CHAPTER!

LITERATURE REVIEW

A detailed literature survey was undertaken to explore the past and the present status

of research work in the field of entrepreneurship development and innovation. The

highlights of this literature survey shall be discussed now.

2.1 DRIVING FACTORS TO BECOME AN ENTREPRENEUR

An impressive amount of research has given insight into driving factors to become an

entrepreneur. Many studies have determined driving factors to become entrepreneur

based on entrepreneurial attitudes, personal attitudes, motivation, ambitions, need for

independence, to be own boss, put innovative ideas into practice, personal challenge,

market demand, previous experience, unemployment. Other studies also mention

entrepreneurial intentions as tolerance for risk, perceived feasibility and net

desirability. Some other studies have highlighted the following factors as the driving

factors to become an entrepreneur. Self-realization, Desire to Contribute to society.

Improve income, become wealthy, be one's own Boss, to be a Role model. Improve

Social status. Continue Family tradition, and inability to proceed with higher

education. Some highlights of the studies are discussed below.

Mitchell (2005) examines the motivation of entrepreneurs in starting a business in the

socio-economic milieu of South Africa. He has aimed to identify similarities and

differences in the motive profiles of 101 male and female entrepreneurs. A motivation

scale and open-ended interviews are used to assess the 'reasons for starting a

business'. Both men and women entrepreneurs were found to be primarily motivated

by the need for independence, need for material incentives and the need for

achievement. Male entrepreneurs in comparison to females were more motivated by

the need to provide family security and to make a difference in the business. Female

entrepreneurs were motivated more than males by the need to keep learning and the

need for more money to survive.

Tarun and Kara (2007) investigate the characteristics and attributes of Turkish

entrepreneurs and compare them to Irish entrepreneurs. Their study is aimed at

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finding the attributes of motivation to create business, attitudes toward

entrepreneurship and challenges encountered by entrepreneurs. In particular they have

found some of the important attributes of motivation to create business as: greater

freedom, desire to be owns own boss, desire to produce an idea or innovation,

challenge, dissatisfaction in previous job, desire to achieve a better position in society

and to follow the example of someone admired.

Linan et al., (2005) prepared a model for entrepreneurial intentions to start business

considering three concepts: Entrepreneurial Knowledge, Perceived Desirability

(Personal attitudes and Perceived Social Norms), and Perceived Feasibility (Self-

efficacy). They have analyzed this model for 354 students of two universities of

Spain.

Raman (2004) has investigated the motivating factors of educated 100 entrepreneurs

in the Emakulam district of Kerala. This study has arrived at five categories of

motivating factors for entrepreneurship. These are: Prime Motivators, Entrepreneurs'

ambitions or motives. Compelling factors. Facilitating factors, and Opportunity

factors.

Bhandari (2006) studied a group of university students in India intended to start their

own business (become entrepreneurs). A 62-item questionnaire was used on sample

size of 100 students. Out of 18 independent variables only two (luck and to lead other

people) are found to be significant. Further the factor analysis resulted in six factors

influencing desire to start one's own business. Finally, the logistic regression analysis

showed that these six factors have a 92.35% predictive value.

Oruoch (2006) has explored the linkage between intention to venture creation and

psychological factors in Kenya. Using data collected from college students and

nascent entrepreneurs in Nairobi. He seeks to establish the relationship between

perceived social norms, social support network and entrepreneurial experience on

perceived feasibility and desirability. Exploratory factor analysis is used to test both

discriminant and convergent validity of measurement items. Structural equation

modeling is used to examine and confirm the structural relationship in the network.

Perceived desirability and feasibility were found to have a significant effect on

intention to venture creation. Entrepreneurial experience, perceived support networks

and social norms had no direct significant effects on intention to venture creation.

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Wong (2005) has investigated the influence of perceptual variables on entrepreneurial

propensity in Singapore. The perceptual variables considered are: self-efficacy,

alertness to opportunities, knowing other entrepreneurs, and fear of failure. Using

pooled data from over 9,000 respondents covered in the Global Entrepreneurship

Monitor (GEM) 2001-2004, Singapore adult population surveys this study has tested

for possible differences in the variables effects on opportunity v/s necessity

entrepreneurial propensities as well as distinguished "high employment potential"

entrepreneurial propensity from general entrepreneurial propensity.

Goel et al., (2006) argue that social support is an important enabler in entrepreneurial

activity in a country or a region. One untested assumption in policy making has been

that all regions are equally desirous of entrepreneurial activity and one policy could

address issues in all regions. It is argued that attitudes towards entrepreneurs and

entrepreneurship are important determinants for future entrepreneurial activity. These

attitudes would be impacted by the familial occupational background of an individual

and entrepreneurial development of the region which he/she comes from. It is

hypothesized that more positive attitude would be seen in (i) people form

entrepreneurial backgrounds, and (ii) entrepreneurially more developed regions.

These hypotheses are tested on more than 5,000 respondents in India and China. The

results for familial occupational background's influence on attitudes found strong

support in both India and China. Regional development showed stronger influence on

attitude in India than in China.

Segal et al., (2005) have reviewed motivation research to explore some of the

commonalities among current theories, and present a new model of entrepreneurial

motivation. In this exploratory study, the ability of tolerance for risk, perceived

feasibility, and perceived net desirability to predict intentions for self-employment are

examined in a sample of 114 undergraduate business students at Florida Gulf Coast

University. Results indicated that tolerance for risk, perceived feasibility and net

desirability significantly predicted self-employment intentions, with an adjusted R of

0.528

Kantis et al., (2002) have presented the results of a comparative study of

entrepreneurship in Latin America and East Asian in of their papers. They defined

Entrepreneurship as the capacity to create and develop new business ventures. Their

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study focuses on the process of creation of new companies. That process is analyzed

at three different stages: inception of the entrepreneurial venture, company start-up,

and its early development. According to them motivation factor to become an

entrepreneur are: Self-realization, Desire to Contribute to society, Improve income.

Become wealthy. Be one's own Boss, be a role model (media), Social status, be a

role model (friends), be a role model (city), be a role model (parents). Family

tradition. Inability to proceed with higher education, and Unemployment.

Grundsten (2004) has used the concept of entrepreneurial intentions is used in this

work as a measure for the entrepreneurial behaviour of an individual and the resulting

entrepreneurial activity. The environment is characterized through two different factor

categories: affective environmental factors and rational environmental factors. A

special group of rational environmental factors considered is the resource availability

of the environment. It is hypothesized that these environmental factors affect

entrepreneurial intentions in that environment. The results of the study show that the

environmental factors affect entrepreneurial intentions.

Jylhankangas (2007) has tried to find motivation factors of Finnish female

entrepreneurs to become entrepreneurs. The following themes are considered in this

study: general motivations theories, basic concepts of entrepreneurship as well as

issues related to female entrepreneurship in the Firmish society. The results of this

research indicate that the main motivational aspects arise from the feeling of freedom,

self-fulfillment and independence.

Taormina and Lao (2006) have examined the relative influence of psychological

variables and external environment variables. They have collected data were collected

from 337 Chinese respondents in three different groups namely: people who do not

want to start a business, people planning to set up a business and entrepreneurs who

had started successful businesses. Respondents are assessed on three

psychological/behaviour variables (achievement striving, social networking, and

optimism), and one external environment variable (perceived importance of a

favourable business environment). Group comparisons revealed that psychological

characteristics as well as the business environment were both significant predictors.

Psychological characteristics showed are stronger influence for potential

entrepreneurs and the business environment for successfial entrepreneurs.

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Kirkwood (2004) has mentioned that the reasons for people to get motivated to

become entrepreneurs are: independence, money, challenges or to get recognition,

work and family reasons are key motivators. This study concludes that women's and

men's motivations for becoming entrepreneurs are similar.

The analysis of Henley (2005) reveals that while aspirations towards entrepreneurship

are widespread, few aspiring entrepreneurs are successful. Aspirations appear to be

driven by "displacement" factors such as low satisfaction with current employment,

rather than personal resources associated with educational attainment, parental

background and financial status.

Wong et al., (2007) argue that an organization's technological innovation activities

develop employee's specialized knowledge that provides them with the

entrepreneurial opportvmities to find new businesses. Besides highlighting the positive

relationship between technological innovation activities in organizations and the

propensity of individuals leaving the organizations to start new businesses, this paper

also provides a more fine-grained explanation of the types of technological innovation

activities that can lead to business finding. They also argue that knowledge acquired

through product innovations is more easily appropriated by individuals for

commercial uses, while knowledge acquired through process innovations must be

integrated with other parts of the organization to be valuable.

Djankov et al., (2008) test two competing hypotheses on what makes an entrepreneur:

nature (attitude towards risk. Intelligence Quotient (IQ), and self-confidence) or

nurture (family background and social networks). The results are based on data from

survey of 400 entrepreneurs and 540 non-entrepreneurs of the same age, gender,

education and location in 7 Brazilian cities. They find that family characteristics have

the strongest influence on becoming an entrepreneur. In contrast, success as an

entrepreneur is primarily determined by the individual's smartness and higher

education in the family.

2.2 FACTORS INFLUENCING SUCCESSFUL ENTREPRENEURSHIP

Cheung and Chow, (2006) have studied multi - perspective success factors of a group

of second generation Chinese entrepreneurs in Hong Kong. Results show that the

common success factors differ slightly from those of last-generation entrepreneurs

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and international entrepreneurs. They have also suggested some new levels of success

factors as: luck and fate, religion, ultimate life value (Image Value) dream life (Ideal

Value) and life philosophy (Mission Value).

Rose et al., (2006) have identified that personal initiative is the one of the major factor

for success factors of entrepreneurs in Malaysia. Their study finds that the

entrepreneurs' education level, work experience and whether parents own business

have a positive relationship with their success.

Papazan et al., (2008) have examined factors determining the success of rural

entrepreneurs in Mahidasht township of Kermanshah province in Iran. They proposed

hypothesis that success of rural entrepreneurs is causally related to innovativeness,

need for achievement, lack of bureaucracy, internal locus of control, and marketing

opportunities. The study was a census of 70 rural entrepreneurs currently active in

agricultural and livestock productions. The results revealed that internal factors such

as innovativeness, need for achievement, internal locus of control and external factors

such as bureaucracy and marketing opportunities accounted for 88% of the shared

variance with entrepreneurs' success.

Yusof (2011) has aimed to analyze the environmental factors for the success of

entrepreneurs in Malaysia. The findings from the research suggest that:

entrepreneurial culture and mindsets and government policies contribute to the

success of entrepreneurship.

Mehralizadeh and Sajady (2006), in their study have tried to explain the main factors

related to success and failure of entrepreneurs in Ahvaz city of Iran. Their study

reveals that the following issues have an important bearing on business performance:

suitable managing technical skills, selecting appropriate personnel with relevant

skills, education and paying more attention to persormel training, application of

management conceptual skills, financial issues, better human relation, recognizing the

economic situation, plarming and organizing of their business and informal issues.

Chattopadhyay and Ghosh (2002) have predicted entrepreneurial success using

psychological variables like individualism- collectivism, achievement value, locus of

control and the socio-cultural variable, entrepreneurial status. They have also

observed that the psychological variables have a fairly high correlation with

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entrepreneurial success, and all of them can also separately predict the success of an

entrepreneur efficiently. However, their study establishes that the achievement values,

along with entrepreneurial status, are the most efficient predictor variables in

predicting entrepreneurial success.

Ramana et al., (2009), have attempted to find the influence of demographic factors on

entrepreneurial attributes and success. They have selected 200 start-ups in the Small

and Medium Enterprises across five states in India. Entrepreneurial attributes like

Industry knowledge, street smarts, tolerance for ambiguity. Impact of personal selling

on start-up success and entrepreneurial success have been compared with socio-

demographic factors. The study highlights that high level of education does not

guarantee entrepreneurial success and senior citizens do not achieve a higher level of

entrepreneurial success.

Panda (2002) has made an attempt to explain the relationship that exists among

various socio-economic variables with different success levels of small scale

enterprises. The findings reveal that there are associations between the success levels

of an enterprise with factors like technical education of the entrepreneur, occupational

background of parents, previous background of the entrepreneur and capability to

arrange working capital. This also brings out the entrepreneur's perception of risk

namely, the functional risk and business risk.

Attahir (1995) has discussed critical success factors which are perceived by South

Pacific entrepreneurs as being necessary for successful operation of small business in

the region. Critical factors considered are: Good Management, Satisfactory

government support. Marketing factors. Overseas exposure. Level of education and

training. Access to finances and level of initial investment. Personal qualities and

traits. Prior experience in business and Political affiliation.

Djankov et al., (2007) have interviewed 400 entrepreneurs and 550 non-entrepreneurs

of the same age, gender, education and location in 7 Brazilian cities to test three

competing hypotheses about the role of economic and legal institutions (security of

property rights, access to credit), the role of sociological characteristics (family

background, social networks) and the role of individual features (attitude towards risk,

I.Q., self-confidence) on entrepreneur ship. The results show that sociological

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characteristics have the strongest influence for becoming an entrepreneur. In contrast,

success as an entrepreneur is primarily determined by the individual's smartness and

higher education in the family.

Frese et al., (2002) have considered the importantants of psychological strategy

process characteristics' and entrepreneurial orientation for entrepreneurial success.

The Psychological strategy characteristics include the variables: complete planning,

critical point planning, opportunistic and reactive. Entrepreneurial orientation covers

the variables: autonomy, innovativeness, competitive aggressiveness and risk taking.

Results show that complete planning and high entrepreneurial orientation of the

owners are positively and reactive strategy is negatively related to business success.

Ganesan et al., (2003) have examined some important demographic correlates such as,

age, education, social category, years of experience, husband's and parents'

education, previous occupation, and present occupation, family's income,

membership in associations and training of locus of control of 32 women

entrepreneurs in two metro cities in India. Self-constructed scale to measure

perceptions of present ladder of success and success rate are used. Results on Person's

correlations revealed that a majority of women entrepreneurs had internal perceptions

about taking up a challenging task and achieving success in it. Perceptions of ladder

of success have inverse correlations with father's previous and present occupation and

significant positive correlations with success rate perceived by women entrepreneurs.

Ruane (2007) has carried out a study of small-scale business enterprises to understand

what determines entrepreneurial motivations and success in Philippines. The study

also presents an empirical analysis of the determinants of success of Filipino small

businesses using Ordinary Least Squares (OLS) technique.

Coy et al., (2007) have resented the results of the survey to identify internal and

external factors that small business owners believe are critical for success, in and

around Karachi. The internal critical factors considered by them are: Analytical

Skills, Decision-Making Skills, Persistence, Higher Education, Relevant Education,

Relevant Work Experience, Interpersonal Skills, Communication Skills, Working

Hard/Long Hours, Ability to Handle Stress, Business Connections, Family Support,

Customer Service, Product Quality, Attention to Customer Needs, Information

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System, Ability to Delegate, Market / Product Research. The external critical factors

are: Government programs, Banks, Franchise, Trade Exhibitions, Training Programs

and Family Advise.

Chu et al, (2007) have surveyed 356 entrepreneurs from Kenya and Ghana to

determine their motivations for business ownerships, variables contributing to

business success and the problems they encountered. Kenyan and Ghanaian

entrepreneurs indicated that increasing their income and creating jobs for themselves

are leading factors motivating them to become business owners. Hard work and good

customer service are cited by both business ovmers as critical for their success. But,

compared to the Kenyan entrepreneurs, Ghanaians weighted support from family and

friends and external relationship building as more important. A weak economy is the

most important problem preventing entrepreneurs of both countries from achieving

their goals. Ghanaian entrepreneurs are more concerned about the inability to obtain

capital, while Kenyan entrepreneurs are more concerned about government

regulations and problems related to business location.

Dafna (2008) has assessed the role of managerial performance in the success of men-

owned businesses (MOB) and women-owned businesses (WOB) for Canadian and

Israeli entrepreneurs. The methodology used is based on two national samples from

Canada and Israel (n= 235) which included mostly members of a private business

networking organization. Multilevel analyses revealed that gender is significantly

associated with some managerial functions, but except for the business longevity - it

is not directly associated with measures of business success; nationality is associated

with two measures of business success: turnover and growth. Women entrepreneurs,

both Canadian and Israeli, ranked significantly higher in some functions of their

managerial performance compared to their male counterparts.

Erzeti^c (2008) has analyzed different approaches to acquiring new knowledge

acquisitions used by entrepreneurs, such as formal education process, professional

development workshops, professional counsellors, professional literature and

information on the World Wide Web. When making a decision on what means to use

in order to increase one's knowledge, entrepreneurs employ different assessment

criteria: time and money investment as well as pedagogical techniques used. Time

shortage is the most frequently cited reason that entrepreneurs do not invest more

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personal resources into knowledge acquisition processes. The main hypothesis

postulates that entrepreneurs who invest more time and money into knowledge

acquisition processes are more successfiil. Success is measured with an average

annual degree of growth of sale, profits and number of employees in the last four

years and with entrepreneur's opinion concerning success of the company's business.

Tewari (1991) presents the findings of a research study on comparative analysis of

factors causing and contributing to the success of Small Scale Industries (SSI) on one

hand, and those responsible for the failure of SSI units on the other. The study

considered eight variables for the calculation of ACRI (Average Composite Rank

Index). These eight variables are: Annual growth rate of investment on plant and

machinery, annual growth rate of employment, aimual growth rate of turnover, annual

growth rate of investment on plant and machinery per employee, armual growth rate

of total productive capital per employee, ratio of turnover to investment on plant and

machinery, ratio of turnover to working capital and ratio of turnover to total

productive capital. The study examines the various operational problems faced by

small scale entrepreneurs in setting up and in the management of their units.

2.3 INNOVATIVE PRACTICES AND THEIR RELATION WITH

ENTREPRENEURIAL SUCCESS

Edwards and Delbridge (2001) have examined the link between innovative activity,

outcomes and the performance of SMEs in Wales. A range of European, UK and

locally developed initiatives in Wales seek to encourage irmovative activity in

indigenous SMEs. The paper offers a general method of assessing the irmovative

potential (the configuration of management practices, capabilities, internal and

external linkages facilitating the generation of appropriation of ideas) of

manufacturing SMEs. This then leads on to an examination of how far innovative

potential is connected to operational and general business performance. The paper

describes how the model was developed and used to assess the innovative potential of

a sample of manufacturing SMEs in Industrial South Wales, and how far the

innovative potential can be linked to improved operational and business performance

using data from case study of two firms.

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Baldwin (1995) has examined the differences in strategies and activities pursued by a

sample of more-successful and less-successful group of- small-and medium-sized

enterprises. Amongst other things this study examines different functional strategies:

the importance of management, human resource practices, marketing, financing, and

the innovativeness of the firm. According to the study innovative activities are the

most important determinants of success; that is, for a wide range of industries, they

serve to discriminate between the more and the less-successful firms better than any

other variable. Almost all of the strategy questions that relate to innovative activity

receive higher scores from the more-successful group of firms than from the less-

successful group of firms.

Deyong et al, (2007) have proposed that tacit knowledge serves to improve

organizational innovating, and impact on their performance. On the basis of the

investigation they found that companies which are at high level of irmovations have

better tacit knowledge.

Johnson et al., (2001), in order to test a model of the effects of communication and

involvement on perceived innovativeness have considered two separate samples

focusing on different innovations, one community based (n = 80) and the other

technical (n = 116), drawn from the same organization. The model which was

developed in the technical innovation test and confirmed in the community based

innovation test provided an excellent fit to the data. The results clearly indicate that

communication variables have both direct and indirect effects on perceived

innovativeness, although the pattern of individual paths appears to be contingent on

the type of innovation.

Vyas (2005) in his study says that productivity, profit and growth of an enterprise are

closely linked to its ability to innovate successfully. He also asserts that the

accelerating technological change, made innovation increasingly difficult for small

and nascent business. The large corporations are using the raised costs and

complexities of technical change to snuff out entrepreneurial aspirations of new

ventures. Notwithstanding the high profile success of a few start-ups' innovative

confrontations with mature business, a large number of ordinary entrepreneurs are

losing in this battle of the imequal. The very spirit of entrepreneurship embodied in

ever sprouting small and nascent enterprises is endangered by this trend.

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Berger and Diez (2006) have stated that technological capabilities correlate with

firms' innovation activities (including cooperation with external partners). At the

same time, it can be assumed that the quality of the national or regional innovation

system influences the development of firms' technological capabilities. They have

compared groups of firms with different technological capabilities in three innovation

systems.

Hung and Mondejar (2005) have presented the findings of a study of the association

between corporate governance and entrepreneurial innovation in a major Asian

metropolitan city. They have identified three primary attributes of entrepreneurial

innovation: preference for risk-taking, acceptance of changes, and development of

new initiatives. While they intended to establish the relationship between corporate

governance and entrepreneurial innovation, research yielded mixed results.

CEO/Chairman duality is positively related to preference for risk-taking and

development of new initiatives of firms, but not to the acceptance of changes in firms.

Results also showed that directors (executive or non-executive) had no significant

impact on the level of entrepreneurial innovation of their firms. Share-ownership of

directors is related to risk-taking preference, but not to acceptance of changes and

development of new initiatives of firms.

Todtling and Kaufmann (2001) have argued that SMEs' innovation is in a different

way compare to larger firms. SMEs have fewer resources, have less R&D, and these

generally face more uncertainties and barriers to innovation. These weaknesses could

partly be overcome by their integration into networks and innovation systems.

Jantan et al., (2003) have tried to determine the influence of organizational structure

(formalization and centralization) and culture (participative decision-making, support

and collaboration, learning and development) on innovation (technological and

process, administrative, product and overall) among firms operating in Malaysia.

Regression analyses of 123 responses revealed that only cultural variables have

positive effects on two forms of innovation (technological and process, and

administrative). Specifically, both participation in decision-making, and support and

collaboration had significant positive effects on technological and process innovation.

On the other hand, both support and collaboration, and learning and development are

found to have significant positive effects on administrative innovation. Structural

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variables (both formalization and centralization) had no effect on all forms of

innovation investigated.

Freel and Robson (2004) have used Ordinary Least Squares (OLS) estimation

techniques of a large-scale survey to examine the effect of firms' innovation activities

on their growth performance. The survey, covering 1347 respondents, is the largest

and most definitive assessment of enterprise in Scotland and Northern England. They

have employed four measures of growth, growth in employment, growth in turnover;

growth in productivity and change in the profit margin. These measures of growth are

analyzed separately for manufacturing and service firms. The findings highlight a

positive relationship between novel product innovation and employment growth and,

for manufacturing firms, a negative relationship between product innovation (both

incremental and novel) and growth in sales or productivity. By contrast, growing sales

and productivity appear positively associated with incremental process introductions

in service firms.

Tirupati (2008) has stated that in recent years, technological innovations have

emerged as an important source of competitive strength, and firms in many industries

have achieved success by competing through innovation. Taking the business

perspective of a small enterprise with focused technological capabilities, he has

examined the role of innovations for competitiveness. He presents a framework that is

useful for classifying and characterizing different types of technological innovations

and describes their impact on firms' capabilities. He further says that the narrow focus

of small enterprises enables them to develop into niche players with specialized

capabilities; however, it often prevents them from offering complete products or

services.

Lynskey (2004) has examined the determinants of innovation, as measured by patent

applications and new products, in Japanese technology-based start-up firms, using

original firm-level data. He has examined these determinants from the viewpoint of

both firm-level and managerial-level characteristics. Findings indicate that

technological capability, the availability of internal fiinds, venture capital funding,

and university-industry linkages are important firm-level determinants of innovation.

It is also revealed that a CEO's educational background and capacity for networking

with researchers are important managerial characteristics.

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Ottenbacher and Gnoth (2005) have identified nine factors that promote successful

service innovations by surveying 184 German hoteliers. The study finds that the

nature of the innovation is far less important than the effectiveness of a hotel's human

resources management and employee training, empowerment, and commitment to the

service.

Cropley (2006) has stated that the Innovation Process is a complex combination of the

following factors: Creativity, the development of novel products. Innovation, the

process of commercializing the novel product, and Entrepreneurship: the skills,

knowledge and capabilities needed to execute the process. This paper identifies

creativity, in particular, as the driving force of the innovation process. The paper

considers a model of functional creativity as most appropriate to the innovation

process and describes critical cognitive and non-cognitive components of individual

and group behaviour that support the production of effective novelty.

Subrahmanya et al, (2010) have probed the drivers, dimensions, achievements, and

outcomes of technological innovations carried out by SMEs in the auto components,

electronics, and machine tool sectors of Bangalore in India. They have ascertained the

growth rates of innovative SMEs vis-a-vis non-innovative SMEs in terms of sales

turnover, employment, and investment.

Mel et al., (2009), have developed a model of innovation which incorporates the role

of both owner and firm characteristics and used this to determine how product,

process, marketing and organizational innovations should vary with firm size and

competition. They have used a representative survey from Sri Lanka to test this model

and to examine whether and how owner characteristics matter for innovation. The

survey also allows analysis of the incidence of innovation in micro and small firms,

which have traditionally been overlooked in the study of innovation, despite these

firms comprising the majority of firms in developing countries. More than one quarter

of microenterprises are found to be engaging in innovation, with marketing

innovations the most common. As predicted in the model, firm size is found to have a

stronger positive effect and competition a stronger negative effect on process and

organizational innovations than on product innovations. Owner ability, personality

traits and ethnicity are found to have a significant and substantial impact on the

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likelihood of a firm innovating, confirming the importance of the entrepreneur in the

innovation process.

Hall et al., (2009), have developed a structural model of innovation which

incorporates information on irmovation success from firm surveys along with the

usual R&D expenditures and productivity measures. They apply this model to a data

on Italian SMEs from the "Survey on Manufacturing Firms" conducted by

Mediocredito-Capitalia covering the period 1995-2003. The model is estimated in

steps, following the logic of firms' decisions and outcomes. They found that

international competition fosters R&D intensity, especially for high-tech firms. Firm

size, R&D intensity, along with investment in equipment enhances the likelihood of

having both process and product innovation. Both these kinds of innovation have a

positive impact on firm's productivity, especially process innovation. Among SMEs,

larger and older firms seem to be less productive.

Jong (2007) has explored the complex relationship between competition and

innovation. He has distinguished between three types of competitive forces: internal

rivalry among incumbent firms in an industry, bargaining power of suppliers and

bargaining power of buyers. Using survey data from 2,281 Dutch firms, he has

applied new perception-based measures for these competitive forces to explore how

competition relates to firms' irmovative intentions. He has also investigated the

influence of innovation strategy as a contingency variable. Results show that specific

innovative intentions, i.e. to invest in product and process innovation, are related to

different competitive forces. Process innovation is correlated with the bargaining

power of suppliers, while intentions to invest in product innovation are associated

with buyer power. Finally, intended product innovation is related to internal rivalry,

but only when firms have no innovation strategy.

Mahemba and Bruijn (2003) have explored innovation activities and ascertained the

relationships between these activities and growth performance of SMEs in the

Tanzanian manufacturing sector. The applied model has been derived from

international studies of innovation. A survey of SMEs combined with in-depth case

studies is made to study innovation practices of SMEs in the Tanzanian

manufacturing sector. The results revealed that an increased level of applied change is

25

associated with innovating SMEs, and a positive relationship between innovativeness

in the SMEs with growth performance is established.

Gunadi (2009) has aimed to seek the type of innovation and the impact of social

capital on the irmovation in the small-medium enterprises (SMEs) in Indonesia. The

data used in this study is collected from several clusters of bamboo handicraft

producers in the district of Sleman, Yogyakarta Special Province. The research found

that more than half of respondents are innovative producers. Social capital, measured

by an index of trust significantly influences the innovation index. Other important

variables that influence the index of innovation are location, sex, and education.

Wijewardena and Zoysa (2005) have attempted to analyze the main factors which are

perceived to have contributed to the progress or success of manufacturing enterprises

in Srilanka. The statistical technique of factor analysis has been used for analyzing the

data. The results indicate a set of six separately identifiable factors that have positive

and significant impact on the success of the sampled firms. These factors, ranked in

the order of importance, are as follows: customer orientation, product quality,

efficient management, supportive environment, capital accessibility and marketing

strategy.

2.4 THE DRIVERS AND BARRIERS ENCOUNTERED BY ENTREPRENEURS

Several studies have tried to identify the problems encountered by the entrepreneurs

for achieving their business objectives. According to these studies major problems

that encountered by entrepreneurs are: Cash Flow, Insufficient Sales Volume, and

Obtaining Long-Term Loans, Controlling My Own Time, Finding & Retaining

Qualified Employees, Motivating Employees, Preparing Strategic/Annual Business

Plans, Ability to Cost-Effectively Advertise, Competition from Large Businesses,

Identifying New Opportunities, Effective Business Use of the Internet, Creating a

Web Site, Integrating Technology into the Firm and Selecting the Best Software.

Some studies have also mentioned the constraints and barriers for their business as:

lack of an organic structure, understanding technologies, planning, availability of

skilled workers, bureaucracy, financial constraints including the high cost of capital,

business regulations, infrastructure, lack of government support, location of industry,

nature of the work, and viability of the business. Some highlights of these studies are

discussed below.

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Rosnah et al., (2004), have conducted a survey to investigate the ability of the SMIs

(Small and Medium scale Industries) of Malaysia to implement AMT (Advanced

Manufacturing Technologies) successfully. The results of the survey show that the

main barriers preventing the SMIs from obtaining the strategic benefits of AMT are:

lack of an organic structure, understanding of the technologies, planning, the level of

skilled workers and engineers and the culture of the industries.

Richtermeyer (2003) has conducted a study in Missouri to take an in-depth look at the

various types of operational problems that small business owners face in their

businesses. The study focuses on four key operational problem areas which

entrepreneurs face namely: finance, management, marketing and technology.

According to this study majority of the problems that entrepreneurs face under finance

are: Cash Flow, Insufficient Sales Volume and Obtaining Long-Term Loans. Under

the management the problems are: Time management. Finding & Retaining Qualified

Employees, Motivating Employees and Preparing Strategic/Annual Business Plans.

Under the marketing problems are: Ability to Cost-Effectively Advertise, Competition

from Large Businesses and Identifying New Opportunities. Finally the technology

problems are: Effective Use of the Internet, Creating a Web Site, Integrating

Technology into the Firm, and Selecting the Best Software.

Bartlett and Bukvic (2001) have in their study aimed at identifying the critical barriers

to small business growth and development in Slovenia. The study is based upon a

survey of a sample of small firms in Slovenia. Results revealed that firms' growth was

negatively linked to firms' size, and that growth was reduced by the presence of

institutional and financial barriers.

Causa and Cohen (2004) have demonstrated their study that productivity depends on

five elements of the economy: infrastructure, capital, trade, education and aggregate

efficiency. These factors, according to them when multiplied together, give a true

picture of a country's situation on productivity. Their approach they say can be

viewed as another way of addressing the so-called "competitiveness problem" of poor

countries.

According to Roomi and Parrott (2008), in Pakistan, women entrepreneurs do not

enjoy the same opportunities as men due to a number of deep-rooted discriminatory

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socio-cultural values and traditions. They also argued that the economic potential of

female entrepreneurs is not being realized as they suffer from a lack of access to

capital, land, business premises, information technology, training and agency

assistance. According to them inherent attitudes of a patriarchal society, that men are

superior to women and that women are best suited to be homemakers, create

formidable challenges. The research suggests that in order to foster development,

multi-agency cooperation is required. The media, educational policy makers and

government agencies could combine to provide women with improved access to

business development services and facilitate local, regional and national networks.

This would help integration of women entrepreneurs into the mainstream economy.

Ganesan et al., (2002), in their article have dealt with the problems, which self-

motivated women entrepreneurs encountered and then highlight the prospects and the

future challenges. They have established the role entrepreneurial training can play in

making the ventures initiated by these self-motivated women self-sustaining. The

study identifies the concern areas of these women who are in business and also

proposes what kind of entrepreneurial training would be ideal.

Roper and Scott (2009) have assessed the ability of UK women-owned firms to obtain

external finance. Their analysis is based on the Global Entrepreneurship Monitor

(GEM) UK 2004 database. They find that women are around 7.4% more likely to face

financial barriers to business start-up than men.

Moktan (2007) has analyzed the constraints of SMEs in Bhutan by conducting a

survey of 168 micro and small firms. The findings indicate that the biggest constraints

are related to restrictive business regulations, finance and infrastructure. Additionally,

significant differences in the severity level of constraints between urban and rural

districts are observed with regards to size, sector and ownership. Even within the

SMEs, the segregation approach generated an altogether different portrayal of their

distinctive needs. Study findings clearly suggest lack of government support to the

SMEs. The study concludes that the Royal Government of Bhutan needs to promote

the growth of SMEs through demand-driven and specifically targeted policies for

urban and rural districts, based on their idiosyncratic needs.

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Getz and Petersen (2004) have explored generic and industry-specific barriers to

inheritance among family businesses within the tourism and hospitality industry.

Survey data collected from owners of tourism and hospitality businesses in Denmark

and Canada and results reveals that a very low rate of inheritance and a number of

industry-specific barriers, including those related to location (e.g., remoteness and

small-town settings result in out-migration by children who do not share their parents'

lifestyle goals), nature of the work (long hours, high contact with customers, and

hands-on labour make the business unappealing), viability of the business (seasonality

of demand, taxes, or inseparability of business and family assets result in low

potential for inheritance), and the life stage of parents and children (many owners are

in a second career or preretirement enterprise, and children cannot become involved).

A framework for examining generic and industry-specific barriers is presented, with

commentary on how other industries could be examined for these barriers.

Clancy (2004) has focused on innovation process in small- and medium-scale

industries in developing countries, in briquetting (densification of biomass) sector.

The technical efficiency is found to vary significantly between firms, which can be

attributed to the lack of technological capabilities within firms and weaknesses in the

external environment. Management skills are found to be weak, which has been

identified as the major factor inhibiting innovation within briquetting firms.

Institutional support is also found to be weak. The policy issues that had the most

influence on the innovation process are identified as import restrictions and financial

incentives.

Das (2001) has studied women entrepreneurs who own and manage small to medium

sized enterprises in two states in southern India: Tamil Nadu and Kerala. She

examined the problems of women entrepreneurs faced during the setting up and

continued operation of their businesses, and the work family conflicts. The initial

problems faced by these women seem to be similar to those faced by women in

western countries.

The elaborate literature survey helped in deciding the possible driving factors for an

individual to become an entrepreneur in the selected three three regions of Kamataka

and also the common factors leading to successful entrepreneurship and the need for

establishing the empirical evidence for the same. This has facilitated framing the

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specific objectives and also the methodology to be adopted to achieve these

objectives. The succeeding chapter deals with the objectives and scope of this

research study apart from detailing the methodology used to meet the stated

objectives.

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