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Foundations of
Entrepreneurship
Economic contributions (and
other value creation) of an
enterprise and entrepreneurs

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Books
Entrepreneurship by Robert D.
Hisrich
Entrepreneurship: Theory,
Process, and Practice 9th Edition
by Donald F. Kuratko

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Economic contributions of an
enterprise and entrepreneurs
How does an economy prosper?
What roles do entrepreneurs play in
economy?
Where does a government get the money
from?
How a nation creates wealth?
What are roles of the corporate world in
the process of creation of wealth?
What is efficiency of money?

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Ultimate Objective of an
Economy

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To gain Full employment - there is

enough overall demand in the
economy for everyone who wants a
job to have one at the prevalent
salary.

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Wealth Creation for the Nation

Adam Smith: The Wealth of Nations. First
published in 1776 inspired by the industrial
revolution.
the division of labour, productivity, andfree markets

John Maynard Keynes: The General Theory

of Employment, Interest and Money
published in 1936
consumption function, the multiplier (1 Rupee of
investment creates income of several Rupees), the
marginal efficiency of capital, the principle of effective
demand and liquidity preference.

Joseph Schumpeter - Creative Destruction as a

way of innovation and entrepreneurship and economic
growth

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Literature Substantiating Economic

Growth Driven by Entrepreneurship
Stel A. v, M. Carree and R. Thurik (2005), The effect of
entrepreneurial activity on national economic growth,
Small Business Economics, Vol. 24, No. 3, pp. 311-321
Praag C. M. Van, and P. H. Versloot (2007), What is the
value of entrepreneurship? A review of recent
research, Small Business Economics, Vol. 29, pp. 351382
Aparicio S., D. Urbano and D. Audretsch(2015) Institutional
factors, opportunity entrepreneurship and economic
growth: Panel data evidence, Technological
Forecasting and Social Change, Manuscript under
review
Rajiv Shah, Zhijie Gao, Harini Mittal (2015) Innovation,
Entrepreneurship, and the Economy in the US, China,
and India - Elsevier

F o u n

Year
2015
d a t i o n s
o f
E n t r e p r e n e
Country EDBI GEI PCG$
Switzerla
nd
77
6958731
Germany
79
6746896
Sweden
80
7247229
US
81
8556421
Finland
80
6640838
Denmark
84
7145451
Austria
77
6547031
Australia
80
7847608
Canada
79
8245723
New
Zealan
86
036152

QLI

223
195
193
192
190
190
182
180
177
175

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Correlation Coefficients

Global
Entrepreneurship
Index
Per-Capita GDP
Quality of Life Index

Ease of
Doing
Business
0.8057

0.0000
0.7255
0.0000
0.7426
0.0000

Global
PerEnt. Index Capita
GDP

0.7772
0.0000
0.8377
0.0000

0.7600
0.0000

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20

Global Entrepreneurship Index

40
60
80

100

Ease of Doing Business and

Global Entrepreneurship Index

40

50

60
70
Ease of Doing Business Index

80

90

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G lobal Entrepreneurship Inde x

20
40
60

80

Global Entrepreneurship Index

and Per-Capita GDP

20000

40000
Per Capital GDP

60000

80000

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G lobal Entrepreneurship Index

20
40
60

80

Global Entrepreneurship Index and

Quality of Life Index

50

100
Quality of Life Index

150

200

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Full Employment

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http://en.wikipedia.org/wiki/Full_employment

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Conditions defning the Entrepreneurial Framework

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Keynesian Economics
Consumption function
Total consumption = Autonomous
consumption + Induced consumption

Multiplier
Private or government investments bring
cycle of spending that increases
employment and prosperity. Rs. 100 spent
in labor cost of a project leads to Rs. 80
expenditure that leads to Rs. 64 and so on
leading up to aggregate Rs. 500 or so.

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Keynesian Economics

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Employment increases with consumption.

Consumption depends on savings.
Savings is influenced by interest rate

The principle of effective demand and

liquidity preference.

Interest
Savings
rate
Consumption

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Value Creation Process

Consumpti
on

Retaile
r

Distributio
n Channel

Utilities

Provide roughly
75% of the fund

Banks
and
Financial
Institution
s

Manufacturing
or
Service
Company

Primary
Inputs
Makers

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Savings with the Banking

System
70.0%

Sector-wise Deposit with Banks in India (as on Mar 31 each year)

60.0%

50.0%
Government Sector
Financial Sector

40.0%

Household Sector
Foreign Sector

30.0%

Private Corporate
Sector
20.0%

10.0%

0.0%
2006

2008

2010

2012

2013

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Value Around a Manufacturing Unit

Transportatio
n
Distributors

Utility
Companies

Service Tax
Excise

Manufacturing or
Service Companies

Input
Materials

VAT
Infrastructur
es
Support to Social
Infrastructures
School
Health Center
Local Transport
Hotel

Income Tax
Employmen
t
Value
Creation for
Local People

CONSUMPTION

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Purchasing Power of Rupee

Movement of Foreign Currency

Export

Repatriatio
n

Exchang
e Rate
FII/NRI/F
DI

Import

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Sources of Government Revenues

2013-14
Head

In Crore of Rupees

Tax Revenue

8,84,078

Non Tax Revenue

1,72,252

Capital Receipts

6,08,967

Grand Total

Tax
Revenue
Non Tax
Revenue
Capital
Receipts

16,65,297

80% of
the
capital
receipts
are
borrowin
gs

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Head

o Crore
n s ofoRupees
f
E
In

Corporate Tax

4,19,520

Income Tax

2,47,639

Wealth Tax

950

Customs

1,87,308

Excise Duties

1,97,554

Service Tax

1,80,141

Taxes on UT

2,758

Grand Total

12,35,870

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Tax Composition
2013-14

Composition of Taxes

Income Tax
Wealth Tax
Customs
Excise Duties
Service Tax
Taxes on UT

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I Want you to appreciate the

significance of the followings in
economic development:
Consumption
Employment
Technology
Purchasing power of domestic
currency
Read more on
this

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Role of Innovation in
Stimulating Economy
The key factor for increasing
consumption is employment that
again is dependent on consumption.
New products and efficient
manufacturing processes tend to
break the equilibrium and shift it to
new paradigm.
Read more on
this

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Economic Contributions of
Entrepreneurs
Entrepreneurs
Bring about the economic value-cycle and
sustain it.
Increase government income resulting in higher
expenditure and more consumption.
Generate employment.
Promote savings.
Increase consumption.
Stimulate new demand by offering products of
higher esteem.

Read more on

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Economic Contributions of
Entrepreneurs contd..
Improve technological landscape
through innovations in all key areas.
Facilitate diffusion of technologies
from abroad into domestic industries
resulting in technological selfreliance.
Bring foreign exchange.
Improve quality of life.

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Fu
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aff

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