Saturday, February 25, 2006

"Social and Economic perspectives on Entrepreneurship"


Entrepreneurship is ubiquitous and is reflected in all the major dimensions of civilization viz. social, political and economic. It involves creativity that is consistent with the healthy edge required to change the basis of competition.

This paper starts with discussion on entrepreneurship and later on develops an analytical framework, which portrays a relationship between economic and social innovation.

The discussion explores the relevance and relationship of economic and social innovation in the Indian context. It enunciates the aspects that are necessary for entrepreneurship to thrive and the kind of support that is required for this to happen. A future scenario beyond Dot.coms for India is projected taking into consideration the social and economic aspects.

1.0 Introduction

"One cannot make decisions for the future. Decisions are commitments to actions in the present, and in the present only. But actions in the present are also one and only way to make the future." --- Peter Drucker

Dot.coms: what started as a trickle some years ago has now developed into deluge that threatens to engulf our lives completely. Innovation, entrepreneurship and host of businesses like Venture Capitalist have come to the fore, riding on the crest of the wave.

The basic premise of entrepreneurship in Dot.coms is to boost the real sectors leading to economic and social prosperity. It is then necessary for the real sectors to be flexible enough to withstand the change that follows. Flexibility is the outcome of the infrastructure that is built in the society and it is true that without proper infrastructure in place a society cannot reap the benefits of Dot.coms. In a country like India, more than seventy percent of the population lives in the villages, where infrastructural support is minimal. If this seventy percent of the population is to derive the full benefits of entrepreneurship in Dot.coms, an economic and social innovation forms the order of the day. Such an innovation will also allow us to explore opportunities beyond Dot.coms.

2.0 Entrepreneurship

Entrepreneurship is a creative human act involving the mobilization of resources from one level of productive use to a higher level of use. "It is the process by which the individual pursue opportunities without regard to resources currently controlled."1 Entrepreneurship involves a willingness to take responsibility and ability to put mind to a task and see it through from inception to completion. Another ingredient of entrepreneurship is sensing opportunities, while others see chaos, contradiction, and confusion. Essence of Entrepreneurship is going against time with maturity and serving as a change agent.

Entrepreneurship is an outcome of the development process2, which also encompasses the emergence of economic and social innovations. The development process as depicted in figure 1 starts and culminates in a stage when the economy is in static equilibrium.

3.0 Current Perspective

In a country like India social (value system) and cultural issues hold their importance besides issues related to infrastructure. Any innovation to succeed in our society needs to be accepted by our value systems and cultural issues. It will not be wrong to say that (or any innovation) will not succeed until and unless a high level of awareness is achieved and the idea is taken to the common people. An acceptance by the mass in itself is a kind of social innovation. Further, in our country, where the population is more concerned about making both ends meet, entrepreneurial activity will achieve sustainability only when support is provided both at the societal and governmental levels.

Currently, with the technological innovation, a dichotomous situation has been created in both economic and social section in India. The effect of the economic disparity is mirrored in the social perspective, where we see a small percentage of our population becoming more and more rich but on the other side there is still about two – third of our population that remains poor and unaware of technological progress.

4.0 Economic Innovation

The common denominator of the economic theory is supply and demand. Economic growth is a process whereby factors on the supply side allow expanding output, while those on the demand side determine how far the growth will proceed.1 Economic Innovation plays a role on both demand and supply side of the growth equation.

Economic Innovation involves more than rising per capita output and income; it constitutes change in structure of production and society. The Schumpeterian dynamic enunciates the fact that one such economic innovation opens the doors to others. Growth is sparked by ‘a thundering herd’ of entrepreneurs, each creating his/her own temporary advantage. For an economic innovation to happen proper infrastructure support should be existent only then there will be an overall growth in the economy.

5.0 Social Innovation

The aspiration of human being is to build a good society that will be achieved by developing good institutes; these institutes are reflected in good businesses, which will be developed by dynamic entrepreneurs and these entrepreneurs are those, which bring in social innovation.

In one perspective the social innovation is a new imaginative and feasible idea or project, which helps in improving the quality of life. The Institute of Social Inventions is doing a similar kind of work. They have set up a Natural Death Center, which helps families looking after a person who is dying at home. The other example is of The Time Out Saturday Walkers' Club, which is a self-organizing walk club - for lonely Londoners or visitors to London.

In other perspective social innovation can just be the acceptance of any change in the society. The changes may be due to progress in technology, introduction of new religion or change in the social value system. Sikhism for example preaches that God has given the capability to work and one must not beg. This preaching has resulted in making Sikhism one of the most dynamic and enterprising communities in the society.

There is another group of social innovators, the NGOs, who are continuously involved in bringing new entrepreneurial ventures without the motive of accumulating wealth. They are continuously putting effort to change the mindset of the society resulting in social innovation and improvement in the quality of life.

6.0 Interaction between Economic and Social Innovation

The entire process of innovation is a cyclical process of growth and development as depicted in Figure: 2. What follows an economic innovation is economic growth and social development. Social development would give rise to improvement in overall quality of life, which leads to social innovation. The betterment of society will generate enough opportunities at the micro level for another economic innovation and thus the process continues.

7.0 Promoting Entrepreneurship

In India, where over 300 million people are living below the poverty line, it is simply impossible for any government to provide means of livelihood to everyone. Such situations surely demand for a continuous effort from the society, where the people are encouraged to come up with their entrepreneurial initiative.

· Encouragement at attitudinal and social level

In the future, innovation and entrepreneurship needs to be encouraged at Social levels, Governmental levels and Managerial levels. There must be a social attitude that views innovations with positive attitude and reject an innovation only when it is not acceptable.

· Encouragement at physical level

At this level the encouragement will refer to two aspects necessary for entrepreneurship to thrive, one is the provision of venture capital and the other being infrastructural support. A real example is Export Processing Zones which are performing extremely well when given the support.

8.0 Entrepreneurship In The Future

The transformation of opportunity into performance is contingent on several factors like industry attractiveness, strategy, execution and required resources. These factors in effect are again influenced by social and physical factors. This model of entrepreneurship incorporates the effects of social encouragement (social factors) and support at infrastructural level (physical factors).

9.0 Opportunities

Activity of entrepreneurship has no reason to be confined with Dot.coms and should be expanded to various contexts. There can be various avenues for innovation.

· Education is a sector, which is waiting for an entrepreneur to exploit the possibilities; especially in the country like India where in addition to the rural areas the small towns also are found lacking the right kind of infrastructure for education. The most recent example is the initiative taken in Madhya Pradesh at the village level.

· In the area of health, the entrepreneur may look into establishing hospital chains.

· There remains a great opportunity of entrepreneurial activity in India because even today only 30% of the agricultural area is irrigated and the rest relies on monsoon.

"Small Business create majority of new jobs in the economy. "1

· Small entrepreneurship has a tremendous potential in a poor country like ours. Association like Self-Employed Women Association (SEWA) is a striking example of entrepreneurship at the grass root level.

· An initiative of marketing in traditional sectors like handloom and the unorganized industries will bring in ways for development of entrepreneurship.

10.0 Future Perspective

Entrepreneurship as in the past will determine technical innovations, status of social institutions and political management systems. On the basis of these factors, we can expect the future to be a place where basic needs will remain and only the wants will change. India will overcome the barriers of infrastructure; we will also visualize a strong manufacturing and agricultural sector. These developments will enable us to successfully incorporate the second wave of revolution in the economy.

The second wave of Dot.coms will see the Dot.coms as only a support system though they will co-exist with other forms of Entrepreneurship. If we widen and look at IT industry as a whole then we can safely project that there won’t be a single aspect of our life remaining untouched by it. The IT driven economy will limit number of jobs and will demand sophisticated skills. The retirement age will decrease with the business institutions demanding younger people who are not resistant to change. Entrepreneurs and not managers will be in demand, as only they will be equipped to find order in chaos. The focus of entrepreneurial energy will shift from achieving volume sales to fulfill a specific requirement. Governance will become more transparent and will be willing to accept changes necessary for growth and development. More autonomy will become the basis of all issues.

The future will see Entrepreneurship as the key driver of economic development Technological obsolescence will become order of the day and there will be more space for leisure. New businesses will be credited with providing variety of new jobs in the economy. New and small business will also develop more than their share of product and service innovation.1 At one end we will see the technological upheavals in quick succession and on the other end there will be social value systems and cultural issues undergoing slow but dynamic transformations.

11.0 Conclusions

There are ample opportunities in small businesses in India and such opportunities will transform India in the coming future. For such transformation to happen there needs to be support both at the governmental and societal level. For the government it is important to realize that the goal of small business owners will be to remain self-employed. Such people may not need financial assistance but they will need marketing and legal assistance in order to sustain themselves. Practical and cost effective programs need to be developed to address their needs because self-employed people will represent an important segment in economic revitalization.


Khurram Masood said...

Very, very interesting. Is this a sociology paper or something? I am very interested in knowing more about the subject of entrepreneurship in India. Please forward me to more information if you can.

Good job.

Rajesh Rana said...

thank you.......

Anonymous said...

Thank You... I was lookig forward for information on Enterprenuership Develpoment in India..

This has indeed helped me alot... Thank again

Keshav said...

Can you help develop entrepreneurship?

Benjamin C. Atuma said...

This piece hit it in the right place.

Over the years, scholars are increasingly recognizing the roles of contextual factors in the development of entrepreneurship.

It's also interesting to note that despite the age-long heritage of entrepreneurship and its unparalleled importance as economic driver of world economies, finding a universally agreed upon definition remains a dilemma.

This is the focus of my series "Economic Perspective on Entrepreneurship" on EnzineArticle.