Entrepreneurship Challenges in 21st.

Century
What

is

Entrepreneurship?

The definition of entrepreneurship has been debated among scholars, educators, researchers, and
policy makers since the concept was first established in the early 1700s. The term
entrepreneurship comes from the French verb entreprendre and the German word
unternehmen, both means to undertake. Bygrave and Hofer in1891 defined the entrepreneurial
process as involving all the functions, activities, and actions associated with perceiving of
opportunities and creation of organizations to pursue them. Joseph Schumpeter introduced the
modern definition of entrepreneurship in 1934. According to Schumpeter, the carrying out of new
combinations we call enterprise, and the individuals whose function it is to carry them out we call
entrepreneurs. Schumpeter tied entrepreneurship to the creation of five basic new combinations
namely: introduction of a new product, introduction of a new method of production, opening of a
new market, the conquest of a new source of supply and carrying out of a new organization of
industry. Peter Drucker proposed that entrepreneurship is a practice. What this means is that
entrepreneurship is not a state of being nor is it characterized by making planes that are not acted
upon. Entrepreneurship begins with action, creation of new organization. This organization may or
may not become self-sustaining and in fact, may never earn significant revenues. But, when
individuals create a new organization, they have entered the entrepreneurship paradigm.
The

Supply

of

Entrepreneurship

and

Economic

Development

British economists such as Adam Smith, David Ricardo, and John Stuart Mill briefly touched upon
the concept of entrepreneurship, though they referred to it under the broad English term business
management. Whereas the writings of Smith and Ricardo suggest that they undervalued the
importance of entrepreneurship, Mill goes out of his way to stress the significance of
entrepreneurship for economic growth. In his writings, Mill claims that entrepreneurship requires no
ordinary skill, and he laments the fact that there is no good English equivalent word to encompass
the
specific
meaning
of
the
French
term
entrepreneur.
The necessity of entrepreneurship for production was first formally recognized by Alfred Marshall in
1890. In his famous treatise Principles of Economics, Marshall asserts that there re four factors of
production: land, labour, capital and organization. Organization is the coordinating factor, which
brings the other factors together, and Marshall believed that entrepreneurship is driving element
behind organization. By creatively organizing, entrepreneurs create new commodities or improve
the plan of producing an old commodity. In order to do this, Marshall believed that entrepreneurs
must have a thorough understanding about their industries, and they must be natural leaders.
Additionally, Marshalls entrepreneurs must have the ability to foresee changes in supply and
demand and be willing to act on such risky forecasts in the absence of complete information.
Marshall also suggests that the skills associated with entrepreneurship are rare and limited in
supply. He claims that the abilities of entrepreneur are so great and so numerous that very few
people can exhibit them in all in a very high degree. Marshall, however, implies that people can be
taught to acquire the abilities that are necessary to be an entrepreneur. Unfortunately, the
opportunities for entrepreneurs are often limited by economic environment, which surrounds them.
Additionally, although entrepreneurs share some common abilities, all entrepreneurs are different,
and their success depend on the economic situations in which they attempt their endeavors.
One school of thought on entrepreneurship suggests that role of the entrepreneur is that of a riskbearer in the face of uncertainty and imperfect information. Knight claims that an entrepreneur will
be able to bear the risk of a new venture if he believes that there is a significant chance of profits.
Although many current theories on entrepreneurship agree that there is an inherent component of
risk, the risk-bearer theory alone cannot explain why some individuals become entrepreneurs while
others do not. Thus, in order to build a development model of entrepreneurship it is necessary to
look at some of the other characteristics that help explain why some people are entrepreneurs; risk
may
be
a
factor,
but
it
is
not
the
only
one.
Modern school of thought claims that the role of the entrepreneur is that of an innovator; however,
the definition of innovation is still widely debatable. Kirzner suggests that the process of innovation
is actually of spontaneous undeliberate learning. Thus, the necessary characteristics of the

entrepreneur is alertness, and no intrinsic skills-other than that of recognizing opportunities-are

necessary. Other school of economists claims that entrepreneurs have special skills that enable
them to participate in the process of innovation. Leibenstein claims that the dominant, necessary
characteristics of entrepreneurs is that they are gap-fillers i.e. they have the ability to perceive
where market fails and to develop new goods or processes that he market demands but which are
not currently being supplied. Thus, entrepreneurs have the special ability to connect different
markets
and
make
up
for
market
failures
and
deficiencies.
Though the idea that entrepreneurs are innovators is largely acceptable, it can be difficult to apply
this theory of entrepreneurship to less developed countries (LDCs). Often in LDCs, entrepreneurs
are not truly innovators in the traditional sense of the word. Entrepreneurs in LDCs rarely produce
brand new products: rather they imitate the products and production processes that have been
invented elsewhere in the world (typically in developed countries). This process, which occurs in
developed countries as well, is called creative imitation. Creative imitation takes place when when
the imitators better understand how an innovation can be applied, used, or sold in their particular
market niche (namely their own countries) than do the people who actually created or discovered
the original innovation. Thus, the innovation process in LDCs is often that of imitating and adapting,
instead of traditional notion of new product or process discovery and development.
By combining the above thoughts it can be generalized that entrepreneurs are risk-bearers,
coordinators and organizers, gap fillers, leaders, and innovators or creative imitators. Thus, by
encouraging these qualities and abilities, governments can theoretically alter their countrys supply
of
domestic
entrepreneurship.
Basic
Types
of
Entrepreneurship
Apparently, it can be said that the starting point of entrepreneurship would define its type. The two
types
of
entrepreneurship
may
be
classified
as:
1. Opportunity-based entrepreneurship- an entrepreneur perceives a business opportunity and
chooses
to
pursue
this
as
an
active
career
choice.
2. Necessity-based entrepreneurship- an entrepreneur is left with no other viable option to earn a
living. It is not the choice but compulsion, which makes him/her, choose entrepreneurship as a
career.
Creating

Indian

Entrepreneurs

A recent Mckinsey & Company-Nasscom report estimates that India needs at least 8,000 new
businesses to achieve its target of building a US$87 billion IT sector by 2008. Similarly, in the next
10 years, 110-130 million Indian citizens will be searching for jobs, including 80-100 million looking
for their first jobs. This does not include disguised unemployment of over 50% among the 230
million employed in rural India. Since traditional large employers- including the government and the
old economy player-may find it difficult to sustain this level of employment in future, it is
entrepreneurs
who
will
create
these
new
jobs
and
opportunities.
Todays knowledge based economy is fertile ground for entrepreneurs, in India. It is rightly believed
that India has an extraordinary talent pool with virtually limitless potential to become
entrepreneurs. Therefore, it is important to get committed to creating the right environment to
develop successful entrepreneurs. To achieve this, India must focus on four areas.
1. Create the Right Environment for Success: Entrepreneurs should find it easy to start a business.
To do so, most Indians would start slow with capital borrowed from family and friends, the CEO
playing the role of salesman and strategist, a professional team assembled months or perhaps years
after the business was created, and few, if any, external partners. Compare this with a start-up in
Silicon Valley: a Venire Capitalist (VC) or angel investor would be brought in early on; a professional
management team would drive the business; a multifunctional team would be assembled quickly;
and partnerships would be explored early on to scale up the business. A major challenge for India is
to create a handful of areas of excellence- the breeding ground where ideas grow into businesses.
Fr example, Gurgaon and Hyderabad for remote services, or Bangalore for IT. One way of
strengthening these areas is to consider the role of universities and educational institutions-places
where
excellence
typically
thrives.

2. Ensure that Entrepreneurs have access to the Right Skill: A survey conducted by McKinsey &
Company last year revealed that most Indian start-up businesses face two skill gaps:
entrepreneurial (how to manage business risks, build a team, identify an get funding) and functional
(product development know-how, marketing skills, etc.) India can move toward ensuring that the
curriculum at universities is modified to address todays changing business landscape, particularly in
emerging markets, and to build centres of entrepreneurial excellence in institutes that will actively
assist
entrepreneurs.
3. Ensure that Entrepreneurs have access to Smart Capital: For a long time, Indian entrepreneurs
have had little access to capital. It is true that in the last few years, several Venture Funds have
entered the Indian Market. And, while the sector is still in infancy in India (with estimated total
disbursement of less than US$0.5 billion in the year 2003), VCs are providing capital as well as
critical knowledge and access to potential partners, suppliers, and clients across the globe. However,
India has only a few angel investors who support the idea in the early stages before VCs become
involved. While associations such as TIE are seeking to bridge the gap by working at creating a TIE
India Angel Forum, this is Indias third challenge creating a global support network of angelswilling
to
support
young
business.
4. Enable Networking and Exchange: Entrepreneurs learn from experience-theirs and that of others.
The rapid pace of globalization and fast growth of Asian economies present tremendous
opportunities and challenges for India. Through planning and focus, India can aspire to create a pool
of entrepreneurs who will be the regions and the worlds-leaders of tomorrow.
The

Future

of

Entrepreneurship

Both the Central Government and various State Governments are taking increased interest in
promoting the growth of entrepreneurship. Individuals are being encouraged to form new
businesses and are being provided such government support as tax incentives, buildings, roads, and
a communication system to facilitate this creation process. The encouragement by the central and
state governments should continue in future as more lawmakers are realizing that new enterprises
create jobs and increase the economic output of the region. Every state government should develop
its own innovative industrial strategies for fostering entrepreneurial activity and timely development
of the technology of the area. The states should have their own state-sponsored venture funds,
where a percentage of the funds has to invested in the ventures in the states.
Societys support of entrepreneurship should also continue. This support is critical in providing both
motivation and public support. A major factor in the development of this societal approval is the
media. The media should play a powerful and constructive role by reporting on the general
entrepreneurial spirit in the country highlighting specific success cases of this spirit in operation.
Finally, large companies should show an interest in their special form of entrepreneurshipintrapreneurship-in the future. These companies will be increasingly interested in capitalizing on
their Research & Development in the hyper competitive business environment today.
Conclusion
The definition of entrepreneurship has evolved over time as the worlds economic structure has
changed and become more complex. Risk taking, innovation, and creation of wealth are the criteria
that have been developed as the study of new business creations has evolved.
The decision to start an entrepreneurial venture consists of several sequential steps (1) the decision
to leave a present career or lifestyle. (2) the decision that an entrepreneurial venture is desirable ;
and (3) the decision that both external and internal factors make new venture creation possible.
There are both pushing and pulling influences active in the decision to leave a present career: the
push of job dissatisfaction or even layoff, and the pull toward entrepreneurship of seeing an
unfilled need in the market place. The desirability of starting ones own company is strongly
influenced by culture, sub-culture, family, teachers, and peers. Any of these influences can function
as a source of encouragement for entrepreneurship, with support ranging from government support
that favour business to strong personal role models of family or friends, Beyond the stage of seeing
entrepreneurship as a a good idea, the potential entrepreneur must possess or acquire the
necessary education, management skills, and financial resources for launching the venture.

The study of entrepreneurship has relevance today, not only because it helps entrepreneurs better
fulfill their personal needs but because of the economic contribution of the new ventures. More than
increasing national income by creating new jobs, entrepreneurship acts as a positive force in
economic growth by serving as the bridge between innovation and market place. Although
government gives great support to basic and applied research, it has ot had great success in
translating the technological innovations to products or services. Although intrapreneurship offers a
promise of marriage of those research capabilities and business skills that one expects from a large
corporation, the results have not been spectacular. This leaves the entrepreneur, who frequently
lacks both technical and business skills, to serve as the major link in the process of innovation
development, and economic growth and revitalization. The study of entrepreneurship and education
of potential entrepreneurs are essential parts of any attempt to strengthen this link so essential to a
countrys economic well-being.

7 Biggest Entrepreneurship Challenges An Indians Perspective

1. Family Challenges
Being in Kolkata (West Bengal) for more than 14 years now I know that Bengali people in general
are more focused on doing a job compared to entrepreneurship. When I talk to them about
entrepreneurship at time they take me lightly because of the fact that they think being from nonBengali and especially Gujarati family means business is in my genes. At times I also get an answer
that it is much easier to be an entrepreneur with my background than from a Bengali family
background. It may look true from their point of view but let me tell you that it is that much more
difficult to become and entrepreneur with business culture around.
For Bengalis the challenging is convincing your parents why you are not willing to opt for a job
and go for an entrepreneurship but then for Gujaratis and Marwaris family it is not only difficult to
convince to opt for entrepreneurship but then very much more difficult on an ongoing basis as well.
Convincing to opt for business over job is easy for Gujaratis but then for business you love is very
very difficult. The first thing they will compare is Will you make more money in business of your
choice or as a successor of family business. This is where it becomes almost impossible to convince
that you can generate more cash with your passion than doing what your Dad is doing.
The challenges are different but there are challenges. We were not born with silver spoon in our
mouth.

2. Social Challenges
Family challenges are always at the top because that is what matter the most but at times social
challenges also are very important. Let us say you and your friend graduated at the same time. You
opted for entrepreneurship and your friend opted for a job. He now has a flat, car and what not
because he could easily get those with a bank loan but you still have nothing to show off and this is
where challenge comes.
You should understand is that your friend opted for Udhar Ki Zindagi i.e. life on loan.

3. Technological Challenges
Indian education system lags too much from the Job industry as a whole but then it lags even more
when it comes to online entrepreneurship. I am yet to see a course in India which talks about
Search Engine Marketing, Affiliate marketing or even Blogging the sole idea of this blog. What this

does is makes entrepreneurs life that much more difficult on technology front What technology
would be ideal and how to use that technology effectively?

4. Financial Challenges
Financial challenges are a lot different in India especially for online entrepreneurs. When you are
starting out as an entrepreneur you dont opt for venture funding but try to go with funding from
small to medium business people. Many such non technical business people dont understand the
online business models as a whole and so getting an initial business funding from them becomes
challenging.
The other option you can think of is loan but bank loan is not at all an option in India for new online
entrepreneurs. The reason I say that is because for software and online business unless you are into
business for 5 years you cannot apply for a bank loan.

5. Policy Challenges
Government is never encouraging for SMBs (Small and Medium Businesses) these days. See this,
this, this I dont know why Indian Govt is taking so many major steps against small businesses
but it looks like Govt dont believe that small business can change the face of the Indian economy
on a large scale which is not at all true.

6. Team-ing Challenges
Indians and especially people in Kolkata are more inclined towards job in big companies than
towards a partnership or even working in small start-ups. You can have the hardest time finding the
right team of people to get yourself moving. I always had (and have) this problem to find the right
balance of people to work with me.

7. Motivation and dedication

This is true for any entrepreneur irrespective of geography but I think I should include it in my list
of challenges which is to keep yourself motivated for what you enjoy doing. At times we judge
entrepreneurs by the amount of money they make and if they dont make piles of cash people tend
to look at them as loser or insanely mad. It is this phase of entrepreneurship which is the toughest
time to keep your motivation and dedication going.
When I left my job couple of years ago, I opted for my earnings to go down by almost 5 times. 40k
to 8k and now I make tons of more cash (see how much here) than some of my colleagues who are
still very close to 40k only.
I have shared my experience of entrepreneurship challenges but I am sure it will be very interesting
to know your entrepreneurship challenges. If you have written it somewhere, share the URL in
comments below and I will be more than happy to read

You had a great idea, a well-drafted business plan, some cash to begin with, a talented team
and you managed to rake in more funds. Now, you are running your own business. So far, so
good. But, are you equipped for the challenges that lie ahead? I share with you my
entrepreneurial experience of six years in the form of seven daily challenges that every
entrepreneur-in-action faces, more as a routine than an exception.

1. No rules protecting employers

There are rules, the world over, upholding the interests of employees. But there is little an
employer can do, if at the receiving end. For example, if you discover that an employee has
secured a job with your company by means of duplicate certificates or fake experience, all you
can do is to ask them to leave with full pay. You hired him/her and it is solely your mistake!
Similarly, there are instances where you hire someone at a very handsome package for a crucial
position. But, by the time you train him/her to understand the responsibilities, you are gifted with
such a beautifully crafted resignation that you wonder why the artist didn't try a hand at creative
writing for Bollywood.
What takes the cake is a situation where, on the second day of the month, you realise a person
performing a highly skilled task decides to quit for a better paying job and doesn't have time for
the handover. Be prepared for such situations and ensure there are some multi-taskers in the
organisation to come to the rescue.
2. Global
competition
You submit a proposal for a requirement to a prospective customer, after taking into account the
cost of your employee, his allowance, certain percentage of the money that has gone into building
the product and a little margin. You do the best costing possible, as you want to penetrate this
account and have a long-term association with the client. You'd think your price would be best,
considering the Indian advantage of labour, materials, etc.
Then comes the bid award day and the contract goes to some other company in some part of the
world, ready to deliver what you promised, in a similar aggressive timeframe, similar reference
customer base, at half the price you quoted. Yes, you heard it right -- half the price! This is a
reality you have to live with. So, when you submit a proposal to one of your prospects, keep in
mind not only your country, but also the rest of the world. After all, the world is a global village
now,
3.

thanks
Changes

to

the
around

Internet

revolution.
the

globe

You have made some profit, and plan to use it to fuel your global expansion. You hire the best
man, train him and get him stationed in another country to give a local presence and comfort
factor to your prospective customers. You are burning a lot of money on a daily basis with a hope
that, sooner or later, you will start getting returns. But, something happens and you have to shut
shop. No questions asked.

The reasons vary, from political changes in the target country to a failed feasibility study. Now,
considering you are not a topnotch multinational able to hire a big consulting company to advise
you, be prepared to burn some money here and there. There are similar situations, for example,
in my company, which depends heavily on the Middle East market -- all our support departments
(sales, pre-sales, recruitment, operations, etc) are idle for the entire month of Ramadan [ Images ]
every year. Such changes have to be managed with a positive attitude.
4.

Balance

between

projects

and

personnel

Usually, with startups or in the early stages of expansion, you have a project but no one to
execute it. And, if the founders are techies, you have no choice but to burn the midnight oil and
finish it somehow. Most likely, if this is the first assignment with the customer, you cannot afford to
compromise on quality -- after all, you are expecting bigger business from the same customer.
Such an experience makes you wise enough to do some advance hiring the next time around
and, guess what -- this time, the opposite happens.
The project that was supposed to come in yesterday now lingers for months. Every time you pay
those salaries, you think, 'Did I make the right decision? Am I doing justice to my investors'
money?' Over time, you will learn to balance the two situations by pitching for regular work to help
you tide over.
5.

Delayed

payments

You finished the work as planned and it is now time to collect payment. You have made plenty of
plans for that money, from hiring more people in sales, to acquiring another office, to investing in
a new idea. But, for no apparent reason, the money is delayed, especially if you are dealing with
a large customer. The only thing you hear is 'Sorry, it is just a procedural delay', or 'You will
receive your payment soon.' But nobody knows when.
So, how do you pay your employees and vendors? This, I must confess, is one of the toughest
parts of being an entrepreneur. The only option you have is to forego your salary. In fact, pull out
all your savings and put them in the company to bridge the gap. If still does not suffice, go to the
bank with some 'tangible' property. That means, if you have a flat, you mortgage it. In most cases,
the family is not even made aware of this, because it is a short-term problem and you do not want
to scare them.
6.

Return

to

the

investor

So far, you may have heard stories of successful entrepreneurs becoming venture capitalists to
help budding entrepreneurs. You may also have been advised not to be 'sticky' and to try and
have a smaller pie of a bigger cake, rather than a bigger pie of a smaller cake. Sounds great! But,

in reality, let's admit, these 'mother hen' entrepreneurs are successful because they are smart.
They know how to grow their money and that is precisely the reason why they have so much
money under their belt to manage.
So, if you end up taking money from them, be prepared to answer many a difficult question on a
daily basis. If you can't manage that, you are out -- of the very own company you built!
Remember,
7.

bigger

pie

of

How

small

cake

society

is

any

day

perceives

better.
you

As an entrepreneur, I remember approaching a leading Indian bank [ Get Quote ] for a home loan,
where I was rejected for being "self-employed." And, believe it or not, a software engineer
working in my own company got his loan sanctioned. If you are an Indian, an entrepreneur and
unmarried, I give you my best wishes, because there is slim chance that a typical Indian middleclass parent will select you for his or her daughter.
You are perceived as a person without job security, unlike your classmates or ex-colleagues, who
are sought after for being placed in well-known multinationals. Surprisingly though, if there is a
natural calamity or any other cause needing attention, society expects successful entrepreneurs
to

donate

generously,

and

they

do.

So, if you thought being entrepreneur is fascinating and fun, yes, it is, but it comes with its own
set of problems. However, once you learn the ropes, you start enjoying the ride. Once an
entrepreneur, always an entrepreneur.