ENTREPRENEURIAL COMPETENCIES-MEANING
MEANING
The success of a small-scale industrial venture depends on '
the following major
factors:
a) Inherent viability of the project, i.e., technical, organizational, financial and
commercial viability.
b) The way a project is planned, i.e. decisions regarding various project parameters
such as where to locate, what technology to use, what should be the capacity of
the machineries, etc.
c) The meticulousness with which a project is implemented.
d) The way a project is managed.
While one can add certain other factors to this list including the environmental
factors, the said factors appear to be major ones. Let us focus our attention on the last
3 factors mentioned above, i.e. project planning, implementation and management.
In a small scale enterprise, it is the promoter of the project, i.e. the entrepreneur who
does most of the functions of the project planning, implementation and management.
If the size of the project is big enough to call for employing professional managers, it
is, the entrepreneur who acts as a driving force behind performance of these three
aforesaid major tasks. In order to plan a project flawlessly, implement it meticulously
and manage it effectively, an entrepreneur needs to possess certain knowledge, skills
and appropriate personality profile.
Entrepreneurship Development Institute of India, Ahmedabad, took up a research
project to identify what it takes to be a successful entrepreneur. The research project
was initiated by Prof. David C. Mc Clelland, a well known behavioural scientist and
was taken up in 3 countries-India, Malawi and Equador. The output of the research
project has been the identification of a set of entrepreneurial competencies or
characteristics that lead to superior performance. A major finding of the research
project was that the said competencies are cross culturally valid. In other words, in
order to perform well as an entrepreneur, it is necessary to possess the competencies
in varying measures irrespective of the geographical locations, where the
entrepreneur is operating,
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Entrepreneur and
Entrepreneurship
In this unit, an attempt has been made to explain the concept of entrepreneurial
competencies.
What is a Competence
A competence is an underlying characteristics of a person, which results is effective
and/or superior performance in a job. A job competence is an underlying
characteristics of a person, in that it may -
be motive, traits, skills, aspect of ones self-
image or a body of knowledge which one uses. The existence of these characteristics
may or may not be known to the person. In this sense, the characteristics may be
unconscious aspects of the person. In simple terms, a competence is a combination of
body of knowledge, set of skills and cluster of appropriate motives/traits that an
individual possesses to perform a given task. In order to understand more about
competencies, let us understand the meaning of knowledge, skills, traits and motives,
which form various components of entrepreneurial competencies.
What is Body of Knowledge
Knowledge means collections of information and retention of facts that an individual
stores in some parts of his brain. Let us take an example of swimming. One could be
in a position to describe how to swim, which would mean that one possesses
knowledge of swimming. But this alone will not enable the listener to actually swim
unless one has something more than the knowledge component to perform the
activity It means that knowledge is necessary for performing a task but not sufficient.
In real life situation, one may find various examples, where people possessing mere
knowledge have miserably, failed while performing the task. Besides knowledge, an
individual should have skills to translate the knowledge into action.
What is a Skill
Skill is the ability to demonstrate a system and sequence of behaviour that are
functionally related to attaining a performance goal. Using a skill is not a single
action. The relationship among the specific actions is such that each contributes
under some direct manner to the capability of people to function effectively or
ineffectively in a given situation. Since a skill is the ability to demonstrate a system
and sequence of behaviour, it must result in something observable, something that
someone in the person's environment can `see' .For example, planning ability is a
skill. People who have this skill can identify sequence of action to be taken to
accomplish a specific objective. They can identify potential obstacles to those
actions. People with this skill can identify sources of help in avoiding obstacles or
overcoming them when they interfere with the action sequence. None of these
separate actions, constitutes a skill, but the system. of behaviour does People who
have this skill can apply it in any number of situations or contexts.
Going by the example of knowledge of swimming, if one has to be in a position to
swim, one needs to have the skill too. Knowledge could be acquired by reading,
listening, visuals etc. while skill can be acquired only through practice, which enables
the individual to demonstrate the system and sequence of behaviour that are
functionally related to performing a task. In other words, knowledge of swimming
could be acquired by reading, talking to experts and so on-where as the skill to keep
oneself afloat on water can be acquired by practicing on a number of occasions.
Thus, knowledge as well as skills are required to perform a given task effectively.
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Entrepreneurial
Competencies
Motives and Traits
A motive is a recurrent concern for a goal state or condition appearing in fantacy,
which drives, directs and selects behaviour of the individual. Motive includes
thoughts related to a particular goalstate. For example people who think about
improving their own performance and competing against a standard of excellence are
said to have Achievement Motivation. When people with high achievement
motivation encounter a situation in which their performance can be measured and a
goal can be stated, their achievement motivation is aroused. Once aroused, the
motivated thoughts direct and select their behaviour, i.e. they will choose to do
things-that help them get feedback on their performance and engage in activities that
may result in improved performance. In simple terms, motive is an urge for which
one has continuous concern in his mind, which directs one to get into certain actions
so that the concerns that one shows, gets satisfied.
Coming back to the example of swimming, the knowledge on how to swim followed
by practice which would help an individual to acquire skills in swimming would lead
to the individual acquiring capability to swim. But then this does not lead to him
becoming the best swimmer within a given reference group. The individual's urge to
do better and better leading to a desire to become the best swimmer could be termed
as a concern for excellence-in other words achievement motivation. It is this concern,
which would help the individual to constantly practice swimming, look out for ways
and means of increasing the speed thereby ultimately increasing the possibility of
becoming the best Swimmer.
A trait is a dispositional or characteristic way in which the person responds to an
equivalent set of stimuli. A trait includes thoughts and psycho-motor activities related
to a general category of events. For example, people who believe themselves to be in
control of their future are said to have the trait of efficacy. When people with this
trait encounter problem or issue in any aspect of life they take initiative to resolve the
problem or understand the issue. They do not wait for someone else to do it nor
expect that luck will take care of it. The thought pattern and resultant behaviour occur
in response to any general set of events, which allow the trait to be expressed.
Thus to perform any given task including that of launching all industrial venture and
managing it successfully, a person needs a set of knowledge, skill, motives and traits
which could be together labelled as competencies.
2.3 MAJOR ENTREPRENEURIAL COMPETENCIES
A RESEARCH STUDY
The knowledge of entrepreneurial competencies has been sharpened over the last 3
decades. Earlier, there used to be a firm belief that those persons with business
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Entrepreneur and
Entrepreneurship
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family background could become successful entrepreneurs. Subsequently there was a
belief that individuals need technical know how , as a major requirement for being
successful in launching all industrial venture. In order to understand clearly what it,
takes to be a successful entrepreneur, EDI took up a research project as indicated in
para 2.2 above. Following is a list of major competencies that contribute towards top
performance:
i) Initiative: All entrepreneur takes action that go beyond job requirements or the
demand of the situation.
Does things before being asked or forced by, the events.
Acts to extend the business into new areas, products; or services.
ii) Sees and Acts on Opportunities: Looks for and takes action on opportunities.
Sees and acts on opportunities (business, educational or personal growth).
Seizes unusual opportunities to obtain financing, equipment, land, work
space or assistance.
iii) Persistence: Takes repeated action to overcome obstacle that get in the way of
reaching goals.
Takes repeated or different actions to overcome obstacles:
Takes action in the face of a significant obstacle.
iv) Information Seeking: Takes action on own-to get information to help reach
objectives or clarify problems.
Does personal research on how to provide a product or service.
Consults experts for business or technical advice.
Seeks information or asks questions to clarify what is wanted or needed •
Personally
undertakes research, analysis, or investigation.
Uses contacts or information networks to obtain useful information.
v) Concern for High Quality of Work: Acts to do things that meet or beat
existing standards of excellence.
States a desire to produce work of high quality.
Compares own work or own company's work favourably to that of others.
vi) Commitment to Work Contract: Places the highest priority on getting a job
completed.
Makes a personal sacrifice or expends extraordinary effort to complete a job
Accepts full responsibility for problems in completing a job for others.
Pitches in with workers or works in their place to get the job done.
Expresses a concern for satisfying the customer.
vii) Efficiency Orientation: Finds ways to do things faster or with fewer resources
or at a lower cost.
Looks for or finds ways to do things faster or at less cost.
Uses information or business tools in improve efficiency
Expresses concern about costs vs. benefits of some improvement, change,
or course of action.
viii) Systematic Planning: Develops and uses logical, step-by-step plans to reach
goals.
Plans by breaking a large task down into sub-tasks.
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Develops plans that anticipate obstacles.
Evaluates alternatives.
Takes a logical and systematic approach to activities.
ix) Problem Solving: Identifies new and potentially unique ideas to reach goals.
Switches to an alternative strategy to reach a goal.
Generates new ideas. or innovative solutions.
x) Self-Confidence: Has a strong belief in self and own abilities.
Expresses confidence in own ability to complete a task or meet a challenge.
Sticks with own judgement in the face or opposition or early lack of
success.
Does something that he says is risky.
xi) Assertiveness: Confronts problems and issues with others directly.
Confronts problems with others directly.
Tells others what they have to do.
Reprimands or disciplines those failing to perform as expected.
xii) Persuasion: Successfully persuades others.
Convinces someone to buy a product or service.
Convinces someone to provide financing.
Convinces someone to do something else that he would like that person to
do.
Asserts own competence, reliability, or other personal or company
qualities.
Asserts strong confidence in own company's or organisation's products or
services.
xiii) Use of Influence Strategies: Uses of variety of strategies to affect others.
Acts to develop business contacts.
Uses influential people as agents to accomplish own objectives.
Selectively limits the information given to others.
xiv) Monitoring:
Develops or uses procedures to ensure that work is completed or that work
gets standards or quality.
Personally supervises all aspects of a project.
xv) Concern for Employee Welfare:
Takes action to improve the welfare of employees.
Takes positive action in response to employees' personal concerns.
Expresses concern about the welfare of employees.
Are these Competencies Independent?
All the competencies described above are instrumental in making a person successful
entrepreneur. Through these competencies, we can discriminate between successful
entrepreneurs and average ones. All these competencies are interrelated. Depending
on the nature and content of these competencies they could be clubbed into various
clusters. These competencies could be developed through systematic training.
Activity 2
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Entrepreneur and
Entrepreneurship
Some people believe that it is the traits of a person that help him in succeeding as an
entrepreneur. Look at the table below and list 6 characteristics that you think are most
important for a person to have in order to succeed as at 1 entrepreneur. Also list 6
traits, which you think, are the least important in this regard.
Most Important Least Important
1) High academic qualification ....................... ......................
2) Physical fitness ....................... ......................
3) Need to achieve ....................... ......................
4) Creativity ....................... ......................
5) Competitiveness ....................... ......................
6) Persistence ....................... ......................
7) Patience ....................... ......................
8) Leadership ....................... ......................
9) Organising ability ....................... ......................
10) Need to have power over others ....................... ......................
11) Desire for money ....................... ......................
12) Independence ....................... ......................
13) Coverage ....................... ......................
14) Positive outlook ....................... ......................
2.4 DEVELOPING ENTREPRENEURIAL
COMPETENCIES
Stage 1: Understanding and Recognising
The first step towards acquiring a new behaviour is to understand what a particular
competence means. With such an understanding one would then able to recognise the
competence when someone exhibits the same.
Step 2: Self Assessment
Having understood a given competence and having been able to recognise the same
when someone else exhibits a given competence, the next step is to find out where
one stands with respect to a given competency. In other words, does one possess a
given competence and if so how frequently one exhibit the same in one's day-to-day
activities.
In order to help one identify the level of one's competencies, enclosed here with is a
questionnaire, titled `Self Rating Questionnaire'. which one could answer and later on
use the coding sheet attached to the questionnaire to understand one's level of
competencies. The •self-rating questionnaire is placed at Exhibit 1. Coding
instructions of Self-Rating Questionnaire is placed at Exhibit 2 A.
After coding, to know where one stands with respect to various entrepreneurial
competencies, we suggest one does some introspection and answer some of the
questions listed in Exhibit 2B labelled as "My Thoughts about my Competence
Level"
Step 3: Practice
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Entrepreneurial
Competencies
Having gone through the above steps, one would be in a position to decide the
competencies that are not a part of one's personality but one would like to acquire
those competencies and strengthen others; By practice, we mean exhibiting, a given
competence in a variety of situations, both simulated and real. Help from a trained
facilitator is called for to develop the competencies through practice in simulated
situations.
Step 4: Application in Real life Situation
Any new behaviour that one acquires would become a part of one's personality only
when one applies the same on a continuous basis in various activities. In other words,
there is a need to make efforts towards exhibiting all the competencies deliberately
and consciously all the time even in the simplest activities that one performs.
Step 5: Feedback
One's desire to acquire new behaviour, internalise and practice the same would be
strong only when one understands the benefit of operating as per the newly acquired
behaviour versus usual/old behavioural pattern. Hence, having understood a
competence and having practised the same in a given situation one needs to
introspectto find out how one's new behaviour" or act of exhibiting a competence has
been rewarding. Greater the benefit more will be ones, determination to continue
exhibiting the competence in a variety of situations.
Schumpeter’s Perspective
Concept of Creative Destruction
Key to Economic Growth of a Society
An entrepreneur develops the society, the nation and
other entrepreneurial firms during his own journey
through a number of factors.
Economic Development and
Entrepreneurship
should be able to explain the role of entrepreneurs in
the structural transformation of countries
from low income, primary-sector based societies into
high-income service and technology based societies.
The entrepreneur acts as a trigger head to give spark to
economic activities by his entrepreneurial decisions.
He plays a pivotal role not only in the development of
industrial sector of a country but also in the
development of farm and service sector.
Entrepreneurship and Economic
Development
The major roles played by an entrepreneur in the
economic development of an economy is discussed in
a systematic and orderly manner as follows.
(1) Promotes Capital Formation,
(2) Creates Large-Scale Employment
Opportunities,
(3) Promotes Balanced Regional Development,
(4) Reduces Concentration of Economic Power,
(5) Wealth Creation and Distribution,
Entrepreneurship and Economic
Development
(6) Increasing Gross National Product and Per
Capita Income,
(7) Improvement in the Standard of Living,
(8) Promotes Country's Export Trade,
(9) Induces Backward and Forward Linkages,
(10) Facilitates Overall Development,
ENVIRONMENTAL FACTORS AFFECTING ENTREPRENEURSHIP
A complex and varying combination of financial, institutional, cultural and personality factors
determines the nature and degree of entrepreneurial activity at any time. The personal backgrounds
of the entrepreneurs are determined mainly by the environment in which they are born and brought
up and work. A multitude of environmental factors determine the entrepreneurial spirit among
people. The entrepreneurs in turn create on impact on the environment. The interaction between
the entrepreneur and his environment is an ongoing process. At any given point of time, the
entrepreneurs derive meanings from the environment prevailing at that time and try to adapt
and/or change the environment to suit their needs.
The environment, particularly the external environment is dynamic. It keeps on environment on the
organisation depends largely on the degree to which the organisation depends (immediate or
remote) on the environment and organizational response to environmental changes. All the factors
outside and inside (Individual, groups, machinery, equipment, procedures, rules, policies, etc.) an
organisation interact and affect the performance of the organisation. Some of the environmental
factors which hinder entrepreneurial growth are given below:
1. Sudden changes in Government policy.
2. Sudden political upsurge.
3. Outbreak of war or regional conflicts, e.g. ‘sons of the soil’ call.
4. Political instability or hostile Government attitude towards industry.
5. Excessive red-tapism and corruption among Government agencies.
6. Ideological and social conflicts.
7. Unreliable supply of power, materials, finance, labour and other inputs.
8. Rise in the cost of inputs.
9. Unfavourable market fluctuations.
10. Non-co operative attitude of banks and financial institutions.
Entrepreneurship is environmentally determined. The most important essential for entrepreneurial
growth is the presence of a favourable business environment. A healthy business environment
requires active social and cultural behaviour of the people, efficient economic conditions, helpful
motivating Government policies, etc. When environment mitigates entrepreneurship it must be
modified.
STATE AND THE ENTREPRENEUR
State plays now a vital role in the sphere of entrepreneurship. This role may be classified into three
categories:
1. Supporting role
2. Regulating role
3. Participative role
Support: The Government of India has launched several schemes for the growth of entrepreneurship
so as to ensure the rapid economic development of the country. It has created a vast network of
institutions and agencies which provide several types of assistance to new and established
entrepreneurs. Public financial institutions or development banks are one part of this institutional
framework. These banks at the national and State level provide financial, managerial and
promotional assistance.
At the national level Industrial Finance Corporation of India (IFCI), Industrial Credit and Investment
Corporation of India (ICICI), Industrial Development Bank of India (IDBI), Small Industries
Development Bank of India (SIDBI) are the major institutions. Every State has its own-State financial
corporation and/ or State industrial development corporation. These agencies provide industrial
finance through term loans, underwriting and direct subscription to industrial securities. They also
render assistance in the identification and promotion of industrial projects. They have set up several
institutes for undertaking training and research in different fields of management. They have
sponsored technical consultancy organisations (TCOs) for providing necessary facilities and guidance
to new enterprises. 'Seed capital' is provided to new entrepreneurs on soft terms. In addition a
directory of industrial, technical and management consultants has been prepared so that
entrepreneurs can take their help in the formulation and implementation of projects. Special
schemes are available for backward areas, women entrepreneurs, sick units and technical graduates,
industrial Reconstruction Bank of India (IRCBI), and Bureau of Industrial and Financial Reconstruction
(BIFR) have been set up to prevent and correct sickness in industry. National Small Industries
Corporation (NSIC) and other bodies are operating to promote small scale entrepreneurs.
In addition to institutional framework, the Government has developed industrial infrastructure in
the form of transportation, communications, power, etc. It provides incentives and subsidies of
various types to deserving entrepreneurs. But for the assistance and facilities provided by the
Government, entrepreneurial base in India would have remained narrow.
Regulation: In order to achieve the objective of socialist pattern of society, Government of India has
enacted innumerable regulations and controls. These regulations are designed to set priorities of
industrial development, to regulate the pattern of production and distribution, to check the growth
of monopolies and concentration of economic power, etc. Some of the more important ways in
which Government regulates business activities are given below:
(i) Industrial Policy Resolutions
(ii) Industrial licensing under the Industries Development and Regulation Act, 1951
(iii) Capital Issues Control
(iv) The Companies Act, 1956
(v) Control over Monopolies and Restrictive Trade Practices
(vi) Fiscal and monetary controls
(vii) Controls over exports and imports
(viii) Foreign exchange regulations
(ix) Commodity controls
Private industrialists in India often complain that there are too many controls and these controls
have failed to achieve the intended objectives. In recent years there has been a trend towards
liberalisation of economic activities. The control and regulatory mechanism is a dynamic process and
has to be viewed against the environmental situation existing at a point of time. Different degrees of
control may be necessary at different stages of economic growth.
Participation: In India, Government has emerged as the single largest entrepreneur through the
public sector. The top ten companies in India in terms of size are all in the public sector. Key and
basic industries like iron and steel, coal mining, aeronautics, power, railways, communications,
cement, etc. are mostly owned and controlled by the Government. All major commercial banks and
insurance companies have been nationalised.
Government began to participate in industry and trade because it felt that private sector alone will
not be able to industrialise the country at the desired pace and scale. Government enterprises seek
to achieve economic (planned growth, rapid industrialisation, generation of surplus), social
(employment generation, balanced regional development, egalitarian society), and political (self-
reliance, national defence, etc.) objectives.
ENVIRONMENT IN UNDERDEVELOPED COUNTRIES
Development of a healthy business environment is an essential condition for growth of
entrepreneurs. New enterprises can flourish and grow only under favourable economic, social and
political conditions. Unfortunately, economic and social conditions in underdeveloped countries are
unfavourable and even prohibitive. There is lack of adequate infrastructure and capital. Social
institutions are hopelessly traditional and social attitudes inhibit entrepreneurial behaviour. People
in general are conservative and do not initiate and appreciate changes. Obviously entrepreneurship
cannot flourish under such conditions. Therefore, it is very difficult lo create and maintain the
required quantity and quality of entrepreneurship in underdeveloped countries.
Business environment in underdeveloped countries is such that entrepreneurship can be organised
on a small scale. Shortage of capital and imperfect market restricts large scale enterprises. Most of
the entrepreneurs can imitate but few can innovate. That is why these countries place emphasis on
the small scale sector as an instrument of economic planning and development. Political ideology
also requires the development of a decentralised industrial structure where ownership and
economic power are mostly distributed. The State in these countries provides preferential treatment
to small scale enterprises lo generate employment, to mobilise local capital and skills and to ensure
a more equitable distribution of income and wealth.
In order to supplement the efforts of private entrepreneurs the Government in underdeveloped
countries has become an important entrepreneur. Active participation of the Slate in business helps
to spread innovating and imitating entrepreneurship throughout the country. In addition the
Government takes various physical and financial measures to stimulate the growth of
entrepreneurship.
1.Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest their own
resources and attract capital (in the form of debt, equity, etc.) from investors, lenders and the public.
This mobilizes public wealth and allows people to benefit from the success of entrepreneurs and
growing businesses. This kind of pooled capital that results in wealth creation and distribution is one
of the basic imperatives and goals of economic development.
2. Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job seekers.
The simple translation is that when you become an entrepreneur, there is one less job seeker in the
economy, and then you provide employment for multiple other job seekers. This kind of job creation
by new and existing businesses is again is one of the basic goals of economic development. This is
why the Govt. of India has launched initiatives such as StartupIndia to promote and support new
startups, and also others like the Make in India initiative to attract foreign companies and their FDI into
the Indian economy. All this in turn creates a lot of job opportunities, and is helping in augmenting our
standards to a global level.
3. Balanced Regional Development: Entrepreneurs setting up new businesses and industrial units
help with regional development by locating in less developed and backward areas. The growth of
industries and business in these areas leads to infrastructure improvements like better roads and rail
links, airports, stable electricity and water supply, schools, hospitals, shopping malls and other public
and private services that would not otherwise be available.
Every new business that locates in a less developed area will create both direct and indirect jobs,
helping lift regional economies in many different ways. The combined spending by all the new
employees of the new businesses and the supporting jobs in other businesses adds to the local and
regional economic output. Both central and state governments promote this kind of regional
development by providing registered MSME businesses various benefits and concessions.
4. GDP and Per Capita Income: India’s MSME sector, comprised of 36 million units that provide
employment for more than 80 million people, now accounts for over 37% of the country’s GDP. Each
new addition to these 36 million units makes use of even more resources like land, labor and capital
to develop products and services that add to the national income, national product and per capita
income of the country. This growth in GDP and per capita income is again one of the essential goals
of economic development.
5. Standard of Living: Increase in the standard of living of people in a community is yet another key
goal of economic development. Entrepreneurs again play a key role in increasing the standard of
living in a community. They do this not just by creating jobs, but also by developing and adopting
innovations that lead to improvements in the quality of life of their employees, customers, and other
stakeholders in the community. For example, automation that reduces production costs and enables
faster production will make a business unit more productive, while also providing its customers with
the same goods at lower prices.
6. Exports: Any growing business will eventually want to get started with exports to expand their
business to foreign markets. This is an important ingredient of economic development since it
provides access to bigger markets, and leads to currency inflows and access to the latest cutting-
edge technologies and processes being used in more developed foreign markets. Another key benefit
is that this expansion that leads to more stable business revenue during economic downturns in the
local economy.
7. Community Development: Economic development doesn’t always translate into community
development. Community development requires infrastructure for education and training, healthcare,
and other public services. For example, you need highly educated and skilled workers in a community
to attract new businesses. If there are educational institutions, technical training schools and
internship opportunities, that will help build the pool of educated and skilled workers.
A good example of how this kind of community development can be promoted is Azim Hashim Premji,
Chairman of Wipro Limited, who donated Rs. 27,514 crores for promoting education through the Azim
Premji Foundation. This foundation works with more than 350,000 schools in eight states across
India.
So, there is a very important role for entrepreneurs to spark economic development by starting new
businesses, creating jobs, and contributing to improvement in various key goals such as GDP,
exports, standard of living, skills development and community development.
