UNIT 3
ENTERPRENUERAL BEHAVIOUR
Innovation is the process of taking a creative idea and turning it into a useful product, service or work method. It implies doing new things, It includes introduction of new products, creation of new markets, application of new method of production, discovery of new and better sources of raw materials and developing a new and better form of industrial organisation. Innovation may be used on the application of knowledge produced by research. Innovation is different from invention. Invention implies discovery of new ideas, new products and new methods whereas innovation refers to the application of inventions to make new combinations and thereby produce satisfaction and profit. According to Paul E. Plsek, “Innovation is the first, practical, concrete implementation of an idea done in a way that brings broad-based, extrinsic recognition to an individual or organisation.” In the words of Peter F. Drucker, “Innovation is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth. ‘
CHARACTERISTICS OF INNOVATION
The characteristics of innovation are-
(i) Innovation implies action, not just conceiving new ideas.
(ii) It is a process of changing, experimenting, transforming and revolutionizing.
(iii) It is a key aspect of entrepreneurial activity,
(iv) It is a “creative destruction”.
(v) It leads to technological changes and employment growth*
(vi) It is a pervasive attitude, feeling, an emotional state, an ongoing commitment to newness,
DIFFERENCE BETWEEN INNOVATION AND INVENTION
Innovation is not similar to invention. Main points of difference between invention and innovation may be summarized as follows :
(1) Nature of Activity: Invention is the creation of something new, whereas innovation is the economic exploitation of the new idea or resource; in other, words, innovation is the transformation of an idea or resource into useful commercial applications.
(2) Results: Invention results in new knowledge. Whereas, innovation results in the products, services, or processes.
(3) Position: All inventors are not innovators, while all innovators are inventors.
RELATIONSHIP BETWEEN INNOVATION AND ENTREPRENEUR
Increasingly, creativity and innovation are seen as being the key to survival in an ever-more competitive and global economy. In fact change and innovation are becoming a ‘way of life’ for most entrepreneurs. An entrepreneur always takes a personal responsibility for encouraging any type of innovative idea, product, or process in the enterprise. Peter Drucker has rightly observed that “Innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or a different service.
It is capable of being presented as a discipline, capable of being learned and practiced. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. Kid they need to know and apply the Principles of successful innovation.” Drucker is of the opinion that an entrepreneur is one who always searches for changes responds to it and exploits it as an opportunity. Innovation is treated as an instrument of entrepreneurship. R.M. Kanter says, “Winning in business today demands innovation” and such is the stark reality facing today s entrepreneurs.
In the dynamic, chaotic world of global competition, entrepreneurs must create new products and services and adopt new technology, if they are to compete successfully, The organisation that is not creative and innovative may not survive. Thus, entrepreneurs are looking for ways to encourage and foster in creativity and innovation on both the individual and the venture level. Thus it can be concluded that innovation and entrepreneurs are indispensable to each other. Both are useless and incomplete in absence of one another.
Key takeaways-
MEANING OF ENTREPRENEURIAL BEHAVIOUR
Behaviour is a manifestation of what a person thinks feels and acts. An entrepreneur is a creative person. Need for self actualization as manifested in the need for achievement forces him to create something new, a new product, a new way of doing things, a new source of raw material, a new market etc. Behaviour is always caused and is never spontaneous. Behaviour is basically goal-oriented. Entrepreneurial Behaviour includes the goal-oriented acts or decisions of an entrepreneur. The entrepreneurial behaviour means the manners or way in which the entrepreneur deals with its total environment: internal and external. It is the way or approach to look at the physical and human resources and the society. The entrepreneurial behaviour is a view of or orientation towards risk-bearing, innovation, achievement, goal-setting, ethics, social responsibility, motivation, challenges and values of human society, and other psychological elements.
CHARACTERISTICS OF ENTREPRENEURIAL BEHAVIOUR
The entrepreneurial behaviour is different from the capitalist’s behaviour. The capitalists assume a traditional or conservative approach. He believes in “safe-playing” while investing his money in the enterprises. He is concerned mainly with his share of interest on his investment. On the other hand, entrepreneur loves to take risk and tends to establish a new enterprise and adopts a new technology, or a new product, or tries to find cut a new raw material. He is always looking out for a new thing or a new method. He is a high achiever. He is guided mainly by achievement motivation. Main characteristics of entrepreneurial behaviour may be summarized as follows:
(1) Initiative Behaviour: It is the entrepreneur who takes or imitate the first move towards setting up of an enterprise. Entrepreneur basically is an innovator who carries out new combinations to initiate and accelerate the process of economic development.
(2) Challenge accepting behaviour: Entrepreneurs take problem as a challenge and put in their best for finding out the most appropriate solution for the same. They will first of all understand the problem and then evolve appropriate strategy for overcoming the problem.
(3) Assertive Behaviour: An assertive person knows what to say, when to say, how to say and whom to say. He believes in his abilities and ensures that others fall in line with his thinking, aimed at promoting the interests of the organisation.
(4) Persuasive Behaviour: A successful entrepreneur through his sound arguments and logical reasoning is in a position to convince others to do the works the way he wants them to do. It is not physical but intellectual force he will use for convincing others.
(5) Effective Monitoring: Entrepreneurs ensure that everything is carried out in their organizations as per their wishes. They ensure regular monitoring of the working so that the goals of the organisation are achieved in best possible manner.
(6) Looking for Opportunity : An entrepreneur is always on the lookout or searching for opportunity and is ready to exploit it in the best interests of the organisation.
(7) Persistence: An entrepreneur is never disheartened by failures. He believes in the Japanese proverb ‘Falls even times, stand up eight’. He follows Try-Try Again for overcoming the obstacles that come in the way of achieving goals.
(8) Information Seeker : A successful entrepreneur always keep his eyes and ear open and is receptive to new ideas which can help him in realizing his goals.
(9) Quality Consciousness: Successful entrepreneurs do not believe in moderate or average performance. They set high quality standards for themselves and then put in their best for achieving these standards. They believe in excellence, which is reflected in everything they do.
(10) Recognizing the importance of Business Relationships : Entrepreneur acts to build report or friendly relationships with customers. He sees interpersonal relationships as a fundamental business resource. He places long-term goodwill over short-term gain.
PSYCHOLOGICAL FACTORS THAT AFFECT THE ENTREPRENEURIAL BEHAVIOUR.
The behaviour of an entrepreneur is dependent largely on his psychology and motives which are the main determinants of behaviour. These motives are based on needs for survival and growth. The movements of an entrepreneur are affected by the psychological background. Many theorists Akouri, McClelland, Javillionar & Winter have given views related to psychological factors as follows:
(1) Achievement Motive: Achievement motive is most important for an entrepreneur. It is this motive which motivates people to do something different and extraordinary so that one may feel that he has achieved or created something which others are not able to do..lt motivates an entrepreneur to take an initiative for innovation. It also makes one personally responsible for his actions and performances. It helps to develop self-reliance and develops the spirit of risk-taking which is very -essential part of entrepreneurial behaviour; one will not establish a unit unless he is prepared to take risk.
(2) Desire to Influence Others: Strong desire of the need for power, helps a person to become a successful institution builder, Thus, it is necessary that an entrepreneur must have the ability of self-management with a strong will power. Thus, they possess a strong desire towards the need of influencing others.
(3) Desire for Independence: Entrepreneur possesses strong desire for independence and it is only due to this desire that they are motivated to start a new business. According to psychologists, the feeling of independence is acquired by them through the family atmosphere. Due to this they do not want to work under anyone rather they like to work independently.
(4) Innovation: This is an important psychological factor Of entrepreneurs. Generally, an entrepreneur does those acts which are not taken up by other persons. They transform the creative ideas into useful applications. Accordmg to Schumpeter, a person is an entrepreneur only when he is an innovator, engaging himself in an innovative behaviour. Thus, innovative behaviour is an entrepreneurial behaviour,
(5) Hope for Success: Entrepreneurs are always hopeful for future success. They work for being successful which enlightens them with the confidence, positive attitude and high energy level. Hope for success makes their behaviour strong and stable.
(6) Calculated Risk Taking: Entrepreneur is a person who is always in a position to accept challenging job, He works on those projects only, which are risky but have a probability of success through their efforts. He does not rely on those ventures, which totally depends on chance. In other words, the entrepreneur believes in calculated risk-taking.
(7) Immediate feedback: Entrepreneur wants immediate feedback of the progress of his entrepreneurial targets so that he can improve the way of achieving the targets and his behaviour changes according to the situations.
(8) Self-Efficacy: An entrepreneur has a drive for self-efficacy. They want to become the problem solver, instead of problem avoiders. They do not want to copy others but they want others to copy them. Further they feel proud of their achievements and live in the present.
(9) Self-Expression: The desire for self-expression appears to be a common thread and may help explain why so many men and women prefer to work for themselves than for someone else.
(10) Self Confidence: Entrepreneurs believe in themselves. They have confidence that they can outdo anyone in their field. They tend not to accept the status quo, believing instead that they can change the facts. Often, they insist the odds are better than the facts would justify. They have winning habits. On the basis of self-confidence, they become overachievers.
PSYCHO-THEORIES AND ENTREPRENEURIAL BEHAVIOUR
Entrepreneurial behaviour is influenced by many psycho-concepts such as perception, motivation, optimism, conditioning, cognition, self actualization or other psychological thoughts, these psychological processes influence the thinking and behaviour of entrepreneur. Main psycho-theories of entrepreneurial behaviour may be discussed as follows:
The entrepreneurship is termed as psychological concept and process. According to this theory, psychological factors are the primary source of entrepreneurship development. Few authors like Schumpeter, McClelland, Hagen and John Kunkell have expressed their opinion about psychological factors affecting entrepreneurship.
According to this theory, an entrepreneurship is important to emerge when the society has sufficient supply of individuals possessing particular psychological elements.
The main psychological theories are as follows:
(i) Joseph A. Schumpeter Theory.
(ii) David C. McClelland Theory.
(iii) Everret E. Hagen’s Theory.
(iv) John Kunkell Theory.
The brief descriptions of each theory are as follows:
(I) JOSEPH ALOIS SCHUMPETER THEORY:
According to Joseph A. Schumpeter, the effective function of an entrepreneur is to start innovation in venture. This theory is also called innovation theory or dynamic theory. According to this theory, the entrepreneurs emerges because of individuals having certain psychological elements i.e., will power, self-intuitions, tolerance capacity. The entrepreneur is a person who has creative nature.
He regarded the entrepreneurship as a catalyst who checks the static conditions of the economy, there by initiates and thrusts a process of economic development i.e., innovation. He carries economy to new height of development.
This innovation includes:
1. Introduction of new goods,
2. Introduction of new methods of production,
3. Opening of a new market,
4. Discovering a new source of raw materials,
5. Carrying out a new source of an organisation.
Although, this theory also included other characteristics i.e., risk taking, superintendence and coordination, he emphasised that these attributes without the ability to innovate will not make an individual as an entrepreneur.
According to him, the following characteristics that appear in the behaviour of an entrepreneur are as follows:
1. An institutional capacity to see the things in a way which afterwards proves to be true.
2. Energy of will and mind to overcome static habits, desires and emotions.
3. The capacity to withstand social opposition.
According to him, an entrepreneur is an innovator who desires to earn profit through innovation. An entrepreneur is neither technical man nor a capitalist but simply an innovator. He introduces something new in the economy. He is motivated by establishing his psychological power. An entrepreneurship is formed for establishing his industrial empire. He has burning desires for creative activities.
He makes a distinction between innovator and inventor. An inventor discovers new methods and new material whereas an innovator is one who utilises or applies inventions and discovers to produce better quality goods that give greater satisfaction to customer and high profit to entrepreneurs. In this way, an entrepreneur is an innovator.
Schumpeter made it clear that an entrepreneur doesn’t have a single person but equal to an organisation. “What matter is the behaviour not the actor?” He emphasised more on technological innovations rather than on organizational innovations. “Entrepreneurs are certainly not economic men in the theoretical sense.”
Critical Evaluation of J. A. Schumpeter Theory:
In this theory, the main theme is the innovation. He makes a distinction between an innovator and an inventor. According to him, an inventor discovers new methods and new materials. But an innovator is one who applies inventions and discovers in order to make new combination.
With the help of new combination, he produces a newer and better goods which yields satisfaction as well as profits. Schumpeter’s concept of entrepreneurship is quite broad based. It includes not only the independent businessmen but also executives and managers who actually undertake innovative functions.
(ii) DAVID C. MCCLELLAND’S THEORY:
David C. McClelland has given a particular concept of entrepreneurship. According to him, needs for high achievement is an essential feature of entrepreneurial behaviour. According to McClelland, “Burning desire of need for achievement attracts an entrepreneur for activities.”
The primary basis of the development of an entrepreneurship is achievement orientation. The capacity of becoming an entrepreneur develops due to desire of reaching heights of excellence and specific performance.
For achieving heights of excellence and specific performances, an entrepreneur needs rational thinking, new combinations, deep thinking, power etc. The achievement motive is uncalculated through child rearing practices, which stress standards of excellences, material warmth, self-reliance training a low, further dominance. Individuals with high achievement motive tend to take keen interest in situation of high risk desire for responsibility and a desire for a Concrete measure of task performance.
His views can be expressed by means of the following points:
a. Ideological Values,
b. Family Socialisation,
c. Need for Achievement,
d. Entrepreneurial Behaviour.
The following elements which are focused by McClelland are as follows:
a. Achievement Orientation,
b. Height of Excellence,
c. Imagination Power,
d. New Combination.
According to McClelland, needs for high achievement drives individual towards entrepreneurial activities. High achievement need can be developed through child rearing and schooling practices. People with high achievement need are not motivated by monetary rewards only, such people regard profit as a measure of success whereas people with low achievement needs are motivated by monetary rewards.
People with a high need for achievement derive satisfaction from achieving goals. High achievers want immediate feedback on their power performances. He has been able to establish the desirability of high need for achievement for entrepreneurial success in the economic development of country.
A drive to influence others and situations. It refers to one’s desire to influence and dominate other through use of authority. Goal’s achievement is less important than the means by which goals are achieved. McClelland and his associates have found that people with high power needs have a great concern for exercising influence and control.
McClelland theory is not free from criticism:
1. There is strong evidence to indicate from politics and religion that adult behaviour can be molded or drastically altered in a relatively short time.
2. The contention that needs are permanently acquired.
Inspite of the above discussion, this theory highlights the importance of matching the individual and the job. People with high achievement needs success on work i.e., challenging, satisfying, stimulating and complexing. People with low achievement needs stability security and predictability.
Critical Evaluation of David McClelland’s Theory:
The psychological roots of entrepreneurship reveal that high achievement orientation ensures the success of entrepreneurs. But the empirical tools of concept used by McClelland are found to be highly suspect.
Empirical investigation also needs the following:
(1) It is necessary to create a climate to enable the children to grow and become individuals with high achievement.
(2) It is possible to improve the performance of existing entrepreneur through imparting proper training and education.
(III) EVERETT E. HAGEN’S THEORY:
Everett E. Hagen has also given a particular concept about an entrepreneurship. He has developed the theory of withdrawal of status. Hagen says, “Entrepreneurship is a function of status withdrawal.”
“Creativeness of disadvantaged minority group is the main source of entrepreneurship.” —Everett E. Hagen
Hagen considers “withdrawal of status respect as the trigger mechanism of change in personality formation” as entrepreneurship status withdrawal is the act of seeing on the part of some social group. The origin of this concept of psychological theory of entrepreneurship is based on Samurai community of Japan.
According to Hagen’s concept status withdrawal as fall of status of social group is the primary cause of personality development. Hagen identifies the following four types of events that can produce status withdrawal and prestige fall.
(1) Displacement of valued symbols.
(2) Denigrations of status symbols with a changing distribution of economic power.
(3) Inconsistency of status symbols with a changing distribution of economic power.
(4) No acceptance of expected status on migration to a new society.
Hagen opined that creative innovation or change is the basic feature of economic growth. He describes an entrepreneur as a creative problem shooter interested in things in the practical and technological realm. Such type of individual feels a sense of increased pleasure when facing a problem and tolerates disorder without discomfort. In traditional societies, position of authority are granted on the basis of status, rather than individual ability. That is why he visualised an innovative personality.
There are 4 responses:
(1) One who combines to work in the society but remains indifferent to work and position is called Retreatist.
(2) One who adopts a kind of defensive behaviour and acts in the ways accepted and approved in his society but with hopes on of improving his position is called Ritualist.
(3) One who forms a rebellion and attempts to establish a new society is called Reformist.
(4) A creative individual who is likely to be an entrepreneur is called Innovator.
Innovation requires creative and such creative individuals cause economic growth. Whenever there is a withdrawal of status respect, it would give rise to birth of innovation of a creative individual who is likely to be an entrepreneur.
Critical Evaluation of E. Hagen’s Theory:
This theory acts as distinction between entrepreneurship and intrapreneurship. There are different factors within the organisation which motivate the executives and professionals to do some innovative behaviour leading to new product and services.
Actually, they are not governed by status withdrawal. The theory only suggests that the people who had enjoyed social standing at some stage in their histories fall into a retreatist phase with an urge to regain the lost status and emerge as an entrepreneurship personality.
(IV) JOHN H. KUNKEL’S THEORY:
John H. Kunkel has also given a particular concept about entrepreneurship. He has presented a theory of entrepreneurial behaviour in connection to the development of entrepreneurship. Kunkel’s theory is concerned with the expressed activities of individuals and their relations to the previous and present surroundings, social structures, physical conditions and behavioural patterns determined by reinforcing and opposing present in the context.
Hence, entrepreneurial behaviour is a function of surrounding and social structures, both past and present and can be readily influenced by the manipulative economic and social incentives.
Kunkel, “The supply and development of an entrepreneur depends upon the existence and extensiveness of four structure i.e., limitation structure, demand structure, opportunity structure, and labour structure.”
He has given stress on the following four types of structure for the development of entrepreneurship:
1. Demand structure,
2. Opportunity structure,
3. Labour structure,
4. Limitation structure.
The description of each point is given as follows:
1. Demand Structure- The demand structure is of economic nature. This structure is changing day by day according to economic progress and government policies. The behaviour of individual can be made enterprising by affecting the main elements of demand structure.
2. Opportunity structure- The opportunity structure is formed by combination of supply of capital, managerial and technical skill production methods, labour and market, training opportunity establishment of an enterprise and conducting different activities.
3. Labour structure- The labour structure is directed by several factors such as source of livelihood, traditional outlook and life ambitions. The quality of labour influences the emergence and growth of entrepreneurship. Rather than capital intensive, labour intensive will serve our interest in a better manner. The problem of labour immobility can be solved by providing infrastructural facilities including efficient transportation wherever an entrepreneurship is promoted.
4. Limitation structure- We can say that the limitation structure is social and cultural. This structure affects the development of an entrepreneur.
Critical Evaluation of Kunkel Theory:
The theory assumes the ideal structures for the supply of entrepreneur. But generally there is discrepancy between objectives, structures and the actual incidence of entrepreneurs. It is due to the fact that there are inadequate or incorrect perceptions. In practice, entrepreneurship is also governed by the specific combination of circumstances which are generally not available in the environment.
At last but not the least, we conclude that all the authors i.e., J. A. Schumpeter, David C. McClelland, Everett E. Hagen and John H. Kunkel have given their own opinion on concept of psychological theory of entrepreneurship. This theory presents the certain psychological motives that are responsible for the evolution of entrepreneurship. The main point which is focused on all the theories is on the individual and his personality inference by environment factors in general and internal values in particulars.
Key takeaways-
3.3 SOCIAL RESPONSIBILITY OF ENTREPRENEUR
INTRODUCTION TO SOCIAL RESPONSIBILITY OF ENTREPRENEUR
“The entrepreneur is the pivot of development,” this statement attracts our attention towards the importance of entrepreneurs in economic development. Economic development of a country takes place when output increases as a result of entrepreneurial activity. The entrepreneur is the central figure in the process of development. The economic development of a country to a large extent depends on human resources. But the human resources alone cannot bring economic development and for solving this purpose, there must be dynamic entrepreneurs. A country maybe rich in natural resources but if it lacks in dynamic entrepreneurs then, it may not be able to utilise the resources and it may lag in economic development. Entrepreneurs are action oriented, highly motivated individuals who take risks to achieve goals. An entrepreneur is one who looks for opportunities, identifies and seizes them mainly for profit. Entrepreneurs perform vital functions in economic development. They have been referred to as the human agents needed to mobilize capital, to exploit natural resources, to create markets and to carry on trade. It has been well said that entrepreneurial inputs spells the difference between prosperity and poverty among nations.
MEANING AND DEFINITIONS OF SOCIAL RESPONSIBILITY
Business ventures are a unit of society in which they operate. These enterprises depend on society for the needed resources like men, material, capital and also for selling their products. In fact, business depends on the society for its existence, growth and promotion. Hence entrepreneurs have a definite social role and responsibility towards the society. Social responsibility denotes the responsibility of the business towards various sections of the society.
Businessmen must consider wider public interest while taking business decisions. A few scholars have defined ‘social responsibility’ in the following way :
According to Koontz and O’Donnell, “Social responsibility is the personal obligation of every one, as he acts in his own interest, to assure that the rights and legitimate interests of all others are not infringed.”
In the words of Adolph Berle, “Social responsibility is the business’s responsiveness to public consensus, i.e., the obligation of the business to meet those demands and aspirations of the society about which there is public consensus.” H.R. Bowen defines as “Social responsibility is the obligation to pursue those policies, to make those decisions or to follow those lines of action which are desirable in terms of objectives and values of our society,”
Nicholas Sirpolis has defined social responsibility as: “The circle of care and concern that a business has for the well-being of society. ”
PROFIT MOTIVE AND SOCIAL RESPONSIBILITIES
It is a misnomer that the concept of social responsibilities is against the profit motive. Some scholars have views that entrepreneur’s primary responsibility is to earn profit for stock-holders. Milton Friedman has observed, “There is one and only one social responsibility of business i.e., to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game which is to say it engages in open and free competition without deception or fraud.” According to Henry Ford Il the foremost social responsibility of business lies in earying out its operations efficiently and economically. He observes,
“Today we need the phrase ‘business is business”‘ to remind us that business is not first and foremost a social institution, a charitable agency, a cultural gathering, community service, a public spirited citizen. It is an action organisation geared to produce economic results in competition with other business. On the other hand, some scholar’s views that enterprise are not independent entities responsible only to stock-holders. They also have a responsibility to the larger society that provide their creation through various laws and regulations and supports them by purchasing their products and services. Peter F. Drucker has observed, “Business should develop concern for society and pursue welfare activities which should form an important area of its operation. It is a demand that quality of life becomes the business of business. The new demand for business is to make social values and beliefs, create freedom for individual and al-together produce good society. ” Socially responsible behaviour of an entrepreneur not only helps the society but is also self-rewarding for the venture in several ways.
ARGUMENTS ‘FOR’ ENTREPRENEUR’S SOCIAL RESPONSIBILITY
The arguments supporting a major role for the social responsibility of entrepreneurs are as follows:
(1) Moral Justification: There is a growing realization that it is the moral duty of business houses to serve the society. They enjoy wide economic and social power. Their power should be balanced with social responsibility. Business has the resources and capabilities to solve social problems.
(2) Long-term Self-interest of Business: In the long run, no business enterprise can survive and grow unless it enjoys a good image in the public. The image of the firm can be improved in the eyes of the society by serving their (society) interests.
(3) Public Image: Socially responsible behaviour create a positive public image of an enterprise.
(4) Profitable Opportunities: That Business has little chance of success in a society which is plagued with enormous problems and evils. Business can meet the challenges by converting the problems into profitable opportunities. The securities of a socially responsible company enjoy a wider market among the investors.
(5) Ensuring Law and Order: To maintain law and order in a country, business should shoulder its responsibilities towards the society, otherwise people will resort to anti-social activities which may ultimately harm business. The doctrine of social responsibilities is helpful in ensuring law and order in the society. It is a preventive measure against social disorders.
(6) Balance of Responsibility and Power: Since business entrepreneurs already have a great deal of social power, their social responsibility should be equally great.
(7) Public Expectations: There is a deep conviction that entrepreneur has a clear obligation to the good of the greater society. The business enterprise is expected to be efficient, profitable and at the same time socially responsible.
(8) Interdependence: Society and business affect each other. For example, goods and services provided by the business determine the standard of living in the society. In case business does not produce and supplies goods of good quality at moderate prices, society will react and stop inputs in business. Therefore, it is in the interest of the business to be responsible to its social obligations.
ARGUMENTS “AGAINST” ENTREPRENEUR’S SOCIAL RESPONSIBILITY
The major arguments against the assumption of broad social responsibilities include the following:
(1) Reduction in Total Profits: It is thought that diverting resources away from the firm to socially responsible programmers may undermine the competitive strength of entrepreneur.
(2) Financial Burden on the Institution: Social obligations can be very expensive and may cause entrepreneurs to forgo attractive business investments or even to go out of business.
(3) Lack of Skills: Most entrepreneurs do not have the skills and training to work effectively with social issues.
(4) Lack of Accountability: There is no way to hold entrepreneurs accountable for the outcomes of its social programmes.
(5) Dilution of Purpose: The pursuit of social goals may dilute the economic productivity of the business enterprise.
SOCIAL RESPONSIBILITY OF ENTREPRENEUR TOWARDS DIFFERENT SECTIONS OF SOCIETY
Business enterprise requires to discharge social responsibilities not only towards society but also towards other social groups like employees, customers, suppliers, government, creditors, unions and the global community. Social responsibility of entrepreneur towards different sections of society may be summarized as follows:
(1) Social Responsibility towards the Customers: It is truly said that “Customers are the life blood of every business.” The major social responsibility of entrepreneur towards customers includes the following.
(i) Producing and supplying goods at reasonable prices,
(ii) Avoiding creation of artificial scarcities.
(iii) Providing after-sale-services.
(iv) To Furnish needed information to prospective customers concerning product composition and its quality.
(v) To ensure the health and safety of customers,
(vi) To prevent formation of monopolies with the, intention of exploiting customers.
(vii) Revealing truth in advertising and levels.
(viii) To respect the integrity of the culture of the customers.
(ix) To ascertain consumer preferences and consumer satisfaction.
(x) To work within the framework of various consumer laws and legislations.
(2) Responsibility towards the Employees: Employees produce wealth for the business and give their best service and share in the resulting profits. Business entrepreneurs have significant responsibilities towards employees. Entrepreneur’s basic obligations to its employees are:
(i) To provide the opportunity for training, promotion and advancement.
(ii) To provide better working conditions and good physical facilities.
(iii) To place an employee in a position for which he is best suited by his skills and interest.
(iv) To start welfare and profit sharing plans for employees.
(v) To satisfy “employee dignity” by allowing him work freedom, self-realisation. It is the responsibility to treat each employee as an entity and not as in impersonal part of a group of humans.
(vi) To recognize the workers right to a fair wage, a right to participate in decisions affecting their working life, to membership of a trade union.
(vii) To settle employee’s grievances and disputes smoothly.
(3) Responsibility towards Suppliers and Creditors: Business also owns responsibility towards suppliers, dealers and creditors as follows:
(i) All dealings with suppliers should be on fair terms regarding price, quality, delivery, payment etc.
(ii) Business must provide accurate and correct information to creditors and suppliers;
(iii) To avoid malicious propaganda, price-cutting, cut-throat competition, unhealthy combinations, interference in production and distribution and other dishonest trade practices.
(iv) To avoid exploitation of small competitors.
(v) To create adequate, fair and inter-business relationship.
(vi) To provide information regarding change in habits, fashion and choices of customers,
(vii) To promote local suppliers.
(viii) To make payment of interest at appropriate time.
(ix) To make appropriate use of debt capital.
(4) Responsibilities towards the Community: A few responsibilities of entrepreneur towards the community are as follows:
(i) To preserve, maintain and improve the natural wealth and resources ofthe society.
(ii) Economic use of natural resources so that these are not eliminated at a faster rate.
(iii) Control of pollution by providing necessary pollution-control devices in the factories, and by facilitating pollution-control measures in the society.
(iv) Establishing of new business units in backward regions, and especially for handicapped people and weaker sections of the society.
(v) Financial support for providing education facilities in rural areas.
(vi) Helping in health and hygiene programmes in the society.
(vii) Creation of their own townships in order to provide living places and facilities to their own workers.
(viii) To provide assistance at the time of any natural calamities like flood, drought, famine etc.
5. Responsibilities towards the State and the Nation: Entrepreneurs owe obligation towards the Government too. Their responsibility is:
(i) To obey the rules, regulations and the laws set forth by local, State and federal governments.
(ii) To pay its dues and taxes to the government fully and honestly.
(iii) To conduct business in accordance with government policies.
(iv) Not to corrupt public servants and democratic processes.
(v) To avoid buying the political favor by any means.
(vi) To help government in overall planning for nation’s well-being.
6. Responsibilities towards the Business Enterprise itself: Entrepreneur is a trustee of the resources of the society. He has to always maintain his business efficient and productive so that he can fulfill his responsibilities towards other sections of the society, only a, healthy business can perform its social obligations. Thus, entrepreneurs have to fulfill the, following obligations towards the business enterprise:
(i) To operate business efficiently at minimum cost
(ii) To make efforts for continuous growth and expansion of business
(iii) To act as an innovator.
(iv) To maintain its wealth-producing resources intact by making adequate profits to offset the risk of economic activity.
(v) He must always, in every decision and action, put economic performance first. Business can only justify its existence and its authority by the economic results it produces.
(vi) To encourage inventions.
(vii) To protect the interest of the enterprise.
(viii) To make optimum use of resources.
(ix) He must tries to achieve the goals of the business.
Key takeaways-
REFERENCES:-
1) Dr. R.K Pathak, M.C Kalwar, Business Organisation and Entrepreneurship Development, Ashok Publication.
2) Dr. S.S Khanka, Entrepreneurship, Entrepreneurship Development, S. Chand Publication.
3) S.S. Sarkar, R.K. Sharma, Shashi K. Gupta, Business Studies, Kalyani Publication.
