Thriving ‘Kandum’ Business

In Raguvir Nagar of West Delhi, as you walk through the shanty lanes you can easily witness a thriving informal sector. Wherever you look, you can find the heaps of used clothing at centre of business activities. Contrary to previous predictions of eventual demise of this sector at the global level, the informal economy has emerged in new guises.
Kailash who runs a unit of stitching and along with his family he manages to earn the considerable sum and his entrepreneurial endeavor enables a comfortable life. They buy used-clothing from the households that are useless for those people. After loosening stitches, they re-stitch them into various sizes before sell to the traders at nearby Purana Kapada Market.
Mohan  (45 year old) a school dropout from Uttar Pradesh who came in Delhi about 20 years ago with having seventy rupees in pocket now he possessed a piece of land which priced at 75 lakh.  Since then, Mohan is a regular peripatetic trader at Mandi and business of this used clothing gave him everything. Mohan narrated his success story to me. He added that he prefers embroidered garments and jeans. And prices of these embroidered cloths are much higher.
It is not an isolated story of entrepreneurial spirit at back of rubbles but this locality is a cradle of such numerous entrepreneurs. They are blooming on a principle – the fine stitch and the more money and further that is improving overall employment scenario. Same locality is also important for another reason. The government is running a cash transfer initiative instead of food grains through public distribution system but growing entrepreneurial spirit enabling them as self-dependent. They are aware of such initiatives.
When I ventured into nearby Purana  Kapda Vikray Market ( one of the largest  market place for used-clothing) there were forty  to fifty thousand  people, roughly. They vied for lying cloths like trousers, sarees etc. Some of workers were sorting cloths very fast. This market opens at 2 am daily and closes at around 1 pm after floor mopping and cleaning.
There are two types of workforce involved in this market one is self-employed and second one is wage employed. Under the self-employed category, whole families work together and toil for more than eight hours a day. On the other hand, there is another group of people who shorts cloths at piece rates. All most all market participants belong to Gujarat.
If you are regular for some times but you have not enough money to pursue your business then you can borrow easily form informal sector here known as Kishtiya. However, this business does not require a lot of money. Traders come here from Alwar, Gurgaon,  Rohtak  and all nook and corner of Delhi.
However there are no exact figures or data on involving work forces. Traders pay 3 rupees per gathar and if you are buyer of cloths then you will pay five rupees per gather.
These are not survival activities. It provides employment, goods and services for low-income groups. Anonymously these “ultimate entrepreneurs” are contributors to the economy as whole but they are invisible to the glitzy but it does not dampen their enthusiasm.

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Entrepreneurship & Indian Policies

In an interaction with a faculty at the leading entrepreneurship development institute lamented over uncertain policy issues related to entrepreneurship. And he said that we don’t have comprehensive entrepreneurship policy at the Union level, it is a policy for MSMEs. In this backdrop, I will shed light on various policy pronouncements by the Union Government in India which is based on publicly available sources.
“The importance of the MSME sector in the growing Indian economy has long been recognized; so also has the fact that the MSME sector faces several major hindrances to growth such as complicated bureaucratic registration procedures, accessing finance and working capital loans from banks and other institutional sources, accessing information and management skills.”(1)

A research study by International Finance Corporation (IFC) stated that the Micro, Small and Medium Enterprise sector is crucial to India’s economy. There are 29.8 million enterprises in various industries, employing 69 million people. The sector includes 2.2 million women-led enterprises (~7.4 percent) and ~15.4 million rural enterprises (51.8 percent). In all, the MSME sector accounts for 45 percent of Indian industrial output and 40 percent of exports. Although 94 percent of MSMEs are unregistered, the contribution of the sector to India’s GDP has been growing consistently at 11.5 percent a year, which is higher than the overall GDP growth of 8 percent. (2)
(Above mentioned figures are based on the Government data and IFC.)

Since Independence to the Sixties, Indian policy makers emphasize on the socialist model of development. During that time span, the Government provided a favorable condition for the State Owned Enterprises (SOEs) in India and the then political leadership leveled them as ‘Temple of Modern India’.  In this backdrop, the Union Government pronounced some policy measures in order to accelerate industrial growth. But the small scale industries remained ignored at the large extent.

The first industrial policy in Independent India announced in April 1948. In order to meet industrial requirement, the Union Government announced industrial policies 1956, 1980 and 1991 which is closely associated with business activities in India. Finally, the Union Government enacted the Micro, Small and Medium Enterprises (MSME) Development Act in 2006.

 

INDUSTRIAL POLICIES & SMALL SCALE INDUSTRIES

Industrial Policy Resolution, 1948: The Policy aimed at outlining the approach to Industrial growth & development. It emphasised the importance to the economy of securing a continuous increase in production and ensuring its equitable distribution

Industrial Policy Resolution, 1956:  Under the Policy the role of State was given more importance as an engine for accelerating the economic growth and speeding up the industrialization as a means of achieving a socialist pattern of society.

Industrial Policy Statement, 1973:  The thrust of this Policy Statement was an identification of high-priority industries where investment from large industrial houses and foreign companies were permitted.

Industrial Policy Statement, 1977:  The Policy emphasized on decentralization and growth of small scale industries

Industrial Policy Statement, 1980:  The Policy einusaged promoting competition in domestic market, technology upgradation and modernization. The policy laid the foundation for an increasingly competitive export based and for encouraging foreign investment in high-technology areas.

Industrial Policy 1991
The main objectives of the Policy were as follows:

• To maintain a sustained growth in productivity and gainful employment and attain international competitiveness.
• Self-reliance or building up the ability to pay our import bills through our own foreign exchange earnings and developing indigenous capacity in technology and manufacturing
• Pursue sound policy framework encompassing encouragement to entrepreneurship, development of indigenous technology, dismantling of the regulatory system
• Development of capital markets and increasing competitiveness
• Spread of industrialization to backward areas through appropriate incentives, institutions and infrastructure investments
• Encourage foreign investment and technology collaboration
• Abolish monopoly of any sector or any individual enterprise in any field of manufacture except on strategic and military considerations and open all manufacturing activity to competition
• Ensure that public sector plays its rightful role in strategic areas of national importance.
• Protect the interests of labour, enhance their welfare and equip them to deal with technology Change
Source: http://eaindustry.nic.in/handbook_200809/Chapter%201.pdf

 

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 seeks to facilitate the development of micro, small and medium enterprises. It provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium.

The Act also provides a statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly from these three categories.

 

Source: http://pib.nic.in/release/rel_print_page1.asp?relid=46960

This Act emphasized on various issues related to MSME Sector. These are access to financing, skill development, access to market, competitive technology and quality improvement.
In order to promote entrepreneurship in India, several ministries started programmes for intended beneficiaries. Some of them are successful in achieving desired goal but many of them are struggling at the ground level.

National Science & Technology Entrepreneurship Development Board (NSTEDB)
The National Science & Technology Entrepreneurship Development Board (NSTEDB), established in 1982 by the Government of India under the aegis of Department of Science & Technology, is an institutional mechanism to help promote knowledge driven and technology intensive enterprises. The Board, having representations from socio-economic and scientific Ministries/Departments, aims to convert “job-seekers” into “job-generators” through Science & Technology (S&T) interventions.

Major Objectives of NSTEDB
To promote and develop high-end entrepreneurship for S&T manpower as well as self-employment by utilising S&T infrastructure and by using S&T methods.
To facilitate and conduct various informational services relating to promotion of entrepreneurship.
To network agencies of the support system, academic institutions and Research & Development (R&D) organisations to foster entrepreneurship and self-employing using S&T with special focus on backward areas as well.
To act as a policy advisory body with regard to entrepreneurship

The programmes are broadly classified into the following areas:
Training programmes
Entrepreneurship Awareness Camp (EAC)
Entrepreneurship Development Programme (EDP)
Faculty Development Programme (FDP)
Technology Based EDP (TEDP)

Institutional mechanisms for entrepreneurship development
Innovation and Entrepreneurship Development Centre (IEDC)
Science & Technology Entrepreneurship Development (STED) Project
Science and Technology based Entrepreneurship Development (i-STED)
Science & Technology Entrepreneurs Park (STEP)
Technology Business Incubator (TBI)
Information dissemination
Source: http://www.dst.gov.in/scientific-programme/st-nstedb.htm#2


National Scheduled Castes Finance and Development Corporation(NSFDC)
NSFDC was setup by the Govt. of India on February 08, 1989 with the name National Scheduled Castes and Scheduled Tribes Finance and Development Corporation (NSFDC) . It was incorporated as a fully owned Government Company under Section 8 of the Companies Act, 2013.

VISION: Fighting Poverty through Entrepreneurship.
MANDATE: Providing concessional finance for setting up of self-employment projects and skill-training grants to unemployed SC persons living below Double the Poverty Line.
NSFDC: NSFDC is an institution under Ministry of Social Justice & Empowerment, Government of India for financing, facilitating and mobilizing funds for the economic empowerment of persons belonging to the Scheduled Castes families living below Double the Poverty Line. NSFDC finances income generation schemes for the target group through the State Channelising Agencies (SCAs) nominated by respective State/UT Governments.
BROAD OBJECTIVE: NSFDC is the apex institution for financing, facilitating and mobilizing funds from other sources and promoting the economic development activities of the persons belonging to the Scheduled Castes living below double the poverty line.
It has been assigned the task for financing, facilitating and mobilizing funds for the economic empowerment of persons living below Double of the Poverty Line (DPL). It provides financial assistance for income generating schemes for the target group through state Channelising Agencies (SCAs) which are nominated by respective State/UT Government.

This is managed by a Board of Directors with representation from Central Government, State Scheduled Castes Development Corporations, Financial Institutions and non-official members representing Scheduled Castes.
Source: http://www.nsfdc.nic.in/


The Khadi and Village Industries Commission (KVIC)

The Khadi and Village Industries Commission (KVIC) is a statutory body established by an Act of Parliament (No. 61 of 1956, as amended by act no. 12 of 1987 and Act No.10 of 2006. In April 1957, it took over the work of former All India Khadi and Village Industries Board.

Objectives
The social objective of providing employment
The economic objective of producing saleable articles
The wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit

Functions
The KVIC is charged with the planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development wherever necessary. Its functions also comprise building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products apart from organisation of training of artisans engaged in these industries and encouragement of co-operative efforts amongst them. To promote the sale and marketing of khadi and/or products of village industries or handicrafts, the KVIC may forge linkages with established marketing agencies wherever feasible and necessary.

The KVIC is also charged with the responsibility of encouraging and promoting research in the production techniques and equipment employed in the Khadi and Village Industries sector and providing facilities for the study of the problems relating to it, including the use of non-conventional energy and electric power with a view to increasing productivity, eliminating drudgery and otherwise enhancing their competitive capacity and arranging for dissemination of salient results obtained from such research.
Further, the KVIC is entrusted with the task of providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information.
In implementing KVI activities, the KVIC may take such steps as to ensure genuineness of the products and to set standards of quality and ensure that the products of Khadi and village industries do conform to the standards.
The KVIC may also undertake directly or through other agencies studies concerning the problems of Khadi and/or village industries besides research or establishing pilot projects for the development of Khadi and village industries.
The KVIC is authorized to establish and maintain separate organisations for the purpose of carrying out any or all of the above matters besides carrying out any other matters incidental to its activities.
Source:http://kvic.org.in/index.php?option=com_content&view=article&id=257&Itemid=147

 

Dairy Entrepreneurship Development Scheme (DEDS)

Dairy/Poultry Venture Capital Fund scheme was started in December 2004 with an outlay of Rs. 25.00 Crore.  The fund was released during 2005-06 for the first time for implementation of the scheme. This scheme has been fragmented into two separate scheme viz. Dairy Venture Capital Fund & Poultry Venture Capital Fund from the financial year i.e. 2008-09.
Dairy Venture Capital Fund Scheme (DCVF)) was evaluated by Centre for Management Development (CMD) Thiruvanthapuram, Kerala and final report was submitted by them in the year 2009.  The modification was made under the scheme on the basis of recommendation made in the independent evaluation study done by CMD, changes suggested by the beneficiaries, implementing agency (NABARD) and lead banks.  In the EFC meeting held on 24th June, 2010 under the Chairmanship of Secretary (ADF ,it was decided to modify the Dairy Venture Capital Fund and change it’s name to Dairy Entrepreneurship Development Scheme to make the scheme more effective through  wider coverage, enhanced component-wise outlays and by including new components for assistance under the scheme. The scheme DVCF came to a close on 31st August, 2010. The new modified scheme DEDS was started from 01.09.2010 with an outlay of Rs 250 crore during the 11th Plan.

Objectives of the Scheme
Setting up modern dairy farms for production of clean milk
Encourage heifer calf rearing for conservation and development of  good breeding stock
Bring structural changes in unorganized sector so that initial processing of milk can be taken up at village level.
Up gradation of traditional technology to handle milk on commercial scale
Generate self-employment and provide infrastructure mainly for unorganized dairy sector.

Pattern of assistance
Entrepreneur contribution (Margin)-10% of the outlay (Minimum)
Back ended capital subsidy –25% of the outlay – general category (33.33% for SC/ST farmers)
Effective Bank Loan – Balance portion/Minimum of 40% of the outlay.
Government of India will provide 25% back ended capital subsidy to General category and 33.33% for SC/ST farmers of the cost of project subject to its component wise ceiling which will be adjusted against the last few instalments of repayment of bank loan.

Implementing Agencies: National Bank for Agriculture & Rural Development (NABARD) will be the Nodal Agency for implementation of the scheme. Commercial Banks, Co-operative Banks and Regional Rural and urban Banks will implement the scheme. The scheme is open to organized as well as unorganized sector.

Target group/beneficiaries: The Department has proposed this scheme for dairy development and the eligible beneficiaries of the scheme are agricultural farmers, individual entrepreneurs and groups of unorganized and organized sector. Group of organized sector, includes self-help groups, dairy cooperative societies, Milk unions, milk federation, etc…This scheme shall also help in employment generation at village level as well as Dairy Co-operative Society level.
Source: http://dahd.nic.in/dahd/deds.aspx

 

National Bank for Agriculture and Rural Development

National Bank for Agriculture and Rural Development (NABARD) was set up on 12 July 1982 with the mandate to achieve rural prosperity through credit and related activities. Recognizing the importance of the Rural Non-farm Sector (RNFS) in the faster economic development of rural areas, NABARD had taken a number of initiatives, both with refinance support and promotional assistance, for development of this sector. Of these, Rural Entrepreneurship Development Programme (REDP) is a major promotional initiative, which aims at developing enterprise and creating employment opportunities in rural areas.

Rural Entrepreneurship Development Programme (REDP)
Rural Entrepreneurship Development Programme (REDP) is one of the important NFS promotional programmes supported by NABARD for creating sustainable employment and income opportunities in a cost effective manner for the benefit of educated unemployed rural youth.

Objective: Developing entrepreneurial and activity-oriented skills among unemployed rural youths willing to set up small/ micro-enterprises by assisting Voluntary Agencies (VA)/ Non- Governmental Organisations (NGO)/ Development Agencies (DA)/ RUDSETIs etc. with good track record in conducting REDPs. 

Features and Coverage of REDP
REDP comprises 3 distinct phases, viz., pre-training, training and post-training phase. The success of the programme depends on the strict adherence to these phases.

(i) Pre-training
Detailed survey for identifying potential business activities/ market, publicity, awareness creation and motivational campaign, Coordination with various agencies – especially banks, Government  Department Formation of Selection Committee, Project Monitoring Committee, Selection of trainees etc… 

(ii) Training
The duration of the programme is 6-8 weeks. Training module comprises : Achievement motivation, Opportunity identification and guidance, Knowledge on supporting agencies and schemes, Preparation of project reports/profiles, Management of resources (men, material, money), Marketing aspects, Book-keeping/Accounting. In case of technical/ activity based REDP, inputs on technical aspects/ skill development/appropriate technology will be included. Case-studies on potential activities, field visits, practical work, visit to successful units, etc., to be integral part of training programme

(iii) Post-training
Facilitating credit linkages for setting up units and Escort services to trainees for atleast two years.

Eligible Institutions
NGOs / Voluntary Agencies / Development Agencies and RUDSETI type institutions. NABARD provides promotional assistance to capable agencies with good track record and professional competence to successfully implement REDP.
Source: http://oldsite.nabard.org/nonfarm_sector/pp_de_redp.asp

Small Industries Development Bank of India (SIDBI)
Small Industries Development Bank of India (SIDBI), set up on April 2, 1990 under an Act of Indian Parliament, is the Principal Financial Institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector and for Co-ordination of the functions of the institutions engaged in similar activities. 

Business Domain of SIDBI
The business domain of SIDBI consists of Micro, Small and Medium Enterprises (MSMEs), which contribute significantly to the national economy in terms of production, employment and exports. MSME sector is an important pillar of Indian economy as it contributes greatly to the growth of Indian economy with a vast network of around 3 crore units, creating employment of about 7 crore, manufacturing more than 6,000 products, contributing about 45% to manufacturing output and about 40% of exports, directly and indirectly. In addition, SIDBI’s assistance also flows to the service sector including transport, health care, tourism sectors etc …Source: http://www.sidbi.in/?q=about-sidbi

 

RAJIV GANDHI UDYAMI MITRA YOJANA

It is a scheme of Promotion and Handholding of Micro and Small Enterprises under the Ministry of MSMEs.

Eligibility
Under RGUMY, financial assistance would be provided to the selected lead agencies i.e.  Udyami Mitras for rendering assistance and handholding support to the potential first  generation entrepreneurs. Following agencies/ organizations can be appointed as the lead  agency i.e. Udyami Mitra:
i. Existing national level Entrepreneurship Development Institutions (EDIs).
ii. Micro, Small and Medium Enterprises Development Institutes (MSMEDIs)/  Branch MSMEDIs.
iii. Central/ State Government public sector enterprises (PSEs) involved in  promotion and development of MSEs e.g. National Small Industries Corporation (NSIC) and State Industrial Development Corporations etc.
iv. Selected State level EDIs and Entrepreneurship Development Centers (EDCs) in public or private sectors;
v. Khadi and Village Industries Commission (KVIC).
vi. Special Purpose Vehicles (SPVs) set up for cluster development involved in entrepreneurship development;
vii. Capable associations of MSEs/SSIs;
viii. Other organizations/training institutions/NGOs etc. involved in entrepreneurship development/ skill development.
Source: http://rgumy.nic.in/RGUMY/rgumy_doc/RGUMY_ENGLISH_Booklet_revised_11052010.pdf

 

REFERENCE

(1) http://www.isb.edu/faculty/shamika/MSME%20chapter_Shamika%20Ravi.PDF

(2) Micro, Small and Medium Enterprise Finance in India
A Research Study on Needs, Gaps and Way Forward (November, 2012) by International Finance Corporation (IFC)

Journey of Entrepreneurship

In India, entrepreneurship is becoming a popular subject among students, faculties and researchers. Increasingly, many people ranging from policymakers to media are emphasizing that entrepreneurship is the key to economic development.

The word “Entrepreneur” is a French derivation. In 1755, Richard Cantillon first introduced the term. Cantillion‟s entrepreneur is someone who engages in exchanges for profit; specifically, he is someone who exercises business judgment in the face of uncertainty.

Writing in Harvard Business Review, Geoffrey Jones and R. Daniel Wadhwani said, “During the 1940s and 1950s business historians pioneered the study of entrepreneurship. The interdisciplinary Center for Research on Entrepreneurial History, based at Harvard Business School which included Joseph Schumpeter and Alfred Chandler, and its journal Explorations in Entrepreneurial History were key institutional drivers of the research agenda. However the study of entrepreneurship ran into formidable methodological roadblocks, and attention shifted to the corporation, leaving the study of entrepreneurship fragmented and marginal. Nevertheless business historians have made significant contributions to the study of entrepreneurship through their diverse coverage of countries, regions and industries, and – in contrast to much management research over the  past two decades – through exploring how the economic, social, organizational, and  institutional context matters to evaluating entrepreneurship.”

Since then literature on entrepreneurship has developed and expanded its horizon after interacting with economic theories and business histories. In the following text, I will discuss various theories on entrepreneurship which is postulated by leading experts and economists.

Jean-Baptiste Say: Father of Entrepreneurship
Jean-Baptiste Say was the second author to take an interest in entrepreneurs. He regarded economic development as the result of venture creation, and hoped the English Industrial Revolution would spread to France (Say, 1815, 1816). Cantillon and Say regarded entrepreneurs as risk-takers basically because they invested their own money.

In Cantillon’s view, entrepreneurs bought a raw material – often a farm product – at a certain price, in order to process it and resell it at an uncertain price. Entrepreneurs were therefore people who seized opportunities with a view to making profits, and assumed the inherent risks. Say drew a distinction between the entrepreneur and the capitalist, and between their profits (Say, 1803; 1827: 295; 1815; 1816: 28-29; Schumpeter, 1954: 555).
In doing so, he associated entrepreneurs with innovation. He viewed entrepreneurs as  change agents. He himself was an entrepreneur, and became the first to define the  boundaries of what an entrepreneur, in the modern sense of the term, actually is.
Schumpeter (1954) admitted that a major part of his own contribution was to tell the Anglo-Saxon community about the world of the entrepreneur as described in the writings of Jean-Baptiste Say. As Say was the first to lay a foundation for the field, we have described him as the father of entrepreneurship (Filion, 1988).1
It is perhaps interesting to note that what Say did was basically to draw together two major trends of thought of his time: that of the physiocrats and that of the Industrial Revolution in Great Britain. He was a great admirer of Adam Smith (1776), whose ideas he brought to France, and of the English Industrial Revolution (Say, 1816). In fact, he tried to establish a framework of thought that would enable the Industrial Revolution to move across the Channel to France. He applied the liberal thinking proposed by Quesnay, Mercier de La Rivière, Mirabeau, Condorcet, Turgot and other physiocrats as a means of developing farming, to the entrepreneur.

Joseph Schumpeter on Entrepreneurship
Joseph Schumpeter is seen as the foremost theoretician of entrepreneurship. In addition, Schumpeter, whose “creative destruction” is as famous as Milton Friedman’s “there is no free lunch,” is increasingly recognized as a major economist, often given the same stature as John Maynard Keynes.

Schumpeter spent the last twenty years of his life as a Professor of Economics at Harvard University. English-speaking readers may be familiar with some of his works, especially The Theory of Economic Development and the classic Capitalism, Socialism, and Democracy. However, very few of Schumpeter’s key texts on the entrepreneur and entrepreneurship have been available in English. (2)
W. Michael Cox and Richard Alm write, “Joseph Schumpeter (1883–1950) coined the seemingly paradoxical term “creative destruction,” and generations of economists have adopted it as a shorthand description of the free market’s messy way of delivering progress. In Capitalism, Socialism, and Democracy (1942), the Austrian economist wrote:
The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. (p. 83)

Although Schumpeter devoted a mere six-page chapter to “The Process of Creative Destruction,” in which he described capitalism as “the perennial gale of creative destruction,” it has become the centerpiece for modern thinking on how economies evolve. (4)
Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative destruction” as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. The question is not “how capitalism administers existing structures…[but] how it creates and destroys them.” This creative destruction, he believed, causes continuous progress and improves the standards of living for everyone.(3)

In online version of Library of Economics and Liberty, Timothy Sandefur stated: “According to Schumpeter, the process of technological change in a free market consists of three parts: invention (conceiving a new idea or process), innovation (arranging the economic requirements for implementing an invention), and diffusion (whereby people observing the new discovery adopt or imitate it). These stages can be observed in the history of several famous innovations. The Xerox photocopier was invented by Chester Carlson,5 a patent attorney frustrated by the difficulty of copying legal documents.6 After several years of tedious work, Carlson and a physicist friend successfully photocopied a phrase on October 22, 1938. But industry and government were not interested in further development of the invention. In 1944, the nonprofit Battelle Corporation,7 dedicated to helping inventors, finally showed interest. It and the Haloid Company (later called Xerox) invested in further development. Haloid announced the successful development of a photocopier on October 22, 1948, but the first commercially available copier was not sold until 1950. After another $16 million was invested in developing the photocopier concept, the Xerox 915 became the first simple push-button plain-paper copier. An immense success, it earned Carlson more than $150 million.8 In the following years, competing firms began selling copiers, and other inventions, such as the fax machine, adapted the technology.”
Sandefur further added, “Schumpeter limited his analysis of innovation to its economic aspects, but Friedrich Hayek pointed out that the same process takes place at the level of social mores and political philosophy. Hayek and his contemporary Karl Popper developed the political theory of the “open society,” stressing the importance of innovation for the discovery and testing of social values. In Hayek’s words, “the existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones.”10 This process, however, creates discomfort as well.” Friedrich Hayek was leading economist. He popularized the Austrian School in economic thinking and various towering figures are associated with this school.

Israel Kirzner and Entrepreneurship
Israel Kirzner(born 1930) refined the academic understanding of entrepreneurship and postulated concepts of entrepreneurial alertness and discovery. His book, Competition and Entrepreneurship criticizes neoclassical theory for its preoccupation with the model of perfect competition, which neglects the important role of the entrepreneur in economic life. His contribution to entrepreneurship is widely recognized.
Russell S. Sobel said in Liberary of Economics and Liberty, “In contrast to Schumpeter’s view, Kirzner focused on entrepreneurship as a process of discovery. Kirzner’s entrepreneur is a person who discovers previously unnoticed profit opportunities. The entrepreneur’s discovery initiates a process in which these newly discovered profit opportunities are then acted on in the marketplace until market competition eliminates the profit opportunity. Unlike Schumpeter’s disruptive force, Kirzner’s entrepreneur is an equilibrating force. An example of such an entrepreneur would be someone in a college town who discovers that a recent increase in college enrollment has created a profit opportunity in renovating houses and turning them into rental apartments. Economists in the modern austrian school of economics have further refined and developed the ideas of Schumpeter and Kirzner.”
For more than three decades, Professor Israel M. Kirzner has developed the economic theory emphasizing the importance of the entrepreneur for economic growth and the functioning of the capitalist process. In his theory building on entrepreneurship, Kirzner links the idea of the highly individual skills and knowledge of man with the entrepreneur of Ludvig von Mises, Kirzner’s teacher and mentor. He has thereby become the single most important scholar in modern Austrian economics. In the 1970s and 1980s he was instrumental in laying the foundation for a new research community in Austrian economics and the theory of the competitive market process.
Kirzner spells out a theory of the entrepreneurial market process that fills the theoretical gap in traditional price theory. The entrepreneur is posited as the prime mover in the economic system and as such s/he is alert to gaps in the market and enticed by the lure of pure profit. The gaps discovered by alert entrepreneurs are continuously closed through arbitrage. The market is depicted as an unending process of the entrepreneurial discovery of opportunities for mutual gain from exchange.(5)

David C. McClelland and Entrepreneurship
In Journal of Enterprising Culture, Louis Jacques Filion wrote in 1997, “For the purposes of this paper, the term “behaviorists” includes the psychologists, psychoanalysts, sociologists and other specialists of human behavior. One of the first authors from this group to show an interest in entrepreneurs was Max Weber (1930). He identified the value system as a fundamental element in explaining entrepreneurial behavior. He viewed entrepreneurs as innovators, independent people whose role as business leaders conveyed a source of formal authority. However, the author who really launched the contribution of the behavioral sciences to entrepreneurship was undoubtedly David C. McClelland.”
According to Filion, McClelland did not define entrepreneurs in the same way as the rest of the literature. His definition was as follows: “An entrepreneur is someone who exercises control over production that is not just for his personal consumption. According to my definition, for example, an executive in a steel-producing unit in the USSR is an entrepreneur.” (McClelland, 1971; see also 1961: 65)

Filion further added, “In fact, McClelland’s (1971) work concentrated on managers of large organizations. Although he is strongly associated with the field of entrepreneurship, a careful reading of his writings shows that he never made a connection between the need for achievement and the decision to launch, own or even manage a business (Brockhaus, 1982: 41). McClelland also identified the need for power, but he paid less attention to this aspect in his later work, and it is less well-known. A number of researchers have studied need for achievement, but nobody seems to have obtained conclusive results that associate it with entrepreneurial success (Durand and Shea, 1974; Hundall, 1971; Schrage, 1965; Singh and Singh, 1972).”

To be continued…

REFERENCE 

(1) http://web.hec.ca/creationdentreprise/CERB_Backup-12-mai-2008/pdf/1997 05EPIEntreprenology.pdf
(2) http://www.sup.org/book.cgi?id=17858
(3) http://www.econlib.org/library/Enc/CreativeDestruction.html
(4) http://www.econlib.org/library/Enc/bios/Schumpeter.html
(5) http://www.eaward.org/web/2006_Israel_M_Kirzner.aspx

Covering Entrepreneurial Ecosystem

Recently one friend suggested me to share all stories on this blog. Keeping his noble suggestion in mind I am sharing few stories and interviews.
In last couple of years, I covered entrepreneurship and solution innovations in India. Here I am posting few stories and interviews. Your comments and feedback are welcome…

relauncHER: Positive Impact on Women Professionals
After a yearlong study of women careers, Jyotika Singh founded relauncHER in order to remove the barriers and biases related to career breaks and stop penalizing women for the difficult choices they have to make. In an interview, Jyotika highlights several issue related to women’s employment in India: (13 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676542554/relauncher-creates-a-positive-impact-on-women-professionals.html

Social Innovation at Work in India
After more than six decades of Independence, the excluded majority in India is grappling with intractable problems where grinding poverty is worsening their conditions. In this backdrop, BMVSS ventured into this segment to reduce social hardship with clear social vision and commitment. (09 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676542192/social-innovation-at-work-in-india.html

Entrepreneurs in Each Region Should Share their Experiences: Vivek Wadhwa
In an exclusive interview, Vivek Wadhwa, a leading global thinker, sheds light on innovative solutions to plug loopholes. (04 November 2013)  http://www.saharasamay.com/business-news/entrepreneurship/676541850/entrepreneurs-in-each-region-should-share-their-experiences.html

Jugaad is crucial for India: Dr Jaideep Prabhu
Dr Jaideep Prabhu is director of the Centre for India & Global Business at Judge Business School, University of Cambridge, UK. Prabhu is co-author of Jugaad Innovation: Think Frugal, Be Flexible, Generate Breakthrough Growth. In an exclusive interview with Samay Live, Prabhu sheds light on various issues related to entrepreneurship development in India. (02 November 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541756/jugaad-is-crucial-for-india.html

Skill Development by Startups
A lack of suitable skills and unorganized nature of employment created tricky situation for the households in various pockets of urban India. But in last few years, several startups with fledgling ideas ventured into this nascent segment to lag the gap. (October 2013) http://www.linkedin.com/lite/external-redirect?url=http%3A%2F%2Fwww%2Esaharasamay%2Ecom%2Fbusiness-news%2Fentrepreneurship%2F676541048%2Fskill-development-by-startups-in-india%2Ehtml&urlHash=pthw

 

Energy for All
Clean cooking solutions in developing countries like India are very much an unexplored terrain. In order to provide such solution, new enterprises are venturing into this terrain in the last few years. (29 October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541402/clean-cooking-solutions-in-india.html

Contributing to the Common Good
India has just entered into social entrepreneurship movement to explore newer and innovative solutions to address the most compelling socio-economic challenges. These young entrepreneurs from all over India are contributing to the common good.  (27 October 2013)
http://www.saharasamay.com/business-news/entrepreneurship/676541055/india-has-just-entered-into-social-entrepreneurship-movement.html

Green Businesses
Sheer amount of electronic gadgets from cheap to high-end have infiltrated every day live in India. Its toxic constituents are posing a big challenge of a different kind where e-waste cycling industry is largely unorganized. At this juncture, some startups have ventured into this uncharted terrain to address growing challenges of e-waste. (26 October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541045/e-waste-recycling-activities-in-india-2013.html

A New Wave of Social Enterprises
In a bid to provide clean drinking water, a new wave of social enterprises emerged and showed an unleashing potential to tackle social-economic hardships. Such change makers are inspiring the coming generation to tackle the world’s one of the toughest social and environmental challenges.  (October 2013) http://www.saharasamay.com/business-news/entrepreneurship/676541258/a-new-wave-of-social-enterprises.html

Pursuing a Passion
Young students are capable to handle pressure, but maturity is still lacking due to lack of exposure to startups, business and entrepreneurship ecosystem. Article sheds light on the entrepreneurship ecosystem from funding to entrepreneurship development programmes in India.  (October  2013) http://www.saharasamay.com/business-news/entrepreneurship/676541156/the-entrepreneurship-ecosystem-from-funding-to-entrepreneurship-.html