amit entrepreneurship shaping the future of india

8/7/2019 AMIT ENTREPRENEURSHIP SHAPING THE FUTURE OF INDIA

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NIMT Institute of Agribusiness and Rural Management,SP3-1, RIICO Industrial Area, Keshwana, Kotputli,

District- Jaipur (Rajasthan)

CONTENTS

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1. Introduction

2. What an entrepreneurship

3. Concepts of entrepreneurship

4. Types of entrepreneur

5. Entrepreneurship in India and China

6. Potential of India and China

7. Contribution of Foreign Investment

8. Entrepreneurship The China vs. India Divide

9. Relationship between India and China

10. Factors that influence entrepreneurship

11. Role of venture capital in spurring innovation &entrepreneurship.

12. What Is Social Entrepreneurship?

13. Promoting social entrepreneurship

14. Conclusion
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INTRODUCTION

Economic growth and development of the country is determined by human,physical and financial resoureces.eventhough, there is an abundance of natural andphysical resources, machinery and capital may go underutilized or misused, if humanresources factors are not adequately cultivated or properly managed.Industrial development of any region is the outcome of the purposeful human activityand entrepreneurial thrust. Entrepreneur is presently at the crest of popularity. inIndia a large number of people are seeking entrepreneurship as a career option.Increasing number of unemployed as youth are getting attracted to entrepreneurship

and ar5e planning to setup their own business ventures. Entrepreneurial developmentis considered as a vital factor for the development of the country.

Economic development, achieved largely through productivity growth, is veryimportant to both developed and developing nations. However, even though we knowthat higher productivity leads to improved economic outcomes (for example, higherincome, more choices to the consumers, better quality products, etc.), there has beenno consensus among researchers about either the desired path of development or therole of state in economic development. Concerning the path of development, Lall(2001) says that the appropriate strategy for any country depends not only on itsobjective economic situation but also on its government policies and national views

regarding the appropriate role of the state. Regarding the appropriate role of thestate, it seems that for every argument in favour of a smaller government role onecan find a counter argument in favour of a more active government role. The role ofthe state in economic development began to change dramatically with the advent ofthe Industrial Revolution. In the West, the resulting industrialization and economicdevelopment were based on the establishment of individual property rights thatencouraged the growth of private capital. Competition and individual enterprise thrivein this environment because individuals pursue their self-interest of survival andwealth accumulation. The instinct to survive under competitive pressures yieldsinnovation and productivity increases, which eventually lead to both increased profitsfor business and lower prices to consumers.1However, the rise and spread of

capitalism led a number of thinkers to examine the consequences of the market-based approach to development. Socialists argued that capitalism (or privateownership of capital) can lead to greater inequalities of income and wealth, whiledevelopmental economists argued that private decisions may not always lead tosocially desirable outcomes (particularly in the case of market imperfections). Indeed,many policymakers at the time saw market failures as quite common and thereforeassumed that only appropriate government interventions could guide an economy toa path of sustained economic development. In the early 20th century, the former


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Soviet Union attempted a bold experiment of improving individual well-being withoutsacrificing the objective of greater equality of income and wealth through totalownership of capital by the government. Initially, the Soviet Government was able toraise productivity through directed industrialization and, within a span of 25 years (bythe end of World War II), emerged as a superpower. It was around this time that a

substantial number of colonized nations were gaining their independence (forexample, India, Pakistan and Burma). Unfortunately, during their time as colonies tothe Western nations, these countries, for the most part, had been deprived of theindustrialization that had engulfed those same Western nations. Based on thesuccessful experience of the former Soviet Union, many economists and policymakersconcluded that, particularly in a poor country, planning was essential for the efficientallocation of an economys resources.

The governments in these newly independent nations assumed a significantrole in economic development. They sought to quickly and substantially raise thestandard of living through directed and controlled economic development. Apart from

everything else, these developing countries invested heavily in education to promoteliteracy and to ensure an adequate supply of technical manpower to meet theirgrowing needs. Further, these previously colonized nations did not want to subjecttheir poor and weak economies to international economic fluctuations and thussought to industrialize through import substituting industrialization, where importswere expected to be increasingly replaced by domestic production.Changing Economy

During the 1980s, however, the economy built around traditional manufacturing began to undergo massive

changes. First, new technologies allowed companies to increase productivity while employing fewer

workers. Individual plants sometimes remained important contributors to the local tax base, but represented

a far smaller employment base. Other plants closed altogether.

By the 1990s, economic globalization was becoming a reality. As predicted, it brought winners and losers.

Domestic companies that could identify new markets, create new value-added products and respond rapidlyto changing conditions prospered and grew. Many farmers and entrepreneurs benefited from expanding into

new markets. Among the losers, however, were people employed in low-skill, low-wage manufacturing that

made up a large portion of the rural economy. As federal policies lowered trade barriers, those workerscould no longer compete successfully with workers in developing countries, where labor costs a fraction of

even the most modest U.S. wages and environmental laws are often less stringent. Jobs in textiles and

furniture, once North Carolina mainstays, themselves became exports: to China, Mexico, Indonesia and theCaribbean Basin.

The national recession that began in 2001 compounded the effects of these structural job losses, resulting inanother round of plant closings. This time, urban technology workers felt the blow as well.

The combined effects of these forces cost North Carolina more than 200,000 manufacturing jobs in five

years alone. Tens of thousands of these dislocated workers have exhausted their unemployment benefitswithout finding a new job that approximates their previous earnings.


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ENTREPRENEURSHIP

An entrepreneur is a person who has possession of an enterprise, or venture, and

assumes significant accountability for the inherent risks and the outcome. It is anambitious leader who combines land, labor, and capital to often create and marketnew goods or services.

Entre-pre-neur a person who organizes and manages a business undertaking,assuming the risk for the sake of profit.

Entrepreneurship is the ability to amass the necessary resources to capitalize on new business

opportunities. The term is frequently used to refer to the rapid growth of new and innovative businesses and is

associated with individuals who create or seize business opportunities and pursue them without regard for

resources under their control. They build something from practically nothing and usually reinvest earnings to

expand their enterprise or to create new enterprises. Other words that characterize entrepreneurship includeinnovative, creative, dynamic, risk-tolerant, flexible and growth-oriented.

Entrepreneurship is often difficult and tricky, resulting in many new venturesfailing. The word entrepreneur is often synonymous with founder. Most commonly, theterm entrepreneur applies to someone who creates value by offering a product orservice, by carving out a niche in the market that may not exist currently.Entrepreneurs tend to identify a market opportunity and exploit it by organizing theirresources effectively to accomplish an outcome that changes existing interactionswithin a given sector.

Business entrepreneurs are viewed as fundamentally important in thecapitalistic society. Some distinguish business entrepreneurs as either "politicalentrepreneurs" or "market entrepreneurs," while social entrepreneurs' principalobjectives include the creation of a social and/or environmental benefit

Entrepreneurship with all its attendant ingredients is one of the best means oftriggering economic and social development in developing countries like India. Thus
http://en.wikipedia.org/wiki/Entrepreneurshiphttp://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Political_entrepreneurhttp://en.wikipedia.org/wiki/Political_entrepreneurhttp://en.wikipedia.org/wiki/Social_entrepreneurhttp://en.wikipedia.org/wiki/Entrepreneurshiphttp://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Political_entrepreneurhttp://en.wikipedia.org/wiki/Political_entrepreneurhttp://en.wikipedia.org/wiki/Social_entrepreneur


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catalyzing the process of entrepreneurship in developing countries will accelerate theprocess of economic and social development. There are several staple and mandatoryingredients necessary for the nourishment of entrepreneurship such as capital, labor,management and several milestones such as funding, recruitment and growth in theevolution of an entrepreneurial opportunity. As entrepreneurship ideas assumes form

and substance, the prevailing process for entrepreneurship guides the entrepreneurpast the following milestones in the new venture life cycle1-idea development2-organizational creation and capitalization, and3-organizational development.

Concepts of entrepreneurship

Entrepreneur traits, creativity, innovation, business planning and growthmanagement are five of the main concepts of entrepreneurship. Lists ofcharacteristics common to entrepreneurs have been published by many authors butothers suggest that previous experiences are more important.

Types of entrepreneurs

Social entrepreneur

Social entrepreneurs act within a market aiming to create social value through theimprovement of goods and services offered to the community. Their main aim is tohelp offer a better service improving the community as a whole and arepredominately run as non profit schemes. To explain this point Zahra et al. (2009:519) said that social entrepreneurs make significant and diverse contributions totheir communities and societies, adopting business models to offer creative solutionsto complex and persistent social problems. Examples of socially run businessesinclude the NHS and also the 'Love One Water' drinks brand.

Serial entrepreneur

A serial entrepreneur is one who continuously comes up with new ideas and startsnew businesses. As opposed to a typical entrepreneur, who will often come up with anidea, start the company, and then see it through and play an important role in the dayto day functioning of the new company, a serial entrepreneur will often come up withthe idea and get things started, but then give responsibility to someone else andmove on to a new idea and a new venture. This can be a good thing if the individualhas lots of unique ideas and is the best one suited to get each one started, but can be
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a bad thing if the individual stops putting time into a company that needs his or herhelp, in order to try to move forward with a new idea that may or may not succeed.

Lifestyle entrepreneur

A lifestyle entrepreneur places passion before profit when launching a business inorder to combine personal interests and talent with the ability to earn a living. Manyentrepreneurs may be primarily motivated by the intention to make their businessprofitable in order to sell to shareholders. In contrast, a lifestyle entrepreneurintentially chooses a business model intended to develop and grow their business inorder to make a long-term, sustainable and viable living working in a field where theyhave a particular interest, passion, talent, knowledge or high degree of expertise. Alifestyle entrepreneur may decide to become self-employed in order to achievegreater personal freedom, more family time and more time working on projects orbusiness goals that inspire them. A lifestyle entrepreneur may combine a hobby witha profession or they may specifically decide not to expand their business in order to

remain in control of their venture. Common goals held by the lifestyle entrepreneurinclude earning a living doing something that they love, earning a living in a way thatfacilitates self-employment, achieving a good work/life balance and owning a businesswithout shareholders.

ENTREPRENEURSHIP IN INDIA AND CHINAEntrepreneurship in the world's two most populous nations, China and

India, has through modern times been somewhat asleep. But now, bothsocieties "have woken up," and the results could reshape business, politics,and society worldwide. In some sense people in these societies are runningfaster than their rules and laws can keep up. So they are creating the rules

as they go along. And entrepreneurship is, after all, doing things in newways, ahead of social norms and customs, and establishing the rules andlaws. In both countries, these processes are unfolding not just in themainstream business sector but in society writ large and even in politics andcivil society.

DIFFERENCE ABOUT ENTREPRENEURSHIP IN BOTHCOUNTRIES

The extent and type of government involvement and the nature of

openness are 2 dimensions in which the countries are different. Thesedimensions pervade all aspects of societal existence, whether that meansraising capital to start a new business, the nature of markets, copyrights, themedia, movies, and religion, as well as the ways in which both countriesthemselves project their power, the way they deal with each other, and theway the village economy works. In China, the government is often theentrepreneur. It is in many instances a very efficient entrepreneur. Of coursethere are bankrupt state-owned enterprises, but there are equally dynamic


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companies starting out in villages, small towns, and major cities, often with asizable amount of investment or involvement by local governmentauthorities. It is hard to find any reasonably sized Chinese company in whichgovernment authorities do not have input. In India, some islands ofexcellence notwithstanding, the government remains inefficient for the most

part, and most pockets of entrepreneurshipinteresting, vibrant new waysof doing thingsare in the private sector or civil society, staying far awayfrom government intervention. So here the private sector leads manysignificant initiatives; in China, the lead is often provided in a top-downmanner.

The second difference is the nature and extent of openness to outsideinfluence and foreigners. Foreign direct investment pours into China. Indiahas embraced foreign direct investment much less, for good and badreasons. On the good side, India never had to endure a cultural revolution.China "wiped its slate clean" in the Cultural Revolution. Literally andmetaphorically, it got rid of intellectuals, human capital, private enterprise,

everything. With a clean slate in those circumstances it came to rely on FDI,and help from the overseas Chinese was a big piece of that. Because Indiadid not follow a similar extreme path it didn't need to embrace FDI quite asmuch. So that's a reasonable reason to expect low FDI levels. On thenegative side, however, India, with its indigenous entrepreneurs, stillengages in some protectionist behavior and lobbies to keep foreigninvestment out. There are other aspects to openness, of course, than justFDI. Traditionally, India has been more open to ideas than has China, forinstance.

HOW IS ENTREPRENEURSHIP SHAPING THE FUTURE OF INDIA


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The progress of Indian economic development from 1947 to the presentprovides further evidence that individuals do respond to incentives in their pursuit ofself-survival and accumulation of wealth. Further, the nature of this response dependson the economic climate, particularly the role of the government. Indias economystruggled as long as it was based in a system of government regulation with little

interaction with economic forces outside the country. The economic reforms of theearly 1990s set the stage for substantial improvements in the Indian economy. As wasstated earlier, Indias economy grew at an average of 6.3 per cent from 1992-1993 to2000-2001 (Acharya, 2001). Further, its rate of inflation and fiscal deficit bothdecreased substantially (Bhalla, 2000). Improved exchange rate management led toimproved financing of the current account deficit and higher foreign exchangereserves. Finally, Indias GDP and per capita income both increased substantially from1990-1991 to 1998-1999. India can do more, however, to further advance itseconomic development. Indeed, one of the more recent microeconomic approaches toeconomic growth is the promotion of entrepreneurial activities. Entrepreneurial effortshave been found to generate a wide range of economic benefits, including new

businesses, new jobs, innovative products and services, and increased wealth forfuture community investment (Kayne, 1999). The following narrative explains inconsiderable depth how entrepreneurial activities have succeeded in severalcountries and how it can now be used to further Indias economic development. It isentirely possible that the officially assessed value may be 5 to 10 per cent of theactual market price of the dwelling of the plot of land. Following an extensive study ofentrepreneurship in 21 countries, Reynolds, Hay, Bygrave, Camp and Audio (2000)concluded that successful entrepreneurial activity is strongly associated witheconomic growth. Their research was subsumed under the Global EntrepreneurshipMonitor (GEM), a joint research initiative conducted by Babson College and LondonBusiness School and supported by the Kauffman Center for Entrepreneurial

Leadership. Their findings, based on surveys of the adult population of each country,in-depth interviews of experts on entrepreneurship in each country, and the use ofstandardized national data, supported their conceptual model depicting the role of theentrepreneurial process in a countrys economic development.

Given Indias economic progress in recent years, the country may now be ready forthe implementation of microeconomic policies that will foster entrepreneurialactivities. Fortunately, in addition to the macroeconomic reforms mentioned earlier,India has taken other steps to lay the foundation for the type of economic growth thatcan be fostered only by entrepreneurial activities and appropriate economic policiesthat reflect individual rights and responsibilities. For example, in recent years India

has made several important structural changes, including the construction oftelecommunications networks and the implementation of a nationwide road-construction programme (Solomon, 2003). Further, several thousand new economybusinesses the types of businesses especially suited for entrepreneurship efforts-were started in 2000 alone. However, more than just opportunities should lead Indiato consider entrepreneurial activities as a way to economic growth. At least one majorthreat, a growing population, also should motivate it to consider entrepreneurial effortas an economic policy. Specifically, the countrys population is expected to increase


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by 110 to 130 million people over the next 10 years, with approximately 80 to 100million of those new citizens seeking jobs that do not currently exist.

Entrepreneurial efforts can help to provide those jobs. Recent research onentrepreneurship around the world indicates that the cultural characteristics that can

foster successful entrepreneurial activities and its related economic benefits are astrong education base, the necessary financial support, opportunities for networkingamong entrepreneurs, and a well-defined, minimal role for the government. In thecase of India specifically, an emphasis upon entrepreneurial activities in theinformation technology sector also seems relevant.

Gupta suggests the establishment of a global support network of venturecapitalists and other funding sources (also known as angels) who would be willing tosupport the new entrepreneurs. He also says that India must create areas ofexcellence breeding grounds where ideas grow into new businesses similar to thosecreated in Silicon Valley in the United States. They can attract the ideas, the venturecapital, and the management talent often found to succeed in other entrepreneurial

efforts around the world. India can begin to create these areas of excellence bydrawing upon the resources of its universities and other educational institutions,including the Indian Institutes of Technology. Providing opportunities for networkingamong entrepreneurs themselves also can help new businesses get started on theright foot. In particular, Gupta says that India needs to foster networking andexchange among both new and established entrepreneurs. The obvious reason is thatentrepreneurs can learn not only through their own experience but also through thatof others. An effective approach to encouraging this type of networking might be tofollow the academic model and begin to schedule conferences throughout India atwhich these individuals could interact. At these conferences, experiencedentrepreneurs could present their ideas on what has worked for them (and what has

not). Entrepreneurs just getting started could describe what they hope to achieve intheir new businesses and get feedback on their plans from other entrepreneurspresent. Obviously, newer entrepreneurs will want to be careful not to divulgeimportant company secrets. The Indian government might have to provide smallgrants to subsidize the travel and lodging expenses of individuals lacking theresources to attend such conferences. However, just as in the academic setting, thosegrants could be awarded based on the merits of an individuals ideas for a startupbusiness. The role that the government can play in the encouragement ofentrepreneurial efforts has already been noted in the above narrative. Clearly, thegovernment can develop policies concerning educational and financial support.Government policies on taxing and regulation of business also are relevant here,

given that such policies can either promote or hamper entrepreneurial efforts. Andthe government can certainly help to provide networking opportunities among newand experienced entrepreneurs.


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HOW IS ENTREPRENEURSHIP SHAPING THE FUTURE OF CHINA

The China we knew as the enormous economy largely fueled by cheap laborand inexpensive manufacturing has changed. Though happening slowly compared toits potential, China is becoming one of the most innovative economies on the planetand the birthplace of entrepreneurs like Robin Li, CEO of Baidu, who areentrepreneurial rock stars at home and around the world. Entrepreneurial capitalism

seems to be taking hold in China. How is entrepreneurship overcoming the roadblocksof a planned economy?

Part of the answer is that the government, interested in developing thecountry's potential, is more and more interested in entrepreneurship, reflected, forexample, in the National Natural Science Foundation of Chinas (CNSFC) funding ofthe Chinese Panel Study of Entrepreneurial Dynamics (CPSED) which will measurebusiness creation. China has also established the Entrepreneurship Foundation forGraduates (EFG) with a mission to create a favorable entrepreneurial environment bypromoting commercialization of scientific and technological breakthroughs andinspiring innovative minds to cultivate creative and entrepreneurial talents. EFG is the

proud host of Global Entrepreneurship Week/China.

A few days ago, the Chair of EFG, Yan Junqi, who is Vice Chairwoman of theStanding Committee of the 11th National People's Congress along with adistinguished delegation led an official visit to the Kauffman Foundation andWashington, DC. As EFG is the proud host of Global Entrepreneurship Week/China, Ihave visited with Madam Yan both in Beijing and in Shanghai. She is a smart scientistand has a deep understanding of the importance of incentivizing new generations ofChinese citizens to innovate, invent and be entrepreneurs. The Founders Forum whichshe invited me to speak at last year as part of GEW, opened my eyes to the fact thatthe Chinese leadership actively encourages new starts and has been working hard toput in place the right incentives including around individual ownership required tofoster a new generation of companies not subsidized at the outset by public funding.

Such interest from Chinese leaders in entrepreneurial activities should not comeas a surprise. The Chinese governments ambition for the country is to produce high-tech goods. In early 2006, Chinese President Hu Jintao declared to the world: "Chinawill be built into an innovative nation in about fifteen years." In an effort to support


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this goal, Chinese regulations are slowly spurring the development of a homegrownprivate-equity industry. Chinas government sees private equity as a means tochannel money into small and midsize enterprises that dont always have readyaccess to bank lending or public markets, told Kathleen Ng, managing director at theCentre for Private Equity Research in Hong Kong, to the Wall Street Journal.

The government is also paying special attention to growth entrepreneurshipwhich may be one reason for visiting the Kauffman Foundation. For example, China'seconomic planning agency, the National Development and Reform Commission,launched venture capital funds totaling 9 billion yuan (equivalent to USD $1.32 billion)in 2009 alone. The funds are primarily backed by private investors (6.8 billion yuan),followed by provincial governments (1.2 billion yuan) and the state (1 billion yuan).The hope from many observing from afar is that political meddling doesnt co-opt andor weaken this effort.

Despite the surges in entrepreneurial activities already observed in China,

sustaining and growing its entrepreneurial energy presents an enormous challenge.Entrepreneurs in China face many obstacles, even at the point of entry. It takes 38days to complete procedures to start a business, compared to the average of 5.7 daysin OECD countries. Copyrights, patents, brand names, trademarks, and trade secretsappear to be routinely violated. Overall, China lacks legal and regulatorytransparency. Overcoming these obstacles will inevitably involve accelerating Chinastransition to greater economic freedom.

In addition, as Yan Junqi herself wrote, China needs a cultural shift. innovation can more quickly gain a foothold in an entrepreneurship-friendly andfailure-tolerating culture, Perhaps this is one reason why EFG is doing such an

excellent job throughout China in stimulating entrepreneurial enthusiasm using GlobalEntrepreneurship Week as a platform for promoting a culture of innovation andentrepreneurship.

There is also reason for optimism in the advantages Chinese entrepreneurshave at home. Baidus Robin Li, speaking for the Stanford Technology VenturesProgram, mentioned one of the greatest. They have a huge domestic marketcombined with an intimate understanding of Chinese language and culture. Thisallows Chinese ventures to have a unique approach to products and services, givingthem a chance to succeed where other giants have failed. Technology entrepreneursin China also have access to a growing pool of scientific talent. It is estimated that

more than 700,000 computer science-related engineering students graduate eachyear in China.

CONTRIBUTION OF FOREIGN INVESTMENTOn the one hand, foreign-funded enterprises has played an increasingly

important role in promoting China's national economic growth, driving


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technological progress of industries, expanding exports, and providing

employment opportunities, and, at the same time, also enjoyed huge

returns. According to the statistics by Ministry of Commerce, since 1990,

foreign investors enjoyed nearly 300 billion U.S. dollars of profits, with a

significant portion of the profits reinvested into their businesses in China.

Take the United States for example. China's economic growth rate

is two times higher than that of the United States in recent years.

Due to the continuous expanding of economic scale, China is becoming a

more and more important market to foreign enterprises. The global

competitiveness of the United States is more and more depending on its

performance in China. In 2007, among the member companies participated

in the survey, 73% declared their operations in China as profitable. The

majority of enterprises also said that the profit rate of its operations in China

in 2006 achieved growth. 60% of the members said that since 2001 the

profit rate had increased annually. U.S. companies continue to invest with ahope to increase their market share. 83% of the respondents said they may

expand the scale of its operations in China.

On the other hand, China's opening-up to the outside world has shown

that the active and rational absorption of foreign capital effectively

compensated the shortage of the domestic construction funds, introduced

advanced technology, business model and management experience, brought

modern concepts of circulation and marketing, introduced international

competition mechanism, rules and standards. The policy played an important

role in setting up and perfecting the market economic system with Chinese

characteristics through promoting technological progress and adjusting and

upgrading industrial structure, and at the same time, accelerating the

formation of an open economy in China,. The contribution of

entrepreneurship of foreign capital to promote the growth of the Chinese

economic development mainly reflected in:

Entrepreneurship The China vs. India Divide

There are scores of articles in every major newspaper and every majormagazine comparing India with China on various economic progress indicators. Thereare even books written about Tiger of India pitted against Dragon of China. To thosewho base their opinions on such reports, articles and books, it looks as though India isposing a strong completion to China, when in fact every measurable economicindicator suggests that China is clearly leading India on all fronts. Moreover the gapbetween these two countries is only widening with each passing year. And yet, many


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forever thereby handing over the race on a silver platter to China, and giving up ontechnology products thereby continuing to serve the West.

China not only won the race in manufacturing and consolidated its position, it is nowentering the technology product space, the domain held closely by the European,

American and Japanese technology leaders. What more, it has started to beat theseleaders at their own game. Huawei has recently won the contract to supply 3Gequipment in Norway, the bastion of Nokia. While India made feeble attempts with C-DOT and ITI who are not even able to sell into BSNL, China has launched not one buttwo major telecom companies Huawei and ZTE, that not only sells within theircountries, they sell to BSNL also.

Infosys, TCS and Wipro, the giants of Indian software services which ThomasFriedman lauds, did not do much to sponsor or promote start-ups in India (barring fewexceptions).Their presence in India did not help any start-up, except that many ex-employees

went out and started companies on their own without any support or encouragementfrom these parent companies.

Meanwhile, China has launched extensive nationwide program to promoteentrepreneurship in China. I was told that even a district head, equivalent to IndianDistrict Collector, could invest up to half a million US dollars to a company that setsup shop in his district. Writing about China

An analysis of documenting the tremendous growth of the Chineseentrepreneurial and cultural initiatives since the demise of Communistleader Mao Zedong reveals that this accounts for the Chinese economys

double digit growth in the last couple of decades.

China, on the other hand, is actively promoting start-ups through various forums andincentives. Though it is a communist country it hosts millions of entrepreneurs and VCfirms which is aiding its economy.

China currently has over 200 million entrepreneurs and it houses 200venture capital firms. The country accounts for 24.6% of the totalentrepreneurship activities across the world, far ahead of Indian at 13.9%and the US at 14%, according to a survey by Global EntrepreneurshipMonitor.

China is even popularizing entrepreneurship as a cultural attitude with variousinitiatives including TV programs.

a Chinese reality TV show Win in China has received applications forentrepreneurial ventures from over 1,20,000 aspirants. Of these, 108 werechosen for prize money and working capital of $5 Million.


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Indians dont know what to do. They are confused. They dont know if they aresocialist or capitalist. The reality is that they are clueless they are neither capitalistnor socialist. China is both socialist and capitalist playing these two cards really well.The only floating hope for Indians has been their mastery of English. And the followingobservation should submerge that hope as well.

To give competition to India and other cost-effective English speakingcountries like the Philippines, millions of Chinese students are learningEnglish systematically. China will become the largest English speakinggeography in the world by the end of this year, Compton added.

State Policies That Impact Entrepreneurship

The remainder of this study covers state entrepreneurial policies in the following ninecategories. Each is important to encouraging entrepreneurship as a career option andsupporting entrepreneurial activity.

General perspective of entrepreneurship.

Tax and regulatory climate.

Access to capital

Entrepreneurship education.

Intellectual capital.

The states are not ranked or graded in terms of their overall performance or in agiven category. In fact, it is impossible to say that any state can claim the title ofhaving the most entrepreneurial-friendly environment. The fact that best practicesunder each of the policy categories are distributed among all the responding states

suggests that states have much to learn from each other. If one were to grade thestates collectively, the data suggests that there are positive trends emerging withinseveral states as evidenced by the best practices. However, there is still considerableroom for improvement. State policymakers should not be discouraged bythis assessment.

Barriers to finance

It's a continuous challenge having your own business, what with keeping upwith market changes for your product and ever changing input costs such as fuel, rawmaterials, labor and new regulations. You have to admit it is just like gambling in anumber of ways. For one, you are not guaranteed the price you will get for yourproduct, nor what the costs will be to make or produce it. Like gambling, there is thatsame feeling it gives you by sticking your neck out and waiting to see what happens,


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looking for the next day to be better than yesterday. While it is not as immediate asthe slot machine or craps table, it involves the risk and the unknown to achieve theprize.

Of course, when the margins tighten up, it is not so much fun, and it no longer feels

like much of a game. I am not making light of all the hard work and long hours putinto your business. Nor am I insinuating that you are in business for a strange sort of"financial high" versus the reasons of earning a good living to support your families. Iam pointing out that being in business has risks and to be successful in your business,you need to mitigate those risks and take advantage of the opportunities.

So here you are in business, wanting to make a decent living and more. It is prettymuch a given that expenses and costs increase over time. Everyone in any business,your suppliers included, face the same struggles as you to make a profit and will raisetheir prices as they see their input costs increase. Some businesses can raise theirprices, the farmer usually cannot. Farmers take what the demand will afford--it is the

nature of the business. You knew that going in and have learned to deal with itthroughout the years, the thick and thin ones.

However, when I refer to the cost of doing business, I am not referring to the normalinput costs and expenses associated with producing your product. I am lookingbeyond the normal, routine costs and am looking at other costs that are not routineand may or may not be expected. These are the costs of doing business that we areusually aware of, but put on the back burner because the need is not imminent butare important to recognize for the long haul.

The costs I am referring to are government regulations, employee retention, effects of

immigration laws, remodelling and maintenance of facilities, new technologicalchanges, township regulations, neighbour complaints, food safety requirements, foodsecurity and many others. These are all potential and/or probable costs that willprobably affect you someday in the future. Recognizing their potential impact is ofutmost importance for remaining a viable business in this fast changing world. Toignore these costs, hoping they will go away, may put you in a position of not beingprepared financially to do what needs to be done.

Food safety is an issue that has been talked about for many years now. It is notsomething anyone can say took them by surprise. Buyers are now performinginspections of not only the packing facilities, but also the growing facilities. They want

to be sure the product they are buying and passing on to the public is safe. They aredoing this because the public wants that assurance and, naturally so, after recentproduce scares. If you are growing mushrooms in questionable facilities, there will bea cost to upgrade, remodel and repair beyond normal maintenance. You may nothave had this cost yet, but if you want to sell your mushrooms at a good price, or atall, you will need to incur this cost of doing business.

Venture Capital


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"A dollar of venture capital is far more likely to produce patented innovations than adollar of traditional corporate R and D spending."

The rise of venture capital in the 1980s and 1990s has coincided with a huge wave ofinnovation and entrepreneurship. It has been widely assumed that there is a causalrelationship at work, but empirical research on the relationship has been scant. InDoes Venture Capital Spur Innovation? Samuel Kortum and Josh Lerner attempt to fillthis gap by examining the link between venture capital and new patents. They findthat a dollar of venture capital is far more likely to produce patented innovations thana dollar of traditional corporate R and D spending. And while this could simply meanthat venture-capital-funded companies do not so much innovate more as patentmore, other measures of innovation indicate that this is not the case. That is, venturecapital does spur innovation. Kortum and Lerner studied data on 20 manufacturingindustries between 1965 and 1992. They found that the amount of venture capitalactivity in an industry significantly increased its rate of patenting. From 1982 to 1992,in fact, venture capital amounted to just 3 percent of corporate R and D spending, butaccounted for 15 percent of industrial innovations. Kortum and Lerner also comparedpatenting activity before and after 1979, when a changed Labor Department rulefreed pension funds to make big venture investments. This change brought on asharp increase in venture capital investment. The authors use this regulatory changeto help address concerns about the interpretation of the results, in particular concernsthat venture capital might follow rather than cause innovations. Finally, Kortum andLerner examined data on 530 venture-backed and non-venture-backed firms based inMiddlesex County, MA. They confirmed that the venture- backed firms' higherpatenting rate coincided with other indicators of innovation, such as how often the

firms' patents are cited in other patent applications and how aggressively they litigateto protect trade secrets.

The process of "creative destruction," whereby entrepreneurs with new ideas and

methods of production displace less efficient incumbents, is believed to play a critical

role in driving productivity growth in the economy. High-profile entrepreneurs create

and commercialize new technologies such as automobiles and semiconductors--major

innovations that spawn new industries. Although clearly important, such start-ups

only represent a tiny proportion of overall entry in the economy. Perhaps 0.1%-0.2%

of U.S. start-ups receive venture capital funding each year--the predominant source of

finance for such high-growth ventures.

A less visible channel is the enhanced productivity growth arising from increased

efficiency in existing methods of production. A substantial share of the productivity

growth in the economy is believed to arise from through the birth of more productive

firms and the closure of unproductive firms rather than just through existing firms

becoming more productive. Foster et al. (2008) show the productivity advantages of


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new entrants in a variety of manufacturing industries, including traditional products

such as concrete. A number of related studies further point to the vital role of this

general entrepreneurship for economic growth. Policymakers should thus pay as close

attention to these attempts to "build better mousetraps" as they do to venture

capital-backed start-ups.Financing constraints and entry

Since start-ups need to raise capital in order to implement their new ideas,

cross-sectional differences in the ability of financial markets to finance promising

entrepreneurs may lead to important differences in entrepreneurship and productivity

growth across economies. Indeed, cross-country studies associate stronger capital

markets with higher rates of economic growth (e.g., King and Levine 1993, Levine

1997).

Our work draws on comprehensive micro-data from the Census Bureau on U.S. firmentry and exit. This enables us to document the relationship between the financial

markets, entrepreneurship and productivity growth. Two facts about firm-level

dynamics are important for understanding how financial markets impact entry and

hence productivity growth.

Role of venture capital in spurring innovation &

entrepreneurship.

Venture capital is an investment in the form of equity, quasi-equity and sometimesdebt, straight or conditional (interest and principal payable when the venture startsgenerating sales), made in a new or untried technology, or high risk venture,promoted by a technically or professionally qualified entrepreneur, where the venturecapitalist

* Expects the enterprise to have a very high growth rate

* Provides management and business skills to the enterprise

* Expects medium to long term gains

* Does not expect any collateral to cover the capital provided

The origins of modern venture capital can be traced to USA. After World War II, a setof intermediaries emerged in the U.S., who specialized in investing in young firms


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having the potential for extremely rapid growth. From its earliest beginnings on theEast Coast of U.S., venture capital gradually expanded and became an increasinglyspecialized institution. During this period, the locus of the venture capital industryshifted from New York and Boston on the East Coast to Silicon Valley on the WestCoast Florida (Richard and Martin Kenney, 1998). In India the discussion on venture

capital started in 1972 when government examined strategies to promote small andmedium enterprises (NASSCOM 2000). In 1975, Industrial Financial Corporation ofIndia (IFCI) introduced venture capital financing in India with an aim to encourageprofessionals and technologist to form new industries.

What Is Social Entrepreneurship?

Entrepreneurs are innovative, highly-motivated, and critical thinkers. Whenthese attributes are combined with the drive to solve social problems, a SocialEntrepreneur is born. Although academics and lay observers generally agree what a

social entrepreneur is, there is still ambiguity surrounding the definition of a socialenterprise. This Closer Look defines a social enterprise as any organization thatranks social impact on par with, or above, profit concerns.Social entrepreneurs and social enterprises share a commitment to furthering a socialmission and improving society. Some of the basic definitional issues that remaininclude the choice of for-profit / nonprofit structure, the necessity of earned-incomestrategies among nonprofits, and the degree to which socialentrepreneurs/enterprises can manage the toughest social and environmental issues.Business entrepreneurs change the face ofBusiness.

1-Social entrepreneurs play the role of changeagents in the social sector

2-Social entrepreneurs create sustainablesolutions that change society for the better

"Social entrepreneurs are not content just to give a fish or teachhow to fish. They will not rest until they have revolutionized the isling industry."

From our perspective, social entrepreneurship has four elements that form ourguiding principles for the kind of social entrepreneurship we promote and encourage.

Social Impact. Does the venture make a significant social impact? Social impact is akey element of a social venture. What issue or problem is the venture being set up toaddress? How a social venture makes the impact and where it wants to make theimpacts are important strategic decisions. A social venture can make impact atdifferent levels (e.g. community, local, regional, national) or with varying degrees ofdepth (e.g. intermediary, service provider, employer, or instructor).


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Social Innovation. Is the venture using a new approach to addressing thesocial/environmental issue? Social ventures break new ground, pioneer newapproaches, or develop new models. These ventures need to creatively navigate theeconomic, social, and institutional barriers to addressing the social need. Social

entrepreneurs develop new approaches to addressing social problems or utilizetechnology to facilitate problem solving.

Sustainability. Is this venture financially viable? Is this venture positioned to fulfilits mission over the long-term? A sustainable social venture is financially viable andpositioned to fulfil its mission. Many social ventures are not sustainable because theyrely upon unstable grant-making or government institutions for their funding.Alternatively, earned-income or fee-for-service business model are generally moreeffective strategies for social ventures. Some social ventures are not sustainablebecause they have not organized their internal resources effectively to fulfil theirmission. How a social venture marshals its resources to be sustainable is an

important strategic decision that often separates traditional non-profit organizationsfrom social entrepreneurship.

Measurement. How does this venture measure its social impact and evaluatesuccess? Are the measurement tools appropriate for this type of venture?Measurement and evaluation are essential to social entrepreneurship. In addition tothe financial metrics used by traditional ventures, social ventures must measure theirimpact and evaluate its effectiveness. There are many ways to measure and evaluatethe social impact of a venture. The key is that the social venture is using anappropriate type of measurement tool that is in line with their theory of change.

Promoting social entrepreneurshipSocial entrepreneurship in India has progressed significantly over the last decade.More and more people are using entrepreneurial skills in building sustainableenterprises for profit and non-profit to effect change in India, a former investmentbanker and now president of Dasra. Based in Mumbai, Dasra is a non-profitorganization which bridges the gap between those investing in social change andthose spearheading the changes.


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Social entrepreneurship in India is emerging primarily because of what thegovernment has not been able to do. The government is very keen on promotingsocial entrepreneurship - not necessarily by funding it or by advising on it or enablingit. What they do, is not disable it, Sanghavi, who brings the rigour and discipline ofan investment banker to the social sector, told INSEAD Knowledge on the sidelines ofthe International Social Entrepreneurship conference held here recently.

For example, in Mumbai alone, non-profit organizations educate more than 250,000children on a daily basis. The government has not told these organizations not to doit, he says. Whereas in some countries, when someone takes it into their own hands

to start a facility for education or healthcare or empowerment, the government oftenputs in place barriers to prevent this from happening. In India, there is this drive andcommitment to take change upon yourself. There are no inherent barriers to beginwith in India.

India still has a long way to go compared to the West where governments are fundingnon-profit organizations by outsourcing social sector services. In India that is notgoing to happen, he says. It will be overambitious for us to think that they will befunding all these initiatives but the fact that they allow these organizations to operatewithin the government structure - albeit with conflict, as they are operating with onehand tied behind their back - is progress.

At the same time the few organizations who have decided to play this role haverealized that even with one hand tied behind their back they can effect great changebecause they have access to hundreds of millions of people that they will never beable to access on their own.

So its the shift in the NGO mindset, where well never get 100 per cent of what wereally want to do but working with the government, if we get 70 per cent thats better


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than the 20 per cent efficiencies that the government is currently operating at, heargues.

Impacting society but so much more to be done

Social enterprises are definitely making an impact on Indian society, says Sanghavi,but with a population of 1.1 billion, it is very difficult to see that impact on a macrolevel. However, in organizations we have worked directly with, we have seen growth15 to 100 times in their beneficiary base in a five- to seven-year period. Clearlygrowth is possible. They are at numbers of tens of thousands and realize they need toget to hundreds of thousands, if not hundreds of millions. But that is taking time. It isthe mindset more now than ever of the need to scale and the ability of theorganization to do so.

CONCLUSION

The Indian economy provides a revealing contrast between how individualsreact under a government-controlled environment and how they respond to a market-based environment. The evidence presented here suggests that recent market

reforms encouraging individual enterprise have led to higher economic growth in thatcountry. The reasoning here is not new, although it is refreshing to discover that thistried-and-true reasoning applies to developing as well as to developed nations.Specifically, reliance upon a free market, with its emphasis upon individual self-interest in survival and wealth accumulation, can yield a wide range of economicbenefits. In India those benefits have included, among other things, increasedeconomic growth, reduced inflation, a smaller fiscal deficit, and higher inflows of theforeign capital needed for investment. We further conclude that India can generate


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additional economic growth by fostering entrepreneurial activities within its borders,particularly within its burgeoning middle class. Not only has entrepreneurship beenfound to yield significant economic benefits in a wide variety of nations, but Indiaspecifically has reached a point in its development where it can achieve similarresults through entrepreneurial efforts. Among other things, India is poised to

generate new business startups in the high technology area that can help it become amajor competitor in the world economy. For example, it has a strong education basesuited to entrepreneurial activities, increased inflows of foreign capital aimed at itsgrowing information technology services sector, and a host of successful newbusiness startups.

To pursue further the entrepreneurial approach to economic growth, India mustnow provide opportunities for (1) education directed specifically at developingentrepreneurial skills, (2) financing of entrepreneurial efforts, and (3) networkingamong potential entrepreneurs and their experienced counterparts. Obviously, thegovernment can play a substantial role in helping to provide these types ofopportunities. It can also provide the appropriate tax and regulatory policies and help

the citizens of India to understand the link between entrepreneurial efforts andeconomic prosperity. However, its role overall must be minimized so that theinfluence of the free market and individual self-interest can be fully realized. Onlytime will tell if increased entrepreneurial activities in India will actually yield theeconomic benefits found in so many other nations of the world. Should India decide topursue that avenue of economic development, then future research needs to examinethe results of Indias entrepreneurial programme. Entrepreneurial activity has becomethe main driving force of Chinas economic development. The cultivation andpromotion of entrepreneurship will help to maintain economic vitality and economicprosperity and reduce employment stress. For entrepreneurs from all over the world,China's domestic economic development provided great spaces for the fulfillment of

entrepreneurship. With the transformation of the types of Chinese enterprises fromnecessity-driven to opportunity-driven entrepreneurship, the contribution ofentrepreneurial activity will keep on growing. Entrepreneurship will be able to deliverinnovative products, innovative technology, more exports, more jobs, and will helpmeet domestic demand, reduce job stress, increase employment, and eventually,maintain regional and global economic prosperity.

There are ample opportunities in small businesses in India and suchopportunities will transform India in the coming future. For such transformation tohappen there needs to be support both at the governmental and societal level. Forthe government it is important to realize that the goal of small business owners willbe to remain self-employed. Such people may not need financial assistance but they

will need marketing and legal assistance in order to sustain themselves. Indianeconomy provides a revealing contrast between how individuals react under agovernment-controlled environment and how they respond to a market-basedenvironment. Specifically, reliance upon a free market, with its emphasis uponindividual self-interest in survival and wealth accumulation, can yield a wide range ofeconomic benefits. India is emerging as the next big center for entrepreneurship.Firstly, India is a strong, inward-looking economy. The countrys rate of growth, evenin the current global economic condition, is very good. Secondly, the prominence of


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agriculture in Indias economy is a source of great strength. If the monsoons are good,we will be stronger. Thirdly, Indias banking system is the strongest and mosttransparent compared to those of other emerging markets. Yet another factor thatenforces my belief in a bright entrepreneurial future for India is its minimaldependence on external markets.

We further conclude that India can generate additional economic growth byfostering entrepreneurial activities within its borders, particularly within itsburgeoning middle class. Not only has entrepreneurship been found to yieldsignificant economic benefits in a wide variety of nations, but India specifically hasreached a point in its development where it can achieve similar results throughentrepreneurial efforts. And soon the entrepreneurship activities of nations like Indiawill leapfrog Japan and China surpasses the US economy

amit entrepreneurship shaping the future of india

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