Academic journal article IUP Journal of Business Strategy

A Framework for the Development and Success of Microenterprises in India

Academic journal article IUP Journal of Business Strategy

A Framework for the Development and Success of Microenterprises in India

Article excerpt


The Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in the overall economic development of the country. It not only plays an important role in providing large-scale employment opportunities at comparatively lower capital cost than large industries but also helps in the industrialization of rural and backward areas, thereby reducing regional imbalances. MSMEs are complementary to large industries as ancillary units and contribute enormously to the socioeconomic development of the country. MSMEs constitute more than 80% of the total number of industrial enterprises and support industrial development in the country. MSMEs contribute nearly 45% to the manufacturing sector and about 40% to the Indian export sector. Their contribution to the Indian GDP is about 8% and the sector has registered a growth rate of about 11% (FICCI MSME Summit, 2012). According to the Final Report of the Fourth All India, Census of Micro, Small and Medium Enterprises published in 2006-07, of the number of enterprises registered, the number of microenterprises alone is about 15 lakhs, which is about 95% of the total MSME sector. The MSME generates 93.09 lakh employment, of which microenterprises alone generate 65.34 lakh employment, which is about 70% of the total MSME sector and the gross output of the MSME sector is ^7,07,510 cr crores, of which microenterprises alone generate ^3,12,973 cr, which is about 44% of the total MSME sector. MSME promotes the formation of micro and small enterprises in the country with the objective of creating self-employment and upgrading the skills of existing and potential entrepreneurs.

According to the Micro, Small and Medium-Scale Enterprise Development Act (MSMED Act, 2006) of the Government of India, an enterprise is categorized as a microenterprise if it has an investment up to ^25 lakh in plant and machinery, excluding land and buildings, and ^10 lakh in manufacturing and service-rendering enterprises, respectively.

The present study aims to develop a framework for the development and success of microenterprises in India by taking into account two broad categories, i.e., individual and business factors. The individual factor is further subdivided into sociocultural factors, psychological factors and entrepreneurial skills-related factors.

Literature Review

Studies analyzing the factors of microenterprise development and success are wide and diverse. This section focuses on review of theoretical and empirical studies related to the development and success of microenterprise. This section is divided into two broad categories. They are individual factors and business factors.

Individual Factors

Sociocultural Factors

Scholars like Berna (1960), Fox (1969) and McClelland (1965) were inspired by Max Weber's (1864-1920) recommendation that norms, religion and values, behavior and economic development are all interconnected and that they all related economic development to culture. They also tried to link the economic slowness of India to culture. For instance, some of them reported that the tradition of Indian society offered little freedom of choice of profession to its population. According to Tripathi (1992) and Weber (2005), the caste of the person determined the occupation of its population, especially in the tradition-driven families. On the contrary, some other scholars like Saberwal (1976), Streefkerk (1985) and Chadha (1986) have rejected Weber's recommendation. They opined that structural conditions, and not cultural conditions, determine if entrepreneurship will flourish in a society or not. Therefore, from the above discussion, it is found that researchers have arrived at contrary conclusions regarding the role of sociocultural factors in supporting and encouraging entrepreneurship, particularly in India. The sociocultural factors are therefore proposed as a determinant of development and success of microenterprises in India to find out the link between the different sociocultural factors and development and success of microenterprises in India. …

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