The Hindu Business Line : Changing face of entrepreneurship, post liberalisation

Economic liberalisation has changed the rules of the entrepreneurial game. The competencies required to thrive in the protected era may no longer be good enough.

The role of entrepreneurship in the economic development and growth of a country or region is often overlooked. In any case, it is not given the importance that it deserves, particularly in economic literature.

In fact, until recently, economists were reluctant to rely on entrepreneurship as a possible determinant of economic outcome. A standard economic explanation, if it is at all important, stems from testable hypotheses and quantifications.

Cultures and traditions are vague in determining economic outcomes although the same situations are tackled in economic literature with the help of multiple equilibrium conditions. Even then the explanations are incomplete. For example, within a geographical boundary, sufficient connections between socio-cultural values and economic outcomes are observed.

More specifically, at the household level often economic decisions are made in accordance with beliefs and traditions. For example, the choice of schools/colleges, professions to be taken up or to live in a particular area are not determined simply by economic decisions. In many of these situations ethnicity may play an important role.

In India, the government realised the importance of entrepreneurship and set up institutions at the national and State levels to develop entrepreneurship and also to provide assistance to first generation entrepreneurs. Though it is difficult to arrive at a firm conclusion on the creation of a new generation of entrepreneurs, the need to do it isclearly established.

What is Entrepreneurship?

Entrepreneurship is universal in any human activity — be it economic, political or social. Entrepreneurship has been defined as a creative human act involving the mobilisation of resources from one level of productive use to a higher level.

Or, as "combining together factors of production" and the supply of entrepreneurship has been identified as critical in determining the wealth and growth of a nation's economy. In fact, entrepreneurship is a vital source of structural change and productivity improvement within economies.

First-generation entrepreneurs quite often start small firms with small investments and then, once established, some of them grow to larger firms. With shorter technology life cycles, the survival rate of these new small firms is expected to be low.

India's accelerated growth, post-liberalisation, has not been accompanied by a commensurate expansion in employment. This suggests a restructuring in many sectors of the economy andalso highlights the importance of entrepreneurship and new units in creating employment.

With development in knowledge and technology, the capital intensity of most production functions has increased. Simultaneously, this substitution of labour with capital has improved labour productivity. Productivity improvements have been significant in manufacturing.But,of late, the production of many services has also become capital intensive.

The infusion of technology and capital has enriched the content of many jobs; the capital required to set up even small firms has gone up. Entrepreneurship involves a willingness to take responsibility and the ability to put the mind to a task and see it through. An ingredient of entrepreneurship is sensing opportunities and serving as a change agent. An entrepreneur has to be a risk-taker; a calculated risk-taker and not a gambler.

An entrepreneur has to have a clear vision, be innovative and have a commitment to his goals with strong management and organisational skills.

Factors such as thrift, hard work, tenacity, honesty and tolerance are the key, though the main aspect is that of being a risk taker

Sociology of entrepreneurship

Historically, Indian business has largely been mercantile.India and China were the world'slargest manufacturing economies; manufacturing in India was entirely in the hands of small artisans.

The Parsees were the first Indian entrepreneurs to set up manufacturing units after the pioneering activities of the British. Around this time the Marwari trading community ventured into manufacturing. They acquired existing units and also set up new ones.

A new trend that has been observed the last 10-15 years is that the Generation Next of the traditional entrepreneurial communities are going for higher/professional education.

This has spawned a new breed of young entrepreneurs, particularly in the new sectors. The units are world class, able to survive and prosper in competitive market.

The key input provided by these new entrepreneurs in many cases is knowledge capital rather than only finance.

Although the economic environment and markets have changed, the traits required of an entrepreneur have remained the same. Economic liberalisation has changed the rules of the entrepreneurial game.

The skills and competencies required to thrive in the earlier protected environment may not ensure survival in the open, liberalised milieu of today.

No longer do business culture and traditions matter for entrepreneurship. The new-age entrepreneurs and candidates can learn it by experience and training relating to risk-taking behaviour. If such things are available, one can spring a surprise.

(The authors are Professors with International Management Institute, New Delhi.)

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