corporation)

Raw material support, marketing, and training.
KVIC (Khadi and Village Industries Commission)

Promotion of rural and traditional industries.
NABARD Finances rural enterprises and agriculture-linked units.

B. Role of Banks

  • Commercial Banks: Provide working capital, term loans, export finance.

  • Cooperative Banks: Serve rural entrepreneurs.

  • Regional Rural Banks (RRBs): Focus on micro and small enterprises.

C. Microfinance Institutions (MFIs)

Provide small collateral-free loans to low-income entrepreneurs, especially women and rural groups.

Models:

  • Self-Help Group (SHG)–Bank Linkage

  • Grameen Model (group-based lending)

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