UNIT IV: ROLE OF ENTREPRENEUR 1. ROLE OF ENTREPRENEUR IN GROWTH AS AN INNOVATOR 1.1.

ROLE OF GROWTH ENTREPRENEUR IN THE THE ECONOMIC ECONOMIC

Entrepreneur is an essential requirement for the speedy economic growth of any economy as stated below: 1.1.1. Increasing Production: It results in exploitation of economys resources such as labour, capital & technology to the fullest extent for increasing national production. Entrepreneurs take up production of goods and services for: i. Meeting the demand of consumers ii. Import substitutions iii. Exports to other countries 1.1.2. Challenging Career Option: A young person who is innovative and creative can start on a small scale & later expand it to create a large enterprise. This will ensure a personal growth of the entrepreneur. 1.1.3. Decentralization of economic power: Most of the entrepreneur starts business enterprises on a small scale & then seek their growth through reinvestments of profits. By doing so, they break the monopoly of existing large enterprises which might be restoring to exploitation of consumers. Rise of small units leads of decentralization of economic power & thus creating a balancing the control of economic resources in the economy. 1.1.4. Increasing Competition in the market: Entrepreneurs are innovators as they introduce new products & substitutes & new techniques of production. Availability of new products & improved substitutes increases the level of competitions in the market resulting in lower prices & the better quality for the consumers. In India, small entrepreneur produces goods for export and thus increases Indias international competitiveness. 1.1.5. Innovation: The entrepreneurs create new technologies & products that displace older technologies & products that

displace older technologies & products resulting in higher income & wealth than what are currently available to them. 1.1.6. Employment Generation: Entrepreneurship results in creation of new jobs in economy. Small business units create more jobs than large ones, During economic recession, when large companies are on their way to retrenchment of their workforce, individuals whose jobs are eliminated find employment with small business units, Small & high technology business creates new job at much faster rate than older business firms. 1.1.7. Harnessing Youth Power: Youth power is available is abundance in India. But, avenues of wage/salary employment are limited. Due to lack of entrepreneurial opportunities in the society, the youth vigor is often channeled to self destruction & non-productive areas. The nation thus loses its most valuable resource-the youth vigor.

1.2. ROLE OF ENTREPRENEUR ECONOMIC GROWTH

AS AN INNOVATOR IN

According to Schumpeter, as an innovator, entrepreneur forces the potentially profitable opportunities to exploit it. He is a risk bearer, problem shooter and gets satisfaction in confronting problems. As an innovator, entrepreneur performs the following activities: 1.2.1. Bringing about new combinations: As an innovator, entrepreneur brings about the new combinations in the following manner: i. Introduction of new products ii. Introduction of new techniques of production iii. Opening of new market iv. Conquest of new source of supply of raw materials or semi-finished goods v. The carrying out of new organizations of any industry like the creation of monopoly 1.2.2. Making use of potential knowledge for continuous technological progress: Continuous technological progress will spearhead towards innovation. Entrepreneur depends upon the following two important things to achieve economic rewards: a) The existence of technical knowledge in order to produce new products

b) The power of dispersal over the factors of production in the form of credit. Innovation results in steady increase in total output & per capita output since historically diminishing return does not operate in case of technological progress. From the point of view of achieving economic development, it is necessary that underdeveloped countries should use innovation as an important tool of economic development. 1.2.3. Emphasizing on purposeful & systematic innovation: Drucker emphasized on the role of entrepreneur as an innovator. He pointed out that purposeful & systematic innovation being with the analysis of opportunities & a successful innovation should aim at leadership. This quality is one of the most crucial attribute of the entrepreneur to bring about economic development. As entrepreneurship development and economic development are interlinked, changes in perception of the individuals are imperative. This will give rise to considerable innovative opportunities. Further, knowledge based innovations are required for development of entrepreneurship. 1.2.4. Implementation of mechanical skills: Technology innovations & creativity played the crucial role in encouraging entrepreneurship & economic development. Innovations give rise to utilization of innovation talents which initiate & improve the economic growth in the following ways: a) Improvement in per capita income b) Increase in capital formation c) Generation of employment opportunities d) Balanced growth e) Improvement in standard of living f) Economic independence g) Backward & forward integration h) Technological advancement i) Establishment of new form of organization j) Entrepreneurial competency development

2. ROLE OF ENTREPRENEUR IN GENERATION OF EMPLOYMENT OPPURTUNITIES

2.1. Establishing tiny, micro and small scale industries: In developing economy like India, where population pressure is quite high & the job employment is limited, the role of entrepreneur is very much significant. Entrepreneurial development gives rise to economic independence through self employment. Creation of tiny,

micro and small enterprises entrepreneurs can lead to creation of both self employment & wage employment opportunities, thereby solving the problems of unemployment in the economy. 2.2. Giving emphasis upon village & cottage industries: Upliftment of economically backward sections of the society can be made possible if self employment opportunities can be provided at the grass root level. To enable these people in backward region of the state to set up village & cottage industries, government has implemented certain anti-poverty programmes and the importance of entrepreneurs in cottage & village industries sector has been clearly acknowledged by Mahatma Gandhi & his policy priorities in village upliftment including khadi & village industries in his famous constructive programme in 1922. Prior to independence, cottage industries & handicraft production located in rural areas had occupied a distinct place in Indian economy because of their high potential in employment generation & income creation especially in rural & backward areas. As such entrepreneur can play a significant role in setting up and reviving the cottage and village industries, thereby creating employment opportunities to a large number of people living in rural and backward pockets of the country. 2.3 Utilising the surplus labour force in industrial activities: India is a primary producing country. This characteristic feature is further accentuated by the seasonality feature of the agriculture. Therefore, for a large part of the year, people remain unemployed. Disguised unemployment is a chronic phenomenon in agriculture wherein more people work in a field than actually required. So the surplus labour force is transferred & utilized by the entrepreneur in non-farm sector activities which are labour intensive in nature. 2.4. Employment argument: It would be worthwhile to mention employment argument favoring the growth of small scale enterprise & the role of entrepreneur in accelerating this growth.

3. COMPLEMENTING ECONOMIC GROWTH

AND

SUPPLEMENTING

The role of entrepreneur is important as it not only complements but also supplements the economic growth of the country. Entrepreneurs initiates increase & sustain the economic growth in the following ways: I. Generation of employment: Entrepreneurs generate employment opportunities, both direct & indirect, through establishment of small scale enterprises. Those enterprises are

conspicuous enough to create large volume of employment & as a result of which unemployment is reduced. Small enterprises create immediate & permanent employment at a relatively small capital& these industries are helping our country to achieve economic growth. II. Capital Formation: It is always necessary to step up the rate of capital formation so that the economy accumulates a large amount of stock which can be geared into production by the entrepreneur. III. Increase in per capita income: It is the entrepreneurial communities who compliment & supplement the economic growth in increasing the per capita income & the Net National Product of the country by identifying & establishing profitable business ventures. IV. Improvement in physical quality of life: Entrepreneurs supplement the economic growth in enhancing the physical quality of life. This implies that increase in the life expectancy & increase in literacy. Establishment of enterprise leads to increase in employment avenues both directly & indirectly. Poverty is alleviated & per capita income grows. This results in improving the physical quality of life which is the indicator of economic growth. V. Improvement in standard of living: Entrepreneurs establish different types of enterprises so as to improve the standard of living of the masses. They produce innovative products & help to improve the standard of living of the common man. Entrepreneurs complement the standard of living & economic well being of the people. VI. Growth of infrastructural facilities: Entrepreneur plays a great role in the growth of infrastructural facilities which are the cornerstones of economic growth. Establishment of factories & industries in a particular locality presupposes the growth of infrastructural facilities. VII. Economic Industries: National self- reliance can be ensured due to the growth of entrepreneurship. In augmenting the indigenous technologies & their usue in massive way in small scale enterprises, dependence in foreign technologies can be avoided. Entrepreneurs can also export their goods & commodities & thereby earn the scare foreign exchange for the

country. Hence, entrepreneurs act as the agents of economic growth. VIII. Backward & forward linkages: Entrepreneurs initiates change in the economy by way of forward & backward linkages. Establishment of a giant unit generates several ancillary industries on one hand & several other industries which grow by utilizing the raw materials & by products produced by the mother plant on the other. In this way, entrepreneurs supplement the economic growth.

4. ROLE OF ENTREPRENEUR IN BRINGING ABOUT SOCIAL STABILITY AND BALANCED REGIONAL DEVELOPMENT
Entrepreneur plays a crucial role in bringing about social stability & balanced regional development. In each & every country entrepreneur is considered as a valuable human resource. Entrepreneurs as a catalyst of change, tries to bring about social stability in the following ways: 1. Absorption of workforce in industries: Establishment of small scale units by the entrepreneurs leads to absorption of a large number of workforce ata relatively small capital cost & ensures social stability. 2. Alleviation of poverty: Entrepreneurs helps in alleviating poverty by reducing unemployment through creation of lagre number of jobs by way of setting of small & tiny units. Thus, social stability is maintained. 3. Glorification of self help: Enterprise creation glorifies the maxim of self help. Self help is the best help because it is binding factor to unite family, clan, village, & communities & thus ensures social stability. 4. Checking expansion of monopolies: Small scale enterprises help to bring about social stability by diffusing prosperity & by checking the expansion of monopolies.

5. Equitable distribution of income: Small scale entrepreneurs explore business opportunities in both rural & urban areas, thereby leading to equitable distribution of

income & wealth in the society. This gives rise to reduction in social instability between rural & urban sectors. 6. Creation of social infrastructures: Entrepreneurs facilitates economic development & social stability through creation of social infrastructure consequent upon establishment of industries. 7. Empowerment of women through enterprises: Empowerment through enterprise involves access to resources & markets, actual ownership & control. These things lead to equity & equality among men & women & act as a lever for social stability. 8. Supply of qualitative goods & services: Entrepreneurs can bring about supplying quality goods & services to the people. They manufacture both consumners & producers goods to meet the ever growing demand which emerges due to population pressure.