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What Young Entrepreneurs Think and Do: A Study of Second-Generation Business Entrepreneurs
Azhar Kazmi Journal of Entrepreneurship 1999 8: 67 DOI: 10.1177/097135579900800104 The online version of this article can be found at: http://joe.sagepub.com/content/8/1/67

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What Young Entrepreneurs Think and Do: A Study of Second-Generation Business Entrepreneurs
AZHAR KAZMI

Enquiries inspired by an urge to know and comprehend more about the entrepreneurial qualities and manifestations of different types of individuals form the bulk of research in the area of entrepreneurship. This paper too falls in this tradition of research as it presents a demographic and psychographic profile of and the type of business strategies formulated and implemented by the young second-generation entrepreneurs in India. It goes a step further by comparing these with their first generation counterparts to draw more generalisable conclusions. The findings reinforce the point that entrepreneurs in general possess certain special characteristics that sustain their need for high achievement.
Azhar Kazmi is Chairman and Dean of the

Department of Business Adminis-

tration, Faculty of Management Studies and Research, Aligarh Muslim

University, Aligarh.
There are numerous theoretical and empirical studies that consider attributes such as risk-taking, innovativeness, need for achievement, and managerial competence as important enabling qualities for entrepreneurship. A closer look into such studies reveals that the issue of age and family background has received scant attention, especially as explanatory variables of the phenomenon of entrepreneurship. It may be mentioned that in the Indian context, family background ana entrepreneurship find mention in few studies. For instance, Gadgil and Singers found that the joint family provides undivided family property to invest in and expand the family fiwm. Sharma and Singh observe that capital formation and the confidence to administer business are essential for the development of industrial entrepreneurship and these are easily available with people who have a business or industrial background. Family occupation and inter-generational occupational mobility are lddi cssed in a study by Khanka&dquo; which shows that there is a high propensity for the

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members of the next generation to choose an occupation related to busi-

industry, if the first generation belonged to the same occupation. By superimposing age and family background one could locate a segment of entrepreneurs who have inherited a business legacy through familial links in terms of tangible and intangible assets, as well as the appropriate environment and expertise at a young age. These are persons who could be called the young second-generation entrepreneurs. The firstgeneration entrepreneur, in contrast, does not possess a business family background and ventures into business optionally and autonomously. This paper presents the fmdings of a study on the second-generation business
ness

and

entrepreneurs in India.

Objectives
The
o

objectives of the study are as follows:

to prepare a

demographic and psychographic profile of young second-

generation entrepreneurs;
.

to trace the

types of business strategies being formulated and implemented by this group of entrepreneurs; and to analyse the similarities and dissimilarities among the first and
with regard to the first two

second-generation entrepreneurs; objectives.

Methodology

popular Indian business daily The Financial Express had been publishing a Sunday feature on young entrepreneurs titled Brat Barons based on personal interviews. Each feature covered one young entrepreneur and provided a variety of information on various aspects such as personal and professional background, information about the company, its strategies, policies, products, customers, markets, technology used, etc. These features formed a ready source of secondary information for our study. Fifty-two such features published in the year 1996 were considered initially. Four of these were dropped as they did not conform to the parameters set for this study. Of the remaining forty-eight, thirty-six were about second-generation entrepreneurs and twelve were related to first-generation
The

entrepreneurs.
A checklist was prepared in order to draw a demographic and a psychographic profile of the young second-generation entrepreneurs. Adequate

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/ 69

information was available about the guiding philosophies, facilitating factors that enabled the person to enter business, personal traits, engagement in non-work activities and entrepreneurial competencies. These aspects of the entrepreneur were considered sufficient to portray a psychographic

profile.
Next, the
contents of the features
were

studied to find out how the

young second-generation entrepreneur formulated business strategies and how these strategies were implemented. The format of the feature permitted the coverage of only strategies in the functional areas of finance, marketing, human resources, and operations. The data collected also enabled a comparison of the second and the first-generation entrepreneurs based on the above two aspects. An obvious limitation of the methodology was that it was entirely based on a secondary source of information. The features were written for purposes other than research. Yet these proved to be an excellent source of information as all these features conformed to a uniform pattern. Once this pattern was discerned, it was easy to formulate the issues on which data could be gleaned from the text.

Findings and Discussion

This section presents and discusses the findings of the study. An attempt is made to highlight the demographic and psychographic profiles of the young second-generation entrepreneur and his/her entrepreneurial competencies. A discussion of the non-work activities engaged in by the entrepreneur is intended to provide a realistic view of the person rather than make him/her look like a super human being. The second part of the fmdings relates to the adoption and implementation of business strategies by the entrepreneur in the areas of fmancial, human resource, marketing, and operations management.

Profile of Entrepreneurs and Companies

As in 1996, the year of reporting, the age group of the entrepreneurs was twenty-three to thirty-nine years, the average age being twenty-five years. They joined the business between the ages of eighteen and twenty-nine, the average age being twenty-one years. Except one, all the sample entrepreneurs were male. Two-thirds of the entrepreneurs, i.e., twenty-four, were married and had the support-direct or indirect-of their spouses in their work. Almost all the entrepreneurs were post-graduates. Twenty

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70 /
of them had professional qualifications in management, accountancy or engineering. A majority of them-twenty-eight out of thirty-six-had previous exposure to business before joining their family business or starting on their own. The companies owned by the young second-generation entrepreneurs were widely dispersed geographically throughout India with a relatively higher representation of the central and western regions. The companies of the sample entrepreneurs belonged to both manufacturing and service sectors. The turnover for the year 1995-96 ranged between Rs one crore and Rs 200 crore.

Psychographic Profile of Entrepreneurs

study probed the guiding philosophies, personal traits, competencies, facilitating factors and the non-work activities to get a comprehensive view of the psychographic profile of the entrepreneurs.
The

Guiding Philosophies Interestingly, several statements expressing similar sentiments were made by the entrepreneurs, which indicated that there is a commonality in thinking and the philosophies that guide their working life. Some examples of the statements are given below:
.
.

. .

Dont cut comers if you want long-term gains. If you have confidence in yourself, others will too. In the world of dreams, everything is possible. Challenges are stepping stones to success.

There were some statements (for instance, looking within before looking beyond and life has to be viewed from different angles) which demonstrated that some young entrepreneurs think differently from the majority of their counterparts.

Personal Trails It is well-established that certain specific personal traits and characteristics (like perseverance, creativity, risk-taking ability etc.) make an entrepreneur what he or she is. Obviously, not all these traits and characteristics are uniformly present in all the entrepreneurs. A generalised list of traits observed in the sample entrepreneurs is given below:

Intelligence: The mental capacity of the entrepreneur to handle situations is the embodied trait of intelligence. Information revealed that the typical

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71

entrepreneur is alert, rational, well-informed, and does

not show carelessness and ignorance. All the entrepreneurs exhibited these traits in some form or the other.

Diligence: The capacity for doing hard work is a sine qua non for becoming an entrepreneur. A high priority is given to getting the job in hand done.
Almost all the entrepreneurs exhibited these traits.

Confidence: Entrepreneurs should trust their own ability to achieve their objectives. Almost all the sample entrepreneurs exhibited a sense of confidence in their abilities.

Creativity: The capacity to innovate, think of new and useful ideas, and approach problems flexibly and imaginatively is the hallmark of an entrepreneur. A significant majority, thirty-three out of thirty-six entrepreneurs in the study exhibit these traits in some form or other.
to

Perseverance: This refers to a characteristic tenacity in pursuing objectives till they are achieved. The trait that keeps the entrepreneurs going is the ability to keep on striving till one reaches the desired end. As compared to a manager, an entrepreneur faces more problems and adversities. These are overcome through perseverance, a trait that is exhibited by thirty-two out of thirty-six entrepreneurs.

Amiability:

An entrepreneur could well be impatient with slow-starters. There could be a certain level of rashness in dealing with people. Yet, amiability-a trait that makes an entrepreneur agreeable, charming, goodnatured, and pleasant-is present in twenty-six out of thirty-six entrepreneurs, making them more acceptable and approachable by the people who work for them.

Entrepreneurial Competencies Entrepreneurial competencies

are

different from traits in sense that the latter contribute more directly to achievement in the work situation. It is true that there is some unavoidable overlapping of personal traits and competencies. The stories of entrepreneurs were scanned to identify a set of competencies that they possessed. We could locate and rank ten such competencies. These are described below in the order of their ranks.

Need for achievement: All the sample entrepreneurs generally have the competency of being highly achievement-oriented. They take responsibility for their actions, persist in the face of obstacles and concentrate on achieving progressively higher goals. They derive pleasure out of overcoming obstacles which spurs them to work for achieving still more difficult goals.

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72

Leadership: A significant majority of entrepreneurs, thirty-four out of thirty-six, clearly demonstrated an ability to accept people with openness and trust, and to provide an environment in which they are motivated to
work.
Human relations skills: Thirty-three out of the thirty-six entrepreneurs tried to maintain a healthy interpersonal relationship with the employees, suppliers, creditors, and other community members. They possessed the quality of emotional stability. Motivation: The inner urge to excel and be demanding on oneself to deliver results is evident in thirty-one out of the thirty-six entrepreneurs. Administrative skills: Entrepreneurial skills are sometimes viewed as an antithesis to administrative skills in the sense that the latter require a different set of qualities. Yet, thirty, out of thirty-six entrepreneurs exhibited the ability to manage human resources effectively, take timely action, and generally engage in activities designed to run the business smoothly and efficiently.

Eagerness to lookfor new ideas: Entrepreneurship is generally viewed as the ability to constantly look out for ideas that could be turned into profitable ventures. Twenty-nine out of the thirty-six entrepreneurs demonstrated enthusiasm towards any ideas that could be used to bring in novelty in products, markets, production methods, sources of raw material, and new forms of organisation and managing.
Risk-taking ability: In fact, risk-taking ability is the singular quality that

distinguishes entrepreneurs from other individuals. Twenty-eight out of thirty-six entrepreneurs did not hesitate to take calculated risks in the face of uncertainty. Time management: Twenty-seven out of thirty-six entrepreneurs placed a high value on time management. Ability to look ahead: Vision is supposed to drive many of the entrepreneurs

towards achievement. An orientation towards the future is demonstrated by twenty-five out of thirty-six entrepreneurs.

Managerial skills: An entrepreneur is rarely a master of all managerial skills, yet is directly responsible for all aspects of business. Twenty-four out of thirty-six entrepreneurs have a deep understanding of one or a few areas of management and a working knowledge of practically all the areas
of their activities.

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73

Business Strategy Formulation and Implementation The second part of the research study dealt with an analysis of information available in entrepreneurial stories about the types of business strategies employed and the implementation of such strategies. Since the published stories did not contain much information regarding the finer aspects of strategic management, the attempt here is to analyse functional implementation aspects in the areas of finance, marketing, human resource management, and operations management. There are a number of strategic alternatives available to an entrepreneur in order to achieve their objectives. They range from complex and difficult options such as diversification to relatively simple ones like technical tie-ups with foreign collaborators. In this section of the paper, a brief description is provided about the types of strategies employed. The sequence of strategies described are in order of ranking based on the number of entrepreneurs, out of a total of thirty-six, opting for a particular type of strategy. Joint venture: The liberalised environment of the 1990s has obviously motivated several young entrepreneurs to enter into joint ventures with foreign collaborators. Fifteen out of thirty-six entrepreneurs opted for the joint venture strategy, almost all of them doing so for the purpose of gaining access to technical expertise and for technology transfer. This is understandable as the relatively smaller size of the units managed by the entrepreneurs required liberal doses of technological inputs. Besides this, , the entrepreneurs wished to share the high initial development costs, spread out risk, and derive synergistic benefits. Seven out of these fifteen entrepreneurs have stated the purpose of modernisation indicating their effort to provide technological improvements. They aim at increasing production, lowering cost, and improving the efficiency and productivity of their

companies.

Diversification and integration: Diversification turned out to be the strategic choice of fourteen of the thirty-six entrepreneurs. These strategies required a change in business defmition in terms of either customer functions provided, customer groups served, or alternative technologies used. The entrepreneurs generally used these strategies to move away from the family business or to chart out an independent course of action.
Expansion: Ten out of thirty-six entrepreneurs adopted expansion strategies for their business indicating their urge to substantially increase the capacity of their units and scale of operations. More often, this option

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74,
was

exercised where the

existing enterprises

were

perceived

as

being

continually profitable. Stability: The young second-generation entrepreneurs often had to enter into family businesses that had been running comfortably for some time. When they entered the scene their first reaction was to maintain the status quo till the time they were able to size up the situation. Till such time, these entrepreneurs relied on stability strategies that aimed at modest growth levels without disturbing the current state of affairs. Only five out of the thirty-six entrepreneurs have adopted the stability strategies.
Retrenchment: Five entrepreneurs had to adopt the extreme option of retrenchment, i.e., getting out of the business they were in so that the business could be saved. This was done to divert resources from the existing business to other prospective areas. One other reason that prompted the entrepreneurs to retrench from existing business, even if it was moderately successful, was to chart out an independent course of action free of past commitments. Turnaround: Some entrepreneurs fmd that the business handed over to them is not so successful and requires a turnaround. Two entrepreneurs adopted turnaround strategies to make their units viable and profitable. Besides the above strategies, eight out of thirty-six entrepreneurs were involved in exporting products and services to foreign countries. This is also viewed as the first step to the adoption of joint venture strategy.
Functional Implementation

of Strategies

The information provided in the features enabled an assessment of the nature of functional implementation that the entrepreneurs exercised in
their

companies. The analysis is presented below.

Financial management: As a basic requirement for project implementation, capital and fmancial assistance is required at every stage. The strategies of expansion, modernisation etc., require a liberal infusion of fiinds. Almost all the entrepreneurs have a sound fmancial background or understanding and managing finances is not envisaged as a problem. The sources of funds in most cases came from the family kitty. This is understandable as the entrepreneurs were essentially involved in managing their family businesses. Seven out of thirty-six entrepreneurs went in for a public issue to raise money for their business activities while four took loans from fmancial institutions and banks.

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75

Human

resource are

management: Contrary to the expectations that

a

entre-

man-managers, substantial majority-thirty out preneurs of thirty-six-lay great emphasis on teamwork. They value the contribution of their staff members and consider them as partners in their work. Since the entrepreneurs work hard themselves they are perceived as hard task masters and expect full commitment from their employees. Good performers are rewarded adequately while laggards are not tolerated.
not good

Marketing management: This is a problem area experienced by a majority of the entrepreneurs, probably due to the small size of business they manage. Yet, they place a high value on maintaining a good relationship with their customers, who, in most cases, are industrial buyers. There is a widespread belief in the efficacy of marketing as a tool to achieve strategic objectives. The techniques employed by the entrepreneurs frequently involve providing personalised customer service, maintaining close public relations, using good advertising and creative selling techniques, and a competitive pricing policy.
Operations management: The use of technology, a constant effort to upgrade it, and continuous search for potential sources of advanced technology characterise the approach of alrpost all the entrepreneurs to operations management. The typical areas that attract attention are selection, installation, and maintenance of equipment, product design and engineering, inventory and quality control and shop floor supervision. The entrepreneurs are quality conscious and consequently, several of them have the ISO 9000 certification for their products. Most entrepreneurs maintain good office premises.
First- and Second-Generation

Entrepreneurs: A Comparison

The source of information provided thirty-six stories on second-generation entrepreneurs and twelve stories on first-generation entrepreneurs. The analysis for the twelve cases of first-generation entrepreneurs was done on similar lines as those for the second-generation entrepreneurs. This analysis yieldcd considerable similarities between the two categories and some important points of differences.
Similarities

First-generation entrepreneurs, like their counterparts, are young, have a good educational background and previous exposure to business before setting up enterprises. They believe in scanning the environment around

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76

them for new ideas and adopt and follow certain mottos and philosophies in their day-to-day working. They also exhibit a high level of intelligence, diligence, confidence, creativity, pragmatism, and amiability though with varying degree. They indulge in non-work activities such as reading and travelling to invigorate themselves for the hard work they have to put in. The entrepreneurial competencies are also similar for this group. They are eager to look for and accept new ideas, arc able to look ahead and take risks, possess a high intensity of need for achievement and demonstrate managerial, administrative and human skills. Business strategies formulation and implementation is also done largely in the same way as the second-generation entrepreneurs.
Dissimilarities

There are certain characteristics that differentiate entrepreneurs who create their own business from those who run an established business. Secondgeneration entrepreneurs have the resources of the existing business on which they have to build. They have the capital, access to credit, and financial worthiness to stand in the market. They have high-talent manpower organised around key entrepreneurial activities. These people are trained to handle varied responsibilities. There are research and development facilities which considerably reduce the expense and risk in developing new product lines. A second-generation entrepreneur, when entering the business, is not so much concerned with running a business as with fmding a niche where potential for advancement exists. They often enter business as a call of duty to handle family responsibilities and then become an integral part of that setting. First-generation entrepreneurs have a different background, motivation, and character than second-generation entrepreneurs. They have to start from scratch and enter the business with a yearning to fmd a place for themselves and an overwhelming compulsion to be on their own. Though they lack in terms of family, support systems, sources of funds, etc., they try to make it up through sheer determination to succeed. Their share of problems are decidedly greater than that of the second-generation entrepreneur. The first-generation entrepreneur is found to be extra dili-

gent, more confident, having a greater propensity to persevere as compared to the second-generation entrepreneur. Their motivation level is higher and time management skills are also more refined. The need for achievement is extremely strong as they realise that they have nothing to fall back upon if they fail.

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Conclusion
As society is becoming increasingly industrialised, new areas open up to which the innovative entrepreneur responds positively. Entrepreneurial studies have gained significance in this context. This study on the second-generation entrepreneurs offers interesting and useful insights into entrepreneurial behaviour in a specific context. From the psychographic profile it is evident that the second-generation entrepreneur possesses many personal traits that are normally ascribed to entrepreneurs in general. So is the case with entrepreneurial competencies. Joint venture, diversification, and expansion are the preferred strategic alternatives of these entrepreneurs, while maintaining stability, effecting retrenchment, and attempting turnaround are less preferred. The context in which the entrepreneurs operate is understandably a prime consideration in exercising a strategic choice. The functional implementation of strategy is done with a finesse that is expected of those who have been exposed to business since long. The first-generation entrepreneur, as compared to his counterpart, turns out to be quite similar, except that he is a much more hardy individual exhibiting greater determination and commitment to succeed. Notes

(The author is grateful to Anika Raja for providing help in data collection and analysis.) 1. D.R. Gadgil, Origins of the Modern Indian Business Class: An Interim Report, (New York: Institute of Pacific Relations, 1959). 2. Milton Singer, When a Great Tradition Modernises, (New York: Praeger Publishers, 1972). 3. K.L. Sharma and H. Singh, Entrepreneurial Growth and Development Programmes in Northern India, (New Delhi: Abhinav Publications, 1980). 4. S.S. Khanka, Entrepreneurship in Small Scale Industries, (New Delhi: Himalaya Pub-

lishing House, 1990).

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