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International Journal of Electronic Governance and Research Vol 1 Issue 3 December 2012

ISSN 2319 8451

Entrepreneurial Economics: A Theoretical Understanding

with Special Reference to Integrated SCM in Indian SMEs
A Mehta


An integrated premise of supply chain management is to view the network of facilities,

processes, resources and people that procure raw materials & WIP, transform them into finished
& semi finished product or service or information, and ultimately distribute them to the
customer or end user as an integrated chain, rather than a group of separate, but somewhat
interdisciplinary approach. Globalization, privatization & liberalization of economy and
information technology have heightened the strategic importance of integrated supply chain
management supported by virtual & green philosophy for the sustainable economic growth &
development of the nation. It has created new opportunities for implementing supply chain
strategy as a competitive tool for all type of organizations. This paper helps to view the
integrated supply chain from the point of view of an Indian SMEs. Logistics and supply chain
management is all about managing the hand-offs in a supply chain hand-offs of either
information or product or service. The design of a logistics system is critically linked to the
objectives of the supply chain. Supply Chain Management (SCM) is an art as well as a science
that involve to design and manage the processes, activities (like sourcing and procurement,
conversion, and all logistics management activities), products, services, assets, flows of material
and information, it also includes coordination and collaboration with channel partners, which can
be suppliers, intermediaries, third-party service providers, employees and customers in order to
satisfy end demands.

Keywords: Entrepreneurship, SCM, SMEs, Economics, iSCM, ERP, eSCM, Virtual SCM


Enabling policies on the part of government in order to provide incentives to SMEs for usage of
ICT is quite essential. SME are often seen as vital for the growth and innovation of economies
and the long term of economic development of the countries depends on the promotion of SME
sector (Ramsey, et al 2003). Entrepreneurship is a multidimensional phenomenon spanning different
units of observation ranging from the individual to the firm, region or industry and even nation
(Wennekers and Thurik, 1999; Davidsson, 2004). Due to this multidimensional nature the conceptual and
theoretical approaches have built on a variety of disciplines such as economics, sociology and psychology

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(Uhlaner, Wennekers and Thurik, 2002). Existing definitions of entrepreneurship often relate to the
functional role of entrepreneurs and include coordination, innovation, uncertainty bearing, capital supply,
decision making, ownership and resource allocation (Friijs et al. 2002: 12; Jskelinen 2000: 5).
Entrepreneurship originates at the individual level, realization is achieved at the firm level. Start-ups or
innovations are vehicles for transforming personal entrepreneurial qualities and ambitions into actions. At
the macro level of industries and national economies, the sum of entrepreneurial activities constitutes a
mosaic of competing experiments, new ideas and initiatives. This competition leads to variety and change
in the market that is, a selection of the most viable firms, their imitation and a displacement of obsolete
firms. Entrepreneurial activity hence expands and transforms the productive potential of the national
economy by inducing higher productivity and an expansion of new niches and industries. Processes at the
aggregate level are, in turn, linked to the individual layer, obviously including important feedback
mechanisms for individual entrepreneurs. Entrepreneurs can learn from both their own and others'
successes and failures, which enables them to improve their skills and adapt their attitudes (Caree and
Thurik 2002: 1920).There is a burgeoning body of literature addressing the issue of sustainability,
considered as a key dimension of corporate social responsibility (CSR) (Pagell, Krause et al.
2008), with an increasing number of special issues on sustainable SCM in recent years, in the
International Journal of Production Economics (Piplani, N. Pujawan et al. 2008), Journal of
Operations Management (Jayaraman, Klassen et al. 2007), Supply chain Management: an
International Journal (Lindgreen, Maon et al. 2008), and Journal of Supply Chain Management
(Pagell, Krause et al. 2008). In many of these issues the notion of the triple bottom line
(Elkington 1999; Savitz and Weber 2006) takes centre stage, focusing on the increasing
influence of espoused concern for economic, ecological and ethical criteria in organizational
decision making. Supply chain management (SCM) is one of the most cited and analyzed
concepts recently in logistics and operations management. Several researchers deal with SCM
from research areas such as logistics, transportation, strategy, marketing, organizational
behavior, economics etc. (Croom et. al. (2001)). The growing number of SMEs and increasing
outsourcing by large firms are a reaction to greater dependence on flexibility and knowledge as
factors of production brought about by technological change and the intensification of global
competition. Smaller business entities appear to be better suited to cope with the conditions of
increased globalization, since they show higher flexibility and propensity to innovation and are
an outstanding vehicle for channeling the entrepreneurial ambitions of ind ividuals (Audretsch
and Thurik 2001: 611; Carree and Thurik 2002: 78).

However, in many companies, management has reached the conclusion that optimizing the
product flows cannot be accomplished without implementing a process approach to the business.
The key supply chain processes stated by Lambert (2004) are:

Customer service management

Demand management style
Order fulfillment
Manufacturing flow management
Supplier relationship management

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Product development and commercialization

Returns management

Knight views the entrepreneur as playing a twofold function: (a) exercising responsible control
and (b) securing the owners of productive services against uncertainty and fluctuations in their
incomes (Knight, 1921, p. 2), in other words, as provider of entrepreneurial inputs and as risk
bearer. The first provider function plays a role answering the question why different individuals
make different occupational choices by emphasizing the role of entrepreneurial ability in the
decision to become an entrepreneur. Several authors follow this route by postulating differences
across potential entrepreneurs (or firms) in terms of some form of entrepreneurial efficiency
(Jovanovic, 1982 and 1994; Lucas, 1978; Murphy, Shleifer and Vishny, 1991; Holmes and
Schmitz, 1990 and Lazear, 2004).

In Kihlstrom and Laffont (1979) and Parker (1996 and 1997) the degree of risk aversion and the
differences in risk of the two occu-pational alternatives determine the occupational choice.
Indian SMEs are now exposed to gloal opportunities than ever for expansion, growth,
deveolmnet and diversification across the sectors. Indian market is growing and Indian
entrepreneurs are making remarkable progress in various Industries .

Literature Review

McClelland is among the most known scholars who have analyzed the concept of
entrepreneurship from a psychological point of view. Psychological studies on entrepreneurship
concentrate on studying who an entrepreneur is and/or the personality traits of an entrepreneur.
McClelland emphasizes the importance of the motivational aspect of the entrepreneur. In his
studies he shows that entrepreneurial behavior is driven by the need for personal achievement
leading to a clear proclivity for becoming an entrepreneur. McClelland also suggests that,
regardless of variations in economic development, entrepreneurs with high motivation will
almost always find ways to maximize economic achievement. He identifies 10 personal
entrepreneurial competencies for detecting and strengthening entrepreneurial potential, which are
remarkably consistent from country to country: (1) opportunity seeking and initiative; (2) risk
taking; (3) demand for efficiency and quality; (4) persistence; (5) commitment to the work
contract; (6) information seeking; (7) goal setting; (8) systematic planning and monitoring; (9)
persuasion and networking; and (10) independence and self-confidence (McClelland 1961). A
few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al.
(2009) have tried to provide theoretical foundations for different areas related to supply chain by
employing organizational theories. These theories include:

Activity Based Costing(ABC)

Advanced Planning System (APS)

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Agency Theory (AT)

Agile Manufacturing
Available-to-promise (ATP)
Business Intelligence(BI)
Capacity Optimization Theory (COT)
Customer Relationship Management (CRM)
Distributed Warehousing Theory (DWT)
Distribution Resources Planning (DRP)
Electronic Data Interchange (EDI)
Institutional theory (InT)
Integrated Enterprise Resource Planning (ERP)
Just-in-Time (JIT)
Knowledge Management (KM)
Knowledge-Based View (KBV)
Management Control Systems(MCS)
Material Requirements Planning (MRP)
Materials Logistics Management (MLM)
Multi Directional Feedback Loop Method(MDFLM)
Multi Sourcing Theory (MST)
Network Perspective (NP)
Quick Response Manufacturing (QRM)
Requirements Chain Management (RCM)
Resource-based view (RBV)
Strategic Forecasting Model (SFM)
Strategic Choice Theory (SCT)
Strategic Inventory Management (SIM)
Supplier Scheduling Theory (SST)
Systems Theory (ST)
Theory of Constraints (TOC)
Time Based Competition (TBC)
Total Quality Management (TQM)
Transaction Cost Analysis (TCA)
Virtual Organization Theory (VOT) Etc

Robinson and Sexton (1994) and Cooper and Dunkelberg (1987) show that the self-employment
decision is influenced by educational attainment. However, a study at the macro level by Uhlaner
and Thurik (2004) shows that a higher level of education in a country is accompanied by a lower
self-employment rate. See also de Wit and van Winden (1989). Blanchflower (2004) reports that
education is positively correlated with self-employment in the US but negatively so in Europe.
Using Eurobarometer data Grilo and Irigoyen (2005) report a U-shaped relation-ship for 2000

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while Grilo and Thurik (2005a) show that this relation is negative up to the intermediate
education level and non-existent for higher levels. The results of Delmar and Davidsson (2000)
and Davidsson and Honig (2003) show a clear education effect for nascent entrepreneurs. There
is need to embrace the state-of-art technologies especially in SMEs in order to penetrate
international markets and remain competitive despite the challenges posed by globalization,
liberalization and technological changes. In addition SMEs are faced with competition from
multinational corporations in the domestic market (Sharma and Bhagwat, 2006).

Possible Dimensions for Future Research

Degree of Understanding
Trade Cycle-Industry Cycle-Firm Cycle-Product Cycle supported by System theory & Human Cycle
Global-Country-State-District-Town-Village level Analysis
Society- Community Family-Individual Member involvement
Sector-Industry-Firm Analysis
Strategic -Tactical-Operational Level Understanding

Proposed Drivers for the Successful iSCM Implementation in Indian SMEs

Acquisition Strategy
Balanced Scorecard Reporting
Baseline Forecasting
Business Case Development
Business Development & Export Promotion
Business Forecasting & Modeling
Business process Reengineering
Business Process Systems
Capacity Building and Connectivity Enhancement
Change Management
Channelize Bank Finance and PE / VC
Code of Conduct
Compliance Management
Contract Manufacturing Tie-ups & Collaborations
Cost Management
Culture and attitude
Customer service management
Demand Management

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Discount Management
Distribution System
Efficient Consumer Response (ECR)
Environment impact assessment (EIA),
Environmental Engineering
Export/Import & Freight Management
Green Management
Industrial Development & Technology Upgradation
Information flow facility structure
Information System
Interaction with Officials and Eminent Personalities
Inventory Management
Invoicing & Payment
Layout Design
Location Selection
Make or Buy
Management of Productivity
Management Methods
Management of Profitability
Manufacturing flow management/support
Market Share
Marketing Strategy and Investment Promotion
Operational Efficiency
Order Management
Organization structure
Organizational Alignment
Overall Transparency
Performance measurement
Planning and control
Plant Management
Power and leadership structure
Power of end user
Process Management

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Product development and commercialization

Product flow facility structure
Product Management
Proposal Management
Purchasing Power
Purchasing Strategy
Quality Improvement
Rebate Management
Recognition and Appreciation Awards
Repair & Maintenance
Replacement & Rehabilitation
Resource Management
Responsible Behavior
Return on Investment
Risk and reward structure
Risk Management
Skill Sets
Strategic Leadership
Strategic network optimization
Strategic partnerships
Strategic Procurement & Sourcing
Structure & Staffing
Supplier power
Supplier Relationship Management
Technology Transfer and Joint Ventures
Time & Motion Study
Tools & Techniques
Training and Education
Warehousing management
Willingness to Change
Work structure Etc


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Information and communication technology (ICT) plays an increasingly important role in

facilitating the introduction of new products or services, in improving operational processes, and
in guiding managerial decision making. The impact of globalization has compelled SMEs to
adopt ICTs, to enable SMEs to survive and compete with large companies. SMEs would greatly
benefit by ICTs adoption in their business processes (Maguire et al., 2007). Most economic,
psychological and sociological research points to the fact that entrepreneurship is a process and
not a static phenomenon. Entrepreneurship is more than just a mechanical economic factor
(Pirich 2001: 1415). Based on a survey of 37 countries representing about 62 per cent of the
worlds population, the GEM 2002 study estimates that 460 million adults around the globe are
engaged in entrepreneurial activity. Some two-thirds of the entrepreneurs are opportunity-
oriented, while the rest are necessity-oriented that is, are trying to start businesses because they
have no job options. Interestingly, the bulk of the ventures involve replication of existing
businesses, not break -through innovations. The highest activity levels have been identified in
Thailand, India, China and Korea, followed by some of the former British colonies Australia,
Canada, New Zealand, South Africa and then Israel and the EU countries. At the bottom of the
rankings are the developed Asian countries of Japan, Taiwan and Singapore. The demographic
profile of the entrepreneurs suggests that about two-thirds are men and one-third women. The
largest re presented age group is 2544. Verheul, Wennekers, Audretsch and Thurik (2002) refer
to definitions of entrepreneurship from economics (based on both the functions of the
entrepreneur and the perception of economic opportunities and innovation) and to those from the
managerial world, where entrepreneurship is referred to as a way of managing. As regards
measurement, two approaches are suggested. Business ownership and self-employment are
considered as equivalent to entrepreneurship and can be the basis for constructing static
indicators. From a dynamic perspective, the proposed measures of entrepreneurship are based on
nascent and start-up activity. See also Wennekers, Uhlaner and Thurik (2002).

Many Indian SMEs are not aware about various Research,developments and changes in
international and domestic trade, incentives and schemes of Government, market development,
Banking,finance, laws, direct and indirect taxes, H.R. Management, TQM, Six Sigma, quality
assurance, productivity, logistics and supply chain management and other related areas. SMALL
INDIA) puts efforts for the development and growth of SMEs by organising various activities to
accomplish its objectives. The Chamber provides information and guidance to newand existing
entrepreneurs in effectively managing and growing their business.Publication of the Bolton
Report (1971) stimulated research into characteristics that distinguish owner-managers from
other members of the economically active population (Watson et al., 1998). One of the more
significant contributions identified sixteen growth factors and four growth drivers including
owners motivation, expertise in growth management, resource access and demand (Perren,
1999). Attempts have also been made to identify the behaviours, skills and attributes normally

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associated with enterprising people (Storey, 1994). These include opportunity-seeking and
persuasion (Gibb, 1996) and commitment of leaders to achieving growth (Smallbone et al.,

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