Entrepreneurship Development in SME Sector
There is no universally accepted definition of entrepreneurship. The concept of “entrepreneurship” is elusive, difficult to define, measure and therefore, promote. The concept of “entrepreneurship” may be applied broadly or in a narrow, focused way depending on the context. “Enterprise” and “entrepreneurship” can have a range of meanings in different contexts denoting a mindset or type of behaviour (entrepreneurial behaviour) in the broadest sense or equated with a small business undertaking in the narrow sense. Entrepreneurship has typically been referred to as an action, process, or activity, in which innovation plays a significant role. The recent Green Paper on Entrepreneurship in Europe by the European Commission (2003b, p.6) defines it as follows: “Entrepreneurship is the mindset and process to create and develop economic activity by building risk-taking, creativity and/or innovation with sound management, within a new or an existing organisation”. Encyclopedia Britannica defines entrepreneur as ”An individual who bears the risk of operating a business in the face of uncertainity about the future conditions.” According to ILO “Entrepreneurs are the people who have the ability to see and evaluate business opportunities; together with the necessary resources to take advantages of them; and to intimate appropriate action to ensure success.”
(2) Role of Entrepreneurship
Despite the definitional differences, it is commonly agreed that entrepreneurship is a driving force behind SMEs. Available evidence suggests that entrepreneurship can contribute significantly to achieving key policy objectives. Entrepreneurship is an effective means of achieving certain policy objectives, but not all, and at least in the short term, there are trade offs which have to be recognised. Entrepreneurs are the driving force behind SMEs, and SMEs play an important structural and dynamic role in all economies. The main areas where increased levels of entrepreneurial activity can contribute significantly to specific policy outcomes are:
i) Create opportunities -Job creation, careers, new products/services
ii) Economic growth, productivity improvement, and innovation.
iii) Poverty alleviation and social opportunities.
iv) Create new customers and open up new markets.
Over the last two decades, there has been a shift toward encouraging greater "social entrepreneurship" as a means of poverty alleviation, increasing employment opportunities and empowerment of disadvantaged or under-represented groups, particularly in rural areas. Awareness of the potential which entrepreneurship may offer for promoting social inclusion is growing worldwide. Much of this emphasis placed by governments is focused on assisting target groups to start up micro enterprises, usually by means of the provision of low cost micro finance. These policies implemented in many developing economies have been shown to be remarkably effective by some criteria, and are well illustrated by the success of the Grameen Bank. Micro enterprises are important in their own right, for two closely interrelated reasons:
(3) Education and Training in Entrepreneurship
Education and training have been recognised in this context as the single most important means for achieving the objective of fostering entrepreneurship in societies. Education and training in entrepreneurship can have two types of effects. First, they can have considerable impact on the performance of entrepreneurs, especially with regard to assisting entrepreneurs increase their firm’s chances of survival, and to a lesser extent, to help make the resulting business more profitable. Education in entrepreneurship increases the chances for start-ups and self-employment and enhances the economic reward and satisfaction of entrepreneurial individuals. Second, although extremely difficult to measure, education in entrepreneurship is also supposed to have some longer term impacts on the degree of entrepreneurial spirit and attitudes which are fundamental for an entrepreneurial population and society.
Although national governments as well as international fora, such as the EU, the APEC, and the OECD, are giving increasing emphasis to the importance of education and training in entrepreneurship, and many initiatives have been launched in practically all countries, entrepreneurship education and training are still characterised by a number of problems and shortcomings that need to be addressed urgently. These include:
In light of the above, issues in the area of education and training in entrepreneurship that require special government attention may include:
(4) Factors affecting Entrepreneurship:
Attitudes to wealth, elders, youth, xperimentation, risk, work, professions, achievers, success etc.
Family, extended family, collective ownership vs. individual,Treatment of women, castes, classes, minorities, etc.
Religion and ethical attitudes to business
Tangible, intangible, telecommunications, transport, distribution, health, public safety, law and courts, education system, etc.
Demographic profile (e.g. ageing population reduces entrepreneurship and start up rates)
Immigration and migration patterns
Caste and class rigidities
Growth opportunities, domestically and across borders
Cyclical opportunities and threats (unemployment may lead to entrepreneurship)
Taxation treatment of capital gains, start up expenses, intangible asset expenditure, stock options, etc.
LEGAL AND REGULATORY
Administrative burden imposed on smaller firms and start ups
Regulatory barriers (licenses, etc.)
Property rights (tangible, intangible) can be protected and marketed
Right to incorporate, and costs of incorporation
Costs of defending or enforcing agreements or rights
Penalties imposed for "failure", treatment of bankrupts
Specific regulations and laws relating to specific markets or activities
Access to information about opportunities, technology, partners, laws and regulations etc.
Freedom of press and ability to advertise or disseminate information (e.g. about new products)
Accessibility of information in different languages
Discrimination in finance (e.g. age, gender, class discrimination)
Sophistication and development of markets (e.g. microfinance, start up and seed finance, angles, equity, religion [e.g. Muslim finance], Venture Capital, second board and OTC markets, mezzanine, etc.)
Continuity in finance markets (i.e. are the gaps in the markets, or can an entrepreneur expand smoothly from seed to IPO)
Competition in financial markets (e.g. competitive finance markets reduce the margin above cost of finance to lenders, and increase range of services)
Ability to use property rights as security (enables entrepreneurs to secure finance)
Access to large firms or universities and research labs for technology transfer
Access to supply chains
Access to incubators and technology support
EDUCATION and HUMAN RESOURCES
Levels of literacy, numeracy Computer and ICT literacy -- Specific education in entrepreneurship at school, university - Access to training programs, mentoring, advice, nanyangs
Monopolistic behaviour, predatory pricing by large firms
Flexibility in labour markets
Industry or market specific incentives and subsidies
Individual personality and motivation traits e.g. locus of control, risk taking, innovativeness
Individual experience and knowledge
(5) Major Entrepreneurial Competencies:
Earlier there was a myth that those persons with business family background could become successful entrepreneur. Subsequently people started believing that individuals need technical know-how , as a major requirement for being successful in launching all industrial ventures. To understand that what actually is requires to be a successful entrepreneur, Entrepreneurship Development Institute conducted a research and found out that following major competiencies are required to be a successful entrepreneur:
(6) Institutional Support for Entrepreneurship Development
Generally bankers and Government agencies believe that the borrower must be possessing requisite entrepreneurial competencies. Fact is that this subject is never seriously included in any school/college curricula. That is why we observe almost all the graduates (even engineering graduates) running to search a job after completion of their education and hesitate to set up a n enterprise. In fact, not only new entrepreneurs but also existing entrepreneurs need continuous education/ training to enhance their entrepreneurial competencies and skills. Recognizing this need, the Central Government and several State Governments have setup various training institutes which are engaged in providing entrepreneurship development trainings, in addition to technical training and other rendering other services. Given below is a list of such institutes. The bankers should make all efforts to ensure that their borrowers are made aware of these facilities and get training from time to time.
Name of Institute
National Institute of Small Industry Extension and Training (NISIET)
Training, research and consultancy services
Indian Institute of Entrepreneurship
National Institute of Entrepreneurship and Small Business Development (NIESBUD)
Coordinating and overseeing activities of various institutes /agencies engaged in entrepreneurship development
Integrated Training Centre (Industries)
Conducts EDP course
Institute for Design of Electrical Measuring Instruments (IDEMI)
Render services to the instrumentation industry
Central Institute of Hand Tools
Aims at rapid growth of the hand tool sector
Hand Tool Design Development and Training Centre
Assistance for improvement in productivity, betterment in quality, high value addition
Central Tool Room
Provides services in the area of consultancy, tool design and manufacture and technical training
Central Tool Room and Training Centre
Training, design and manufacture of complicated precision tools for the telecom industry and other common facility services
Central Institute of Tool Design (CITD)
Training, CAD/CAM centre to train post-graduate trainees, automatic process control unit, and so on
Product-cum-Process Development Centre for Sports Goods
Training, process and product development of sports goods, R & D
Product-cum-Process Development Centre for Essential Oils
Modernise and upgrade technology status for the essential oils and perfumery industry
Product-cum-Process Development Centre
Provide better technology to small-scale foundry and forging units, process and product development, and provision of design for melting equipment, testing facilities
Electronic Service and Training Centre
Training, technical and consultancy services
Centre for the improvement of Glass industry
Development and adoption of new technologies and products
National Small Industries Corporation
Supply of machinery, marketing assistance, training
Some other organizations engaged in training and Development of SME Entrepreneurs are:
A brief of important institutes engaged in entrepreneurial development training is given below:
(i) The National Institute for Entrepreneurship and small Business Development (NIESBUD) : NIESBUD was established in 1983 by the Ministry of Industry (now Ministry of Small Scale Industries), Govt. of India, as an apex body for coordinating and overseeing the activities of various institutions/ agencies engaged in Entrepreneurship Development particularly in the area of small industry and small business. The Institute which is registered as a society under Govt. of India Societies Act (XXI of 1860) started functioning from 6th July, 1983. Its website can be accessed through www.niesbud.nic.in
Major activities of the Institute are:
Evolving effective training strategies and methodology Standardising model syllabi for training various target groups Formulating scientific selection procedure Developing training aids, manuals and toolsFacilitating and supporting Central / State/ Other agencies in organising entrepreneurship development programmes Conducting training programmes for promoters, trainers and entrepreneurs.
The trainings conducted by the Institute include:
(ii) National Institute of Small Industry Extension Training (NISIET): NISIET since its inception in 1960 by the Government of India, has taken gigantic strides to become the premier institution for the promotion, development and modernization of the SME sector. An autonomous arm of the Ministry of Small Scale Industries ( SSI ), the Institute strives to achieve its avowed objectives through a gamut of operations ranging from training, consultancy, research and education, to extension and information services. It has been renamed as National Institute of Micro Small and Medium Enterprises (NIMSME) (www.nimsme.org) from April 2007. The primary objective of the Institute was to be the trainer of trainers. Today, with the technological development and ever-changing market scenario, their involvement has undergone changes too. From being merely trainers they have widened their scope of activities to consultancy, research, extension and information services. Its website can be accessed through www.nisiet.gov.in
(iii) Indian Institute of Entrepreneurship (IIE): With an aim to undertake training, research and consultancy activities in the small industry sector focusing on entrepreneurship development, the Indian Institute of Entrepreneurship (IIE) was established in the year 1993 at Guwahati by the erstwhile Ministry of Industry (now Ministry of Small Scale Industry) , Government of India as an autonomous national institute. The institute started its operations from April 1994 with North East Council (NEC) , Govt. of Assam, Arunachal Pradesh and Nagaland and SIDBI as other stakeholders.
The activities of the Institute include identification of training needs, designing and organizing programmers both for development functionaries and entrepreneurs; evolving effective training strategies and methodologies for different target groups and locations; organize seminars, workshops and conferences for providing fora for interaction and exchange of views by various agencies and entrepreneurs; undertaking research on entrepreneurship development, documenting and disseminating information needed for policy formulation and implementation on self-employment and entrepreneurship.The Institute acts as a catalyst for entrepreneurship development by creating an environment for entrepreneurship in the support system, developing new entrepreneurship, helping in the growth of existing entrepreneurs and propagation of entrepreneurial education. Its website can be accessed through www.iie.nic.in
(iv) Entrepreneurship Development Institute of India (EDII): The Entrepreneurship Development Institute of India (EDI), an autonomous body and not-for-profit institution, set up in 1983, is sponsored by apex financial institutions, namely the Industrial Development Bank of India (IDBI), IFCI Ltd. ICICI and State Bank of India (SBI). The Institute is registered under the Societies Registration Act 1860 and the Public Trust Act 1950.
An acknowledged national resource institution, EDI is committed to entrepreneurship education, training and research. The institute strives to provide innovative training techniques, competent faculty support, consultancy and quality teaching & training material.EDI has been spearheading entrepreneurship movement throughout the nation with a belief that entrepreneurs need not necessarily be born, but can be developed through well-conceived and well-directed activities. Its website can be accessed through www.ediindia.org.
(v) The Institute of Small Enterprises and Development (ISED): The Institute of Small Enterprises and Development (ISED) stand for ‘Sustainable development through enterprise’. It is a multi-faceted Center for advanced learning and practice in the area of development. For the past decade, the Institute for Small Enterprises and Development has focused on research, education, innovative program design and entrepreneurship development initiatives, advocacy and networking dedicated towards sustainable development through enterprise creation. Among the similar institutions ISED’s leading-edge is the identification of methodologies and processes that empower one to break out of existing ‘mental models’ in order to identify new opportunities, while exploiting the emerging niche. ISED's interest in linking research, policy, and action is realized through the programmes of its Activity Centers. The integration of the outcomes takes place at the Centre for Policy Integration. In realizing its vision and fulfilling its mission, the Institute also collaborates with like-minded institutions and individuals. Its website can be accessed through www.isedonline.org.
Handout No. 1429 Updated by Shrimohan Yadav (Member of Faculty) on 19 July 2007
Entrepreneurship Development in SME Sect... , By: Shrimohan Yadav