LEVERAGING INNNOVATIVE ENTREPRENEURSHIP AND ITS ROLE IN ECONOMIC DEVELOPMENT OF INDIA

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1 LEVERAGING INNNOVATIVE ENTREPRENEURSHIP AND ITS ROLE IN ECONOMIC DEVELOPMENT OF INDIA Ruchi Vohra* ABSTRACT In today s world the creative economy which is boosted by the creative, innovative and knowledge intensive industries with high exploitation of intellectual property takes centre stage at both the national and international levels. Such firms go beyond the traditional view by searching new ways for creating the value for customer. The formation of new entrepreneurial ventures in such industries is particularly important to developing economies such as India, where micro and, small-and medium sized enterprises (SMEs) are dominant. Whether it is social entrepreneurship, educational entrepreneurship or business entrepreneurship, to be creative and innovative brings in a lease of fresh input which can fuel a significant change in the system. It is the responsibility of every business, organisation and individual to keep pace with the societal demands and needs and provide dynamic solutions. The importance of innovative entrepreneurship is recognized by many companies today. Not only new ventures but also existing corporate invests time and money training their employees and management in particular on effectively utilizing the power of dynamic innovation. This is in fact, one of the most important pre-requisites for sustained survival of companies in today s competitive business environment. KEY WORDS: Economic Development, educational entrepreneurship, Innovative Entrepreneurship, SMEs, Social Entrepreneurship INTRODUCTION Entrepreneurship has become a term that is increasingly widespread around the world. According to a broad spectrum of key players in society, including policymakers, academics, entrepreneurs themselves as well as for the population at large, entrepreneurship tends to be associated with economic development and well-being of society. Promoting innovative entrepre-neurship is thus a central concern for policy makers. Innovative entrepreneurship is becoming the cornerstone of economic growth in the developed world. It is the source of jobs and high living standards for individuals, as well as great benefits for society in the form of technical progress and economic development. * Assistant Professor Kalindi College, Delhi University, ID: ruchivohra27@gmail.com

2 Leveraging Innnovative Entrepreneurship and its Role in Economic Development Entrepreneurship is vital to a vibrant, growth-oriented economy, and this is no less true in India, where the economy has grown sharply since the reforms of the early 1990s. India s high rate of economic growth (averaging over 7 per cent annually) can only be sustained if approximately 1 million jobs are created. If India can, in the next decade, provide its next generation with the education and training for entrepreneurial ventures, it will not only create the jobs necessary to stay on a growth trajectory, it will foster more start-ups, accelerate growth, and spawn creative industries for the benefit of millions, including for many residing outside India. India has two distinct advantages in terms of creating new entrepreneurs and start-ups at this particular time: it is facing a surge in its working-age population, when the rest of the world is confronting an aging citizenry; and it is able to leapfrog entire decades because of technology. Meaning and Definition The word entrepreneur is derived from the French verb, enterprendre. It means to undertake. There are many views and opinions on the concept of entrepreneurship forwarded by some of the world famous management gurus and economists as mentioned below which will help in understanding this concept. A person who sets up a business or businesses, taking on financial risks in the hope of profit. (Oxford Dictionary, 2005: ) An individual who bears the risk of operating a business in the face of uncertainty about the future conditions. (International Encyclopedia of Business and Management, 1997: ). The entrepreneur in an advanced economy is an individual who introduce something new in the economy-a method of production not yet tested by experience in the branch of manufacturing, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like. (Schumpeter, 1951: 255) Meaning of Entrepreneurship Although the term entrepreneurship has been used in a business context for well over two hundred years, there is still considerable disagreement regarding its meaning. While there have been literally hundreds of perspectives, seven of the most prevalent themes are summarized here. Creation of Wealth Entrepreneurship involves assuming the risks associated with the facilitation of production in exchange for profit. Creation of Enterprise Entrepreneurship entails the founding of a new business venture where none existed before. Creation of Innovation Entrepreneurship is concerned with new combinations of resources that make existing methods or products obsolete. Creation of Change Entrepreneurship involves creating change by adjusting, adapting and modifying one s personal repertoire, approaches, and skills to meet different opportunities available in the environment. Creation of Employment Entrepreneurship is concerned with employing, managing and developing the factors of production, including the labour force. Global Journal of Business Management

3 56 Ruchi Vohra Creation of Value Creation of Growth Entrepreneurship is the process of creating value for customers by exploiting untapped opportunities. Entrepreneurship is defined as a strong and positive orientation towards growth in sales, income, assets and employment. An Integrative Approach to Entrepreneurship A more integrative picture of the entrepreneurial process is provided by Morris et al. (1994). Presented in Figure 1, this model is built around the concepts of input to the entrepreneurial process and outcomes from the entrepreneurial process. Fig. 1: Integrative Approach to Entrepreneurship The input component of Figure 1 focuses on the entrepreneurial process itself and identifies five key elements that contribute to the process. The first is environmental opportunities, such as a demographic change, the development of a new technology, or a modification to current regulations. Next is the individual entrepreneur, the person who assumes personal responsibility for conceptualizing and implementing a new venture. The entrepreneur develops some type of business concept to capitalize on the opportunity (e.g., a creative approach to solving a particular customer need). Implementing this business concept typically requires some type of organisational context, which could range from a sole proprietorship run out of the entrepreneur s home or a franchise of some national chain to an autonomous business unit within a large corporation. Finally, a wide variety of financial and nonfinancial resources are required on an ongoing basis. Vol. 8, No. 1, June 2014

4 Leveraging Innnovative Entrepreneurship and its Role in Economic Development These key elements are then combined throughout the stages of the entrepreneurial process. Stated differently, the process provides a logical framework for organising entrepreneurial inputs. Objective of the Study The main objective of the study is to understand the role of Innovative Entrepreneurship in India. For achieving this main objective following sub-objectives have been framed: 1. to understand the nature of Entrepreneurship and its relation to innovation and creativity, and 2. to study the role of Innovative Entrepreneurship in economic development of India. RESEARCH METHODOLOGY The Research design is descriptive and exploratory in nature as it shall describe the concept and role of Innovative Entrepreneurship in Indian context. The research is primarily based on secondary data. (Secondary data is collected from Books, Reports, Magazines and Journals.) The approach of this paper can be described as integrative, conceptual, and theory building rather than purely empirical one. Linkage among Innovation, Creativity and Entrepreneurship According to Schaper & Volery (2004), figure 2 the representation is an oversimplification of the links between creativity, innovation and entrepreneurship as a process model. It is portrayed as a sequential process, divided into a number of interdependent stages, for example, creativity is a prerequisite for innovation and (strictly speaking) entrepreneurship follows innovation (whereby the ongoing debate as to whether all business start-ups are really examples of entrepreneurship example of street corner snacks shops). Latest science and technology Technology Push Fig. 2: Linkage Between Creativity, Innovation and Entrepreneurship Global Journal of Business Management

5 58 Ruchi Vohra The framework can be visualised as a set of communication paths over which knowledge is transferred through internal and external linkages with both the market place and the science and technology base. Two main factors influence the entrepreneurial process are: Pull factors: The unsatisfied needs of the marketplace (pull) represent one source of opportunity to develop and commercialise new products or services. Push factors: Progress in science and technology such as powerful computers, telecommunication networks, biotechnology etc. produce knowledge at an exponential rate and commercial applications (push) their way up the market. Customer needs are often unformulated (latent needs) and astute entrepreneurs often (at a risk) intuitively push products on the market for example, the need for a sophisticated mobile phone can be more about a need to acquire latest technology than a need to communicate. ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT Entrepreneurship is an ill-defined multidimensional concept. The difficulties in defining and measuring the extent of entrepreneurial activities complicate the measurement of their impact on economic performance. Understanding their role in the process of growth requires a framework because there are various intermediate variables or linkages to explain how entrepreneurship influences economic growth. Examples of these intermediate variables are innovation, variety of supply, entry and exit of firms (competition), specific efforts and energy of entrepreneurs, etc. Joseph Schumpeter s contribution to our understanding of the mechanisms of technological progress and economic development is widely recognized. In The Theory of Economic Development he emphasizes the role of the entrepreneur as prime cause of economic development. He describes how the innovating entrepreneur challenges incumbent firms by introducing new inventions that make current technologies and products obsolete. This process of creative destruction is the main characteristic of what has been called the Schumpeter Mark I regime. In Capitalism, Socialism and Democracy, Schumpeter focuses on innovative activities by large and established firms. He describes how large firms outperform their smaller counterparts in the innovation and appropriation process through a strong positive feedback loop from innovation to increased R&D activities. This process of creative accumulation is the main characteristic of the Schumpeter Mark II regime. Role of Entrepreneurship in Economic Development India is currently 10 th largest economy of the world and one of the top three countries most talked about for their economic growth. India was known for developing computer codes and back office work for many American and European firms in 90 s but today in 2014 it is handling most of Information technology based service operations of the world and is known for knowledge management, telecom, bank and hospital related operations and is continuously increasing sophistication in service offering. Thousands and lakhs of new start-ups are building webtechnologies, web-based services and technology based products like mobile applications etc. IT and IT enabled services; alternate energy, education and service industry are providing maximum number of entrepreneurs in country. Success stories of first generation entrepreneurs in recent years have provided role models entrepreneurs and made Indian parents more open and acceptable Vol. 8, No. 1, June 2014

6 Leveraging Innnovative Entrepreneurship and its Role in Economic Development to the idea. The landscape of Indian entrepreneurs has moved from need based to need creation and identification. One of the recent approaches to the Indian economic growth is the development of entrepreneurial activities. Entrepreneurial efforts have been found to create a broad array of economic benefits, together with new businesses, new jobs, new products and services, and increased assets for investment in future. The Government of India in company with different public sector banks are coming up with a lot of plans, particularly for up-and-coming entrepreneurs, thus motivating them to take up entrepreneurship. Small and Medium Enterprise (SME) loans with eye-catching interest rates are offered by almost all major banks across India. The significant role played by the entrepreneurs in the economic development of advanced countries has made the people of developing and under developed countries aware of the importance of entrepreneurship for economic development. Employment Generation Entrepreneurs not only give employment to the entrepreneur but also a source of direct and indirect employment for many people in a country. Unemployment is a chronic problem in most of the developing and underdeveloped countries. Entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turn clears the path towards economic development of the nation. Promotes Capital Formation Entrepreneurs mobilize the idle funds which lead to capital formation. The funds which are used by entrepreneurs are a mix of their own and borrowed. This leads to creation of wealth which is very essential for development of an economy. Small Business Plan Dynamism Great dynamism is one of the qualities of the small and medium enterprises. This quality of dynamism originates in the inherent nature of the small business. The structure of small and medium enterprises is less complex than that of large enterprises and therefore facilitates quicker and smoother communication and decision-making. This allows for the greater flexibility and mobility of small business management. Also, small enterprises, more often make it possible for owners, who have a stronger entrepreneurial spirit than employed mangers, to undertake risk and challenges. Balanced Economic Development Small business promotion needs relatively low investment and therefore can be easily undertaken in rural and semi-urban areas. This in turn creates additional employment in these areas and prevents migration of people from rural to urban areas. Since majority of the people are living in the rural areas, therefore, more of our development efforts should be directed towards this sector. Such enterprises use local resources and are best suited to rural and underdeveloped sector. The growth of industries and business in these areas lead to a large number of public Global Journal of Business Management

7 60 Ruchi Vohra benefits like road transport, health, education, entertainment, etc. Setting up of more industries leads to more development of backward regions and thereby promotes balanced regional development. Increase in National income Entrepreneurs always keep their eyes open for opportunities. They explore and utilize opportunities, make effective resource mobilization of capital and skill, raise new goods and services and develop markets for growth of the economy. The goods and services produced are for consumption within the country and to meet the demand of exports. Thus the national income is increased and increase in national income is certainly a sign of economic growth. Innovations in Enterprises Business enterprises need to be innovative for survival and better performance. It is believed that smaller firms have a relatively higher necessity and capability to innovate. The smaller firms do not face the constraints imposed by large investment in existing technology. Thus they are both free and compelled to innovate. Better standards of living Entrepreneurs play a key role in increasing the standard of living of the people by taking on newest innovations in the manufacture of goods and services at lower cost and supply quality goods at lower price to the community according to their requirements. This allows the people to get better quality goods at lower costs which results in the betterment of their standard of living. Facilitates Overall Development Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units required by it and there will be so many other units which require the output of this unit. This leads to overall development of an area due to increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus for overall development of the area. Key Findings The analysis highlights a close linkage between innovation and entrepreneurship. The study observes the impact of Innovative Entrepreneurship and its role on the Indian Economy on the basis of selected parameters. CONCLUSION The modern economy combines knowledge with management to generate wealth. Growing economies need innovation. Many of path-breaking innovations are developed into new products, outside of laboratories of leading industry giants, in small entrepreneurial companies. These innovations boost economic growth by providing new jobs and technology. Vol. 8, No. 1, June 2014