Journal of Entrepreneurship 1999 Kazmi 67 77

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DOI: 10.1177/0971355799008001041999 8: 67Journal of Entrepreneurship

Azhar KazmiSecond-Generation Business Entrepreneurs

What Young Entrepreneurs Think and Do: A Study of

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What Young EntrepreneursThink and Do: A Study of

Second-GenerationBusiness Entrepreneurs

AZHAR KAZMI

Enquiries inspired by an urge to know and comprehend more about the entrepre-neurial qualities and manifestationsof different types of individuals form the bulkof research in the area of entrepreneurship. This paper too falls in this tradition ofresearch as it presents a demographic and psychographic profile of andthe typeof business strategies formulated and implementedby the young second-genera-tion entrepreneurs in India. It goes a step further by comparing these with theirfirst generation counterparts to draw more generalisable conclusions. The find-ings reinforce the point that entrepreneurs in general possesscertain special char-acteristics that sustain their

need for highachievement.

Azhar Kazmi is Chairman and Dean of the Department of Business Adminis-tration, Faculty of Management Studies and Research, Aligarh MuslimUniversity, Aligarh.

There are numerous theoretical and empiricalstudies that considerattributes such as risk-taking, innovativeness, need for achievement, andmanagerial competence as important enabling qualities for entrepreneur-

ship. A

closer look into such studies reveals that the issue of age andfamily background has received scant attention, especially as explana-tory variables of the phenomenon of entrepreneurship.

It may be mentioned that in the Indian context, family backgroundanaentrepreneurshipfind mention in few studies. For instance, GadgilandSingersfound that the joint family provides undivided family property toinvest in and expand the family fiwm. Sharma and Singhobserve thatcapital formation and the confidence to administer business are essential

for the development of industrial entrepreneurshipand these are easilyavailable with people who have a business or industrial background. Familyoccupation and inter-generational occupational mobility are lddi cssed ina 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-ness and

industry,if the first

generationbelongedto the same

occupation.By superimposing age and family backgroundone could locate a seg-ment of entrepreneurs who have inherited a business legacy throughfamilial links in terms of tangible and intangible assets, as well as theappropriateenvironment and expertise at a young age. These are personswho could be called the young second-generation entrepreneurs. The first-generationentrepreneur, in contrast, does not possess a business familybackgroundand ventures into business optionally and autonomously. This

paper presents the fmdingsof a

studyon

the second-generation businessentrepreneurs in India.

Objectives

The objectives of the study are as follows:

o to prepare a demographicand psychographic profile of young second-

generationentrepreneurs;. to trace the types of business strategies being formulated and imple-mented by this group of entrepreneurs; and

. to analyse the similarities and dissimilarities among the first andsecond-generation entrepreneurs;

. with regard to the first two objectives.

Methodology

The popular Indian business daily The Financial Express had been pub-lishing a Sundayfeature on young entrepreneurs titled Brat Barons basedon personal interviews. Each feature covered one young entrepreneurand provided a variety of information on various aspects such as personaland professionalbackground, information about the company, its strate-gies, policies, products, customers, markets, technology used, etc. Thesefeatures formed a ready source of secondary information for our study.

Fifty-twosuch features published in the year 1996were

considered ini-tially. Four of these were dropped as they did not conform to the param-eters set for this study. Of the remaining forty-eight, thirty-six were aboutsecond-generationentrepreneurs and twelve were related to first-generationentrepreneurs. A checklist was prepared in order to draw a demographicand a psycho-

graphic profile of the young second-generation entrepreneurs. Adequate



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information was available about the guiding philosophies, facilitatingfactors that enabled the person to enter business,personaltraits, engagementin non-work activities and

entrepreneurialcompetencies.These

aspectsof the entrepreneur were considered sufficient to portray a psychographicprofile.

Next, the contents of the features were studied to find out how theyoung second-generation entrepreneur formulated business strategiesandhow these strategies were implemented. The format of the feature per-mitted the coverage of only strategies in the functional areas of finance,marketing,human resources, and operations. The data collected also ena-

bleda

comparison of the second and the first-generation entrepreneursbased 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 pur-poses other than research. Yet these proved to be an excellent source ofinformation as all these features conformed to a uniform pattern. Oncethis pattern was discerned, it was easy to formulate the issues on whichdata could be gleaned from the text.

Findings and Discussion

This section presents and discusses the findings of the study. An attemptis made to highlight the demographic and psychographic profiles of theyoung second-generation entrepreneur and his/her entrepreneurial com-petencies. A discussionof the non-work activities engagedin by the entre-preneur is intended to provide a realistic view of the person rather than

make him/her look likea

super human being. The second part of thefmdings relates to the adoption and implementation of business strategiesby the entrepreneur in the areas of fmancial, human resource, marketing,and operationsmanagement.

Profile of Entrepreneurs and Companies

As in 1996, the year of reporting, the age group of the entrepreneurs was

twenty-threeto

thirty-nine years, the average age being twenty-fiveyears.They joined the business between the ages of eighteen and twenty-nine,the average age being twenty-one years. Except one, all the sample entre-preneurs were male. Two-thirds of the entrepreneurs, i.e., twenty-four,were married and had the support-direct or indirect-of their spousesin their work. Almost all the entrepreneurs were post-graduates. Twenty



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of them had professionalqualifications in management, accountancy orengineering. A majority of them-twenty-eight out of thirty-six-had

previousexposure to business before joining their family business or start-ing on their own.The companiesowned by the young second-generation entrepreneurs

were widely dispersedgeographically throughout India with a relativelyhigherrepresentation of the central and western regions. The companiesof the sampleentrepreneurs belonged to both manufacturing and servicesectors. The turnover for the year 1995-96 ranged between Rs one croreand Rs 200 crore.

Psychographic Profile of Entrepreneurs

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

Guiding Philosophies Interestingly, several statements expressingsimilar sentiments were made by the entrepreneurs, which indicated thatthere is a commonalityin thinking and the philosophies that guide theirworking 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.. Challengesare steppingstones to success.

There were some statements (for instance, lookingwithin before lookingbeyond and life has to be viewed from different angles) which demon-strated that some young entrepreneurs think differently from the majorityof their counterparts.

Personal Trails It is well-established that certain specific personal

traits and characteristics (like perseverance, creativity, risk-taking abilityetc.) make an entrepreneur what he or she is. Obviously, not all thesetraits and characteristics are uniformly present in all the entrepreneurs. A generalised list of traits observed in the sample entrepreneurs is givenbelow:

Intelligence: The mental capacityof the entrepreneur to handle situationsis the embodied trait of intelligence. Information revealed that the typical



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entrepreneur is alert, rational, well-informed, and does not show care-lessness and ignorance. All the entrepreneurs exhibited these traits in some

form or the other.

Diligence:The capacityfor doing hard work is a sine qua non for becomingan 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 theirobjectives. Almost all the sample entrepreneurs exhibited a sense of con-fidence in their abilities.

Creativity: The capacity to innovate, think of new and useful ideas, andto approach problems flexibly and imaginativelyis the hallmark of anentrepreneur. A significant majority, thirty-three out of thirty-six entre-preneurs in the study exhibit these traits in some form or other.

Perseverance: This refers to a characteristic tenacity in pursuing objec-tives till they are achieved. The trait that keeps the entrepreneurs going isthe ability to keep on striving till one reaches the desired end. As comparedto a manager, an entrepreneur faces more problems and adversities. Theseare overcome through perseverance, a trait that is exhibited by thirty-twoout 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, good-natured, and pleasant-is present in twenty-six out of thirty-six entrepre-

neurs, making themmore

acceptable and approachable by the peoplewho work for them.

Entrepreneurial Competencies Entrepreneurial competencies aredifferent from traits in sense that the latter contribute more directly toachievement in the work situation. It is true that there is some unavoid-able overlapping of personal traits and competencies.

The stories of entrepreneurs were scanned to identify a set of compe-tencies that they possessed.We could locate and rank ten such competen-cies. These are described below in the order of their ranks.

Need forachievement: All the sampleentrepreneurs generallyhave the com-petency of being highlyachievement-oriented. They take responsibility fortheir actions, persist in the face of obstacles and concentrate on achiev-ing progressively higher goals. They derive pleasure out of overcomingobstacles which spurs them to work for achievingstill more difficult goals.



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Leadership: A significant majority of entrepreneurs, thirty-four out ofthirty-six, clearly demonstrated an ability to accept people with opennessand trust, and to provide an environment in which they are motivated towork.

Human relations skills: Thirty-three out of the thirty-six entrepreneurstried to maintain a healthy interpersonal relationshipwith the employees,suppliers, creditors, and other community members. They possessed thequality of emotional stability.Motivation: The inner urge to excel and be demanding on oneself todeliver results is evident in thirty-one out of the thirty-six entrepreneurs.

Administrative skills: Entrepreneurialskills are sometimes viewed as anantithesis to administrative skills in the sense that the latter require a differ-ent set of qualities. Yet, thirty, out of thirty-six entrepreneurs exhibitedthe ability to manage human resources effectively, take timely action,and generallyengage in activities designed to run the business smoothlyand efficiently.

Eagerness to lookfor new ideas: Entrepreneurshipis generallyviewed asthe ability to constantly look out for ideas that could be turned into prof-itable ventures. Twenty-nine out of the thirty-six entrepreneurs demon-strated enthusiasm towards any ideas that could be used to bring in noveltyin products, markets, production methods, sources of raw material, andnew forms of organisationand managing.

Risk-taking ability: In fact, risk-taking ability is the singular quality that

distinguishes entrepreneurs from other individuals. Twenty-eightout

ofthirty-six entrepreneurs did not hesitate to take calculated risks in theface of uncertainty.Time management: Twenty-sevenout of thirty-six entrepreneurs placed ahigh value on time management.

Ability to look ahead: Vision is supposed to drive many of the entrepre-neurs towards achievement. An orientation towards the future is demon-

strated by twenty-fiveout of thirty-six entrepreneurs.Managerial skills: An entrepreneur is rarely a master of all managerialskills, yet is directly responsiblefor all aspects of business. Twenty-fourout of thirty-six entrepreneurs have a deep understanding of one or a fewareas of management and a workingknowledge of practically all the areasof their activities.



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Business Strategy Formulation and Implementation

The second part of the research study dealt with an analysis of informa-tion available in entrepreneurialstories about the types of business strate-gies employed and the implementation of such strategies. Since thepublished stories did not contain much information regardingthe fineraspects of strategic management, the attempt here is to analysefunctionalimplementation aspects in the areas of finance, marketing,human resourcemanagement, and operationsmanagement.

There are a number of strategic alternatives available to an entrepre-neur in order to achieve their objectives. They range from complex anddifficult optionssuch as diversification to relatively simpleones like tech-nical tie-ups with foreign collaborators. In this section of the paper, abrief description is provided about the types of strategiesemployed. Thesequence of strategies described are in order of rankingbased on thenumber of entrepreneurs, out of a total of thirty-six, opting for a particulartype of strategy.

Joint venture: The liberalised environment of the 1990s has obviouslymotivated several young entrepreneurs to enter into joint ventures withforeigncollaborators. Fifteen out of thirty-six entrepreneurs opted for thejoint venture strategy, almost all of them doing so for the purpose ofgaining access to technical expertise and for technology transfer. This isunderstandable as the relatively smaller size of the units managed by theentrepreneurs requiredliberal doses of technologicalinputs. Besides this, ,the entrepreneurs wished to share the high initial developmentcosts, spreadout risk, and derive synergistic benefits. Seven out of these fifteen entre-preneurs have stated the purpose of modernisation indicating their effortto provide technologicalimprovements. They aim at increasingproduc-tion, lowering cost, and improving the efficiency and productivityof theircompanies.

Diversification and integration: Diversification turned out to be the stra-tegic choice of fourteen of the thirty-six entrepreneurs. These strategiesrequireda change in business defmition in terms of either customer func-

tions provided,customer groups served, or alternative technologiesused.The entrepreneurs generallyused these strategies to move away from thefamily business or to chart out an independent course of action.

Expansion: Ten out of thirty-six entrepreneurs adopted expansion strate-gies for their business indicating their urge to substantially increase thecapacity of their units and scale of operations. More often, this option



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was exercised where the existing enterprises were perceivedas beingcontinuallyprofitable.

Stability: The young second-generation entrepreneurs often had to enterinto familybusinesses that had been running comfortably for some time.When they entered the scene their first reaction was to maintain the statusquo till the time they were able to size up the situation. Till such time,these entrepreneurs relied on stability strategies that aimed at modestgrowth levels without disturbing the current state of affairs. Only five outof the thirty-six entrepreneurs have adopted the stability strategies.

Retrenchment: Five entrepreneurs had to adopt the extreme option ofretrenchment, i.e., getting out of the business they were in so that thebusiness could be saved. This was done to divert resources from the exist-

ing business to other prospectiveareas. One other reason that promptedthe entrepreneurs to retrench from existing business, even if it was moder-ately successful, was to chart out an independent course of action free ofpast commitments.

Turnaround: Some entrepreneurs fmd that the business handed over tothem is not so successful and requires a turnaround. Two entrepreneursadopted turnaround strategies to make their units viable and profitable.

Besides the above strategies, eight out of thirty-six entrepreneurs wereinvolved in exporting products and services to foreign countries. This isalso 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 thenature of functional implementation that the entrepreneurs exercised intheir companies. The analysis is presented below.

Financial management: As a basic requirement for project implementa-tion, capital and fmancial assistance is requiredat every stage. The strat-egies of expansion,modernisation etc., require a liberal infusion of fiinds.

Almost all the entrepreneurs have a sound fmancial backgroundor under-standingand managingfinances is not envisaged as a problem. The sourcesof funds in most cases came from the family kitty. This is understandableas the entrepreneurs were essentially involved in managing their familybusinesses. Seven out of thirty-six entrepreneurs went in for a public issueto raise money for their business activities while four took loans fromfmancial institutions and banks.



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Human resource management: Contrary to the expectations that entre-preneurs are not good man-managers, a substantial majority-thirty outof thirty-six-lay great emphasis on teamwork. They value the contribu-tion of their staff members and consider them as partners in their work.Since the entrepreneurs work hard themselves they are perceived as hardtask masters and expect full commitment from their employees. Goodperformers are rewarded adequately while laggards are not tolerated.

Marketingmanagement: This is a problemarea experienced by a majorityof the entrepreneurs, probably due to the small size of business they man-

age. Yet, theyplace a high value on maintaining a good relationship withtheir customers, who, in most cases, are industrial buyers.There is a wide-spread belief in the efficacy of marketing as a tool to achieve strategicobjectives. The techniques employed by the entrepreneurs frequently in-volve providing personalisedcustomer service, maintainingclose publicrelations, using good advertising and creative selling techniques, and acompetitive pricing policy.

Operations management:The use of

technology,a constant effort to

up-grade it, and continuous search for potential sources of advanced tech-nology characterise the approach of alrpost all the entrepreneurs tooperationsmanagement. The typical areas that attract attention are selec-tion, installation, and maintenance of equipment, product design and en-gineering, inventory and quality control and shop floor supervision. Theentrepreneurs are quality conscious and consequently, several of themhave the ISO 9000 certification for their products. Most entrepreneursmaintain

goodoffice

premises.First- and Second-Generation Entrepreneurs: A Comparison

The source of information provided thirty-six stories on second-generationentrepreneurs and twelve stories on first-generation entrepreneurs. Theanalysis for the twelve cases of first-generation entrepreneurs was doneon similar lines as those for the second-generation entrepreneurs. This

analysis yieldcdconsiderable similarities between the two

categoriesand

some important points of differences.

Similarities

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



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them for new ideas and adopt and follow certain mottos and philosophiesin their

day-to-day working. Theyalso exhibit a

highlevel of intelli-

gence, diligence, confidence, creativity, pragmatism, and amiability thoughwith varying degree. They indulge in non-work activities such as readingand travellingto invigoratethemselves for the hard work they have to put in.

The entrepreneurialcompetencies are also similar for this group. Theyare eager to look for and accept new ideas, arc able to look ahead andtake risks, possess a high intensity of need for achievement and demon-strate managerial,administrative and human skills. Business strategiesformulation and

implementationis also done

largelyin the same

wayas

the second-generation entrepreneurs.

Dissimilarities

There are certain characteristics that differentiate entrepreneurs who createtheir own business from those who run an established business. Second-

generationentrepreneurs have the resources of the existing business onwhich

theyhave to build.

Theyhave the

capital,access to

credit,and

financial worthiness to stand in the market. They have high-talent man-power organised around key entrepreneurial activities. These people aretrained to handle varied responsibilities. There are research and develop-ment facilities which considerably reduce the expense and risk in devel-oping new product lines. A second-generationentrepreneur, when enteringthe business, is not so much concerned with running a business as withfmding a niche where potential for advancement exists. They often enter

businessas a call of

dutyto handle

family responsibilitiesand then become

an integral part of that setting.First-generation entrepreneurs have a different background, motiva-

tion, and character than second-generation entrepreneurs. They have tostart from scratch and enter the business with a yearning to fmd a placefor themselves and an overwhelmingcompulsion 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 decidedlygreater than that of the second-generationentrepreneur. The first-generation entrepreneur is found to be extra dili-gent, more confident, having a greater propensity to persevere as com-pared to the second-generation entrepreneur. Their motivation level ishigher and time management skills are also more refined. The need forachievement is extremely strong as they realise that they have nothing tofall back upon if they fail.



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Conclusion

As society is becoming increasinglyindustrialised, new areas open up towhich the innovative entrepreneur responds positively. Entrepreneurialstudies have gained significance in this context.

This study on the second-generation entrepreneurs offers interestingand useful insights into entrepreneurialbehaviour in a specific context.From the psychographic profile it is evident that the second-generationentrepreneur possesses many personal traits that are normally ascribed to

entrepreneursin

general.So is the case with

entrepreneurial competen-cies. Joint venture, diversification, and expansion are the preferred stra-tegic alternatives of these entrepreneurs, while maintaining stability,effecting retrenchment, and attempting turnaround are less preferred. Thecontext in which the entrepreneurs operate is understandably a primeconsideration in exercising a strategic choice. The functional implemen-tation of strategy is done with a finesse that is expected of those whohave been exposed to business since long.

The first-generation entrepreneur,as

comparedto his

counterpart,turns

out to be quite similar, except that he is a much more hardy individualexhibiting 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 DevelopmentProgrammes

in Northern India, (New Delhi: Abhinav Publications, 1980).4. S.S. Khanka, Entrepreneurship in Small Scale Industries, (NewDelhi: HimalayaPub-

lishing House, 1990).

Documents

Journal of Entrepreneurship 1999 Kazmi 67 77