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ENTREPRENEURSHIP.doc

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Peaceful turbulence favours entrepreneurship but has some pitalls in choosing the right product, right process and right markets that an entrepreneur has scope to avoid by taking the right partners and developing knowledge as a key driver for growth and digitizing operations from day one.

Peaceful turbulence favours entrepreneurship but has some pitalls in choosing the right product, right process and right markets that an entrepreneur has scope to avoid by taking the right partners and developing knowledge as a key driver for growth and digitizing operations from day one.

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ENTREPRENEURSHIP.doc

  1. 1. ENTREPRENEURSHIP How do you spell Entrepreneurship? What do the different models of entrepreneurship mean? What are some proven best practices? How much does national culture hinder or favor entrepreneurship? Entrepreneurship or Intrapreneurship? Entrepreneurship is defined in the dictionary as the creation of value through the creation of organization. The second spelling, which is lately found in literature, does not find yet a place in dictionary. This is often referred to that process in organization, which encourages innovation, creativity and spontaneity in responding to situations that would benefit the organization. 1. Entrepreneurs discover, invent, reveal, enact and in other ways make manifest some new product, service, transaction, resource, technology, and/or market that has value to some community or market place. 2. It is the process of providing a new product or service. 3. It is the process of starting and/or growing a new profit-making business. 4. Entrepreneurial behavior is opportunistic, value-driven, value adding, risk accepting, creative activity where ideas take the form of organization birth, growth or transformation. 5. Entrepreneurship is the intentional creation of value through organization, by an individual contributor or small group of persons. Characteristics of an Entrepreneur:  Achievement motivation  Risk-taking propensity  Tolerance for ambiguity A dynamic theory of entrepreneurship was first advocated by Schumpeter (1949) who considered it as a catalyst that disrupts the stationary circular flow of the economy and thereby initiates and sustains the process of development. Concept of Innovation, embedded in entrepreneurship, and its corollary development embraces five functions: 1. introduction of a new good; 2. introduction of a new method of production; 3. opening of a new market; 4. conquest of a new source of supply of raw materials; and 5. carrying out of a new organization of any industry. Models of Entrepreneurship:
  2. 2. 1. The Laissez-faire Model: (De-regulation and Privatization)-LFM No Government interference and regulations—Allows entrepreneurs to become competitive and create wealth therefrom. E.g., The Cayman islands Company Law has a series of liberal provisions for establishing firms: Company directors may be of any nationality and domiciled anywhere in the world. No direct taxation on income and capital. No inheritance tax or no death tax, no capital transfer tax No mutation tax on the transfer of immovable property. Result: Constant inflow of capital for investment; A catalyst to prosperity. In these islands, there is no apparent poverty, no unemployment, no beggars and no roadside peddlers. 2. LIMITED ENVIRONMENT MODEL (LEM):: Government should play a role in encouraging the small business sector, but that this role should be limited to providing a positive environment. The ingredients are: (a) Adequate infrastructure. (b) Low levels of taxation (c) A stable currency (d) A free trade arrangement E.g., Austria becoming a member of European Free Trade Arrangement – Tariffs equal to those in EEC; stable exchange rate with German Deusche Mark. 3. STRATEGIC INTERVENTION MODEL (SIM): State promotes small businesses through interventions in a market place. e.g., Namibia has a public corporation, which serves as a visible hand that guides small business in a market place. Government actively participates in the development of small business by ensuring that training, research, finance, marketing, know-how and support are available to small business. 4. SUBSIDISED INTEREST RATE MODEL (SIR): Low cost loans: Subsidised interest rates to a few favored borrowers would create many jobs. They develop into Chaebols; i.e., mega-conglomerates. E.g., South Korea—a small number of highly diversified mea conglomerates. 5. The Egalitarian Model (EGMO): Taiwan is a good example of this model. Non-discriminatory, eglitarian model whereby all borrowing by entrepreneurs had to be at relatively high interest rates. Small firms in Taiwan have equal access to capital. Result: Emergence of multitude of small entrepreneurs; high interest rates were an incentive to thrift and save rather than borrow. While subsidized loans in South Korea resulted in a chaebol-dominated economy, the implementation of the egalitarian model in Taiwan resulted in a nation of small businesses leading the export regime. 6. The Trade Facilitation Model: (TFM)
  3. 3. Unique mercantalist model focused at the internationalization of small businesses. Government assistance in Kenya is in the shape of facilitation rather than tangible aid.  Free consulting service to entrepreneurs  Helping small business step by step from the inception. 7. The Top-down Reform Model (TDRM) : East Germany after unification suffered because of heavy subsidization syndrome in which they were brought up. The Unification led to collapse of employment and markets. 2lac jobs are reported lost. 8. The Open Door and Reform Model (OPEDOR model): China shows a successful experience. Chinese farmers are kept completely outside the planned sector in order to promote entrepreneurship among them 9. The Doi-Moi Model (DOM): It literally means ‘renovation’ or ‘new thinking’. It is compatible with restoring the prestige of the ruling communist party of South Vietnam. It promoted complimentarity and harmony between government firms still operating under a system of centralization and the business sector operating independently. IN A VAST COUNTRY LIKE India, where the cultural diversity is large and where different ethnic groups with varying resource bases, entrepreneurship development is inextricably linked to cultural background of the entrepreneur. Gujarat and Maharashtra States are supposed to have born entrepreneurs. Kerala State seemed to have engendered out-bound entrepreneurs. More on this subject follows.

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