Chapter 2: LITERATURE REVIEW - Information and...

of 253

Chapter 2: LITERATURE REVIEW

2. Introduction to Literature Review

There have been many attempts by many researchers through their research studies to

define and arrive at typical entrepreneurial characteristics. All these studies lead us to the

conclusion that there is a definite absence of a generic definition of entrepreneur. There

exits different notions about the traits and characteristics which make an individual, an

entrepreneur. Entrepreneurship is akin to leadership, in fact an entrepreneur is considered

to be a leader, but as it has been established that there cannot be one generic definition of

a leader as many traits, characteristics, even situations lead to leadership, the same is true

for entrepreneur too. There appears to be a general consensus that an entrepreneur is the

one who creates and manages an enterprise. This common agreement leads us to look at

an entrepreneur from his behavior. To have a closer look at the activities undertaken by

an individual who is defined as an entrepreneur. This leads us to behavioral approach and

it definitely is an appropriate approach to follow to study an entrepreneur.

There are some characteristics which have been assigned to an entrepreneur such as risk

takers, locus of control, leadership, initiative, commitment, self reliance, and many more

but it can very well be argued that these characteristics are not specific or restricted to an

entrepreneur, they can be observed in a manger or even a worker too. The above

mentioned characteristics also lead us to a fact that they are more related or manifested

by an activity carried out by an individual. This again confirms that rather than asking a

question who is an entrepreneur, one should try to seek an answer to a query what does

an entrepreneur do.

An entrepreneur is more an opportunity driven individual than a necessity driven. Off

course some individuals get into entrepreneurship due to a necessity and by their

behavior prove to be a successful entrepreneur. Entrepreneur exploits an opportunity and

to exploit the same, he follows some strategies, policies. The strategies and policies

followed by an entrepreneur may differ from situation to situation and even from an

individual to individual. Some of the traits which could be termed as entrepreneurial

traits and characteristics may get amplified or noticed, if one studies the strategies and

policies adopted by an entrepreneur. Entrepreneurship is about bringing together

different resources to create and successfully run a business proposition. The

management of different resources needs some strategic approach, which defines a

of 253

successful and non-successful entrepreneur. Strategies, policies assume greater

importance in the study of entrepreneur and entrepreneurship.

An entrepreneur operates in a complex socio economic environment. Socio economic

factors affect the performance of entrepreneur and the entrepreneurship. In fact it also

shapes the behavior of an entrepreneur and the enterprise he manages and operates. The

sustenance and growth of an enterprise which are the fundamental elements of success of

a MSME are achieved through competitiveness only. Again what is competitiveness has

been debated and it is measured by various factors and parameters. Here again the

conclusion appears to be absence of a universal definition of competitiveness.

Competitiveness can be the ability of the enterprise to persuade its customers to choose

his products and or services over other manufacturers or service providers. This can be

achieved by various strategies such as providing quality products, competitive rates, or

even offering products which were hitherto not provided by anybody. Again MSME

becomes and remains competitive by various strategies. Be it a strategy to acquire a

technology to produce quality and innovative products, or to penetrate new markets,

achieve certified quality, or even develop managerial skills to manage the enterprise

effectively and efficiently, besides the entrepreneur’s own resources and efforts, external

assistance is required from different agencies. It includes government and government,

entrusted with the primary responsibility of achieving sustenance, balanced, inclusive

growth of the general economy has to play an important role in making these large

number of MSMEs competitive not only in domestic but also in international arena.

Government has assumed the role of facilitator, moderator, and motivator and has

promoted many a schemes to ensure sustenance and growth of MSMEs. The schemes

have seen a shift in its composition, operations and administration and from a unit based

nurturing and promoting initiative now has settled for a collective approach. This

approach has yielded results, yet these needs to be analyzed further. There definitely is a

need to ascertain the effectiveness of this government initiatives and promotional

schemes. Large public resources are at stake with a clear objective of making the

important and crucial segment of MSMEs more competitive. It is indeed imperative for

researchers to critically study, and assess their contribution in making MSMEs more

competitive. If the objectives are not achieved, definite suggestions are necessary to

ensure the success of the government programs in the larger national interest.

of 253

2.1 Entrepreneur

Entrepreneur and especially the entrepreneurial characteristics, entrepreneurial traits

have been a subject of interest of many researchers for many years. Several studies have

been carried out and even today attempts have been made to precisely profile an

entrepreneur. Since 1950 researchers have been looking for personality traits and

characteristics present in an entrepreneur, which contributed to successful

entrepreneurship.

Schumpeter (Schumpeter J. A., 1934)1, put forth the thought that entrepreneur plays a

pivotal role in economic growth process. This set into motion research in the area of

entrepreneurship resulting into research and research papers on various aspects of

entrepreneurship.(Yves Robichaud, 2010)2

Entrepreneurs are described as risk takers, problem solvers and innovators. In

Brockhus’s(1980) view an entrepreneur is the major owner and manager of a business

enterprise and not engaged in any other employment. Davids (1963) described an

entrepreneur as a founder of new business. An entrepreneur’s obsession with relentless

engagement in an activity emerged out of his belief in his business idea, till he creates a

successful enterprise, probably leads to the definition of entrepreneur by Ries, that An

entrepreneur has to be willing to be wrong to fail. (Ries, 2014)3. This depicts the

tenacity, perseverance determination; observed in an entrepreneur and probably many

attempts he has to make to be an owner of successful business. It was observed that

entrepreneurs have a higher need of achievement and at the same time moderate risk

takers. (David C. McClelland, 1961)4.

Many definitions of an entrepreneur primarily refer to creation and management of an

independent activity by an entrepreneur with an element of leadership. This is in

conformity with Schumpeter (1934) views that entrepreneurship is a phenomenon which

falls under the wider aspect of leadership.(Gartner W. , 1988)5.There have been several

studies on characteristics of Leaders, however no empirical evidence was found to

support the argument of leaders having certain finite traits and the traits which

differentiate between a good and bad leader (Ven, 1980)6.

Cole, A.H. Admitted that in his own personal experience of running a research centre, in

entrepreneurial history, for over ten years, though many attempts were made to define

entrepreneur, they all failed. The reason was the different notions carried by different

thinkers and hence no unanimity on one single definition.(Cole, 1969)7.(Gartner W. ,

1988)5.However even after Cole’s above observations, researchers have not stopped from

defining an entrepreneur.

of 253

Absence of a generic definition of entrepreneurship or a psychological instrument to

discover the characteristics which would help defining entrepreneur has been stated by

Gartner.(Gartner W. B.)6. There appears to be no significant distinguishing features of

entrepreneurship according to many researchers including Gartner.

2.2 Individual Traits - Characteristics.

Identification of about 500 individual personality traits has been reported by some

researchers. It has also been observed that in studies trying to find out the relationship

between traits and entrepreneurship, not more than half a dozen traits are examined. The

nature of a personality is very complex and even the psychological profiling methods are

not enough to reach the depth of the personality. It is very difficult to measure

personality through some scale of moderate size as it is made of up of thousands of traits

or attributes, which are influenced variedly in accordance with time, emotional condition,

situation etc. The traits or attributes would indeed be dynamic. Secondly, a person may

portray himself quite differently than what really he is and this makes understanding of

the personality more difficult. Our superficial observation of a person is not enough to

distinguish what a person projects himself to be and what really he is. (Murray H. ,

2012)8

Attempts have been made to identify common characteristics shared by all entrepreneurs.

In 60s some attempts were made by some researchers to establish links between

entrepreneurs and psychological traits and characteristics. This was primarily to answers

some basic questions such as the difference between entrepreneur and non entrepreneur,

why some individuals are good in identifying entrepreneurial opportunities. Efforts were

also put in to develop a profile of an entrepreneur.

The decade of 1980s and 1990s presented substantial research on personality

characteristics and socio cultural backgrounds of successful entrepreneurs.

Timmon(1994)analyzed more than 50 studies to arrive at consensus around six general

characteristics of entrepreneurs such as1) Commitment and determination2) leadership 3)

opportunity obsession 4) tolerance, risk, ambiguity and uncertainty 5) creativity, self

reliance and ability to adapt 6) motivation to excel. (Timmons, 1994)9. Some research on

the demographic and cultural background leading to successful entrepreneurship,

(Bianchi1993)indicates some characteristics which include and are relevant from this

research point of view. These characteristics are1) being an offspring of self employed

parents 2) previous employment in a firm with more than 100 people (meaning large

organizations)and 3) being a collage graduate. (Tom Byers, 1997)10

.These factors help

of 253

shape the entrepreneurship of an entrepreneur as they provide guidance, experience and

knowledge, but definitely these are not inherent characteristics.

Researchers have also cited locus of control as one of the characteristics of an

entrepreneur. Locus of control is the individual’s perception of the outside world and are

their beliefs of the causes of events affecting their lives. There are two types of people,

one who believe that they have the control over the environment through their action and

they are characterized to have internal locus of control. The other type has a belief that

they have no control over the environment and they have what is called as external locus

of control. It is said that individuals with internal locus of control tend to become

entrepreneur, while the one with external locus of control would avoid being an

entrepreneur.(Chen, 1998)11

.Here again the perception of the outside world is the

outcome of an interaction of an individual with the external environment and analysis of

the same based on his experience and or knowledge, skills developed. This may not be

regarded as intrinsic characteristics but could be an acquired one. The basic confidence

that an individual has control over the environment through his action is not definitely in

built but is developed from some successful experiences.

Further, a hypothesis by Rotter says that the individuals with internal locus of control

strive more for achievement than individuals with external locus of control. (Rotter,

1966)12

.However this characteristics is not exclusively an entrepreneurial characteristics

but could be observed in non entrepreneurs too. Hence not a differentiator between

entrepreneur and a non entrepreneur.

Propensity to take risk is assumed to be more in entrepreneurs. This may be due to the

characteristics, internal locus of control. The risk includes amongst other, financial,

career and family risk. It is assumed by many researchers that entrepreneurs will take

moderate risk to satisfy their need of achievement. The propensity to take risk is more in

entrepreneurs than managers. (Bowen, 1986)13

. Some researchers have concluded that

amongst the other entrepreneurial characteristics, propensity to take risk is important in

identifying entrepreneur. There are contrary findings too. Rather than viewing risk

seriously, many entrepreneurs manage the risk well with their knowledge and

confidence. There are studies which have indicated that the risk is more situational and

depends on specific conditions and entrepreneurs don’t take more risk than managers.

Even after case studies of successful entrepreneurs and identification of traits present in

them, instrumental for their success, the traits observed might not be same in all cases.

(Murray, 2012)14

. Hence the study of entrepreneurial psychological traits has been

expanded to study other external, internal factors and situational circumstances. (Gartner,

of 253

1988)5, (Ardichvili, 2003)

15.Personality characteristics or individual traits, which explain

entrepreneurial behavior, are termed as internal factors.

Steve Jobs, the cofounder of Apple in 1976 is considered to be an ideal entrepreneur.

Isaacson, the writer of the book on Steve Jobs, has identified some important factors

which lead to Steve Job’s success as an entrepreneur, which could surely be considered

as the important characteristics of an entrepreneur. One of the characteristics is the

“Focus”, the product or the operational area of the Company, where more concentration

is required. A successful entrepreneur needs to concentrate or focus on what is required

to be done and what is not required to be done. That is the characteristics, determination

and commitment analyzed by Timmons. The other characteristics listed are the ability to

simplify things by concentrating on them and eliminating unnecessary components.

Which helps to concentrate on what is good for the organization? Taking responsibility

of everything is yet another important characteristic, again a leadership quality. Steve

Jobs quality of “push for perfection” is other important characteristics entrepreneurs

should have. “A true craftsman uses a good piece of wood even for the back of a cabinet

against the wall”. (Isaacson, 2012)16

, that implies a characteristic, quality conciseness

which probably is more specific. These are more individual specific characteristics which

have been identified after due analysis of the performance and work of the individual.

Again these characteristics can be attributed to the personality development process of

the individual.

“Entrepreneurs who sustain their momentum know that the road to success is always

under construction. Their hallmark is never ending desire to improve along with an

abiding interest in learning all they can. They thrive on challenges during periods of

uncertainty.” (Ms. Lila Poonawalla, Chairperson, DeLaval Private Limited. Chief Guest

of 8th

EDI –PGP Convocation: 2005-06.) (Poonawalla, 2005-06)17

.This statement

probably aims at distinct characteristics of an entrepreneur, the conviction in the ideas,

persistence, adherence to quality and development, ability to accept and deal with

challenges. Which again may be observed in manager too and obviously may not be

inbuilt but could be situational.

An entrepreneurial personality may have a combination of positive and negative

personality characteristics which may not directly influence his behavior but would have

complimentary effect on it. It is argued that these characteristics may not be indicative of

of 253

any specific behavior. (Epstein, 1985)18

An individual’s general orientation, the situation

and his own motive may play a role in shaping his behavior. (Shaver, 1991)19

Some Commonly Mentioned Characteristics of Entrepreneurs.

Ability to Learn from

mistakes

Foresight Product Knowledge

Able to take calculated

risks

Goal oriented Profit oriented

Aggressive Honest Quick decision maker

Balanced Imaginative Resourcefulness

Charismatic Independent Responsible

Committed Influential over people Responsive to criticism

Confidence Initiative Responsive to suggestion

Cooperative Intelligent Self reliant

Courageous Integrity Sensitive

Creativity Leadership Sense of power

Customer orientation Market Knowledge Sociable

Determination Maturity Street Smart

Diligence Need for achievement Technical knowhow

Dynamism Non conformist Thorough

Efficacy Optimism Tolerant of ambiguity

Efficient Passion for work Trustful of others

Egotistical perceptive Trustworthy

Energy perseverance Versatility

Flexible Positive to challenge Visionary

Table 2.1

(Murray, 2012)8

The above list of traits appears to be quite narrow. These traits on their own or combined

with some other traits cannot predict entrepreneurial behavior. Some traits may be useful

in phase of entrepreneurship whereas some others could be useful in some other

phase.(Murray, 2012)8.Besides there are many traits in the above list which are not

exclusive to an entrepreneur. Even a worker or a manager may possess many of them.

These traits may not necessarily and definitely lead to entrepreneurship.

4 of 253

It has also been argued that many personality characteristics such as need for power,

recklessness, over confidence, unrealistic optimism (which are identified, confirmed or

inferred post an activity) can have counterproductive results on entrepreneurial behavior.

(Peay, 1989)20

, (Kidd, 1969)21

(Laurie, 1977)22

(Solomon, 1988)23

.

The existence of Individuals with entrepreneurial characteristics appeared to be varied

across the countries and cultures. The factors which contribute to these differences in

entrepreneurial potentials are the culture, the stage of economic development, political

and economic traditions.

It is a common observation that while the economy develops and grows more and more

resources becomes available and hence the entrepreneurship is also on rise. The growth

also promotes innovativeness and that further fuels entrepreneurship and new venture

creation. The economic growth stimulates entrepreneurship which in turn gives rise to

more new ventures. (Mueller, 2008)24

. This is a case of favorable external environment

providing opportunities to potential entrepreneurs and a confluence of internal and

external characteristics to produce entrepreneurship.

The relationship between an individual and the social environment was also considered

to be an important factor, responsible for entrepreneurship. These external factors were

defined as work experience, education, culture, and environment. Entrepreneurship is

considered to be the result of the interaction between the internal and external factors.

(Smith-Hunter, 2003)25

While delivering the key note address at Pune in TiECon (the entrepreneurship

conference of The Indus Entrepreneurs (TiE),held on March 30, 2013 Mr. N.R. Narayan

Murthy the co – founder of Infosys and great business visionary commented that one of

the biggest qualities of an entrepreneur is to have a grand vision. The idea should be

exciting not only to you but also to the people with whom you work. He also mentioned

that the entrepreneur should have the character and strength to sacrifice short term

gratifications for long term goals. Entrepreneurship is all about deferred gratification.

While expressing his views on vision, he advised the budding and potential entrepreneur

to create differentiated value proposition for their customers, which should be simple

enough to be expressed in one sentence. The entrepreneur should be convinced that there

is a good market for the product that he wants to launch. He should also have absolute

trust and confidence in himself. Here again the emphasis is more on the relationship

between the individual and the external environment. An assessment of the external

environment comprising, customers, other stake holders can only help to create vision,

identify market needs, to produce product and services to fulfill that. One can conclude

of 253

from Mr. Narayan Murthy’s statement that more than inherent characteristics what is

important is building a personality, acquiring some attitudes and skills.

The equilibrium model of entrepreneurship of Khilstrom and Laffont, depends on

attributes of the individuals and emphasizes characteristics such as uncertainty which

leads to entrepreneurship. (Laffont, 1979)26

.Though some dimensions of equilibrium

models are useful for understanding entrepreneurship, it is not exhaustive and is

incomplete to some extent. The presence of a large number of entrepreneurs in the

ecosystem, points to the fact that entrepreneurship cannot be explained solely with

reference to characteristics. Some people respond to the situational signals than others

which are not stable characteristics that differentiate some people from others.

The entrepreneur is considered to be a part of the complex process of new venture

creation. “Entrepreneurship is the process of creating or seizing an opportunity and

pursuing it regardless of the resources currently controlled" (Timmons, 1994)9.It is a

behavior, an outcome of a desire to exploit a seen or perceived opportunity.

Entrepreneurship is the outcome of an entrepreneurial act or behavior. Hence the study of

an entrepreneur may not be complete without an examination of his enterprise creation

and operation behavior.

2.3 Behavioral Approach.

Many researches are inclined towards the behavioral approach than the trait approach.

We have many studies which have indicated refocusing on what does an entrepreneur do

rather than addressing the question what an entrepreneur is. Gartner believes that

research on entrepreneurial behaviors is more of field and the researcher should observe

them on the field while performing the tasks of entrepreneurship. That is studying the

management policies and strategies adopted by them. This may bring out the

characteristics of an entrepreneur more distinctly. Organization creation skills are more

relevant than behavioral. Entrepreneurship which is a result of entrepreneur’s activity or

job has been cited as a creation of an enterprise.

There appears to be a general consensus that an entrepreneur is one who necessarily

builds an enterprise. An enterprise is a venture, a project, an activity, an endeavor. In the

creation of such an enterprise he exhibits a distinct behavior. The behavioral approach is

considered to be more relevant than the trait approach and there are many reasons

assigned to that. In many research studies, the entrepreneurs are studied many years after

the start up. The question here is whether the individual succeeded because of his

entrepreneurial characteristics alone or the strategies adopted by them. Again the

of 253

entrepreneurial characteristics might have played an important role in shaping strategies

and surely it needs to be researched. The behavioral approach views the creation of an

organization in the context of outcome of many influences.(Gartner W. B.)27

.This

approach probably takes into consideration the inter play, cause and effect of various

external, internal factors and forces.

In a behavioral approach, the study of entrepreneurship treats the organization as the

primary level of analysis and the individual is viewed in terms of activities undertaken to

enable the organization to come into existence.(Gartner W. B., 1985)28

The personality

characteristics are ancillary to the entrepreneurship. There are studies quoted in

psychology which suggest that when an entrepreneur is being observed for his

entrepreneurial actions, the observers often conclude that the actions or results of such

actions are caused by the characteristics of the entrepreneur( like persistence, optimism )

while the entrepreneur may credit the situation or something about the situation. This

pattern is referred to as “fundamental attribution error” because the observer has a

tendency to place credit or discredit on personality characteristics and not enough on the

environmental or situational factors that motivated the entrepreneur to action. (Fiske S.T.

and Taylor, 1991)29

. This attribution error occurs because the observer’s first reaction is

caused by observing the individual rather than also analyzing the operational

environment in which, the entrepreneur acted. According to leadership researcher James

Meindl, the scholars and business reporters emphasize the leader’s individual

characteristics (personality traits)as the causes of performance and the business

environmental factors such as the other people, structural opportunities and constraints

did not get enough attention. (Meindl.J.R., 1990)30

.

Eric Ries a Sillicon Valley entrepreneur and the author of a book titled “The Lean Start

Up” in an interview has quoted entrepreneurship as being fundamentally interactive. An

interaction of the individual with many elements, objects in the operational environment.

Gartner also argues that all new ventures need some type of support which includes

finance, marketing, technology and it could further be extended to government support in

terms of incentives and conducive policies. This causes the interaction for seeking the

external support. Individual knowledge and skills are important in successful

entrepreneurship. (Habib, 2011)31

. They are important mainly because in the absence of

it, the interaction would not be effective, yielding results. But the success also depends

on using knowledge and skills effectively in a conducive atmosphere.

of 253

2.4 Opportunity and Necessity Entrepreneurship;

An interaction between internal and external factors results into Entrepreneurship.

(Smith).This response to the environment is not uniform for all the individuals. Some

individuals respond to apparent business opportunities and in some cases unfavorable

circumstances force the individuals to be an entrepreneur. This response is defined as

“Pull” and “push “factors. (Buttener, 1997)32

,(Harding, 2006)33

,(McClelland,

2005)34

,(Stevenson, 1985)35

.

The “Pull” is considered to be a venture creation to seize a market opportunity and it is a

deliberate choice to become an entrepreneur. This is also termed as opportunity

entrepreneurship. The others are pushed into entrepreneurship because of adverse

conditions such as loss of job. This is also termed as necessity entrepreneurship. These

are two different situations and the characteristics of the individuals acting in these

situations cannot said to be the same. One is self driven,self motivated act where as other

is an act more out of compulsion.

A research conducted in Canada shows that entrepreneurs who have exploited

opportunities, are of pull category, with following characteristics,

1) Younger

2) More Educated.

3) Have better relevant skills.

4) They have better penchant to perceive business opportunity in the short term.

5) They have some recent contacts with an entrepreneur.

6) Have more positive view on growth of operations.

Reynolds et al. findings show that the opportunity entrepreneurs are older, that is they

are in the age group of 35 to 44. The necessity entrepreneurs on the other hand fall in the

age group of 18-24. (Reynolds, 2002)36

. Robichaud et al. findings were contrary to

Reynolds and it associates youth with opportunity entrepreneurship.(Lohest, 2011)37

.

Bergmann and Sternbey from their findings have vehemently stated that the level of

education impacts the entrepreneurship of an opportunity entrepreneur. (Bergmann,

2007)38

.

The results have also indicated that the pull category or opportunity driven entrepreneurs,

display more confidence, professionalism. (Yves Robichaud, 2010)2. Opportunity driven

or “Pull” entrepreneurs besides being more confident, are engaged in networking to a

greater degree than those who are pushed into business.(Solymossy, 1997)39

.

of 253

Research has shown that networking is an important key to entrepreneurial

performance.(Lerner, 1997)40

It has also been shown that the link between the

opportunity driven entrepreneurs and the perception of opportunity as also the estimates

of more employees, probably required from the growth, expansion perspective are

indicative of aggressive growth intentions observed in the “Pull” category of

entrepreneurs. (Morris).It has been suggested that growth oriented entrepreneurs tend to

follow variety of strategies.(Morris, 2006)41

.These new strategies include manpower

addition, new product introduction, market penetration etc. (LeBrasseur, 2003)42

An entrepreneur is characterized by his innovative behavior, he deploys strategic

management practices, and he establishes or manages business to achieve his objectives

and goals. (James W. Carland, 1984)43

.

This definition also lays an emphasis on behavior rather than on inherent characteristics

or traits and probably also is indicative of the achievement needs of an entrepreneur.

There has been considerable emphasis on behavioral approach than the trait approach.

There are various studies which point towards the need to refocus on what an

entrepreneur does rather than addressing the question, what is an entrepreneur. Gartner

emphasizes the need to study the entrepreneurial field or observing the entrepreneur

while performing his entrepreneurial activities. Observing and studying the management

policies and strategies adopted by an entrepreneur is important to understand an

entrepreneur. It is said that organization skills are more relevant than behavioral. Gartner

argued that all new ventures require financial, marketing, and technological as also

government support in the form of various incentives, conducive policies to perform and

grow. The external environment is also a major contributor in the process of

entrepreneurship.

Many scholars argue as to why would one study entrepreneurship considering the

realities of this ecosystem. It is very difficult to obtain data, theory is in underdeveloped

state and the findings so far are similar to the findings of other areas of business. Still

there are some plausible reasons for the study of entrepreneurship. Much technical

information finds its presence in various products and services. Entrepreneurship

converts this information into the various products and services.(Arrow, 1962)44

. This

conversion is the route through which the information hitherto not available to many

reaches many. Entrepreneurship is a process through which longtime existing

inefficiencies in an economy are discovered and are resolved. (Kirzner, 1997)45

.In a

capitalist society amongst the many change processes Schumpeter recognized

“entrepreneurially driven innovation in products and processes”, as the crucial engine

of 253

driving the change process”. Therefore, he observed that entrepreneurship cannot be

separated from the collective theories of markets, firms, organizations, and change makes

our understanding of the business landscape incomplete. Entrepreneurship since is the

outcome of entrepreneurial activity, entrepreneur and entrepreneurship cannot be

separated either in the study of entrepreneur or the entrepreneurship..

Many countries have placed emphasis on promotion of entrepreneurship as an element of

their economic growth and development policies. (African Development Funds., 2006)46

,

(European Commission, 2003)47

, (Leitao, 2009)48

, (Yves Robichaud, 2010)2

Scott Shane and S venkataraman in their article “THE PROMISE OF

ENTREPRENEURSHIP AS A FIELD OF RESEARCH” (SCOTT SHANE, 2000)49

while stating the absence of a conceptual framework of entrepreneurship, have presented

their conceptual frame work based on the earlier research in the field of social sciences

and applied fields of business. The strategic approach of entrepreneurship according to

them is not unique and does not provide adequate test of entrepreneurship, since

entrepreneurship is about discovery and exploitation of profitable opportunities. Strategic

approach mainly looks at the performance side of entrepreneurship. Conceptual frame

work too for assessing relative performance may be good and sufficient for strategic

management but not for entrepreneurship. Their attempt was to provide an integrated

framework for the researchers in the area of entrepreneurship, a framework which

recognizes the relationship amongst the various factors necessary but not sufficient to

understand entrepreneurship. Till date, most of the work in entrepreneurship while

defining entrepreneurship revolves around who is an entrepreneur and what he or she

does. Most of the definitions look at the relationship between lucrative opportunities and

the presence of enterprising individual. (Venkataraman, 1997)50

. There appears to be a

definite need to investigate relationship between different factors playing important role

in the entire process of entrepreneurship. This research could be considered as an attempt

towards that objective.

The definition of an entrepreneur as a person who establishes new enterprise is also an

incomplete definition as it overlooks the other considerations such as quality of

opportunities. It is not only establishment of enterprise which is important but far

important is the sustenance, growth of the enterprise and the role played by it in the

achievement of economic objectives. More exhaustive definition of entrepreneurship

could be the scholarly examination of the entire process,(that is how), the concerned

individual(by whom) the opportunities to create future goods and services are identified,

examined and then exploited definitely in the light of results achieved.(Venkataraman,

of 253

1997)50

. The study on entrepreneurship essentially involves the sources of

entrepreneurial opportunities, the entire process of identification, assessment and

utilization of such opportunities, definitely in the light of the group of individuals who

are responsible for such discovery, assessment and exploitation of such opportunities. In

an entrepreneurial research the main research problems are basically concerned with the

“why, when and how” of the three major elements of entrepreneurship, the

entrepreneurial opportunities for the creation of goods and services, the characteristics of

the individuals who exploit such opportunities as distinct from others and the different

modes of actions used for the such an exploitation of entrepreneurial opportunities. The

Shane, Venkataraman framework focus on the existence of entrepreneurial opportunity,

its identification or discovery and its further exploitation, the influence of individuals and

opportunities, rather than environmental background and consequences; and this frame

work extends beyond the sole framework of firm creation. The entrepreneurial

investigation frame work thus assumes multidimensional approach. There appears to be a

further need to go beyond this and examine the relationship between different elements

involved in the process.

2.5 Entrepreneurial Opportunities

Entrepreneurial opportunities are very basic to entrepreneurship. If opportunities don’t

exist, entrepreneurship will not develop. These entrepreneurial opportunities are the

situations which lead to offering of manufactured goods, services, raw materials, to the

market at a price greater than their cost of production.(Casson, 1982)51

. Entrepreneurial

opportunities differ from other business opportunities as entrepreneurial opportunities

need new methods, processes where as others need more efficient optimization of the

existing processes and methods.(Kirzner, 1973)52

.There definitely is a difference

between an entrepreneur and an individual engaged in a business. Business appears to be

a more routine process of vocation.

Entrepreneurial opportunities are of different types. The earlier research on

entrepreneurial opportunities has focused on product markets

opportunities.(Venkataraman, 1997)50

Entrepreneurial opportunities also exist in factor

markets such as discovery of new material. (Schumpeter J. , 1934)1 Peter Drucker has

considered three different categories of entrepreneurial opportunities. The creation of

new information which occurs due to new invention, offers entrepreneurial opportunities.

The second one is exploitation of market inefficiencies resulting from information

asymmetry at all times and places. The third one is the reaction of the market to shift in

of 253

the relative costs and benefits of alternative uses for resources due to various

environmental reasons be it political, regulatory, demographic changes.(Drucker,

1985)53

.

Entrepreneurship is about bringing together different resources to create the new product

or service. The effective management and control of these resources makes the

opportunity profitable. The entrepreneur’s assumptions about the accuracy of resource

prices must differ from those of resource owners and other potential entrepreneurs.

(Casson, 1982)51

. This brings out precisely the difference between an entrepreneur and a

non entrepreneur. If the resource owners are of the knowledge of the entrepreneur they

would price the resource in the light of that knowledge and the entrepreneur’s profit

would vanish. In an entrepreneurial opportunity the assumptions of the entrepreneur and

the resource owners must differ, otherwise there is no entrepreneurial opportunity. The

entrepreneurial profit will get divided amongst many and hence would not provide any

incentive to the potential entrepreneurs. (Schumpeter J. , 1934)1.

On commenting on the different beliefs of different market operators about the prices

market would offer, Kirzner has observed that the process of discovery in a market

requires the participants to understand each others’ expectations. The people decisions

are based on assumptions, intuitions, hunches, heuristics, information which may be

correct or wrong, which leads to correct or incorrect decisions.(Kirzner, 1973)52

.This

leads to shortages, surpluses, misallocated resources, and further exploitation of

opportunities. Schumpeter (Schumpeter J. , 1934)1 has referred to the constant

disequilibrium state of the economy. The technological, political, social, regulatory

changes lead to constant availability of new information on exploitation of resources in

different manners. This may transform the resource to a new valuable form, altering its

value and taking it to its new equilibrium price. As information is imperfectly distributed

in an economy and is not being received by all in its proper perspective, it leads to

creation of entrepreneurial opportunities.

Earlier research has suggested two main categories of factors that lead to discovery of

entrepreneurial opportunities by some and not by all. The first is possession of prior

information to identify opportunity and the second is cognitive, analytical characteristics

to value it. These could be the entrepreneurial characteristics. To recognize an

entrepreneurial opportunity the potential entrepreneur needs to have prior information

which compliments new information triggering entrepreneurship. This information may

be about the specific needs of the user or specific aspect of production or the process.

(Kaish, 1991)54

.(Von Hippel, 1997)55

(Bruderl.J, 1997)56

of 253

It has been observed that same information is not generally shared by two individuals at

the same time. Venkataraman states that information about underutilized resources, new

technology, unfulfilled demand, political and regulatory framework is being recognized

by individuals according to the characteristics and circumstances of the select individuals

in the population.(Venkataraman, 1997)50

.

Even with the availability of the prior information for identifying an entrepreneurial

opportunity, it cannot be conclusively said that the opportunity would be exploited by the

one who possesses it, because of inability to conceptualize the exploitation process and

the end product or service emerging from the process. The process of visualization is

very difficult. Prior research has shown that people differ in their ability to decipher

consequential utility of such relationship. Research in the field of Cognitive science, has

shown that people differ in their abilities to translate existing concepts and information

into new ideas. (Ward, 1997)57

. Sarasvathy, Simon and Lava (1998) have shown that

where the entrepreneurs see entrepreneurial opportunity others sense risk.(Sarasvathy,

1998)58

. The individual entrepreneurial characteristics or traits such as propensity to

assume risk, conviction, determination, etc. may play an important role in the

exploitation of the opportunity. There is an interaction between an internal and external

factor in the process of entrepreneurship.

Though identification of an entrepreneurial opportunity is must in the process of

entrepreneurship, what is more important is the will and determination to exploit the

same. Not all opportunities result into entrepreneurial ventures. According to

Venkataraman(Venkataraman, 1997)50

exploitation of the entrepreneurial opportunity is

the function of characteristics of the opportunity and the individual.

It has been seen that the exploitation of an entrepreneurial opportunity is more if there is

greater availability of funding.(Evans, 1991)59

. In a review of research findings Aldrich

and Zimmer observed that good relationship with resource provider results in

exploitation of entrepreneurship opportunity. This brings out the importance of the role

required by external agencies including government. It has also been concluded that

persons with useful information related to entrepreneurial opportunity from the previous

employment, tend to exploit such an opportunity since such information reduces the cost

of opportunity exploitation.(Cooper, 1989)60

.The prior work experience of the individual

counts vastly in exploitation of entrepreneurial opportunities.

The differences in individual perceptions are also one of the differentiators between

opportunity exploitation or non exploitation, between an entrepreneur and non

entrepreneur. As for any exploitation investment of time and money is required upfront,

of 253

there is always a downside risk of losing the same. The differences in assuming the risk

amongst the individuals influences the decision to exploit an opportunity. (Khilstrom,

1979)61

. Individual levels of optimism also influence the decision to exploit the

entrepreneurial opportunity. The individuals who exploit entrepreneurial opportunities

perceive their success in the entrepreneurial venture much higher than others in the

industry and even higher than the reality.(Cooper A. , 1988)60

.It has also been stated that

over optimism is observed in those individuals who exploit entrepreneurial opportunities.

(Audretsch, 1991)62

.

Researchers have also observed that the individuals who exploit entrepreneurial

opportunities have greater self efficacy and more internal locus of control. Since

opportunity exploitation has the higher element of ambiguity, individuals with higher

tolerance for ambiguity have observed to exploit the entrepreneurial

opportunities.(Begley, 1987)63

. Individuals with higher needs of achievement are more

likely to exploit entrepreneurial opportunity. (McClelland, 1961)64

.

A business starts with some individual eyeing an opportunity, developing an idea to

exploit the opportunity into a product or service. The entire process of business start up

is the perception, interpretation and combining both with prior knowledge into an idea

which with internal motivation translate into actual action, that is the entrepreneurial

venture. Many a times the idea may not totally befitting the opportunity and may require

manipulating the product, resources strategies, capabilities and organization to make the

fit. This dynamic construct may be termed as product of entrepreneurial mindset and the

action as entrepreneurial behavior.(Murray, 2012)8

It is necessary to find out how entrepreneurs find out opportunities. It has been observed

that very few entrepreneurs formally scan the environment. This is inferred because if

they really investigate the environment, we won’t find individuals in high competition,

low margin businesses like majority of the entrepreneurs do. (Johnson, 2004)65

.An

entrepreneurial opportunity or idea evolves with a frame work of time, place, prior

knowledge, motivation, and the creativity to relate all these. Opportunities are rooted in

individual’s personal knowledge, experience, personal aspirations, imaginations and fear

of uncertainty. Most ideas or entrepreneurial thoughts originate from some old idea,

some old observation of experience. (Murray, 2012)8. Most entrepreneurial ventures are

duplication of some earlier seen idea with or without modification.

Individuals working within a particular industry may see some units or customers not

satisfied with a particular product, or they feel something can be done better, or they

observe some more room for another direct competitor and hence they get into that

of 253

activity. Working in a particular industry makes oneself more familiar with that industry

besides the work experience develops confidence, and it is easier to establish network.

This motivates many to establish entrepreneurial venture. The chances of survival in

such situations are more. Research has shown that the major reason why individuals get

into entrepreneurship is that they don’t like to work for others. Self employment is the

major reason for entrepreneurship.(Van Gelderan, 2006)66

(Hamilton, 2000)67

.

The entire process of entrepreneurship starting with Opportunity identification, strategy

development and execution is a multi dimensional process, where multiple factors are

interacting. Only psychological features, characteristics will not alone lead to

entrepreneurial behavior.

The various factors, a combination of socio-psychological characteristics that influence

entrepreneurial behavior can be represented by the following schematic diagram.

of 253

2.6 Socio-Psychological Characteristics Influencing Entrepreneurial Behavior.

Figure 2.1

(Murray, 2012)8

A precise explanation of the phenomenon of entrepreneurship is not possible. It is an

outcome of various factors, internal as well external, personal characteristics, emotions,

traits, social situations, hence very complex to be described by a diagram. It is definitely

a trigger, which could be caused by an external or internal event, which pushes an

individual towards entrepreneurship. The external events could be loss of job, an

opportunity identified while in employment. Internal events could be job dissatisfaction,

frustration, internal desire to be on one’s own, etc.

2.7 Personal Paradigms

Murray Hunter has put forth a concept of a filter which shapes our perceptions, and he

calls it as “personal paradigms”. Personal paradigms are group of attributes which give

meaning for an individual to the information which he is using for his analysis and

decision making. He believes that these personal paradigms decide how an opportunity is

seen, evaluated and acted upon by an individual. Personal paradigms are considered to be

buffers between an individual’s internal and external world. The entire individual

process of perception, feeling and thought is related to personal paradigms.

of 253

Some of the personal paradigms are alertness, the ability to be perceptive to the external

environment, ability to infer from the happenings, information in the external

environment where opportunities exist. High alertness is required to catch the

information, analyze the information and generate entrepreneurial ideas. Motives are the

factor which pushes an individual to act in a particular manner to satisfy one’s needs.

Prior knowledge is yet another personal paradigm. It is the accumulation of information,

knowledge as also experience by an individual over the tenure of his earlier work

life.(Von Hippel E. , 1994)55

.This helps the individuals to identify entrepreneurial

opportunities. This prior knowledge recognizes the opportunities which are there to be

exploited in the realm of related prior familiar areas. Shane states that an individual will

tend to identify opportunities which are related to his area of prior exposure and

knowledge. (Shane, 1999)68

.Consequentially individuals with no prior information or

exposure to that related area will fail to identify such opportunities.(Kirzner I. ,

1997)45

Every individual’s prior information will have different peculiarities and hence

there will be unique “knowledge corridors” with each individual that either assists in

identifying an opportunity or not.(Hayek, 1945)69

,(Ronstadt, 1988)70

.

Ardichvili, A. and Cardozo, R., Ray, S. have presented three dimensions of prior

knowledge. They have classified it as 1) prior knowledge of markets, 2) prior knowledge

of ways to serve markets, and 3) prior knowledge of customer problems. They further

break it down in two areas, the first is the knowledge of subject matter which is the

matter of special interest to the individual which provides a tremendous insight into the

said subject matter. The other one is work experience gathered over a long period. When

the information from the first area is combined with the second, it offers an individual an

opportunity to identify and grab an entrepreneurial opportunity.

The strategic outlook personal paradigm is about the vision, ability of an individual to

identify and critically assess opportunities, visualize them in real world perspective,

identify resource requirements and evaluate all the issues in a strategic manner. This

ability is also linked to individual creativity, perception of own talents, skills and

inclination towards action.

Tom Peters and Robert Waterman have stated “Bias for action “as one of the eight, basic

principles of excellence. Bias for action is the decision to do something rather than doing

of 253

nothing. Individuals may identify opportunities but if the bias for action is not there in

the individual no entrepreneurial action will happen. (Peters, 2003)71

.Hence bias for

action which is seen in some only, can be one of the important characteristics of an

entrepreneur. The characteristics are the desire to achieve, be different than others and to

excel in one’s activity or profession.

of 253

2.8 Variables in new Venture creation

Variables in new Venture creation

Figure 2.2

(Gartner W. , 1985)28

Environment Venture capital availability Leadership Presence of experienced entrepreneurs Technically skilled labour force Accessibility of suppliers Accessibility of customers or new

markets. Governmental influences Proximity of universities Availability of land or facilities Accessibility of transportation Attitude of the area population Availability of supporting services Living conditions. High occupational and industrial

differentiation High percentage of immigrants in the

population Large industrial base Large size urban area by government Availability of financial resources.

Changes.

Barriers to entry

Rivalry amongst competitors

Pressure from substitute products

Bargaining power of buyers

Bargaining power of suppliers.

Individual

Need for achievement

Locus of control

Risk taking propensity

Job satisfaction

Previous work

experience

Entrepreneurial parents

Age, Education

Process

The entrepreneur locates a business opportunity

The entrepreneur accumulates resources

The entrepreneur markets products and services

The entrepreneur produces the product

The entrepreneur builds an organization

The entrepreneur responds to government and

society.

Organization Overall cost

Differentiation Focus

The new product or

services. Parallel competition

Franchise entry Geographical transfer

Supply shortage Tapping unutilized

resources. customer contact

Becoming a second

source Joint ventures

Licensing Market relinquishment

Sell off of division Favored purchasing Governmental rule

of 253

The above diagram vividly brings out the role played by different variables in the

process of entrepreneurship and the inter play between them which is necessary for the

process completion. The variables are internal as well as external. All the variables may

not be involved but an expanded picture always gives a clear idea of the process.

Studies on the entrepreneurs from the SME segment have identified variety of

entrepreneurial motivations. These motivations are of economic and non economic

nature.

2.9 Some Common Motivational Factors for Entrepreneurship.

Motivator Description

Achievement Need to master, manipulate, organize and arrange, object, people and

events in an accomplished way overcoming obstacles and excelling

Exhibition A need to be seen and heard by others and be the center of attention and

make an impression on others.

Order A need to put things in an orderly arrangement, balance and in precision

Dominance To seek and direct the behavior of others by persuasion and command,

coercion or seduction. To seek to control the environment.

Abasement To accept injury, criticism, and blame. To submit to the force of others

and resign yourself to the fate. To admit wrong doing, inferiority and

error.

Aggression To overcome any opposition forcibly. To avenge injury and hurt with

attack and oppression.

Autonomy To maintain free of others restraints, to break out of confines, to be

one’s own master.

Blame avoidance To avoid blame and humiliation at all cost to avoid situation that may

lead to embarrassment, to refrain from action because of fear of failure.

Affiliation/intimacy To seek cooperation with others, to draw near and close to others, to win

affection of others, to be liked to develop loyalty and receive loyalty

from others.

Nurturance To take care of others in need to give sympathy and gratify the needs of

helpless others.

Succor To receive help from others to have one’s needs, gratified by another, to

be indulged, nursed, supported, and protected by others

Table 2.2

(Murray H. , 1938)72

of 253

An example of these motivators could be an additional source of income, or desire for

independence respectively. Many researchers have put forth need for autonomy and

independence as one of the important motivators for the entrepreneurship. (Adrien,

1999)73

,(Carter, 1992)74

. Kirkwood after analysis of various reasons for entrepreneurship

arrrived at a four broad groupings viz. a desire for independence,financial motivations,

factors relating to family and factors related to work. (Kirkwood, 2003)75

Inability to achieve personal development in one’s work and or non fulfillment of the

need for recognition result into professional and personal dissatisfaction. This often leads

to entrepreneurship which has been considered as necessity entrepreneurship.

(Noorderhaven, 2004)76

.Some researchers have classified the entrepreneurship as

necessity or push type of entrepreneurship where the enterprise has been created by an

individual just to meet family expectations or to continue the family tradition. They are

rather pushed into entrepreneurship. In many a cases individuals are pushed into

entrepreneurship because of the obligation to take over family business. (Bhola, 2006)77

In conclusion, we can say that study of entrepreneur, entrepreneurship cannot happen in

isolation. Any research on these topics have to examine the various elements like

entrepreneur, entrepreneurship, the entire process and other factors from the external

environment associated with it. A definition of entrepreneur is linked to the process of

entrepreneurship and vice versa.

It is difficult to identify precisely the characteristics or traits of an entrepreneur as they

are not general in nature. These traits could be subjective and many in number. In many a

situations a trait or characteristics may not be visible on its own but acting with some

other situational factor the inbuilt trait gets magnified. Some of the traits are inherent,

some are acquired and even some are situational. These traits come into play many a

times in an entrepreneurial activity. An entrepreneurial activity again is multifaceted. It

consists of strategies, policies, interactions. We need to proceed further in an

entrepreneurial study in other related areas to have deeper understanding of the

phenomenon.

2.10 Competitiveness

The success of an entrepreneur is judged by the success of his enterprise. The enterprise

performs with the entrepreneur at the helm. The entrepreneur guides, directs and

navigates his enterprise and the entire course the enterprise takes and achieves, is the

entrepreneurship of the entrepreneur. The enterprise operates in a competitive

of 253

environment and all its strategies, policies are supposed to have a competitive

perspective. The sustenance and growth is definitely linked to competitiveness of the

enterprise.

Various research papers have brought forward the absence of a universal and exact

definition for competitiveness. This has left to the assumptions of many to come out with

the definition perceived in different perspectives and may be in different situations. As a

result, competitiveness has received many definitions from many researchers and

authors.

Some researchers and organizations define competitiveness as the ability of the

organization to “persuade customers to choose their offerings over alternatives”.

(Chaharbaghi, 1994)78

.Rainer Feurer and Kazen Chahanbaghi have given a holistic

definition of Competitiveness, “Competitiveness is relative and not absolute”. The

competitiveness of an enterprise is dependent on its value proposition to its shareholders

and customers, its financial strength which in turn determines its ability to operate within

competitive environment and most importantly, the quality and potential of its

manpower, technology for implementation of its strategic plan. Competitiveness can

only be achieved and sustained if an appropriate balance is maintained between these

factors, which can be of a conflicting nature”. (Chaharbaghi, 1994)78

. Some view it as

the ability of the organization to improve continuously process capabilities. It probably

extends beyond that and, it presumes the benefits which follow the improvement in

process capabilities. Core competencies as well as capabilities that drive competence can

be considered as essence of competitiveness. Again a core competency is a vague

concept and even capabilities could be a part of core competency. These two could be

interrelated too. It could be said that, competitiveness is the end result of the strategies

and policies adopted by the entrepreneur and it is the culmination of various operational

decisions taken by the entrepreneur in the short, mid and long term. Hence there appears

to be the need to define competitiveness in a holistic manner. This approach should be

more comparative, bench marking against certain competitiveness measure. Such a

measurement should allow a comparison of the competitive position of an organization

against that of its competitors.

Entrepreneurial performance by earlier studies on “Entrepreneurial Heuristics” has

shown that firm or enterprise performance varies significantly with the types of policies

and strategies adopted by the enterprise (entrepreneur). Such policies and strategies are

often termed as ‘heuristics’ because of their non-formal and evolutionary nature. In an

entrepreneurial venture the primary source of such policies, strategies, or heuristics is

of 253

naturally the founder who normally has the maximum influence on the decisions made in

the enterprise. In entrepreneurship, a relationship between founder characteristics and

policies, strategies designed and adopted by the entrepreneur of the enterprise may be

observed.

“The essence of formulating competitive strategy is relating a Company to its

environment”. (Porter, 2004)79

If the competitive strategy is dependent on external

environment, it implies that the assessment of the competitiveness of a firm has

necessarily to be a comparative analysis of a firm with similar types of the firms

operating in the environment.

Porter considers product differentiation, overall leadership, and focus as the three

Generic strategies. Product differentiation according to him is brand identification,

customer loyalties steaming from past advertising, customer service, product differences

achieved by the firm. (Porter, 2004)79

. Competitiveness could be also achieved simply

being the first in the industry. This could not be the competitiveness of operations of the

company but an advantage of being first in the market to supply product, which hitherto

was not supplied or was inferior. Here customer service would also include quality as the

ultimate quality of Original Equipment Manufacturers (OEM) product is dependent on

the quality of its components secured from various vendors. One of the competitive

strategies according to Porter is to achieve overall cost leadership in an industry through

functional policies, such as aggressive construction of efficient scale facilities, vigorous

pursuit of cost reduction from experience, tight cost and overhead control, cost

minimization, in areas like R & D, service, sales, advertising etc.

Focusing on a particular buyer group, segment of the product line or geographic market

is the third generic competitive strategy, according to Porter. The enterprise creates a

niche position of its own. The policy concentrates on target market whose needs are not

satisfied by way of service or product. It implies servicing a particular target very well..

“The strategy rests on the premise that the firm is thus able to serve its narrow strategic

target more effectively or efficiently than competitors” (Porter, 2004)79

.

of 253

2.11 Porter’s Competitive Strategies.

Porter talks of need of different

resources and skills in

implementing the generic

competitive strategies. It also

requires differing organizational

arrangements, control procedures,

inventive systems as also sustained

commitment to one of the

strategies. In his analysis he puts

forth some commonly required

skills and resources and common

organizational requirements as

given below. Generic Strategy

Commonly Required

Skills and Resources

Common

organizational

requirements.

Overall cost leadership Sustained capital

investment and access to

capital.

Process engineering skills

Intense supervision of

labor

Product designed for ease

in manufacture

Low cost distribution

system

Tight cost control

Frequent, detailed

control reports

Structured

organization and

responsibilities,

Incentives based on

meeting strict

quantitative targets.

Differentiation Strong marketing abilities.

Product engineering

creative flair.

Strong capability in basic

research.

Corporate reputation for

quality or technological

leadership.

Long tradition in the

industry or unique

combination of skills

Strong coordination

among functions in

R & D. product

development, and

marketing.

Subjective

measurement and

incentives instead

of quantitative

measures.

Amenities to attract

of 253

drawn from other

businesses.

Strong cooperation from

channels

highly skilled labor,

scientist or creative

people.

Focus Combination of the above

policies directed at the

particular strategic target

Combination of the

above policies

directed at the

particular strategic

target.

Table 2.3

(Porter, 2004)79

The above table gives us the various elements, actions, resources required to formulate

and implement competitive strategy. The model is exhaustive. In a segment of Micro

Small and Medium Enterprises (MSME)it would be difficult to have all the resources,

skills, capabilities. For example strong capabilities for basic research, engineering design

capabilities, processing capacity, ability to infuse capital etc. Hence the above model

would be more appropriate in the case of large companies. But at the same time the

MSMEs may definitely indulge in practices such as product differentiation, quality, cost

competitiveness, service, product engineering.

Ability to act and react within its competitive environment is considered to be an

important component of competitiveness. The act and react in this case may be act in

response to the needs of the customer and market and react, meaning changes in policies

in tune with the environment and market changes. This at times may need adequate

financial resources to achieve, technological up gradation and also essential to employ

people. An organization is considered to be competitive by its customers, if it is in a

position to deliver a better value proposition as compared to its competitor. Act and react

implies the capacity of the firm to maintain its competitive position by satisfying the

expectations of customers and constantly eliminating threats and exploiting the

opportunities which arise in the competitive environment. Continuous improvement of

the product, services and capabilities of the organization can only assist the organization

to maintain its competitiveness, the level of technology and capabilities of the employers

in achieving and sustaining competitiveness.

Competitiveness cannot be measured or described by a single parameter. It has to be

measured by various parameters from different operational areas. Competitiveness as the

of 253

word implies, is relative and absolute too as it has significance with respect to the type of

industry, the area and the entrepreneur.

To ascertain the competitiveness of a firm, a measurement system comprising different

dimensions is essential. The important dimensions could be customer values, shareholder

value (in this research it could the owner –entrepreneur, where the shareholding is

limited to the entrepreneur and or his family and friends.) technology and manpower.

Customer values are a combination of benefit accrued by customers for a given price for

a product, service and it includes all aspects of physical product. It is the product

characteristics, the process of delivery. It could include cost, speed, flexibility,

dependability. Measurement of shareholder value (entrepreneur/owner value) is by the

return on investment achieved and other evaluator factors could be earnings per share,

payout ratio, dividend yield or more relevant for MSMEs could be ability to acquire

large OEMs order, sustain that order, growth in sales, fixed assets etc.

It is not possible to develop a universal framework for measuring competitiveness. The

measure which defines the ability of the firm to act and react within competitive

environment, profit, ability to raise capital, cash flow, appropriateness of technology and

quality and ability of manpower would be the parameters required to be considered for

confirming the competitiveness of the firm. (Chaharbaghi, 1994)78

.

The operational support to an enterprise by the practices and processes adopted by an

enterprise termed as “soft Technology” along with the procured and developed

equipments, technology, innovations, input materials, called as “Hard Technology” has a

positive relationship with the performance of an enterprise.(Vargas, 2007)80

. Superior the

hard and soft technology better the performance and competitiveness.

Access to relevant technology, excessive costs of product development projects, absence

of effective marketing techniques and limited market research have been identified to be

the main constraints in the competitiveness of MSMEs. (Gunasekaran, 2001)81

, (Chorda,

2002)82

, (Singh R. K., 2010)83

.

It has also been observed that the areas of strategy development for MSMEs are supplier

development, total productive maintenance and organizational culture. The major focus

of the MSMEs is found to be on supplier development as most of them are vendors to

Original Equipment Suppliers (OEM), hence quality at all levels is very crucial and

important. It has also been observed that SMEs, in India pay lowest attention to I.T.

applications. It has also been inferred that Indian MSME strategies such as HR

development, quality improvement, IT applications, are significantly correlated with

competitiveness.

of 253

2.12 I.T. Technology and Competitiveness in MSME

An I.T adoption survey by Dun and Bradstreet conducted in 2009 (Singh, 2010)84

found

that 80% companies in the Pune cluster had I.T adopted processes in their operations as

against 30% in Chennai region. This was attributed to higher revenue of the firms which

adopted I.T. The Pune companies allocated more I.T. budget for hardware and softwares

applications like ERP, accounts software, CNC were few of the adopted I.T applications.

High cost of implementation is the major issue in low IT adoption. The answer could be

tailormade software products, that are cost effective. Another issue is lack of awareness

about ICT related issues. Dissemination of information is considered to be an important

tool to help I.T. adoption and greater penetration. The government for dissemination of

appropriate information can set up a web portal to dessimination of ICT related issues.

This would help SMEs knowing and deciding about the right technology implemant. It is

also suggested that along with government initiatives, MSMEs themselves need to take

initiatives in the adoption of I.T. processes to enhance their competitiveness.

2.13 The Nine Components of Competitive strategies.

The nine components of competitive strategies of MSMEs, identified in order of

importance are as follows.

1. Supplier Development.

2. Total productive Maintenance.

3. Organizational Culture.

4. Customer satisfaction.

5. Quality improvement.

6. Development of Human Resources.

7. Cost Reduction.

8. Competencies Development.

9. IT applications.

(Singh R. K., 2010)83

2.14 The Chinese MSME growth strategy: “Guanxi”

The growth of Chinese MSMEs has been attributed to the implementation of a strategy

which encourages SMEs to develop according to their unique nature and circumstances.

“Guanxi” has been quoted as an important essence of the Chinese approach to business.

“Guanxi” has been defined as ‘existence of direct particularistic ties between one or

more individuals”. It implies that internal management processes are more flexible,

of 253

dynamic as compared to the practices in the west. Minimization of transaction cost by

informal relationship development which is basically highly personalized and fluid is an

important component of the strategy. In the startup period enterprises, aim to create

capabilities to minimize cost, achieve reduction in operation cost by procuring cheap

material, simplifying production process and duplicating western product designs,

compete on price rather than on quality.(Singh R. K., 2010)83

. This appears to be an

appropriate, situation and culture based competitive strategy.

In a manufacturing enterprise manufacturing activity is definitely at the core of the

business of the enterprise. A manufacturing performance which is superior to others

definitely makes the unit competitive. In fact productivity and superior performance are

one and the same. The superior performance encompasses quality and efficiency.

(Leachman, 2005)85

. (Porter M. , 1998)86

.

To remain competitive the MSMEs have to benchmark themselves continuously with the

best practices in the industry. Market conditions would be the guiding force for

formulating strategies and policies. The implementation of these strategies and policies

would lead to performance improvement and in turn competitiveness. This is depicted

well by the following diagram. (Singh R. K., 2008)87

of 253

2.15 Market conditions, Strategies (Framework for Competitiveness Analysis.)

Figure 2.3

(Singh R. K., 2008)87

2.16 The MSME Competitiveness- Challenges

The global as well as domestic competition has forced the firms to outclass others in

many areas such as innovativeness, response to customers, which necessitated enhancing

performance standards in many areas such as quality, cost, productivity, product launch

time, and smooth flowing operations. The capability of the firm to increase business,

excel in manufacturing process to meet the challenges of the global (as well as domestic)

competition are the prerequisites of achieving and maintaining competitiveness in the

long term. In this pursuit the enterprises have to adhere to low defect rates through

quality, excellent product features, competitive prices and delivery performance.

(Lagace, 2003)88

(Singh R. K., 2008)87

.Some of the major challenges for the SMEs to

achieve and remain competitive are up gradation of technology, new product

development, human resources development, partnership with customers, suppliers.

The constraints experienced by the MSMEs in attaining and maintaining competitiveness

have been summarized as

Inadequacy of Technology and other resources.

Market

Conditions

Pressures

Constraints

Strategy

Development

Benchmarking

of Processes

and

Performance

Competitive Priorities.

Process and Management

Practices.

Performance

of 253

Far higher or sometimes exorbitant cost of product development.

Inefficient or absence of proper market research and (sales)Marketing.

Inability in meeting the demand of multiple technologies.

Lack of coordination or communication gap between marketing and

production function.

Inadequacy of funds to resort to ICT or advanced software to implement

enterprise resource planning.

(Gunasekaran A. , 2001)81

(Chorda L. A., 2002)82

(Singh R. K., 2008)87

Competitiveness of an enterprise is its ability to perform well in all the areas such as

cost, quality, dependability, innovation and is also possess flexibility of adopting to

demand variations. (Carpinetti, 2000)89

. The four well accepted competitive priorities,

cost, delivery, quality, flexibility are mostly related to manufacturing process.

There are different Strategic initiatives but almost all the initiatives focus on improving

market information, workforce development, supply chain improvements, quality

standards, branding forward integration and process improvements.

The policy and institutional obstacles experienced by the enterprises in the achievement

of competitiveness could be effectively overcome in the best way by a cluster based

approach.

A major measure of competitiveness of a country is the productivity with which the

country uses its human and natural resources. The same can be applied to Industrial units

and enterprises. Competitiveness is definitely not a static concept, but it is dynamic and

again not restricted to only cost and price, as it was earlier. It is now involving

techniques like connectivity, standards, certifications, quality, and innovation

exploitation of geographic and cultural benefits. A sound competitiveness policy should

include appropriate incentive; it should have an effective administration to ensure that

resources flow to an enterprise with comparative advantage and economic efficiency.

The incentive schemes should reward units with good performance exhibited by high

productivity.

of 253

2.17 Core Policy Framework for Competitiveness.

Figure 2.4

( World Bank, 2009)90

.

Though the above policy framework has been designed more from the objective of

making units export competitive, the same framework can also be used for the MSME

enterprises for building their capacity, capability and making them competitive. The

factors which are important or relevant for the Manufacturing MSMEs have been

highlighted.

World experience has clearly pointed out that only macroeconomic policies alone cannot

be sufficient to facilitate and sustain improvement in competitiveness. Its conversion to

implementation and operations of firms and markets is also important. Enterprises whose

cost for energy, transport, logistics, finance, specialized skills, is more in comparison to

other enterprises will find it difficult to be competitive. Competitiveness is also about

making production and exchange of goods and services more advanced. Making the firm

sophisticated. An enterprise’s productivity is linked to the environment in which it

works. That is the reason why for increased competitiveness the enterprises have to

depend on government and other institutions. ( World Bank, 2009)90

2.18 Factors enhancing competitiveness

i) 2.18.1 Strategic Planning by MSMEs

To be a competitive enterprise could be the most important objective of MSME units.

Several hard and soft technology measures can be taken to take the unit on the path of

competitiveness. The competitiveness will not be achieved only by improving

Services and Costs: Energy, Telecommunication,

Customs services, transport and logistics,

specialized skills, business services.

An Economic incentive Regime.

Import-Export tariffs, exchange rate systems, factor

market, and tax policies.

Pro active policies and institutions.

Export and investment promotion agencies.

Standards bodies, agency to support innovation and

R & D, cluster facilitation, agencies to help skills

transfer

of 253

manufacturing conditions and parameters but it needs to be extended to all other business

functions. This can be achieved only by strategic planning.

Calvin Wang, Elizabeth Walker, Jenice Redmond referring to the various research

studies carried out into SMEs (byLurie 1987,Schwenk and Shrader 1993,Miller &

Cardinal 1994,Hormozi Sutton, McMinn & Lucio 2001) suggest that the key determinant

of success in business is the presence or absence of strategic planning in a SME.. (Calvin

Wang, 2007)91

. (Miller C. C., 1994)92

(Lurie, 1987)93

, (Schwenk, 1993)94

(Miller C. C.,

1994)92

(Hormozi, 2002)95

Strategic planning is setting long term organizational goals, the development and

implementation of the plans to achieve objectives. It also involves allocation of resources

towards the plan execution. (Stonehouse, 2002)96

(O'Regan, 2004)97

.Strategic planning is

carried to achieve Competitiveness. Ohmae has stated that the purpose of Strategic

Planning is to enable business to gain as efficiently a sustainable edge over its

competitors. (O'Regan N. G., 2002)98

.It has been observed that Strategic Planning is

present in companies which are performing well than those whose performance is not

good. SMEs who have well laid strategic policies and plans achieve higher sales growth,

higher returns on assets, higher margins on profits and higher employee growth, which is

quite obvious.(Bracker, 1988)99

Ownership motivations are important determinants in

understanding planning practices in SMEs. These motivations to a greater extent decided

whether an entrepreneur adopts strategic planning or not. Strategic planning is observed

and adopted more if the objectives of the entrepreneur are growth oriented. If the

entrepreneur objectives are non economic such as independence, higher job satisfaction,

which are more personal, he will not adopt strategic planning. It is a fact that many

owner managers do not want to grow and want to stay small. Many SMEs are not

‘entrepreneurial’ and will never engage in active growth activities including strategic

planning. Consequently what strategic or management policies an entrepreneur decides

to adopt and practice would be dependent on the objectives of the entrepreneur. (C

Wang, 2006)100

Strategic planning, it is observed by many researchers leads to enhanced performance of

an enterprise. Many researchers have concluded that SMEs do not resort to strategic

planning. Absence of long term vision and decisions with myopic vision is characterized

in SMEs. Absence or presence of strategic planning is an important determinant of

business success. (Lurie, 1987)93

(Schwenk C. , 1993)94

(Miller, 1994)92

(Hormozi A.

)95

.Strategic planning in brief is setting long-term goals, development of and

implementation of the same, allocation of available resources to achieve the set goals.

of 253

(Stonehouse G. P., 2002)96

, (O'Regan N. , 2004)98

. Empirical research has supported the

finding that better performing SMEs have strategic planning, which results in higher

sales growth, higher returns, higher employee growth, and higher returns on asset and

margins of profit. (C Wang, 2006)100

, (Bracker J. P., 1988)99

(Berman, 1997)101

.The

main objective of strategic planning is to acquire sustainable edge over competitors,

efficiently and effectively. (O'Regan N. , 2002)98

Some research has indicated that few SMEs resort to Strategic Planning. The reasons put

forth for non adoption of strategic planning have been identified as lack of Time, lack of

specialized expertise, inadequate knowledge of planning process, or reluctance to share

the strategic plan with the employees or the outsiders. (Robinson, 1984)102

.

It has also been stated that adoption of the process of Strategic Planning depends upon

the stage of development of the firm or life cycle. (Berry, 1998)103

. In early

establishment phase the enterprise especially MSME may not have the resources, which

includes time. In this phase probably such unit’s first objective is to sustain.

Most MSMEs pursue the vision and mission of the entrepreneur. The actions, decisions,

originate and move with the thought process of the owner entrepreneur. The goals and

objectives of the entrepreneur become the goals and objectives of the enterprise. Hence

when studying the policies and strategies of the enterprise, it is necessary to study the

same in the light of the characteristics of the entrepreneur. The motivations, ambitions,

may be influenced by the characteristics of the entrepreneur. The Strategic planning is

hindered in SMEs by various reasons and there are many barriers to adopting strategic

planning. These barriers could be of two types. One Organizational barrier, two,

Individual or Entrepreneurial centric barriers. The enterprise’s indulgence in strategic

planning is dependent on the objectives adopted by the entrepreneur. The entrepreneur

may pursue Profit Growth and Maximization objective or Personal fulfillment objective.

As has been observed, if the objective of Profit Growth and Maximization is pursued

then the entrepreneur adopts strategic Planning. In other case if the personal fulfillment

is the main objective the levels and degree of strategic planning is either low or it is

absent. As strategic planning leads to competitiveness, the adoption of vision, mission by

the entrepreneur decides the competitiveness of the enterprise. (C Wang, 2006)100

of 253

2.18.2 Motivations -Strategic Planning.

Motivators of Strategic Planning

Figure 2.5

(C Wang, 2006)100

2.19 Manufacturing Sector and contribution to GDP

Manufacturing assumes importance in almost all economies of the world and it is a core

activity of any economy. This is true of Indian economy too. Currently manufacturing

accounts for about 15 % percent of the country's GDP. The SME sector’s contribution to

the total manufacturing output is about 45% and this segment contributes about 40

percent of the total exports.

Information on the production of Micro, Small and Medium Enterprises (MSMEs) in the

country is collected by conducting All India Census of the sector, periodically. As per

the latest Census (Fourth Census) conducted (with base reference year 2006-07) wherein

data was collected till 2009 and results published in 2011-12, gross output of MSME

Sector has annual compound growth rate of 30.72 percent at current prices as compared

to the Third All India Census of Small Scale Industries (with base reference year 2001-

02), published in 2004. Based on the data published by Central Statistics Office, Ministry

of Statistics and Programme Implementation, the annual compound growth rate of gross

domestic product (GDP) is 13.51 percent at current prices during the same period.

(Ministry of Micro Small and Medium Enterprises, 2013)104.

Owner-Manager’s

Motivation For

Being in Business

Profit Or

Growth

Maximiz

ation

Higher

Levels of

Strategic

Planning

In SMEs.

Personal

Fulfillmen

Lack Or

Lower

Levels Of

Strategic

Planning

in SMEs.

of 253

In a written reply to a question in the RajyaSabha Mr. K.H. Muniyappa stated that based

on data of GDP published by Central Statistics office, Ministry of Statistics and program

implementation the estimated contribution of MSMEs to Gross Domestic Product of the

country is as follows

MSME contribution to GDP.

Year Share of MSME sector in GDP%

2006-07 7.20

2007-08 8.00

2008-09 8.72

Table 2.4

(Ministry of Micro Small and Medium Enterprises, MSME contribution to GDP,

2013)104

As per a press release of ASSOCHEM (Embargo for Release on Sunday, May 12, 2013 -

Share of manufacturing in India’s GDP declining, reversing the targets

Saturday, May 11, 2013 ) the share of Indian manufacturing in GDP has declined to

15.2% in the fiscal 2012-13 and its showing a declining trend. Further it is expected to

fall below 15 % in the financial year 2013-14,which is definitely detrimental to the

overall economy.

The Government of India is aiming to bring manufacturing’s contribution to GDP to a

level of about 25 percent by 2020.MSME segment will also have to play an important

role in enhancing its contribution too.

In the MSME segment growth is considered to be achievable only by adopting measures

for enhancing competitiveness. Hence the government policies for MSMEs are directed

towards increasing the competitiveness of the MSME segment.

2.20 The ingredients of an Effective MSME policy.

In a production ecosystem along with land, labor, capital, entrepreneurship is also

considered to be an important factor to produce goods and services. In order to assess the

impact of the entire ecosystem on entrepreneurship it is very essential that an assessment

be done in the context of following parameters.

of 253

Parameters

Local environment

& ecosystem

Infrastructure Finance Manpower

Issues

Regulatory

issues

Governance

issues

Support

organizations/incub

ation centers

Road networks Availability

and access to

various sources

of finance.

Availabilit

y of skilled

manpower

Labour

regulations

Bureaucracy

/corruption

Sub Entrepreneurial

education

Railways Availability of

debt loans from

Banks/Instituti

onal investors

Cost of

manpower

Ease of

regulatory

and legal

procedures

for setting

up an

enterprise

( single

window

clearance)

Fiscal

policy, Tax

administrati

on

Mentoring

facilities/

Networking

opportunities

National

connectivity

Venture

capital/ Private

equity

Security of

manpower

Availability

of

information

for setting

up/expandi

ng an

enterprise

( policy,)

Information

on

intellectual

property

rights

parameters Seed funding International

connectivity

Govt. funding Activities

of Trade

unions

Subsidies

inputs( like

land,

electricity

etc.)

Tax

holidays

Angel investor Availability of

power

Favorable

policy

framework

Cost of power

Availability of

water

Telecommunicati

on service

I.T.

Infrastructure

Warehousing and

logistics

Table 2.5

(KPMG, 2008)105

of 253

In analysis and designing positive, effective policies for the favorable impact of the

ecosystem on the entrepreneurship the above factors play an important role. If you

analyze the above factors and parameters, the role of government is quite evident. The

above frame work is quite useful in analyzing and also designing an effective policy

framework for the capacity and capability enhancement of the MSMEs.

The government’s efforts since 1990 has been primarily to enhance the capacity and

capability of MSMEs and make them more competitive. The policies of the government

have centered around this fundamental, important objective. In the light of the dropping

contribution of manufacturing to GDP and the need to enhance the same to more

reasonable level as global standards, it is essential that MSMES are made competitive

and thus productive. The policy framework adopted under the 12th

five year plan is well

presented by the following diagram.

2.21 12th

Five Year plan :MSME Strategy Triangle

Figure 2.6

(P.M.Mathew, 2011)106

India Micro, Small and Medium Enterprise Report 2011

The plan envisages a cluster approach through quality investment for a faster, inclusive

sustainable growth of the MSME segment. This approach is expected to make MSMEs

more competitive which is the need of the hour. The cluster approach, the major

backbone of the MSMES policies since 1990 has yielded good results.

of 253

2.22 Government schemes for MSMEs

Focal Areas of MSME Policy in India

No. Focal Area Policies Schemes

1. General Policy of Reservation

Reserved Items

Licensing Policy

Trade Policy – Imports & Exports

Price & Purchase Preference Policy

Labour Policies

Rehabilitation of Sick Units

Single window scheme

Industrial estates

National Awards for outstanding

SSI Entrepreneurs

National Awards for Quality

Products in Small Scale Sector

National Award for banks

2. Priority Sector Policy for Tiny Sector

Cottage & Village Industries,

Handicrafts, Khadi & Handlooms

Development of Backward Areas

PMEGP

RGUMY

Assistance to SC/ST

Entrepreneurs

3. Funding &

Finance

Policy of Fiscal Support Policy of

Priority Credit

Equity Participation

Excise Exemption Scheme Tax

Holiday

Venture Capital

National Equity Fund Scheme

Other SIDBI Schemes

NSIC Schemes

4. Modernization

& Training

and Cluster

Development

Quality Certification Schemes (ISO

9000)

Application for the Reimbursement

of Certification Charges for

acquiring ISO 9000 Certification

(or its equivalent) Policy of

Technology Up gradation

(UPTECH) Technology Bureau for

Small Enterprises Policy for

Development of Information

Technology National

Manufacturing Competitiveness

Programme

Technology Development Fund

Schemes Testing Centers

Integrated Infrastructure

Development Training

Infrastructure

Growth Centers

Technology Development &

Modernization Quality

Certification Schemes

Modernization of Small Scale

Industries Ancillary Development

Small Entrepreneur Management

Assistants Scheme

Entrepreneurship Development

of 253

Programme

Management Training

Programme Skill Development

Programme

5. Energy &

Environment

Pollution & Control Measures

Environmental Control

Pollution Control Schemes

Energy Conservation Schemes

Alternative Energy Use Schemes

Ozone Depleting Substances

Phase out

Table 2.6

(P.M.Mathew, 2011)106

India Micro, Small and Medium Enterprise Report 2011.

It would be observed that the schemes promoted by the government has a wider focus.

The important operational areas where the MSMEs need assistance have been covered

under the government policy.

The Ministry of Micro, Small and Medium Enterprises (MSME) provides incentives

under its various schemes and programs with a view to promote Micro, Small and

Medium Enterprise (MSME) in the country. The major schemes/ programs include

Prime Minister's Employment Generation Programme (PMEGP), National

Manufacturing Competitiveness Program (NMCP), Credit Guarantee Scheme (CGS),

Credit Linked Capital Subsidy Scheme (CLCSS) and Cluster Development Program

(CDP).

The total canvass of promotional schemes of the Government, comprises schemes which

envisage a role for Business Membership organizations, associations. The said scope has

been limited mainly to promotion and creation of awareness. There is a definite need for

the review of said scope. There are schemes promoted by sector specific ministries and

cross cutting ministries. Ministries such as Textiles, Food processing, Health focus on

the respective sectors and ministries such as MSME, Commerce, Industry, finance focus

on across the segments.

The development and promotional schemes which are either unit based or cluster based

have different objectives. The schemes which are primarily unit based where individual

units are beneficiary are aimed at enhancing the competitiveness of the units through

technology up gradation support, assistance for marketing access, product, process

of 253

development, training, skill up gradation. The schemes which have been promoted for

individual units are,

1. Credit Linked Capital subsidy scheme of MSME Ministry primarily directed

towards Technology up gradation.

2. Technology Up gradation scheme of Ministry of Textiles, for up gradation of

technology of Textile units.

3. Schemes for Ayurveda, siddha & unani (ASU) drug manufacturers to strengthen

in house quality control requirements and to meet the requirements of Good

Manufacturing Practices.

4. Credit Guarantee Fund scheme of Ministry of MSME to facilitate access to

finance.

5. MSME ministry’s financial support scheme for obtaining certification of quality

control.

6. Market development assistance scheme from MSME ministry for the

development of markets for individual units.

7. Financial support for Research and development for new product/process

development from Department of Science and Technology.

The cluster approach for capacity enhancement of the MSMEs has been derived from the

experience of such schemes in Europe and other continents. This approach has been

accepted well and have shown good results in the European region as well as India. The

cluster schemes are basically for number of units who have come together to pool their

resources and overcome gaps which the units on their own find it difficult to address.

These schemes are either primarily oriented towards creation of good infrastructure,

bridging the infrastructure gaps and creating common facilities such as raw material

testing, marketing under a common brand, power supply, transportation etc. some such

schemes are,

1. Integrated Textile park scheme promoted by Ministry of Textiles.

2. Industrial Infrastructure Up gradation schemes (IIUS) from Department of

Industrial policy and promotion (DIPP) to provide quality infrastructure in sector specific

clusters.

3. Scheme of Funds for Regeneration of Traditional Industries (SFURTI) for Khadi

Village Industries.

4. Integrated handloom cluster Development program.

of 253

5. Mega Food Park.

The scheme of latest origin is the “Lean Manufacturing cluster scheme “introduced on a

pilot basis in 2009 and subsequently introduced as a regular scheme in 2013. Very

recently considering the necessity of promoting Electronics manufacturing in the

country, to reduce the major imports, Electronic cluster schemes have been introduced.

The clusters under the scheme are of two types. The brown cluster, a cluster to be created

by existing units and Green cluster, a cluster of new manufacturing units, in a green

field.

of 253

The Economic Geography of MSME Clusters in India.

State Number of Clusters Number of Units Employment

Registered Unregistered Registered Unregistered Registered Unregistered

Jammu &

Kashmir

13 13 2016 8582 5561 16801

Himachal Pradesh 20 10 4451 10963 8132 12855

Punjab 67 12 15568 20431 88939 34798

Chandigarh 1 3 118 4050 670 9612

Uttaranchal 17 3637 7030

Haryana 38 2 7468 1130 52171 1637

Delhi 2 10 260 7662 7350 26462

Rajasthan 38 31 6664 30263 26454 48756

Uttar Pradesh 131 157 26910 281356 100586 763977

Bihar 54 85 10114 155213 24480 349038

Nagaland - 3 3170 12374

Manipur 4 13 554 18409 2180 45347

Mizoram 1 - 135 - 559 -

Meghalaya 1 3 113 4933 479 10336

Assam 8 24 1613 36683 6412 90920

West Bengal 36 62 6984 101334 34109 305903

Jharkhand 15 21 2801 50140 11721 88306

Orissa 4 57 587 139101 2405 335197

Chhattisgarh 24 18 5703 17725 16039 68290

Madhya Pradesh 91 64 18372 83374 38442 151922

Gujarat 106 9 38828 17825 195329 26999

Maharashtra 74 42 18254 51227 117874 108154

Andhra Pradesh 71 79 90174 225115

Karnataka 126 55 29624 54360 121706 127806

Kerala 149 17 35615 35089 146116 64236

Tamilnadu 131 28 34741 26499 303699 1300494906

A & N Islands 1 1 132 514 498 1029

Total 1223 819 271262 1250207 1318941 1303420776

Table 2.7

(P.M.Mathew, 2011)106

Source : Third all India Census of Small Scale Industries

of 253

The states of Utter Pradesh and Tamil Nadu are leading the table, while the state of

Maharashtra has not been successful in the promotion and utilization of the scheme

though it is one of the leading industrialized state.

2.22.1 Elements of Government MSME schemes.

One notable feature of the schemes promulgated by the Central government is that there

are some 41 schemes where a prominent and important role has been envisaged for what

is called as Business Membership organizations (BMO) or the Industrial associations,

Chambers of commerce and similar organizations. The different types of roles such

organizations are expected to assume are as follows.

2.22.2 Need assessment and scheme design.

Here it is presumed that as an independent body in deep understanding of the industry

segment, the BMO would be in a position to ascertain appropriate needs which are also

demand driven.

2.22.3 Awareness creation and information Dissemination.

The BMOs considering the nature of their role are most appropriate bodies to create and

disseminate information on the schemes made available by the Government.

2.22.4 Promoters and vehicle of implementation.

A typical cluster where the members are individual units there is a need to have a

bonding agency and this need is served by a Special purpose Vehicle ( SPV). This SPV

is the administrative body for the cluster. The SPV creation is a job of an intermediary

and the most apt intermediary is the BMO.

2.22.5 A scheme evaluator and approver.

The BMO with its resources and experience can play the important role in assessing the

scheme of the cluster in total perspective and grant necessary approvals on the

satisfaction of required elements.

2.22.6 An implementation, monitoring and evaluating agency.

The BMO can play an important role in the implementation of the project. It can also

monitor and evaluate the project being an experienced independent body.

of 253

The underlying objective of all the schemes promoted and formed by the Government is

enhancement of competitiveness and growth of the MSME segment. The objective is

attained by the schemes by focusing on one of the following areas.

1. Provision of Infrastructure.

2. Soft intervention including capacity building, training etc.

3. Marketing assistance/ market access.

4. Technology up gradation.

5. Research and Development. Innovation.

On the backdrop of the above objectives, the government of India’s National

Manufacturing Competitiveness Program (NMCP) seeks to help Indian SMEs scale up to

global levels. To achieve a sustainable double digit growth in GDP, it is imperative that

the overall growth of the manufacturing sector is on a positive trajectory. In the light of

these broader objectives the government of India is committed with policy incubation in

areas such as IT adoption, manufacturing management, skill development; access to

capital, procedural simplification, marketing and governance reform etc.

2.23 NMCP (National Manufacturing Competitiveness Program)

The objective of making the MSME units more competitive, prompted the Government

of India to launch the National Manufacturing Competitiveness Programme (NMCP).

The NMCP is the national nodal programme of the Government of India to develop

global competitiveness among Indian MSMEs. Conceptualized by the National

Manufacturing Competitiveness Council, the Programme was initiated in 2007-08. An

amount of over Rs.600 crore has been allocated over the 11th Plan period for the scheme.

The NMCP initiative of the government seeks to address these important aspects of the

MSME segment, economic growth and build the scale of Indian micro, small and

medium manufacturing enterprises (MSME) and enable them to compete in the global

arena. It also seeks to provide assistance to help the MSME manufacturers compete with

foreign entrants into the domestic market.

2.23.1 The Ten Components of NMCP

The 10 main components of the programme which seek to address MSME

competitiveness issues, are as follows:

Support for entrepreneurial and managerial development of MSMEs through

incubation

Increasing quality through Quality Management Standards and Quality

of 253

Technology Tools

Technology up gradation and quality certification support to MSMEs

Marketing support to MSMEs

Marketing assistance for MSMEs and technology up gradation activities

Design clinic scheme to bring design/innovation expertise

Promotion of ICT ‘

Setting up Mini Tool Room and Training Centers

Building awareness on Intellectual Property Rights

National Programme for Application of Lean Manufacturing

2.23.2 Marketing Assistance/ Support to MSMEs

The first component to be made operational under the national scheme was "Marketing

Assistance and Support to MSMEs". The objective of the scheme is to promote the Bar

Code usage in the Indian SMEs and motivate them to adopt the Bar Code Certification

on large scale. To sell their value added products in the international markets and enable

higher exports with higher price realization. Under the Scheme, 75% of annual fee

(recurring) of Bar Code certification for the first three years are reimbursed to micro and

small entrepreneurs.

2.23.3 Building Awareness on Intellectual Property Rights (IPR)

The scheme for "Building Awareness on Intellectual Property Rights (IPR) was launched

to help Indian MSMEs to attain global leadership position and to empower them in using

effectively the tools of Intellectual Property Rights (IPR) of innovative projects. The

main features of the scheme are:

i. Awareness/Sensitization Programmes on IPR;

ii. Pilot Studies for Selected Clusters/Groups of Industries;

iii. Interactive seminars/Workshops;

iv. Specialized Training;

v. Assistance for Grant on Patent/GI Registration;

vi. Setting up of IP Facilitation Centre (IPFC); and

vii. Interaction with International Agencies. These initiatives are being developed

through Public-Private Partnership (PPP) mode.

of 253

2.23.4 Entrepreneurial and Managerial Development through Incubators

Providing Entrepreneurial and Managerial Development of MSMEs through Incubators

is a scheme whose objective is to nurture innovative business ideas (new/ingenious

technology, processes, products, procedures, etc.), which could be commercialized in a

year. Under the scheme, various institutions like Engineering Colleges, Research Labs,

etc. receive funds up to Rs.6.25 lakh for handholding each new idea/entrepreneur. The

incubators provide technology guidance, Workshop and Lab support and linkage to other

agencies for successful launching of the Business and guide the entrepreneur in

establishing the enterprise.

2.23.5 Enabling competitiveness through QMS & QTT

Under the NMCP, the Government has also introduced a scheme, namely, "Enabling

Manufacturing Sector to be Competitive through Quality Management Standards (QMS)

and Quality Technology Tools (QTT)".The scheme is introduced to improve quality and

productivity in the MSME sector. It would help the MSMEs to adopt quality

consciousness in their operations. The major activities under this scheme are

Introduction of Appropriate Modules for Technical Institutions; Organizing Awareness

Campaigns for MSEs; Organizing Competition-Watch (C-Watch); Implementation of

Quality Management Standards and Quality Technology Tools in selected MSMEs;

Monitoring International Study Missions; and Impact Studies of the initiatives.

2.23.6 Mini Tool Rooms under PPP mode

Under the scheme, "Mini Tool Rooms under PPP mode", mini tool rooms are to be set

up. The objective is to develop more tool room facilities for providing technological

support to the SME segment. This would help create capacity in the private sector for

designing and manufacturing quality tools. The facility would also provide quality

training in this area.

of 253

2.23.7 Lean Manufacturing Competitiveness Programme

The Ministry of Micro Small and Medium Enterprises in July 2009,introduced the sixth

component of the NMCP, namely, "Lean Manufacturing Competitiveness Programme

for MSMEs”, on a pilot basis. Under the Lean Manufacturing Programme (LMP),

MSMEs will be assisted in reducing their manufacturing costs, through proper human

resources management, effective space utilization, scientific inventory management,

improved process flows, reduced engineering time and so on. Lean Manufacturing would

also help in improving the quality of the product and lowering costs which are essential

for competing in national and international markets. The broad activities included in the

program are total Productive Maintenance (TPM), 5S, Visual Control, Standard

Operation Procedures, Just in Time, Kanban System, Cellular Layout, Poka Yoke, TPM,

etc.

2.23.8 Promotion of Information & Communication Tools (ICT)

The NMCP component on "Promotion of Information & Communication Tools (ICT)” in

Indian MSME sector aims at identifying some of those clusters of SMEs, which are

engaged in equality production and have export potential. This scheme will assist them

in adopting ICT applications to achieve competitiveness in the national and international

markets. The broad initiatives planned under the scheme include, identifying target

clusters for ICT intervention, setting up of e-readiness infrastructure, developing web

portals for clusters, skill development of MSME staff in ICT applications, preparation of

local software solutions for MSMEs to enhance their competitiveness, construction of e-

catalogue, e-commerce, etc. and networking MSME cluster portals on the National Level

Portals in order to outreach MSMEs into global markets.

2.23.9 Design Clinics Scheme for MSMEs

The main objective envisaged for “Design Clinics Scheme for MSMEs” is to bring the

MSME sector and design expertise on to a common platform and to provide expert

advice and solutions on real time design problems, resulting in continuous improvement

and value-addition for existing products. It also aims at value-added cost effective

solutions. The broad activities planned under the scheme include creation of Design

Clinics Secretariat along with regional centers for intervention on the design needs of the

MSME sector.

of 253

2.23.10 Marketing Assistance & Technology Up gradation Scheme

The "Marketing Assistance and Technology Up gradation Scheme for MSMEs” is

directed towards improving the marketing competitiveness of MSME segment by

improving their techniques and technology for promotion of exports. It involves eight

sub components for which funding assistance is available from the government. The

major activities under the scheme are,

1) Technology Up gradation in packaging.

2) Skill up gradation/development for modern marketing techniques.

3) Competition studies.

4) Special component for North Eastern region.

5) New Markets through state/District level local exhibitions, trade fairs.

6) Corporate Governance practices.

7) Marketing hubs.

8) Reimbursement to ISO 18000//22000//27000 certification.

The main objective of "Technology and Quality Up gradation Support to MSMEs”

scheme is to make aware and motivate the manufacturing MSME sector in India for up

gradation of their technology, usage of energy efficient technologies to reduce emissions

of Green House Gases, adoption of other technologies mandated as per the global

standards, improving their quality and reduce cost of production, etc., towards becoming

globally competitive. The major activities planned under the scheme include Capacity

Building of MSME Clusters for Energy Efficiency/Clean Development Interventions,

Implementation of Energy Efficient Technologies in MSME sector, Setting up of Carbon

credit aggregation centers and encouraging MSMEs to acquire product certification

licenses from National/International bodies.

All the components of the National Manufacturing Competitiveness Programme have an

inbuilt objective of providing competitive edge to the MSMEs in the long run by

focusing on cost reduction and efficiency, productivity enhancement. This is expected to

help MSMEs in achieving twin objectives of achieving a higher growth rate and

expanding markets, both at the domestic and global level. In the national perspective it

would create more job opportunities and employment.

The Government has initiated several measures for enhancing the competitiveness of

SMEs in the present competitive and integrated global environment. The first important

step in this direction was the enactment of the ‘Micro, Small and Medium Enterprises

Development Act, 2006’, which aims to facilitate the promotion and development and

of 253

enhance the competitiveness of MSMEs. The Act came into force from 2nd October

2006.

2.24 Prime Minister’s Task Force on MSMEs.

The Prime Minister of India in August 2009 set up a task force to study and formulate an

agenda for action to address the concerns and issues regarding MSMEs. The Task force

identified 6 major areas for the said assignment and the areas covered were1) Credit

2)marketing 3)labour 4)rehabilitation and exit policy 5) infrastructure, technology and

skill development 6) taxation. Six sub groups were formed to study each of the issues

and these sub groups submitted their reports to the task force.

Some of the major recommendations of the sub groups and the Task Force are as

follows.

1. Earmarking an additional public expenditure of Rs. 5000-5500 crores, in next 3-5

years, with an objective of targeting deficiencies in the existing infrastructure and

institutional set up. These funds were recommended for1) supporting the establishment

of rehabilitation funds at the state level for the revival of potentially viable sick units 2)

Assistance to MSMEs for acquisition, adoption of new clean technology and also

creation of technology banks and product specific Technology Development centres3)

promotion of business incubators in educational institutions 4) renovate existing MSME

industrial estates and develop new infrastructure for MSMEs 5) reengineer, strengthen

and revitalize District Industries centers in order to make them capable of playing a more

active role in advocacy, capacity building 6) Strengthening NSIC equity base for

enhanced market support to MSMEs, 7) Up scaling the existing entrepreneurship and

skill development programs.

2. Government should initiate appropriate measures for the transition of MSMEs

from unorganized to organized sector as well as their corporatization.

3. The impending Direct Tax code, GST should seek attainment of the above

objectives through appropriate graded corporate tax structures, incentives for R & D. etc.

4. Government should set up a national independent body for the promotion and

development of MSMEs, the body should provide financial, managerial support for

setting up of industrial estates, common facility centers in partnership with private

sector, promote technology development, dissemination of information etc.

5. Government should create fund of Rs. 1500 crore to support clean technology.

of 253

6. The central government should support the state governments to set up

rehabilitation fund and set up appropriate mechanism for rehabilitation of sick units with

potential viability.

7. The government should infuse capital in industrial estates and upgrade them to

Industrial Townships. This will permit effective municipal administration and a single-

stop mechanism for the provision of municipal services.

8. The Government should work on insolvency legislation.

9. Labour laws needs to be simplified in order to reduce compliance transaction

cost.(Price Water House Coopers, Confederation of Indian Industries., 2010)

2.25 Implementation, Utilization and Outcomes of various Government schemes

To create more awareness amongst the Micro, Small and Medium Enterprises (MSMEs)

about the major schemes of the government, the MSME ministry is taking important

action by involving industry and trade associations to take responsibility and create

awareness amongst the potential beneficiaries.

"Among Indian MSMEs, there is a lack of awareness about existing schemes, which are

intended to benefit the industry, leading to their non-implementation on time. Therefore,

there is a need to ensure that the right level of awareness is created among

entrepreneurs," MSME Secretary, Madhav Lal said during FICCI's 4th annual Micro,

Small and Medium Enterprises (MSME) Summit 2013, in New Delhi. He added that the

government is implementing various schemes and policies to boost employment

generation through development of manufacturing/service oriented enterprises, including

those exclusively meant for women empowerment.

The MSME Ministry is creating a framework where the role, responsibility and

obligations of each sector-specific industry associations will be clearly spelt out, he

mentioned. "The idea is to bring together MSME industry associations dealing with a

particular sector so that the coverage of the related schemes is enlarged and their

adoption is expedited," he added.

of 253

State-wise Financial Assistance/Subsidy Extended to Small Scale

Entrepreneurs in India

(2003-2004 to 2005-2006)

(Rs. in Lakh)

State/UTs

Credit Linked Capital

Subsidy Scheme

ISO-9000/14001

Certification

Reimbursement

Scheme

Performance and

Credit Rating

Scheme 2005-06*

Adoption of

Bar Code

Certificate

2003-04 to

2005-06 2003-04 2004-05 2005-06 2003-

04 2004-005 2005-06

Andaman and Nicobar 0.00 0.00 0.00 0 0.00 0 0 0

Andhra Pradesh 6.02 162.51 123.87 22.89 86.47 65.80 20.75 0.86

Arunachal Pradesh 0.00 0.00 0.00 0 0.00 0 0 0

Assam 0.00 0.00 0.00 0 1.76 1.97 0 0.41

Bihar 2.40 19.20 0.00 1.27 8.76 5.62 1.10 0.07

Chandigarh 0.00 0.00 17.67 3.63 8.66 14.24 0 0.0

Chhattisgarh 6.15 51.09 61.21 0 5.40 8.01 0 0.90

Dadra & Nagar Haveli 0.00 0.00 0.00 3.09 6.18 7.63 0 0

Daman & Diu 0.00 0.00 0.00 2.57 11.00 10.36 0 0.45

Delhi 36.66 81.75 37.46 14.36 44.99 43.23 35.07 3.00

Goa 0.00 0.00 7.29 0.58 4.88 0.96 0.0 0.60

Gujarat 0.00 58.12 83.59 11.45 38.70 42.69 7.40 2.31

Haryana 58.72 4.52 57.07 70.02 177.65 186.28 5.81 1.61

Himachal Pradesh 0.00 0.00 0.96 2.73 7.39 11.54 0.0 0.15

Jammu & Kashmir 0.00 0.00 0.00 0 0.49 7.26 0.00 0.75

Jharkhand 0.00 0.00 16.78 2.49 18.95 9.64 0.30 0.00

Karnataka 12.92 91.29 295.17 26.62 100.08 125.07 23.63 3.49

Kerala 7.16 0.00 11.24 6.19 25.02 33.81 1.10 2.81

Madhya Pradesh 8.79 43.02 34.85 9.57 2788.00 22.53 4.32 1.01

Maharashtra 13.91 173.90 158.24 106.37 366.08 447.08 42.82 9.65

Manipur 0 0.00 0.00 0.00 0.00 0 0 0.00

Meghalaya 0 0.00 0.00 0.00 0.00 0 0 0.00

Mizoram 0 0.00 0.00 0.00 0.00 0 0 0

Nagaland 0.00 0.00 0.00 0.00 0.00 0 0.00 0.00

Orissa 4.80 2.40 14.40 2.88 13.66 8.20 1.90 0.11

Pondicherry 0 0.00 0 0 3.54 5.19 0.40 1.42

Punjab 16.74 94.66 71.77 40.10 119.04 122.71 7.82 1.76

Rajasthan 3.72 126.40 206.78 36.81 90.38 84.23 6.32 0.00

Sikkim 0.0 0.00 0 0 0.00 0 0 3.34

Tamil Nadu 185.72 381.98 512.84 60.82 269.05 415.75 44.06 0.00

Tripura 0.0 0.00 0 0 0.00 0.00 0 3.04

Uttar Pradesh 10.78 45.52 80.89 1.87 183.35 180.90 23.54 0

Uttaranchal 0 0.00 0.00 1.51 9.65 10.10 0.40 0

West Bengal 0.00 23.40 22.17 21.47 74.16 73.84 14.28 1.39

Total 374.49 1359.76 1814.25 489.29 1730.51 1944.64 241.02 39.13

Table 2.8

Note : * : Scheme Started In 2005-2006.

Source :LokSabha Unstarred Question No. 3722 dated 16.05.2006.

of 253

During 2008-2009 the Indian Industry also suffered due to the global slowdown and the

SME segment was the one which was affected more severely. To withstand the effects of

slowdown government of India announced many sops for the MSME segment. A survey

conducted by The Federation of Indian Chambers of Commerce and Industry (FICCI)

stated that 73% of the enterprises were not aware of the stimulus package. Business

standard in its report, after an interaction with entrepreneurs confirmed the same view.

The Industry association opined that they can create awareness about the schemes

amongst the SME units but the problem is poor implementation and the lack of

information about the scheme. A serious problem with information dissemination at the

ground level was voiced to be a major problem in the poor utilization of the schemes.

Business standard report of its interview with H E Farooq Ahmed, Executive Director,

South India Shoe Manufacturers Association, commented that the Government is taking

all necessary steps and efforts and identified the problem with the implementation

agency. He provided an example of Lean Manufacturing cluster scheme under NMCP.

The scheme is basically for enhancing the productivity of the MSMEs. While the scheme

according to many is one of the best schemes introduced by the government, according

to Mr. H E Farooq the scheme is not being properly implemented by the government

agency and there is no enthusiasm observed in its implementation. This researcher who

was also actively involved in the implementation of the said scheme concurs with the

same views. It’s been further confirmed by the above interviewee that the Lean

manufacturing scheme if implemented properly by the MSMEs they would be able to

bring down overall cost by at least 15%. (The same views are confirmed by the

researcher. This has also been documented and confirmed by another association,

Mahratta Chamber of Commerce Industries and Agriculture, Pune.)The survey

conducted by FICCI observed that a major segment of respondents about 59 %, who

expressed high cost of finance as a persistent problem. This was considered to be serious

as the same survey reported that 90% of the respondents were dependent on bank finance

for their operations. (Narasimhan, 2010)107

.

2.26 Why Entrepreneurs don’t avail incentives:

Lack of awareness is often cited as the reason why majority of the entrepreneur do not

avail the incentives and grants offered by the Government under its various schemes. It is

difficult to apprehend the fact that these entrepreneurs never heard of any schemes

promoted by the government for helping the SMEs. In this context the awareness means,

inability to relate the different incentives to individual enterprise.

of 253

In a study jointly conducted by TiE and KPMG, designed to develop the Indian

Entrepreneurial Confidence Index and create awareness on issues which are relevant to

entrepreneurs, a sample of 1000entrepreneurs across 15 Indian states was researched.

The study evaluated the entrepreneurial perception of the ecosystem in their respective

states. The ecosystem comprised Finance, Governance issues, Infrastructure, Local

environment and ecosystem, manpower issues, regulatory issues that affect an

entrepreneur. The result indicated an average level of conduciveness for entrepreneurial

ventures at 3.3, on a scale of 5, where 5 indicated an excellent state, 3 averages and 1

poor state. The study showed that Finance, infrastructure, manpower in order of

importance have been indicated as the most important factors considered for encouraging

entrepreneurial growth. Though finance emerged as the most important factor the

interviewed entrepreneurs still indicated some obstacles in the easy procurement of the

same. The study pointed out towards a credit gap, that is availability, supply and demand

of finance. The new initiatives of funding start ups, as well as small and medium

enterprises were also considered to be not effective and lacking in some respect,

fundamentally due to several procedural issues and the demand of high collateral. The

entrepreneurs demanded improvement in infrastructure, majorly power. The study also

indicated unawareness of many schemes like incubation centers, mentoring facilities and

entrepreneurial development training. A large number of respondents considered

procedural formalities as major obstacle in starting and expanding an enterprise. The

KPMG study while assessing the Maharashtra state entrepreneur’s confidence in their

ecosystem observed that state’s entrepreneur consider local environment and ecosystem

as the most important factor. It is observed that the entrepreneurs in the state are aware of

incubation facilities, mentoring opportunities. (KPMG, 2008)105

Education and training are considered to be important ingredients of a public policy on

entrepreneurship development. A total and drastic change in education and training at

University is required if entrepreneurship is to be nurtured in India. Business Bankruptcy

is often considered as a social stigma in many world societies. The situation is different

in United States and there even very successful entrepreneurs have been through two or

three bankruptcies and have learned from experience. This is due to the progressive

bankruptcy laws of the United States. In Indian society, bankruptcy is very often an

irrevocable social stigma.

(Mueller, 2008)24

Some of the obstacles to entrepreneurship in Switzerland outlined by an OECD studies

are as follows.

of 253

♦ Administrative burdens on Entrepreneurs. (Very true in Indian context too)

♦ Strict bankruptcy law is a very strong deterrent on the creation of Businesses. Many

entrepreneurs are less likely to take risks and may refrain from expanding their activities.

(In India also fear of failure and bankruptcy could be one of the predominant reasons for

shunning away from entrepreneurship.)

(Mueller, 2008)24

A survey amongst 100 SMEs conducted by FICCI and Grant Thornton indicated

regulatory compliances and availability of finance as the main constraints faced by the

SMEs in their operations and expansion. In the said survey only 31% of the respondents

believed that the government was playing a meaningful role in enhancing

competitiveness of their businesses. These units felt the need of introduction of policies

and procedures to address this area of enhancement of competitiveness and growth.

Amongst the respondents who could secure business with multinational corporations

more than 80% have identified quality and competitive pricing as the factors that have

secured the collaboration for them with multinational corporations. (Jacob, 2013)108

.

Mint in its feature “SME PANORAMA” has referred to a study by The Associated

Chamber of Commerce and Industry (ASSOCHAM), “Cluster development drives

inclusive growth in MSME sector”, which has recommended a creation of a statutory

body as Cluster Development Authority(CDA)in each state for promoting the

development of MSME clusters. This would help in proper deployment of funds and

development of clusters. The report has further quoted Mr. Sunil Kakkad, Chairman

ASSOCHAM Gujarat council, as saying that the cluster development not only creates

huge employment at lower cost but also contributes to inclusive growth and prosperity

around the region where the cluster is developed. According to Mr. D.S. Rawat, National

Secretary General of ASSOCHAM, the number of clusters assisted by the government in

2010 is around 450 as against unassisted cluster of around 6,000. Mint in its said report

also quotes a sample survey covering five clusters in five locations which has observed

that the cost of production in assisted cluster was 15-20 percent less than the unassisted

clusters and the assisted clusters showed 20-30per cent overall improvement in income

generation, social welfare, product quality, raw material consumption and skill

improvement. Due to non availability of government assistance to a large number of

clusters in the country, the estimated loss would be around Rs. 1000 crore, on account of

loss of manufacture of goods and services as also loss of jobs estimated around2- 3 lakh

in a single year. (Mint, 2010)109

.

of 253

The daily business news paperMINT also reported a survey conducted by REGUS, the

world’s largest workplace solution provider which infers that despite contributing

significantly to the economy the SME segment feels that they have been neglected by the

government in the matter of making enough capital available to them. About 56% of the

SMEs in India echoed the same views in this survey. The said survey, gathered feedback

from about 5000 entrepreneurs from 78 countries on their main concerns. About 78%

respondents globally and 87 % in India opined that banks should be forced to lend more

to these units. 86 % entrepreneurs globally and 90% in India responded that government

should make available venture capital funds to the entrepreneurs. (Mint, 56 % SMES feel

Neglected by Government : REGUS survey, 2010)110

In a survey conducted by PHDCCI 68% of the respondents indicated that they are

planning to scale up their operations and move from small to medium scale to derive the

benefits of competition and growth. However 32% of the respondents were satisfied to

be in the small scale segment. 66% of the respondents in the said survey said that they

would like to scale up their operations in their core area of competence, provided the

government provides necessary enabling policy environment. (Ahuja, 2010)111

In another survey conducted by FICCI in the116 SMEs, manufacturing a diverse range

of products from 20 locations across the country, suggestions were received that the

faster processing of loan applications, government support for technical up gradation,

and setting up of more training institute to provide skilled manpower, availability of

quality control facilities near the clusters are essential for the competitiveness of the

SMEs. (Narasimhan, SMEs Face the heat from Cheap Chinese imports. , 2010)112

.

New technology adoption is imperative for the sustenance and growth of MSMEs.

Adoption of new advance technology by MSMEs becomes difficult due to the high cost

and this has a definite effect on the competitiveness of the MSMEs. (CII, 2013)113

Dr. Arvind Panagariya in his article : “MSME separating wheat from chaff”, has cited

the size of the MSMEs as the main reason for the perpetual low productivity of the

MSMEs. According to him, they are too small to take advantage of the modern

technology. He further cites the ongoing work of Mr. Hasan and Ms. Kapoor, and an

example provided by them from the apparel industry. Though a variety of machines and

tools are available for pre-sewing and post sewing operations, the cost of the machines

keeps away the MSMEs in this segment from acquisition of these machines which are

essential for high volume, good quality, just in time production, the demand of the world

competitive market place. Dr. Panagariya argues that last more than 50 years

interventions for making MSMEs competitive have not produced tangible results and we

of 253

are indirectly encouraging them, to stay small and unproductive. The government

support for MSMEs should help them to grow large and competitive, in the world

market. Dr. Arvind Panagariya, professor of economics at Columbia concludes that, “Do

not look for easy interventions to help small-scale enterprises - carry out the

reforms that will let them grow big”.(Panagariya, 2014)114

In the manufacturing segment the MSMEs are the specialist suppliers of sub assemblies,

components, to original equipment manufacturers mainly because of their cost

advantage. A bad quality component may result into a poor quality product of the OEM

and it can affect the competitiveness of the OEM. (Singh R. K.)115

Hence the OEM has to

ensure that its vendors are also competitive and adhere to quality philosophy. Hence in

the selection of a vendor the OEM would be very careful and considerate. He will seek

component supplies only from those who meet stringent norms and hence a vendor

selected by a OEM after due diligence and evaluation would definitely be competitive as

compared to those who are not the vendors of the OEM. To ascertain the competitiveness

of its suppliers, the OEMs before registering the vendor for their supply, gather

information on certifications obtained, the manufacturing practices adopted by the

vendor, inspections. Often the vendor insists for certain manufacturing practices such as

5S, Kaizen, Kanban, Total Productive Maintenance (TPM),MIS, and Standard Operating

Practices(SOP) etc. These are basically important components of Lean Manufacturing

Practices. These practices yield many benefits and contribute hugely for enhancing the

competitiveness of the manufacturing MSMEs. The Lean Manufacturing scheme is an

important and appropriate component of NMCP.

of 253

Performance of National Manufacturing Competitiveness Programme (NMCP)

2013-14

Sr.

No

Activity No. of Beneficiary

Units

Amount of

reimbursement. Rs.

1 New Markets through

state/District Level

Exhibition/Trade Fairs

30 8,42584

2 Assistance for obtaining Bar

Code

53 15,80,992

3 Assistance for obtaining

Product certification

National

International

33

04

17,89,307

6,02,872

4 ISO Reimbursement scheme 87 3,389,692

5 BIS Licensing National

Standards

40 14,35,098

Table 2.9

(MSME Development Institute, 2014)116

The above report is for the state of Maharashtra. The above data shows that the

utilization of the scheme by the MSME segment is too low. The major assistance has

been sought for obtaining ISO certification, followed by BIS Licensing for national

standards and product certification. We can conclude that the major assistance is

obtained for ensuring that the units are certified for their quality.

2.27 Entrepreneurship Skill Development Programme (ESDPs)

The Government of India’s agency MSME development Institute, Mumbai, organizes

ENTREPRENEURSHIP SKILL DEVELOPMENT PROGRAMMES(ESDPs).The

objective of the said scheme is to offer comprehensive training programs for the up

gradation, of technological, production skills of entrepreneurs and their work force.

The performance of the said programme, Entrepreneurship Skill Development

Programme(ESDPs) for the year 2013-2014, is as follows.

of 253

Performance Entrepreneurship Skill Development Programme. 2013-14

Particulars

Target 126

Achievement/Programs Completed 126

Expenses in Rs. Lakh 75

Number of persons trained 3026

Table 2.10

Source: MSME Development Institute, 2014116

2.28 Clusters: Definitions and overview of Lean cluster scheme

Definitions

"Clusters are a geographically proximate group of interconnected companies and

associated institutions in a particular field linked by commonalities and

complementarities. Clusters encompass an array of linked industries and other entities

important to competition…including governmental and other institutions- such as

universities, standard setting agencies, think tanks, vocational training providers and

trade associations." Porter (1998).

“Geographically bounded concentration of similar, related or complementary

businesses, with active channels for business transactions, communications and dialogue,

that share specialized infrastructure, labor markets and services, and that are faced with

common opportunities and threats." Rosenfeld (1997).

"Regional clustering has been used to describe industrial districts of small crafts

firms, high technology centers, agglomerations of financial and business service firms in

cities, company towns, and large branch plants and their supply chains.""….clusters at

least must be characterized along relevant dimensions if appropriate policies are to be

devised … (these include)…density…breadth…depth…activity base…growth

potential…innovative capacity." Enright (1998).

Source: OECD 2007, Cluster Policies Whitebook 2004 & Enright (1998).(OECD,

2007)117

,(Foundation for MSME Clusters., 2007)118

of 253

Some Critical Success factors in cluster Development.

Success Criteria. Percentage of Respondents.

Net working & Partnership 78

Innovative Technology 74

Human Capital 73

Physical Infrastructure 42

Table 2.11

Some Critical Success factors in cluster Development.

Graph/Chart 2.1

(Foundation for MSME Clusters., 2007)118

An Industrial cluster is a mass of industrial or business units, their suppliers, service

providers, associated, allied institutions, in a particular area or segment of an industry,

which also includes educational institutions, financial institutions, and governmental

agencies. The entire mass is chained in a particular geographical area by externalities and

complementarities of different types.

Due to the geographical proximity and similarity of activities, the members of the cluster

enjoy the economic benefits of several location specific externalities and synergies. The

general advantages are availability of specialized man power, suppliers, knowledge

spillovers, competition (leading to enhancing performance).These clusters very

effectively get linked to the national economy. Clusters can contribute substantially to

the national competitiveness. An effective implementation of clusters can serve as an

effective vehicle for broader policy reforms, private sector development and hence can

also effectively lead towards capacity building of MSME segment. “The concept of

0

20

40

60

80

Net working &Partnership

InnovativeTechnology

HumanCapital

PhysicalInfrastructure

of 253

economy-wide competitiveness has brought forward the relevance of a cluster approach.

Competitiveness is a proxy for the productivity of an economy.”

( World Bank, 2009)90

A typical cluster

An Agribusiness Cluster

Figure 2.7

2.29 Some NMCP Schemes in Action and Results.

2.29.1 Overview of Lean Management Cluster Scheme.

One of the important components of NMCP which is primarily introduced with an

objective of enhancing the competitiveness of the MSMEs is the Lean Manufacturing

Cluster Scheme. It is a cluster which is formed to jointly learn the various techniques of

lean manufacturing then adopt and practice it at individual work places.

The idea of Mini – Cluster germinated from Lean Management Competitiveness

Scheme. The scheme is a government of India initiative to germinate ideas and

Seed Nurseries

Fertilizers

Insecticides

Farm Equipment

Storage Facility

Irrigation

Technology

State Government and

Donner Agencies

Growers Processors

Clusters of other

Agricultural products.

Clusters of

Buyers/Consumer

Industries.

Educational, Research and Trade

Operations

Crop

Processing

Transportatio

n

Packing

Services

Public Relations

Advertising

Specialized

Publications

Financial

Services

of 253

methodologies of Waste Elimination in the SME sector in India. Which contributes to

the increased competitiveness of the unit.

The scheme is governed by the Ministry of Micro Small and Medium Scale

Enterprises (MSME) along with NPC-National Productivity Council as the key

Monitoring and Implementation Unit.

It seeks to bring a similar success like TQM movement in India

Offers substantial subsidy for the implementation of the scheme

Started in 2009 and pilot phase of 100 clusters completed.

The Scheme has been launched under the 5 year program as Lean Manufacturing

Competitiveness Scheme -.Very recently in 2013 the scheme has been re- launched with

some new additions and improvements.

2.29.2 Objectives of Lean Cluster

Lean Cluster

Reduce Waste

Improve productivity

Improve Competitiveness

Inculcate Good Management Systems

Imbibe culture of Continuous Improvement

of 253

Lean Manufacturing Scheme State wise Special Purpose Vehicles set up.

Sr. No. State. Number of Lean SPVs set

up.

1 Himachal Pradesh 4

2 Punjab 11

3 Uttarakhand 1

4 Haryana 2

5 Delhi/NCR 15

6 Utter Pradesh 17

7 Rajasthan 2

8 Madhya Pradesh 2

9 Gujarat 9

10 Maharashtra 15

11 Jharkhand 3

12 West Bengal 5

13 Andhra Pradesh 2

14 Karnataka 5

15 Tamil Nadu 14

16 Pondicherry 2

17 Kerala 4

18 Assam 3

19 Orissa 5

Total 121

Table 2.12

(National Productivity Council, 2014)119

of 253

Sector wise Representation of Lean Manufacturing SPVs.

Graph/Chart 2.2


The pilot scheme of Lean Manufacturing introduced by the government of India in 2009

has been fairly successful. Under the said scheme 112 Special Purpose Vehicles

represented by 1000 MSMEs were formed. 55 SPVs., have been able to successfully

complete their lean interventions.

Classification of clusters based on activity

Activity Number clusters

Number of clusters where implementation was

completed.

55

Number of clusters where Tripartite Agreement

was signed

89

Number of clusters where SPV was formed 112

Number of Awareness Program conducted 120

Number of clusters covered through Awareness

Programs

136

Table 2.13

2 4

1

4 2 1 2 1 1

4

8

3

8

2 4

1

5 6

21

3 2 1 3

19

4

0

5

10

15

20

25Sc

ien

ce In

stru

me

nts

Ric

e M

illin

g

IT H

ard

war

e &

Ele

ctro

nic

s

Pla

stic

s

Ph

arm

a

Ch

em

ical

&D

yes

Pac

kagi

ng

Oil

exp

elle

rs

Met

al w

ork

Mac

hin

e To

ols

Ligh

t En

gin

eeri

ng

Leat

he

r

Ap

par

els

& G

arm

ents

Han

dic

raft

s

Han

d t

oo

l

Gra

nit

e

Fou

nd

ry

Foo

d P

roce

ssin

g

Engi

nee

rin

g &

Fab

rica

tio

n

Elec

tric

al &

Ele

ctri

c Fa

ns

Die

sel

Dia

mo

nd

Pro

cess

ing

Bal

l Bea

rin

g

Au

to &

Engi

nee

rin

g…

Wh

ite

go

od

s

SPVs

SPVs

of 253

Classification of cluster based on Activity

Graph/Chart 2.3


The above statistics indicate that Maharashtra is second in the list of beneficiaries of the

Lean Manufacturing scheme promoted by the government of India. Engineering, Auto

and Engineering component segment are the two segments amongst MSMEs who have

taken the benefit of Lean Manufacturing scheme, whose objective is to enhance the

competitiveness of the SMEs. This also reflects the awareness and utility of the scheme

from the point of view of MSME entrepreneurs.

0 20 40 60 80 100 120 140 160

Number of clusters where implementation wascompleted.

Number of clusters where Tripartite Agreementwas signed

Number of clusters where SPV was formed

Number of Awareness Program conducted

Number of clusters covered through AwarenessPrograms

of 253

Performance of Lean Manufacturing Scheme (The All India Pilot project 2009)

1 No. of Clusters started implementing Lean Manufacturing 89

2 No. of Clusters successfully completed 55

3 No. of SMEs participating in LMCS 900

4 Annual Savings from LM 60 cr.

5 Salvage Value of Scrap from 5S implementation 3 cr.

6 Increase in Production capacity without CAPEX 10%

7 Space reclaimed for productive work 10%

8 Increase in Inventory turnover 25%

9 Reduction in Manufacturing Lead Time 5-30%

10 Improvement in OEE ( Model Machines 15%

11 No. of Kaizens generated 7500

Table 2.14

Source: (National Productivity Council, 2014)119

2.30 Success stories of Lean Manufacturing under NMCP.

“The Lean Manufacturing Program left us with a cleaner Shop floor. All waste was

identified and reused wherever possible and the remaining was scrapped. This program

educated our workmen to reduce waste and our Customer M/s TATA Motors was

satisfied with our improved performance on Quality and Delivery”. Shri Bharat Khanna,

MD, Stallion Auto Parts Pvt. Ltd.

Stallion Auto parts, Lucknow, Kanpur, is a small unit established in 1995and is the

manufacturer and exporter of precision auto components.

“We are convinced that Lean will give competitive edge”. Shri G.P. Singh, CEO, PMT

Engineers Pvt. Ltd. Faridabad, A Small company established in 2010 with a turnover of

2.63 crores. Providing machining services to auto industrial units.

“We have been benefitted in terms of improved man and machine productivity; better

quality of products and reduced rejections. The training given to us on 5S was very

beneficial for improving the housekeeping of our shop floor. Our employees are

motivated and number of Kaizen are evolved for improvements

Shri Pawan Sharma, MD, Victor Components, Pvt. Ltd. NOIDA, U.P.

Victor Components Pvt. Ltd established in 1989is an electrical and electronic component

manufacturer. The company mainly manufacturers, Ferrite core transformers, Torroid

of 253

coils, EMI filters, inductors, linearity coils, Line Filters, Linear Transformers and LED

Drivers etc.

“Techniques like waste management (Muda) and 5S,Inventory management amongst

others have equipped young firms like ours with new found wisdom and expertise to

create value through resourcefulness. For our organization Lean has been a continuous

journey of growth which has sensitized us towards various facets of world class

manufacturing. Shri Shirish Khutale, CMD, of M/s Khutale Engineering, Satara,

Maharashtra, established in 996.Company manufactures, sheet metal pressed

components and fabrication assemblies in India. The company registered a sales turnover

of 7 crores.

The benefits achieved by Khutale Engineering, Satara, are as follows.

Particulars

Productivity Increase 10 to 15%

Area saved (Sq. Mts.) 159.50

Annual Savings (Rs.) 127,965

Salvage value due to 1 S (Segregation) (Rs.) 87145

Change over time reduction 24%

Kaizen, Poka Yoke related savings (Rs.) 1144/shift

Table 2.15

Source: (National Productivity Council, 2014)119

2.31 The Pune Experience and findings.

The Researcher was involved in implementing Lean Manufacturing clusters at his

Organization, Mahratta Chamber of Commerce Industries and Agriculture, Pune. During

and at the completion stage the benefits derived by the cluster members were

documented. The following tables indicate the achievements, benefits accrued to the

cluster members by adopting and availing one of the important components of the

NMCP scheme, “Lean Manufacturing Scheme”.

of 253

Machining and Press Parts Cluster (Cluster 3)-Details

No. of

Companies Duration Date of Commencement Date of Completion

10 1 Year 19th

August, 2011 18th

July, 2012

Table 2.16

Light Engineering Cluster (Cluster 4)-Details

No. of Companies Duration Date of Commencement Date of Completion

10 1 Year 1st April, 2012 31

st March, 2013

Table 2.17

Cluster 3 & 4 benefits.

Sr. Parameters Cluster 3 Cluster 4

1 Average Productivity Improvement 24.63 % 11.20 %

2 Average Reduction in the Area under

Production 16.22 % 15.10 %

3 Average reduction in In-house Rejection 34.04 % 28.92 %

4 Average reduction in Customer Complaints 64.71 % 55.15 %

Table 2.18

of 253

Cluster 3 & 4 Other Benefits

Improvements in Reduction in

Inventory management & Fund

flow

Machine maintenance

Organizational set up

Work culture & Employee morale

Use of safety equipments

CEOs confidence

Customer confidence

Inventory carrying cost

Losses due to machine breakdown

Losses due to rejection/rework

Workers’ fatigue level

Machine changeover time

Accident frequency and severity

Customer rejections

Customer complaints

Deployment of new Improvement Initiatives

Kaizen &Poka Yoke

Collection of data on 16 parameters

Graphical display of data

Internal review mechanism

Sunrise and Sunset meetings

Modification in machine layout

Optimum utilization of the shop floor

Creation of gangways

Preventive maintenance plan

Macro and Micro production plan

Standard Operating Procedures

Creation of problem bank

Use of8 D Approach

Disposal of old accumulated scrap

Table 2.19

(Source: Reports submitted by the Lean Manufacturing Consultant)

The Nasik Experience and Findings.

Areas of improvement

Quality

Delivery

Productivity

Sales Revenue

Inventory Turnover

5S Score

Floor Space Utilization

Reduction in ppm to the tune of 50%.

At least 20% capacity released without any additional investment.

15% improvement in Asset Availability due enhanced Maintenance Practices

Tangible Productivity improvements and Savings due to Waste reduction

of 253

Access to knowledge regarding the latest Operations Management techniques and

their applications.

Reduction in rejections – Nasik Project.

Unit Reduction in Rejection PPM( parts per million)

Before After Remarks Trend

Aher Engineering and Fabrication 1434 252 82% Improvement

Amod Enterprises 0 0 Maintained No change

Auto Works 403 294 27% Improvement

Automech 2586 700 73% Improvement

Leena Gears & Engineers 0 0 Maintained No change

Mitesh Ancillary Pvt. Ltd. 8970 230 97% Improvement

Nasik Forge Pvt. Ltd. 14489 7445 49% Improvement

Panchal Engineers 986 804 19% Improvement

PATNSONS 2313 511 78% Improvement

Somesh Forge Pvt. Ltd. 8990 7446 17% Improvement

VM Auto Parts Pvt. Ltd. 19775 1500 92% Improvement

Table 2.20

(Hariharan, 2014)120

Delivery Performance Nasik Project

Unit OTIF(On Time in Full)#

Before% After

%

Remarks

%

Trend

Aher Engineering and Fabrication 96 100 4 Improvement

Amod Enterprises 95 100 5 No change

Auto Works 100 100 Improvement

Automech 100 100 Improvement

Leena Gears & Engineers 80 100 20 No change

Mitesh Ancillary Pvt. Ltd. 76 100 24 Improvement

Nasik Forge Pvt. Ltd. 67 90 23 Improvement

Panchal Engineers 47 82 35 Improvement

PATNSONS 98 100 2 Improvement

Somesh Forge Pvt. Ltd. 75 100 25 Improvement

VM Auto Parts Pvt. Ltd. 78 100 22 Improvement

Table 2.21


of 253

# OTIF (On Time in Full) is a measure of delivery or shipping performance. Meaning

How many orders were shipped Complete and on time.

Ahmednagar Experience & Finding Improvement in Rejections

Unit Reduction in Rejection PPM( parts per

million)


Akshar Industries 1152 587 49% Improvement

Arihant Industries 6487 2753 58% Improvement

Indo Meta Forge 3240 1770 45% Improvement

Kaizen Engineer 19478 9209 53% Improvement

Phoenix Enterprises 2770 2527 9% Improvement

Sadguru Enterprises 723 539 25% Improvement

Shriram Coatings 16419 3448 79% Improvement

Sun Electrical services 15978 5641 65% Improvement

Superb Die Castings 745 652 12% Improvement

Supertech Heavy Equipment 8216 3378 59% Improvement

Technotrak Engineers 10443 7084 32% Improvement

Table 2.22


of 253

Ahmednagar Improvement in Delivery

Unit OTIF


Akshar Industries 95 100 1 Improvement

Arihant Industries 95 99 4 Improvement

Indo Meta Forge 90 96 6 Improvement

Kaizen Engineer 78 97 19 Improvement

Phoenix Enterprises 100 100 0 Improvement

Sadguru Enterprises 95 100 5 Improvement

Shriram Coatings 91 99 8 Improvement

Sun Electrical services 90 96 6 Improvement

Superb Die Castings 96 99 3 Improvement

Supertech Heavy Equipment 99 100 1 Improvement

Technotrak Engineers 90 100 10 Improvement

Table 2.23

Source: (Hariharan, 2014)120

of 253

References:

1. Schumpeter, J. (1934). Cahange and the Entrepreneur. Cambridge, MA.:

Harvard University Press.

2. Yves Robichaud, R. L. (2010). "Necessity and Opportunity Driven Entrepreneurs

in Canada:An Investigation into their Characteristics and an Appraisal of the Role of

Gender ". Journal of Applied Business & Econics , 11 (1), 59-79.

3. Ries, E. (2014, April). "Disreutive Entrepreneurs". (M. G. Institute, Interviewer)

4. David C. McClelland. (1961). The Achieving Society. Princeton,NJ.

5. Gartner, W. (1988). '"Who is an entrepreneur?'Is the wrong Question". American

Journal of small business. , 11-32.

6. Ven, A. H. (1980). Early planning,implementation, and performance of new

organizations. (J. .. Miles, Ed.) The organization life cycle , 83-134.

7. Cole, A. (1969). Definition of entrepreneurship. Karl A Bostrom seminar in the

study of Enterprise (p. 17). Milwaukee : Milwaukee Centre for Venture Management .

8. Murray, H. (2012). ON SOME OF THE MISCONCEPTIONS ABOUT

ENTREPRENEURSHIP. Economics,Management and Financial Markets. , 7(2), 55-

104.

9. Timmons, J. (1994). Venture creation: Entrepreneurship for the 21st Century.

Burr Ridge,IL: Irwin Press.

10. Tom Byers, H. K. (1997, October). Characteristics of the Entrepreneur: Social

creatures,Not solo Heroes. (R. C. Dorf, Ed.) The Handbook of Technology Management .

11. Chen, C. (1998). Does Entrepreneurial Self- efficacy Distinguish Entrepreneurs

from Managers. (D. B. Sexton, Ed.) Journal of Business Venturing , 295-317.

12. Rotter, J. (1966). Generalized Expectancies for Internal Verses External Control

of Reinforcements. Psychological Monograph , 1-28.

13. Bowen, D. H. (1986). The Female entrepreneur: A career Development

Perspective. Academy of Management Review , 393-407.

14. Murray, H. (2012). ON SOME OF THE MISCONCEPTIONS ABOUT

ENTREPRENEURSHIP. Economics,Management and Financial Markets. , 7(2), 55-

104.

15. Ardichvili, A. ,. (2003). A theory of Entrepreneurial opportunity Identification

and development. Journal of Business Venturing , 105-123.

16. Isaacson, W. (2012, October 1-14 October). "The Leadership Lessons of Steve

Jobs". Business Toady , pp. 113-125.

of 253

17. Poonawalla, L. (2005-06). Ms. Ahmedabad: Entrepreneurship Development

Institute.

18. Epstein, S. O. (1985). "The Person-situation debate in Historical and Current

Perspective". Psychological Bulletin , 532.

19. Shaver, K. S. (1991). "Person Process Choice: The psychology of New Venture

Creation". Entrepreneurship,Theory and Practice , 23-45.

20. Peay, T. (1989). "Power Orientations of Entrepreneurs and Succession

Planning". Journal of Small Business Planning , 47-52.

21. Kidd, J. M. (1969, June). "A predictive Information System for Management".

Operational Research Quarterly , 149-170.

22. Lurie, S. (1987). Strategic Business Planning for the Small to Medium Sized

Company. The CPA Journal , 57 (6), 90-92.

23. Solomon, G. (1988). "Towards a Descriptive Profile of an Entrepreneur". Journal

of Creative Behavior , 22(1), 162-171.

24. Mueller, K. T. (2008, October 18). link.springer.com/content/pdf/10.1007/S

10843-008-0028-4.pdf. Retrieved October 26, 2014, from Link Springer:

hhtp://www.link.springer.com

25. Smith-Hunter, A. J. (2003). "A psychological model of entrepreneurial behavior".

Journal of the Academy of Busines and Economics. , 2 (2), 180-192.

26. Laffont, R. K. (1979). A general equilibirum entrepreneuriaul theory of firm

formation based on risk aversion. Journal of Political Economy , 87, 719-748.

27. Gartner, W. B. (Summer 1989). "Who Is an Entrepreneur ?" Is the Wrong

Question. ENTREPRENEURSHIP THEORY andPRACTICE (Summer 1989), 47-68.

28. Gartner, W. (1985). "A conceptual Framework for Describing the phenomenon of

New Venture Creation". Acedemy of Management Review. , 10 (4), 696-706.

29. Fiske S.T. and Taylor, S. (1991). Social Cognition. (s. Edition, Ed.) New York:

McGraw Hill.

30. Meindl.J.R. (1990). On leadership: An alternative to conventional wisdom. (B. S.

L.L.Cummings, Ed.) Research in Organizational Behavior , 12, 159-204.

31. Habib, H. (2011). Levaraging entrepreneureship in a competitive environment.

The IPU Journal of Entrepreneurship Development , VIII (1), 21-28.

32. Buttener, E. D. (1997). Women's Organizational Exodus to

Entrepreneurship:Self-reported Motivations and Correlates with Success. Journal of

Small Business Management , 35 (1), 34-46.

33. Harding, R.-E. (2006). Entrepreneurship Monitor-United Kingdom 2005.

of 253

34. McClelland, E. (2005). Following the Pathway of Female Entrepreneurs.

International Journal of Entrepreneurial Behaviour and Research , 11 (2), 87-107.

35. Stevenson, H. G. (1985). The Heart of Entrepreneurship. Harvard Business

Review. , 63 (2), 85-94.

36. Reynolds, P. (2002, April 20). GEM Global Entrepreneurship

Report,2001Summary Report. Retrieved July 10, 2014, from Global Entrepreneurship

Monitor,: http://www.gem

consortium.org/download/1293023015823/summary%20Report%20Version%208%2002

%20April1%2002.pdf

37. Lohest, O. G.-l. (2011, March 15). Munich Personal RcPEc Archive. Retrieved

July 10, 2014, from http://mpra.ub.uni-muenchen.de/29506/MPRA paper No.29506

38. Bergmann, H. S. (2007). The Changing face of Entrepreneurship in Germany.

Small Business Economics , 28 (2-3), 205-221.

39. Solymossy, E. (1997). Push/Pull motivation:Does it matter in Venture

Performance ? Frontiers of Entrepreneurship Research,Babson Collage , 204-217.

40. Lerner, M. H. (1997). Israeli Women Entrepreneurs: An Examination of Factors

Affecting Performance. Journal of Busines , 13 (4), 315-339.

41. Morris, M. C. (2006). The Dilemma of Growth:Understanding Venture Size

choices of Women Entrepreneurs. Journal of Small Business Management , 44 (2), 221-

244.

42. LeBrasseur, R. (2003). Growth Momentum in the Early Stages of Small business

start-ups. International small business Journal , 21 (3), 315-330.

43. James W. Carland, F. H. (1984). Differentiating Entrepreneurs from small

business owners- A conceptualization. The Academy of Management Review , 9 (2), 354-

359.

44. Arrow, K. (1962). Economic welfare and the allocation of resources for

invention. (N. R, Ed.) 609-626.

45. Kirzner, I. (1997). "Entrepreneurial Discovery and the Competitive Market

Process:An Austrian Approach". Journal of Economic Literature , 35, 60-85.

46. African Development Funds. (2006). Entrepreneur Promotion and Microfiance

Project:Republic of Gambia Appraisal Report. Retrieved June 25, 2014, from

http://www.afb.org/fileadmin/uploads/afdb/Documents/project-and-operations/GM-

2006-096En_ADF_BD_WP_GAMBIA_AR_EPMDP.PDF: http://www.arb.org

47. European Commission. (2003). Green Paper: Entrepreneurship in Europe.

Brussels,Belgium:. Commission of the European Communities.

http://mpra.ub.uni-muenchen.de/29506/MPRA%20paper%20No.29506

http://www.arb.org/

of 253

48. Leitao, J. (Ed.). (2009). Public Policies for Fostering Entrepreneurship:a

European Perspective. Secaucus, N.J.: Springer.

49. Shane Scott, V. S. (2000, Janaury). The promise of Entrepreneurship as a filed of

research. Academy of Management review. , 25 (1) , 217-226.

50. Venkataraman. (1997). The distictive domain of entrepreneurship research: An

editor's perspective,. (J. a. Kartz, Ed.) Advances in entrepreneurship,fromemergence and

growth , 3, 119-138.

51. Casson, M. (1982). The entrepreneur. Totowa, NJ: Barnes & Noble Books.

52. Kirzner, I. (1973). Competition and entrepreneurship. Chicago: University of

Chicago press.

53. Drucker, P. (1985). Innovation and entrepreneurship. New York: Harper & Row.

54. Kaish, S. &. (1991). Characteristics of opportunities search of entrepreneurs

versus executives:sources,interests and general alertness. Journal of Business Venturing ,

6, 45-61.

55. Von Hippel, E. (1994). "Prior Knowledge and the Discovery of Entrepreneurial

Opportinities". Organizational Science , 11(4), 448-469.

56. Bruderl.J, P. (1997). Survival chances of newly founded business organizations.

(L. B. Busenitz, Ed.) American Sociological Review , 227-242.

57. Ward, T. (1997). Creative thoughts. Washington,DC: American Psychological

Association.

58. Sarasvathy, D. (1998). Perceiving and managing busines riskd:Difference

between entrepreneurs and bankers. Journal of Economic Behavior and Organization

(33), 207-225.

59. Evans, D. (1991). Some empirical aspect of entrepreneurship. American

Economic Review. (79), 519-535.

60. Cooper, A. (1989). Entrepreneurship and the initial size of firms. Journal of

Business Venturing (4), 317-332.

61. Khilstrom, R. (1979). A general equilibrium entrepreneurial theory of fir,

formation based on risk aversion. Journal of Political Economy , 87, 719-748.

62. Audretsch, D. (1991). New firmsurvival and the technological regime. Review of

Economics and statistics , 520-526.

63. Begley, T. (1987). Psychological characteristics associated with performance in

entrepreneurial firms and smaller businesses. Journal of Business Venturing. , 79-93.

64. McClelland, D. (1961). The achieving society. Princeton,NJ: Nostrand.

of 253

65. Johnson, P. (2004). Diffreences in Regional Firm Formation Rates: A

Decomposition Analysis. Entrepreneurship Theory and Practice , 5, 431-445.

66. Van Gelderan, >. (2006). Success and Risk Factors in the pre-start-up phase.

Small Business Economics , 26, 319-335.

67. Hamilton, B. (2000). Does Entrepreneurship Pay ?An Empirical Analysis of the

Returns to Self Employment. Journal of Political Economy , 3, 604-631.

68. Shane, S. (1999). "Prior Knowledge and the Discovery of Entrepreneurial

Opportunities". Organizational Science , 11(4), 448-469.

69. Hayek, F. (1945). "The use of Knowledge in Society ". AMeriacn Economic

Review , 35(4), 519-530.

70. Ronstadt, R. (1988). "The Corridor Principle". Journal Of Business Venturing ,

1(3), 31-40.

71. Peters, T. T. (2003). In Search of Excellence: Lessons from America's Best-Run

Companies. . New York: Collins.

72. Murray, H. (1938). "Explorations in Personality". New York: Oxford University

Press.

73. Adrien, M. S. (1999). Women Entrepreneurship in Canada: All that Glitters is not

Gold. Universalia Occational Paper, , 38, 1-13.

74. Carter, S. C. (1992). Women as Entrepreneurs ,CIBC World Markets (2005).

75. Kirkwood, J. (2003). The Motivation of entrepreneurs:Comparing Women and

Men. Proceedings of the 48th World Conference of the ICSB. Belfast.

76. Noorderhaven, N. (2004). The Role of Dissatisfaction and Per Capita Income in

Explaining Self Employment across 15 European Countries. Entrepreneurship Theory

and Practice , 28 (5), 447-466.

77. Bhola, R. G. (2006). Explaining engagement levels of opportunity and necessity

entrepreneurs. EIM Business and Policy Research, , H200610.

78. Chaharbaghi, R. F. (1994). Defining Competitiveness -A Holistic Approach.

Management Decision , 32 (2), 49-58.

79. Porter, M. E. (2004). Competitive Strategy-Techniques for Analyzing industries

and competitors. New York: Free Press.

80. Vargas, D. R. (2007). Development of internal resources and capabilities as

sources of differentiations of SME under increased global competition:a filed study in

Mexico. Technological Forecasting and Social Change , 74 (1), 909.

of 253

81. Gunasekaran, A. G. (2001). Implications of Organization and human behavior on

the implementation of CIM in SMEs:an empirical analysis. International Journal of

CIM. , 14 (2), 175-85.

82. Chorda, L. A. (2002). Product development process in Spanish SMEs,: an

emperical research. Technovation , 22 (5), 301-312.

83. Singh, R. K. (2010). The Competitiveness of SMEs in a globalized

economy.Observations from China and India . Management Research Review , 33 (1),

54-65.

84. Singh, A. (2010, September 3). D&B. Retrieved July 6, 2014, from D&B:

http://www.dnb.co.in/News_press.asp?pid=551

85. Leachman, C. S. (2005). Manufacturing performance :evaluation and

determinants. International Journal of Operations & Production Management. , 25 (9),

851-74.

86. Porter, M. (1998). Competitive Advantage: Creating and Sustaining Superior

Performance. (2nd Edition. ed.). New York: The Free Press.

87. Singh, R. K. (2008). Strategy development by SMEs for Competitiveness: a

review. Benchmarking.An International Journal , 15 (5), 525-547.

88. Lagace, D. ,. (2003). Linking manufacturing improvement programs to the

competitive priorities of Canadian SMEs. Technovation , 23 (8), 705-715.

89. Carpinetti, L. (2000). A conceptual framework for deployment of strategy-

related continuous improvements. The TQM Magazine , 12 (5), 340-349.

90. World Bank. (2009). Cluster For Competitiveness:A Practicle Guide and Policy

Implication for developing Cluster Initiatives. Washington: International Trade

Department -PREM The World Bank.

91. Calvin Wang, E. W. (2007). Explaining the lack of Strategic Planning in

SMEs.The importance of owner motivation. International Journal of Behaviour , 12 (1),

1-16.

92. Miller, C. (1994). Strategic Planning and Firm Performance:A synthesis of More

Than Two Decades of Research. Academy of Management Journal , 37 (6), 1649-1665.

93. Laurie, L. (1977, April). Managerial Myopia:Self Serving Biases in

Organizational Planning". Journal of Applied Psychology , 194-198.

94. Schwenk, C. (1993). Effects of Formal Strategic Planning on Financial

Performance in Small Firms: A Meta Analysis. Entrepreneurship Theory , 17 (3), 53-64.

95. Hormozi, A. (2002). Business Plans For New or Small Businesses.:Paving the

Path to Success. anagement Decision , 40 (8), 755-763.

of 253

96. Stonehouse, G. (2002). Strategic Planning in SMEs-Some Emperical Findings.

Manment Decisionage , 40 (9), 853-861.

97. O'Regan, N. (2004). "Revisiting the Strategy-Performance Question:An

Empirical Analysis. International Journal of Management and Decision Making , 5

(2/3), 144-170.

98. O'Regan, N. G. (2002). Effective Strategic Planning in Small and Medium Sized

Firms. Management Decision , 40 (7), 663-671.

99. Bracker, J. P. (1988). Planning and Financial Performance Among Small Firms in

a Growth Industry. Strategic Management Journal , 9 (6), 591-603.

100. C. Wang, E. W. (2006). Ownership Motivation and Strategic Planning in

Small Business. (R. F. MUELLER, Ed.) Journal of Asia Entrepreneurship and

Sustainability , II (4), 26-50.

101. Berman, J. (1997). A Study to Determine the Benefits Small Business Firms

Derive from Sophisticated Planning Versus Less Sophisticated Types of Planning. The

Journal of Business and Economic Studies , 3, 1-11.

102. Robinson, R. (1984). Research Thrusts in Small Firm Stretegic Planning.

Academy of Management , 9 (1), 128-137.

103. Berry, M. (1998). Strategic planning in SMall High Tech Companies. Long

Range Planning , 31 (3), 455-466.

104. Ministry of Micro Small and Medium Enterprises, G. o. (2013, April Monday

22,). Production of MSME sector. Press Release . New Delhi, India: Ministry of Micro

Small and Medium Enterprises.

105. KPMG. (2008). Entrepreneurial India : An assessment of the Indian

entrepreneurs' confidence in their business ecosystem. Entrepreneurial India. Bangalore:

KPMG_TIE.

106. P.M.Mathew, S. V. (2011). India Micro,Small & Medium Enterprises Report

2011. Cochin: Institute of Small Enterprises and Development.

107. Narasimhan, T. E. (2010, june 8th). SMEs ignorant about Stimulus Packages-

Blame the poor implementation and lack of Information. Business Standard - SME world

. Pune, Maharashtra, India: Business Standard.

108. Jacob, S. (2013, May 13th). www.business-standard.com/article/company.

Retrieved July 11th, 2013, from www.business-standard.com: http://www.business-

standard.com

109. Mint. (2010, December 13). 56 % SMES feel Neglected by Government :

REGUS survey. MINT . Mumbai, Maharashtra, India: HT Media Ltd.

of 253

110. Mint. (2010, November 29). SME Tracker. MINT . Mumbai, Maharashtra, India:

HT Media Limited.

111. Ahuja, S. (2010). For a fitting size. Pune: The Financial Express,10.

112. Narasimhan, T. E. (2010, June 1). SMEs Face the heat from Cheap Chinese

imports. . Business Standard . Pune, Maharashtra, India: Business Standard.

113. CII. (2013). MSME Conclave. Enhancing the Competitiveness of MSME.

Enhancing the Competitiveness of MSME (p. 17). Agra: CII.

114. Panagariya, A. (2014, October 23). www.busines-standard.com/article/printer-

friendly-version?article-id=114102300569-1. Retrieved October 25-10-2014, 2014,

from www.business- standard.com: www.business-standard.com

115. Singh, R. K. (2010). The Competitiveness of SMEs in a globalized

economy.Observations from China and India . Management Research Review , 33 (1),

54-65.

116. MSME Development Institute, M. (2014, April 15). Annual Report 2013-

14,MSME Development Institute ,Mumbai. Retrieved October 23, 2014, from

www.msmedimumbai.gov.in: www.msmedimumbai.gov.in

117. OECD. (2007). OECD Reviews of Regional Innovation, Competitive Regional

Clusters-National Policy Approaches. OECD.

118. Foundation for MSME Clusters. (2007). "Policy And Status Paper on cluster

Development in India . New Delhi: Foundation For MSME clusters.

119. National Productivity Council. (2014). www.npcindia.gov.in. Retrieved October

25, 2014, from www.npcindia.gov.in

120. Hariharan, M. (2014, July 10). Lean Management and Cluster Methodology. Navi

Mumbai, Maharashtra, India.

Chapter 2: LITERATURE REVIEW - Information and...

Documents

Transcript of Chapter 2: LITERATURE REVIEW - Information and...