17882 entrepreneurship shrumpeter 2012

International Conference on Entrepreneurship Celebrating Centenary Year of Schumpeter Jointly Organized by SME Business Support Fund

and SURE Institute Lahore Dec. 9-11, 2012 Research Paper by Prof S. Tahir Mehmood Kiani - Doctor Sidra Kiani - Doctor M Raza T. Kiani

Professor S. Tahir Mehmood Kiani - Sarhad University of Science & IT

E n t r e p r e n e u r s h i p

Wealth Creation in

Rural Communities incorporating innovation and entrepreneurship skills development for sustainability

through the lens of Schumpeter!

Rural Entrepreneurship Development Insight Next Rural Revolution Sarhad University of Science & IT

Series of articles by Department of Management Sciences Sarhad University of Science & IT 2009-2012*




International Conference on Entrepreneurship Celebrating

Centenary Year of Schumpeter! L A H O R E

Dec. 9-11, 2012 Research Paper

Wealth Creation in Rural Communities incorporating innovation and

entrepreneurship skills development for sustainability through the lens of

Schumpeter!

Rural Entrepreneurship Development Insight




Sarhad University of Science & IT

Series of articles by Department of Management Sciences

Sarhad University of Science & IT 2009-2012*




Determinants of Rural

Entrepreneurship in

Pakistan




Professor Sultan Tahir Mehmood Kiani

Sarhad University of Science & IT

Walden University USA - [email protected]

Dr. Sidra Kiani

State Medical University Semi Kazakhstan,

Department of Healthcare Management & Policy

University of Surrey UK

Dr. M Raza Tahir Kayani

State Medical University Semi Kazakhstan

mailto:[email protected]




“Most new jobs won’t come from our biggest

employers. They will come from our smallest. We’ve

got to do everything we can to make entrepreneurial

dreams a reality”.

(ROSS PEROT)




Abstract:

Target group: Rural communities, Graduating Students, researchers in Microfinance field, MFI’s, NGO’s and Governmental

structures. Research Question: How do entrepreneurship skills development, micro financing and social entrepreneurship

serves as a sustainable combined tool to alleviate poverty, empower rural communities and contribute to sustainable

development in rural 65 percent of Pakistan? The paper focuses on the (most power full entrepreneurial muscle) rural assets of the

agro based economy of Pakistan, where 65% population lives in harsh rurality. The 42% skilled and non skilled HR is absorbed by the

agro economy. The 9 million dairy production houses that produce 177 - 540 billion rupees milk stands at 4th in the world. The rural

agriculture sector further contributes 24% of the GDP and exports of over $ 5-8 billions raw agricultural products and venturing off the

farm entrepreneurship, yet the rural communities are experiencing extreme poverty and deprivation. The paper develops and refines

focus to rural area culture, working conditions, communities cognition levels, collective activities, micro entrepreneurship, micro

financing and recognition of existing opportunities in rural Pakistan. The rural entity is becoming an abuse due to shortage of

technology, water, electricity and poor governance in the country.

The previous researches on entrepreneurship has been scattered and fragmented, no significant literature and data sets are available to

empirically compare the facets of entrepreneurship discipline and especially the topology of skills of the rural communities for micro

entrepreneurship, micro financing for boot strapping and to measure the predicted sustainability. The paper further develops and

correlates the empirical data on the preferences and choices of rural communities for micro entrepreneurship, matching with the

existing rural and end user urban infrastructures and industrial units. The empirical data consists of 30 selected rural youth’s interviews

from KPK North Waziristan, rural Agencies and adjoining areas. The discussion pertaining to the miseries of rural entrepreneurship in




Pakistan revolves around lack of Government policies, financing, inadequate micro entrepreneurial skills (topology of skills

comparison) and hallow contribution by Universities, lack of micro financing opportunities, and old vintage technology of rural

infrastructures. The study incorporates and discusses the need of rural education and skills development modules of rural motivation,

entrepreneurship management, rural infrastructures mobilization, set of skills development, business plans cadres and rural dedicated

programs by universities which can play pivotal role for grooming the graduating students to act as economic engines within their

communities and address abandoned rural green valleys’ boundaries. There has to be next rural revolution for the sustainability of 65 %

population of Pakistan and 52% rural communities of the world.

Key words: Rurality, Human Resource (HR), Khyber Pukhtunistan (KPK), Entrepreneurship, Entrepreneurial muscle, Financing,

Rural skills, Infrastructure, Economic engines, Rural revolution.




Schumpeter describes entrepreneurs as visionary change management

agents (Sandberg, 1992) who introduce new economic activity that leads to

a change in the market. From Schumpeter’s point of view, an

entrepreneur is not necessarily the one who puts up the initial capital or

invents new products, but a person who participates with innovative

business idea.

International Conference on Entrepreneurship Celebrating Centenary Year of Schumpeter Jointly

Organized by SME Business Support Fund and SURE Institute Lahore Dec. 9-11, 2012 Research

Paper by Prof S. Tahir Mehmood Kiani - Doctor Sidra Kiani - Doctor M Raza T. Kiani


Determinants of Rural Entrepreneurship

in Pakistan

Background

The domain of Social entrepreneurship has

been the subject of considerable interest in

the management and Entrepreneurial

literature as it encompasses the social

problems and issues of communities in

broader spectrum especially in rural areas of

developing economies. The Governments,

Universities and academia have encouraged

graduating students to devise entrepreneurial

plans, cadres, courses and biz plan

competition to foster entrepreneurial spirit,

confidence and initiative for self

employment and becoming economic

engines within their communities. It is of

paramount importance to engage with the

evidence recording process in a way that it

improves the ecological validity of results

and minimizes undesired multidirectional

biases in the minds of the future graduating

entrepreneurs’ and future economic engines.

The Karl Marx’s authoritative economic

model and theory of Communism’ worked

for decades as instrumental tool of economic

growth and production till it was out dated

and replaced by the Capitalism as economic

growth and social welfare engine. The

mighty China and Russia also followed to

capitalistic economic model characterized

by profit-maximizing for private enterprises.

Today China has designed its economy on

export drive entrepreneurship and

intrapreneurship model and maximized

cheap production and increase in exports.

However the 9/11 and the collapse of the

mortgage and financial industries, banks and

stocks triggered the global recession, which

has yet to stabilize and still poses challenge

for the capitalistic economic model. The

entrepreneurship is acting as stabilization

factor and taken over as self sustained

economic engines.

Empirical Literature Review

The nineteenth century has been significant

for the emergence of industrial growth and

birth of Joseph Schumpeter’s (1885-1950)

thoughts on the entrepreneurship and social

entrepreneurship as drivers of the economy

and self employment economic engines.

Schumpeter’ gave three visionary narratives

on the merits of entrepreneurship of society

and the economy growth.

First, Schumpeter describes entrepreneurs

as visionary change management agents

(Sandberg, 1992) who introduce new

economic activity that leads to a change in

the market. From Schumpeter’s point of

view, an entrepreneur is not necessarily the

one who puts up the initial capital or invents

new products, but a person who participates

with innovative business idea.

Consequently, the creative activity of the

entrepreneur is independent of the

organizational or legal setting in which

he/she may operate and practice innovative

ideas.

Second, entrepreneurship is natural skills

set, and the one who perfects and applies it

for micro and macro businesses and

vertically integrating with main hubs of

market(s) for revenue generation. The

entrepreneur remains linked with market and

continues for certain period in the business

activity and finally reverts to the usual

business activity (Schumpeter, 1980).

Third, Schumpeter opined with authority

that entrepreneurship is all about making an

innovative difference and acts as corner

stone of the economies. The entrepreneur is

an agent of the firm, alters the present





business practices and innovates new business direction and designs doctrine

to move into new direction (Christensen,

2003; Davidsson, 2003:318; Mintzberg at

al., 1998:125). The mostly advocated aspect

in the Schumpeterian theory is the market

driven and market growth affected activity

adopted by the entrepreneurs with new idea

and innovation, that he does not flows with

the old routine but enter new idea and

products and services, may it be

environment friendly and cheaper product

with new features.

The discipline of entrepreneurship is vital

link in the management and business

sciences but, still in infancy and lacks

coherent direction and study to establish the

accepted paradigms (Brown et al., 2001;

Busenitz et al, 2003; Gartner, 2001; Aldrich

and Baker 1997; Murphy et al, 2006; Shane

and Venkataraman, 2000; Sexton and

Landström, 2000) agreed that the discipline

of entrepreneurship is new, shaping fast and

gathering new knowledge which is

significant in the micro enterprises and

micro business set ups and bootstrapping.

The domain of entrepreneurship is complex

and possesses many direction for the

entrepreneurs to explore the new micro

business with new idea and some kind of

innovation to capture the attention of the

present market, the very essence of the

entrepreneurs has been coined by the

Schumpeterian theory as strategic game

player. Who opens business and bootstraps

in micro business start up environments

(Elfring and Hulsink, 2007; Hite, 2005;

Larson and Starr, 1993; Szabó, 2007). In

nut shell Schumpeter (1934) described the

nascent entrepreneurs and the

entrepreneurship as driver of the market

economy. He opined that the entrepreneurs

impulse the economic motion, through their

opportunity recognition capabilities and

locus.

Rural Entrepreneurship is a Varying

concept in nature and somewhat in practice

and application at various geographical

locations and cultures. But all the research’s

and definitions agree that the aim is almost

same to create self employment and to make

best use of the Infrastructures and fight

growing poverty and tightening situation in

urban and rural areas specially in Asia &

Sub Continent, “The phenomenon of value

creation within new or existing businesses.

The entrepreneur has to be able to

find ways and means of creating and

developing a profitable business. McElwee,

(2005) wrote entrepreneurship is therefore

different from professional and management

tasks and activities, although it affects all

professional and management activities. He

further quotes Corman and Lussier (1996),

who stated that the ability to operate an

organization requires different skills and

abilities than those required for being an

entrepreneur. It is true that rural

entrepreneurship is more challenging being

away from Technological hubs and main

facilitations and market thus making rural

community more isolated and primitive and

slow growing phenomena.

The rural population of Pakistan faces

many challenges being away from main

education centers, facilitation set ups and

main markets. The farmers and rural

entrepreneurs do not possess adequate

entrepreneurial skills and financial support

to Innovate and expand their present

ventures. The remoteness of rural areas and

old technology further aggravates prevailing

mess and poverty in 65% of rural Pakistan.





Murphy, Liao & Welsch (2006) emphasized

that the entrepreneurs transpire innovation

and bring positive changes through their

knowledge and futuristic vision and create

economic activity in

any society. The entrepreneurs affect change

and apply their skills when they have

resources and opportunities.

This theory argues that entrepreneurs

have individual-specific resources that

facilitate the recognition of new

opportunities and the assembling of new

resources for the emerging firm Research

shows that some persons are more able to

recognize and exploit opportunities than

others because they have better access to

information and knowledge. The argument

that the possession of” individual specific

“resources and infrastructure in rural or

urban setups facilitates the creation and

recognition of opportunities and it is

important that the individuals have the

entrepreneurial ability to muster and

recognize these opportunities (Aldrich,

1999; Alvarez & Busenitz, 2001; Anderson

& Miller, 2003, Shane 2000, 2003; Shane &

Venkataraman, 2000).

The cadre of entrepreneurs is extension

of larger social net work structure; where

they operate and derive value form the

surfacing opportunities (Clausen, 2006).

The opportunities can be utilized to create

value provided the entrepreneurs have the

necessary social net work (Shane and

Eckhardt 2003). The stronger links with

suppliers and the social net working can

bring the possibilities of the opportunities

recognition and exploitation for value

creation (Aldrich & Zimmers, 1986). The

opportunity recognition and value creation

for nascent entrepreneurs would be easy task

if they have strong social net working of the

entrepreneurs group (Aldrich & Cliff, 2003;

Gartner et al, 2004; Kim, Aldrich & Keister,

2003).

The combination of “education and

experience may be heterogeneously

distributed in family “makes a stronger

factor for the entrepreneurship designing

and operating methodology (Anderson &

Miller, 2003; Becker, 1975; Chandler &

Hanks, 1998; Gartner et al, 2005, Shane &

Venkataraman, 2000). Empirical studies

show that human capital factors are

positively related to becoming a nascent

Entrepreneur the family business continue

for next generations to be nascent

entrepreneur in same or other niche (Kim,

Aldrich & Keister, 2003; Davidson &

Honing 2003; Korunka et al, 2003). The

creation and value creation for success full

entrepreneurial operations (Anderson &

Miller, 2003; Davidson & Honing, 2003).

The underpinned by ample background

knowledge and the disciplines of economic,

psychological, sociological, anthropological,

opportunity-based, to resource based have

been substantiated by ample evidence from

the past and the present examples. These

studies and entrepreneurial concepts have

brighter future and furthering reflections for

rural entrepreneurship in Pakistan by

creating new entrepreneurial communities

and business hubs as explained in diagram:

Figure 1.1.





Rural Urban

Rural Problems

No Entrepreneurship

Single economy/lack of micro financing

Unemployment

Educated youth migrated to urban areas Migration

Entrepreneurial Migration

Shaping & Changing Communities

Rural Problems

No Entrepreneurship

Single economy/lack of micro financing

Unemployment Migration

Educated youth migrated to urban areas

Entrepreneurial Diversified

Job creation- opportunity

New Rural Communities Finances – Consultants New Rural Communities

Migration Markets/Business

Vertical Integration

Migration of entrepreneurs

New Rural Communities

New Rural Communities

Figure 1.1 shows the migration trends in Swat, Dir and Chitral and growth of the new communities.

Discovering

New markets

Rural

Communities

New Rural

Communities

Urban Economic &

Investment Hubs

New Rural

Grouping

Communitie

s

Urban

Economic &

commercial

markets

Rural

Communities

Urban

Education

Hubs





Name

Micro Business Type

Employees

Age

Education

Marital

Status

Type & Business

Background

M.Khan Dairy Production 6 49 - M +5 kids Family Business

Wali H Vender Meat shop 1 57 - M+4 Kids Family Business

Gul Kahan Vender shoe repair 1 47 - S Family Business

M. Shamrez Entrepreneur/Grocery store 1 39 Secondary S New Micro

Business

Ali Timber micro business 4 53 FA M +4 Kids Family Business

Ahmed Transportation 2 48 Middle S Family Out

Gull Wali Property Development 2 56 BA M =3 Kids Family Business

Derwash K Home made products

Bakery

1 48 Middle S Family In

Haroon K Grocery shop 1 26 Middle S Family In

Hamza Restaurant 3 29 Secondary M+6 kids Family Business

Rashid Poultry Farms 3 22 - M+6 Kids Family Business

Data Table 1.2 Selected: Purposive sample (socio cultural graphics) from Swat, Dir &

Chitral rural areas 2010- 2011 Survey





METHODS AND MATERIALS

The study was a descriptive co relational

survey. The target population for the study

included rural and urban entrepreneurs of

Khyber Paktunkhawa (KPK) of Pakistan.

The accessible sample was 123

entrepreneurs active in tourism, taxi drivers,

shop keepers, dairy farming, agricultural and

livestock production. Data was collected via

Purposive sampling survey questionnaire

designed by the researcher. It contained 43

questions using seven-point Lickert type

scale. Content and face validity for the

questionnaire was established by a panel of

experts. All survey data were analyzed using

the Statistical Package16 for Social

Sciences.

RESULTS

Descriptive analysis of the study

revealed the following about the

demographic information of the

respondents. Among the three age groups

(14 -45 -55- 65 - 40, 41 and 60), the

majority of respondents belonged to 25 – 45

group. Less than 7 % of the respondents

were women, and 93 % of the respondents

were men. The respondents who were

middle educated, (39%) percentage had

high-school diploma. However, 8 % of the

respondents had bachelor or some higher

degrees. Moreover, 18% of the respondents

were illiterate. The majority of the

respondents were involved in agriculture

(18%), poultry and farming (9%)

respectively. Almost 69 % of the

respondents were married while the rest

being single.

The results of correlation analysis

indicated that there was a significant

relationship between independent variables

(micro finance, motivation, Infrastructures,

literacy/skills, and technology and success

of dependent variable entrepreneurial

sustainability of the rural communities.

Regression analysis revealed that 91% of

changes in (success of entrepreneurial

sustainability) could be predicted by five

independent variables (micro finance,

motivation, Infrastructures, literacy/skills,

technology and cognition Levels for success

of entrepreneurial sustainability. Table 1

illustrates coefficient correlation (R) and R2

of each independent variable with the

dependent variable.





Figure: 1.3 Independent & Dependent Variables





Table 1.4 Regression Analysis of effective factors in success of entrepreneurs

Variables

Correlation

Coefficient

(R2)

B β Significance

Level

Micro Finance

Motivation

Literacy/skills

Infrastructures

Technology

Opportunities/

Cognition Levels

.704

.777

.852

.872

.886

.299

0.605

1.181

0.411

0.487

0.488

0.044

0.427

0.279

0.329

0.229

0.322

0.022

0.00

0.00

0.00

0.00

0.00

0.00

Table 1.4 illustrates coefficient correlation (R) and R2 of each dependent variable with the

independent variable

Explanation: The 6 independent variables (Micro financing, motivation, Literacy/Skills,

Infrastructures, Technology, Opportunities/Cognition Levels) and dependent (Entrepreneurial

Success) variable correlate with each other and support the dependant variable entrepreneurial

success for the 65 % poor communities of the rural Pakistan. The statistical regression analysis





significance levels have further substantiated the correlation between the variables and

entrepreneurial success.

.63 .49

.44

.53 .30

.32

.55

.88

.50

.55

.17

.22 .40

.11

.11

Figure: 1.5 Chisq, Structural equation modeling.

Micro Financing

Literacy/ Skills

Infrastructures

Technology

Motivation

Cognition Levels

Entrepreneurial

Sustainability





Results & Discussion

Descriptive analysis of the study

revealed the following about the

demographic information of the

respondents. Among the three age groups

(16 -40 -54- 65 - 40, 41 and 60), the

majority of respondents belonged to 24 – 40

group. Less than 6 % of the respondents

were women, and 94 % of the respondents

were men. The respondents who were

middle educated, percentage (39%) had

high-school diploma. However, 8 % of the

respondents had bachelor or some higher

degrees. Moreover, 8% of the respondents

were illiterate. The majority of the

respondents were involved in agriculture

(18%), and poultry husbandry (9%)

respectively. Almost 82 % of the

respondents were married while the rest

being single.

The results of correlation analysis

indicated that there was a significant



literacy/skills, cognition levels, technology

which proved the success of entrepreneurial

sustainability of the rural communities.

Regression analysis revealed that 91% of

changes in dependent variable (success of

entrepreneurial sustainability) could be

predicted by six independent variables


literacy/skills, technology and Cognition

Levels result success of entrepreneurial

sustainability. Table 1 illustrates coefficient

correlation (R) and R2 of each independent

variable with the dependent variable.

Conclusion

The paper focuses on the (most power

full entrepreneurial muscle) rural assets of

the agro based economy of Pakistan, where

65% population lives in harsh rurality. The

42% skilled and non skilled HR is absorbed

by the agro economy. The 9 million dairy

production houses that produce 177 - 540

billion rupees milk stands at 4th in the world.

But there is no dedicated support and micro

financing from Government. The rural

agriculture sector further contributes 24% of

the GDP and exports of over $ 5-8 billions

raw agricultural products and venturing off

the farm entrepreneurship, yet the rural

communities are experiencing extreme

poverty and deprivation. The rural areas

culture, working conditions, non skilled

communities severely impact the collective

activities, micro entrepreneurship, micro

financing and recognition and value creation

of existing opportunities in rural Pakistan.

The rural entity is becoming an abuse due to

shortage of micro financing technology,

water, electricity and poor governance in the

country.

The study based its rural focus on six

independent variables to prove the success

of dependent variable entrepreneurial

sustainability. There was a significant


(finance, motivation, Infrastructures,

literacy/skills, cognition levels, technology).

This proved the success of dependent

variable (Entrepreneurial success) can be

achieved. The structural model also

supported the relation of the variables and





showed the accepted fit with the conceptual rural sustainability model.

Recommendations

The universities, academia, Governmental

policy formulating agencies and graduating

students from rural area of KPK, Pakistan

who are looking for jobs must narrow their

focus for their existing infrastructures in

rural areas. The existing infrastructures of

family businesses for micro

entrepreneurship opportunities would work

as initial bootstrapping entrepreneurship

base, subsequently to expand and act as

economic engine. There is need to address

the 65 % rural Pakistan by rural Politicians

in particular for modernization and skills

development programs.





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