Understanding Entrepreneurship

gtz Deutsche Gesellschaft für
Technische Zusammenarbeit (GTZ) GmbH
Understanding Entrepreneurship
and How to Promote It
September 1995
Jim Tomecko and Rainer kolshorn
Walt Disney the famous Hollywood animator and film maker was asked, when
he had just completed the construction of Disneyland, the first major theme park ever
built, if he was a rich man. “ Of course I’m rich.” he answered, “ No one could owe $7
million and not be rich.” Disney went on to be one of the most outstandingly successful
entrepreneurs in entertainment history. We are always fascinated with such “rags to
riches” stories of people who, against impossible odds, achieve success in building
great business empires from almost nothing! What is the alchemy that is worked?
What is the secret of success? How can we replicate it? Perhaps it is because of this
fascination with this unpredictable ability of the entrepreneur to turn lead into gold or
coal into diamonds that governments have always been excited about the possibility of
creating more entrepreneurs in their societies, for although fashions seem to come and
go in the business of world development, the field of Entrepreneurship and small
enterprise promotion has endured as one of the most consistently popular interventions
funded by donor and Governments alike. No doubt much of this attention is because of
the overwhelming contribution that this sector makes simultaneously to the goals of
economic growth and redistribution of income within society1.
With unemployment looming as the most challenging socio-economic problem of

the next century, a renewed focus has been placed on the major part which small
businesses play in non-agricultural employment generation. In the United States
between 1980 and 1987, 17 million jobs were created by new and small firms, whereas
the public sector only contributed 1.3 million and in Kenya the small business sector is
the source of 75% of all new jobs. Their role in technological innovation as well, cannot
be overlooked as they have been responsible for 50% of all innovations and 95% of all
radical innovations since the Second World War. These innovations include: the
microcomputer, the pacemaker, overnight express packages, fast food, oral
contraceptives and the X-ray machine.2
The dramatic change in the global political economy in the last decade has also
sharpened our interest in small enterprise and the entrepreneur. Seldom has there
been greater unanimity among countries on the need to use market forces in the
1
Ray, Dennis, The Role of Entrepreneurship in Economic Development, in Liebenstein, Harvey and
Ray, Dennis, Journal of Development Planning No. 18, 1988, Department of Social and Economic Affairs,
United Nations
2
Various studies for the US Small Business Administration by David Birch, reported in INC Magazine.,
and several studies by the US Dept. of Commerce, as quoted from Bygrave, William, The Entrepreneurial
Process.
1
stimulation of economic growth. Whether in China, South Africa, Germany or a former

republic of the Soviet Union, everyone recognises the need to expand the private sector
as the major instrument for increasing incomes. Entrepreneurs are now held up to be
role models and one of the fastest growing businesses has become Entrepreneurship
education, the art of starting and running a business. Entrepreneurship is having the
same impact on the 20th Century that machinery did on the 19th Century. Just as the
widespread introduction machinery liberated workers from tedious and repetitive tasks,
so Entrepreneurship represents the common person's chance to participate in a life
style previously assumed to be restricted to a few. Entrepreneurs record the highest
levels of personal satisfaction and because many never retire they continue to make
meaningful contributions to the economy late into their lives .3 When the well known
auto maker Henry Ford was asked on his seventy-fifth birthday when he planned to
retire, he replied “ I haven’t given a bit of thought to it ! I am going to stay around as
long as I can be of any use; and I want to be of use as long as I stay around”
This paper will briefly review some of the past trends in enterprise and
Entrepreneurship promotion and identify the key considerations relevant for the
sustainable replication of practical and cost-effective enterprise promotion programmes
in emerging economies. The paper concludes with the presentation of one method of
enterprise promotion which has been widely applied and has produced impressive
results in Eastern Europe, Asia, Latin America and Africa.
A Brief History of Entrepreneurship

The earliest usage of the term "entrepreneur" is recorded in 17th Century French
military history. It referred to persons who undertook to lead military expeditions. An
18th Century Irishman named Richard Cantillon who was living in France at the time, is
credited with being the first to use the term "entrepreneur" in a business context, as
someone who buys goods and services at certain prices with a view to selling them at
uncertain prices in the future, in other words bearing an not-insured risk. This definition
seemed to satisfy people until a decade or so later Jean Baptiste Say, writing in 1803,
described the entrepreneurial function in broader terms laying emphasis on "the
bringing together of the factors of production with the provision of management and the
bearing of the risks associated with the venture".
While Say and Cantillon created some casual interest in entrepreneurs and their
role in society, it was not until the early 20th century when the Morovian, Joseph
Schumpeter, cast the entrepreneur as being the central actor in the change process,
that anyone really took note. He contended that the single most important function of
the entrepreneur was innovation. But some have suggested that Max Weber's earlier
writings of 1904 had a critical influence on Schumpeter. In Weber's paper the
entrepreneur is depicted as an energised individual painted against the clumsy and
sluggish background of the traditional economy. As the hero, the entrepreneur sets in
3
Bygrave, William, The Entrepreneurial Process op. cit.
2
motion the revolutionary processes associated with change. For Weber the main
motivating factor for the entrepreneur was religious belief or the Protestant work ethic
which established social norms that discouraged extravagance, conspicuous
consumption and indolence. The result was higher productivity, increased savings, and
investment, all factors which are vital to economic growth.
Schumpeter, on the other hand maintained that it was the entrepreneurs who
used Protestantism to legitimise what they were already doing. He attributed the
motivation of the entrepreneur to the need "to found a private kingdom...the will to
conquer, the impulse to fight, to prove oneself superior to others, to succeed for the
sake of it, and not for the fruits of success itself... finally there is the joy of creating, of
getting things done or simply exercising one's energy and ingenuity". For Weber the
entrepreneur was the product of society but for Schumpeter these individuals occurred
randomly in any ethnically homogenous population and were gifted with a special
intuition to see things in a way which afterwards proved to be correct, they possessed
the energy and force of will to overcome traditional norms and withstand social
opposition. These two theories still command a great deal of respect even today and
are constantly referred to in most of the literature on Entrepreneurship.4
 The Evolution of Definitions
Since that time the definition of an entrepreneur has not dramatically changed,
but a few are worth noting; the well known economist, Marshall in 1920 described the
entrepreneur as someone who " combines through vigorous activity the factors of
production, labour and capital so as to produce an increased output of goods and
services thereby increasing the total wealth or material welfare of society." David
McClelland the behaviourist who inspired the introduction of achievement motivation
training for entrepreneurs defined the entrepreneur as "a person who organises and
maintains a business undertaking assuming the risks for the sake of profit". Our final
definition is from William Bygrave and although short on description and detail it is
perhaps the simplest and most elegant, "an entrepreneur is someone who perceives an
opportunity and creates an organisation to pursue it." Although these definitions are
helpful in telling us what an entrepreneur does, they do not give us many clues as to the
relevance of Entrepreneurship or how to promote it. This investigation only began in
the second half of the 20th Century.
 Establishing the Link Between Entrepreneurs and Economic Growth
The post-war 1950s and 60s were a time of great expansion for most Western
countries, and this was also true in the growth of the social sciences of sociology,
psychology, political science and economics. Academicians were encouraged to
explore the frontiers of their disciplines and combine ideas in interdisciplinary ways.
4
Schumpeter, Joseph, Capitalism, Society and Democracy, 3rd Edition, New York Harper and Row,
1950
3
Everett Hagen in his book On the Theory of Social Change: How Economic Growth
Begins linked personality formation and Entrepreneurship with the economic growth of
society. Hagen saw the entrepreneur as a creative problem-solver interested in both
technological and practical matters, and above all driven by a "duty to achieve". The
central theme of his link between growth and entrepreneurial motivation revolves
around what he termed the "the authoritative-creative personality dichotomy". At the
risk of oversimplifying this thesis, he proposed that entrepreneurial personality is
shaped in a childhood characterised by low father dominance, maternal warmth, self-
reliance training and standards of excellence. This kind of upbringing leads to a more
creative person who, when encountering "relative social blockage" or obstacles arising
from a traditional view of things, is then triggered to respond in an entrepreneurial way.
He suggested that a similar process happened to societies at different times in their
histories and this has lead to surges of creative energy in cultures thereby producing
economic growth.5
Thomas Cochran was another one of the first to attempt a direct correlation
between Entrepreneurship and economic growth. By looking at cultural themes in Latin
America he isolated three important variables: cultural values, role expectations and
social sanctions. In his view entrepreneurs are not seen as deviant personalities or
supernormal individuals, rather they are people who represent society's "modal
personality". This modal personality is shaped by the prevailing child-rearing practices
and schooling common to the culture. A person's subsequent performance in business
will be influenced by three factors, their own attitude towards their occupation, their role
expectations as perceived by the sanctioning groups and the operational requirements
of the job or the situation, and the first two factors are determined by society's value
system. Where the value system of society encourages entrepreneurial behaviour,
growth will take place.6
Another approach was taken by the "Field" theorists who claimed that a person's
traits are inseparable from the social situations in which they take place. They began to
look at successful entrepreneurial profiles to examine regional differences, family
background, close previous associations with business an so on. The implications of
this were that promoters had a little bit more information to assist them in identifying and
encouraging Entrepreneurship in given situations.7 Writing on the phenomenon of
Entrepreneurship in ethnic or cultural minorities Frank Young stated "..when a group
has a high degree of institutional and occupational diversity relative to its acceptance in
the larger society, it tends to intensify its internal communication with the result that a
unified definition of the situation emerges." This network of close and trusted associates
that make up financiers, buyers and suppliers is recurrent theme in studies on the
5
SIET, Theories of Entrepreneurial Supply, from Entrepreneurial Motivation Development, Small
Industry Extension Training Institute, Yousufguda, Hyderabad
6
SIET, op. cit. Extracts from Kilby, Peter, Hunting the Heffalump, Chapter ! Entrepreneurship and
Economic Development, The Free Press, New York
7
Christopher, K.J., Identification and Detection of Latent Entrepreneurship, in SIET op.cit.
4
emergence of Entrepreneurship and has frequently been used as one of the principle
characteristics of an enterprise culture.
Perhaps the most well known of those who worked on the theory of linking
Entrepreneurship to economic growth was the Harvard psychologist David McClelland
who in his book the Achieving Society tried to find a value pattern in recent history that
regularly preceded rapid growth. He set out to establish a relationship between
economic progress and the existence in a culture of a "popular need for achievement"
which he defined as "the desire to do something for its own sake rather than to gain
power, love, recognition or for that matter, profit". The main methodology for doing this
was to examine popular literature at various times in history, score it according to the
presence of achievement imagery, and then to look for indicators of rapid economic
growth. Achievement imagery in folk tales was scored by the number and strength of
references to "unique accomplishments, competition with self-imposed standards of
excellence, long term involvement and the desire for success in competition with
others". For signs of growth he used several indicators, from the controversial method
of recording the increase in the use of electricity to the rather fascinating examination of
the quality and contents of funerary urns in Pre-Inca burial sites.
Naturally such generalisations have attracted a great deal of criticism, but

McClelland was the first to start usefully applying the theory of Entrepreneurship to
public promotional programmes aimed at stimulating economic growth and his work
represented a radical shift in theory to a more dynamic model of entrepreneurial
behaviour in which the entrepreneur was both a product of society as well as an initiator
of societal norms.8
 The Birth of Entrepreneurship Development
In later works such as Changing Values for Progress, McClelland laid out
specific recommendations for creating a favourable culture for the growth of
Entrepreneurship, the most well known of which was achievement motivation training
for executives. The basic premise for his theory was that adults can acquire a strong
need to achieve.9 Up to this point most psychologists had been pessimistic about
personality change, and few believed that it could be altered after childhood.
McClelland was later joined by a colleague D.G. Winter and together they set out to
develop a method for stimulating entrepreneurial behaviour. To do this they needed to
look at what motivated this behaviour and for this it was necessary to understand what
a motive was. They started from the premise that all motives are learnt and that not
even biological discomforts or pleasure urges arise unless they are linked to "cues" that
trigger a recognition of their presence or absence. The reaction is almost like the
Pavlovian dog who salivated when he heard the bell which proceeded his meal.
Clusters of expectancies grow up around certain experiences to the point where they
8
Mc Clelland, David., The Achieving Society, The Free Press, New York 1961
9
Mc Clelland, David and Winter, Motivating Economic Achievement, The Free Press, New York, 1971
5
become the motive. These motives are arranged in a hierarchy of strength or

importance in every individual. The more a person thinks about a particular motive the
stronger it is. Based on these assumptions, the way to change someone's motivation is
to shift the existing hierarchy of motives. The commonly accepted means of doing this
through behaviour training were: the frequency of the reward for the desired behaviour,
the meaningfulness of the materials learned, recitations, warmth and sympathy on the
part of the facilitator, using reason and prestige to support an argument, and supporting
the change with the affiliation to a new reference group.
To test the theory several training courses were conducted in India, where, using
the same basic idea of looking for achievement imagery that had been used in the
scoring of folk tales in The Achieving Society, they asked executives to write short
spontaneous stories about what was happening in "neutral" pictures that they were
presented with. The executives were taught how to score and tabulate the results of
the stories. They were then requested to rewrite them trying to score as high as
possible on achievement imagery. The purpose of this Thematic Apperception Test
was to start the process of learning new "clusters of expectancies" or associative
networks to strengthen the achievement motive. The achievement motivation training
could last up to three weeks, on the premise that the more thoroughly an individual
conceptualises the associations or defines the motive, the more likely that person is to
develop the motive. When the motive is nurtured and exercised it will lead to the
anticipated behaviour. The tests were never definitive but it was clear to almost
everyone who participated in achievement motivation training, that "something profound
was going on" and most people appreciated the chances that they were given for
guided self analysis, reflection on their motivation and review of their own personal
goals. This form of training, with some modifications, became the "standard" for most
Entrepreneurship training up until the late 80s.
 Entrepreneurial Traits
In the 80s with the advent of more conservative political forces in America and
Europe came a strong emphasis on accountability, self reliance, and a growing
recognition of the need for the private sector to play a more prominent part in
development. This heightened the role of small businesses as the "engine of growth"
for many countries. With this trend came a renewed interest in Entrepreneurship that
provided the impetus, in 1983, for USAID to fund a key piece of research as a follow-up
to the classical Entrepreneurship programme designed by McClelland and Winter.
Large numbers of entrepreneurs were interviewed in three countries: India from Asia,
Malawi from Africa and Ecuador from Latin America. The study suggested that there
were a number of traits associated with success. They fell within three main clusters:
the first cluster was consisted of achievement traits, namely: opportunity seeking,
persistence, commitment to work contract, demand for quality and efficiency, and risk
taking; the second cluster was composed of planning traits, such as, goal setting,
systematic planning and control, and information seeking; while the third cluster related
to power traits, composed of persuasion and networking, and self confidence. After the
6
identification of these traits a training package was developed to teach the traits to
entrepreneurs.
 The Entrepreneurial Process
Allan Gibb, an Entrepreneurship practitioner working out of Durham University

Business School in the UK, challenged the validity of the assumption that only those
with certain entrepreneurial characteristics can successfully be self employed or run
independent owner managed businesses. He questioned the relevance of many of the
common Entrepreneurship tests as a means for selection on the grounds that the traits
which are sought after by the selectors are traits learned in business. For Gibb running
achievement motivation training as a separate module for entrepreneurs was artificial
because, in his view, the whole training programme should be oriented to learning and
developing the skills needed to succeed in business. Also instead of having one
programme to cover all target groups he advocated the design of many training
interventions suited to the different stages of the business start-up, survival and growth
process. Gibb also laid out the start-up process into 6 stages: From idea and motivation
acquisition to raw idea; from raw idea to valid idea; from valid idea to scale of operation
and resource identification; from "scale" to business plan and negotiations; from
negotiations to birth; and from birth to survival.
Carol Moore developed a similar linear model of the start-up process in 4

stages: Innovation-Trigger Event-Implementation-Growth. She suggests that what
gives life to the process are a series of factors working on the would-be entrepreneur.
These factors are: personal, such as achievement orientation, locus of control,
tolerance for uncertainty, risk taking, personal values, education and experience;
sociological factors, like networks, teams, parents, family, and culture; and
environmental factors such as opportunities, role models, competition, resource
availability, government policy, and markets or customers.10
Reducing the key components of success down to the minimum, Jeffrey

Timmons identifies: the opportunity; the entrepreneur (and the management team); and
the resources needed to start the business. Out of these three components the lead
entrepreneur is considered the most important, and Timmons refers to venture
capitalists, or entrepreneurs who make their living from picking winners, as giving 80%
of their selection points to the quality of the entrepreneur, the other 20 % goes to the
market potential. Timmons second component is the opportunity. Opportunities exist
because of changing circumstances, inconsistencies, chaos, lags or leads, information
gaps, and a variety of other vacuums in the market. Opportunities are situational, they
are like constantly moving targets they are seen by many but their potential is
recognised by a few. It takes great skill and experience to recognise when the window
of opportunity is open and when it is closed, when to shoot and when to hold fire. As
10
Moore, Carol, Understanding Entrepreneurial Behaviour in A.J. Pearce II and R.B. Robinson Jr. eds.,
Academy of Management, Best Papers Proceedings, Forty-sixth Annual Meeting of the Academy of
Management, Chicago, 1986
7
Mark Twain once said " I was seldom able to see an opportunity until it had ceased to
be one". Timmons third component is resources. He says that "entrepreneurs are
frugal with their resources", they try as much as possible to keep their overheads low,
their productivity high and have minimum ownership of their capital assets. Knowing
when these three components fit together and when they do not is for Timmons the key
to entrepreneurial success. He sums it up by saying,
" Experienced entrepreneurs exhibit an ability to quickly recognise a

pattern- an opportunity- while it is still taking shape. Thus, the process of sorting
through ideas and recognising a pattern can also be compared to the process of
fitting pieces into a three dimensional jigsaw puzzle. It is impossible to assemble
such a puzzle by looking at it as a whole unit. Rather one needs to see the
relationship between seemingly unrelated pieces and be able to fit them together
before the whole is visible. The ability to recognise ideas that can become
entrepreneurial opportunities stems from a capacity to see what others do not-
that one plus one equals three or more. ... Nobel prize-winner Herbert Simon of
the Department of Psychology at Carnagie-Mellon University described the
recognition of patterns as a creative process that is not simply logical, linear, and
additive; he says, rather that the process is often intuitive, involving the creative
linking, or cross association, of two or more in-depth "chunks" of experience,
know-how and contact"11
 Prevalent Culture
Max Weber was among the first to study the enterprising cultures and link them
to business growth. By connecting the ethics of high productivity, savings, and the
discouragement of conspicuous consumption with economic success he was able to
establish a powerful case for the impact of culture on business growth. Allan Gibb
defined an enterprising culture as one which is characterised by "a set of attributes,
values and beliefs operating within a particular community or environment that lead to
'enterprising' behaviour and aspiration towards self-employment."12 Those with even a
brief exposure to some of the minority cultures that are known for their enterprising
behaviour such as the Gujaratis in India, the Asians in East Africa, the Chinese in South
East Asia etc., cannot help being impressed with the single pointedness with which
these people pursue not only business success but also success in their chosen
professions. As children, most of their positive role models are business persons, they
apprentice in businesses when young so that their potential fears of becoming self
employed are dispelled early in life. Societal norms reinforce any attributes or personal
talents relevant for business success such as hard work, assertiveness, opportunism
and the like. Perhaps one of the most relevant factors, an enterprise culture develops is
the social network of contacts with suppliers, buyers, and investors that feeds the
11
Timmons, Jeffrey ibid page 54
12
Gibb, Allan, Stimulating New Business Development: What Else Besides EDP?, in the SEED
Symposium Technonet Asia, op.cit.
8
entrepreneur with the information needed for "pattern recognition", opportunity

identification and problem-solving, all of which are vital competencies for success.
Promotional interventions that are suited to this element of the enterprise

development process are for example: enterprise award schemes and the endorsement
of Entrepreneurship by popular opinion leaders; the strengthening of Entrepreneurship
and business education within the education system; Entrepreneurship apprenticeship
schemes for adolescents; supporting youth associations to develop enterprise
programmes; promoting youths to engage in summer business programmes where
they start their own enterprise rather than take a summer job; and a greater stress on
Entrepreneurship in career counselling for the youth. Although some of these
programmes may appear to be long term it should be kept in mind how quickly the
enterprise culture was created in the latter half of the 80s in the United Kingdom. With
steady public support and a favourable macro policy it was possible to significantly alter
the enterprise culture in the Britain.
 Macro Economic Framework
Much of the growth that we have seen in the Asian and Pacific region over the
last 15-20 years has been due to the Governments of many of these countries putting in
place a macro economic policy that promoted and enabled business. Policies aimed at
stabilising currency fluctuations, keeping inflation to a minimum, managing the public
deficit, and allowing positive real interest rates have had a significant impact on the
emergence of a strong private sector which has all of the signs of depth and endurance.
When such measures are combined with natural resource endowments, rational public
investments in infrastructure, and a banking system which can serve the needs of small
enterprises one has all of the ingredients for a positive macro economic framework for
enterprise development. Liberalisation and the deregulation of many industry and
commerce sectors has frequently created the market for a wide variety of new and
profitable ventures that mostly start out as small ones. An open economy in which
market information flows relatively freely allows entrepreneurs to identify new
opportunities and create products or services that add value to the economy.
Enterprise development programmes in the context of the macro economic

framework are usually oriented to sensitising policy makers to the needs of enterprise
and designing positive interventions for support and regulatory institutions which are
more facilitative and enabling rather than wasteful and restrictive.
 Micro Climate
The micro climate is the immediate circumstances in which entrepreneurs find

themselves. It is composed of market niches, competition and resources. Resources
for entrepreneurs come in many forms such as loan or venture capital, reliable and
trustworthy suppliers and a network of business contacts, skilled labour, information,
and promotional programmes. Whereas "mega trends" may be observed at the macro
9
level because of changes in culture, life styles, or liberalisation, it is within the micro
climate, by virtue of their size of investment, that the small business person must
identify opportunities that will produce an attractive return.
A good example of a favourable micro climate and supporting prevalent culture

is provided by Frank Young in his analysis of minority groups in which the incidence of
Entrepreneurship is high. Under these circumstances venture and loan capital is
readily available for new investments because of the trust and knowledge of the
investor combined with the obvious pressure on the entrepreneur to "get it right" or face
ostracism by the community. Also such an entrepreneur has the opportunity to access
a ready made network of suppliers and distributors, and when the entrepreneurs need
confidential advice they can access this from the experience of respected role models
who are expected to share their knowledge for the good of the community.
The ideal micro climate rarely exists outside such exceptional cases as
mentioned above however it can be influenced much easier than the prevailing culture
or the macro economic framework. Special loan schemes or Entrepreneurship
programmes which are introduced by governments to address the issues of: ethnic
imbalances, regional variations, unlocking untapped potential, the development of
specific sectors, and export orientation are all examples of what can be done to
positively influence the micro climate without going so far as to intervene.
 Motivation
Most people have some degree of Entrepreneurship, but the motivation to start
and run a business may not necessarily be very prominent within the hierarchy of
motives as described by McClelland and Winter in Can Adults Acquire a Strong Need to
Achieve. Motivation or the striving for some particular satisfaction or goal, is a function
of the strength of the motive, the likelihood of achieving the goal and the perceived
value of the pay-off from the goal. This motivation is significantly influenced by one's
culture or societal norms, childhood rearing practices, economic circumstances, and
exposure to situations in which the motive is evoked.
The main determinant of the use of a particular motive is the situation in which
persons find themselves. Certain characteristics of the situation trigger different
motives which open different valves. Since different motives are directed to various
kinds of satisfaction, each motive leads to a different kind of behaviour. The implication
is that by changing the nature of the situational characteristics or stimuli, different
motives are aroused or actualised which lead to different patterns of behaviour. When
these situations occur relatively frequently the motives become stronger. The
consequence of this is a rearranging of the hierarchy of motives for an individual, and
the changing to some extent the behaviour of individuals in response to situations.
With this understanding of motivation it is possible to influence peoples'

behaviour in training situations that are designed to evoke the kinds of reactions that
10
are typically associated with business success. It is debatable as to how much motives
can be influenced during a four to six week training course, or indeed whether the
hierarchy of motives can be shifted in such a short time considering the lifetime of prior
cultural, normative, family and economic circumstances that have preceded the
exposure to the more clinical situation in which enterprising behaviour is encouraged
and developed. At the same time it can be a rather easy step to ignore that enterprising
behaviour is not the only behaviour that is of value in a society, and therefore respect
for participants' existing behaviour patterns must be the premise from which
"enterprising behaviour training" starts.
 Competence
Without competence, not even the most hospitable environment or the best of
motives is likely to generate successful businesses. The successful American
entrepreneur Henry Ford was once quoted as saying, “If money is your hope for
independence, you will never have it. The only real security that a man can have in this
world is a reserve of knowledge, experience and ability” At the end of the day it is the
competent individual who manages the process and produces the result. Although we
may be looking for the kind of mythical "traits" that McClelland or McBer Consultants
identified for USAID in the early 80s, it is easy to overlook successful potential
entrepreneurs because they do not fit into our conventional model of what they should
be. We may be blinded by a stunning trait or miss the underlying competence that
makes the difference between success and failure. While it can not be denied that
some people may be born with a great deal of talent, competence can only be acquired
through experience. The following is what INC.Magazine has to say about competence
in entrepreneurs.
"Entrepreneurs play a mythical role in American society. They're our risk taking
adventurers. Heroes of the new economy.... Or so we figured. By way of an
eight-page survey and dozens of follow up phone calls, we asked INC.500 Chief
Executive Officers to recall for us how they came to create a company. We
probed their background. We asked them where they got the idea for their
business, how they implemented it, and of course how they financed the whole
thing... Given the mythology of Entrepreneurship we expected tales of inspiration
and imagination, of boldly going where no man (or woman) had gone before.
Instead of iconoclastic individuals, the cowboy capitalists of America's dreams,
we found people enmeshed and embedded in industries, with rich networks of
contacts and colleagues they could draw on to help them build a business. For
most, the secret of successful Entrepreneurship seemed to lie not just in
individual inspiration but in knitting a dozen different interests into one co-
operative endeavour. Creating a company was a matter of knowing customers,
suppliers, partners, and sources of capital. It was a matter of knowing the
marketplace well enough to notice tiny fault lines of change-- fault lines that
11
would one day become sizeable niches in the business landscape.... The
inescapable conclusion: entrepreneurs are made not born".13
Competence is a function of knowledge and experience acquired through many

different situations; competencies may be learned through training whether formal or
informal, through personal experience on the job of life, or through disastrous mistakes,
but the most profound business competencies come from running a business on your
own. No amount of simulation in the classroom will fully prepare someone for the
hardships and personal anguish that a business is bound to cause. No amount of
positive reinforcement or feedback in a training course is likely to come close to the thrill
of achievement after a difficult struggle. What a training programme can however
provide is an enabling situation in which a person can begin to answer the questions of
whether or not running an enterprise is their career of choice and if so what types of
competencies they are likely to need in their quest for success.
The most important competencies to develop are: awareness of one's own

strengths and weaknesses; the ability to look for and see patterns where others do not;
the ability to match one's own human and material resources with new opportunities or
"strategeering"; the ability to marshal people and money in the pursuit of a goal; as well
as competencies associated with networking, seeking information, and business
planning. These competencies can all be acquired. They are most frequently acquired
through direct experience in business, but can also be learned to a lesser degree
through training.
 The Business Activity or Situation
The situation is the stage on which the actors and their audience come together.
It is where "pattern recognition" takes place, where the trigger event stimulates a person
to go it on their own, it is where motives are acquired, where markets are identified and
where competencies are learned. It is also where disaster strikes and where the
rewards of the enterprise development process are evident. Each activity or situation is
an opportunity to learn a competency, acquire information, make contacts, and plan for
the future.
Consequently some of the training courses for entrepreneurs try to simulate a

business activity and an opportunity, one which could, in itself, be a trigger event to start
a new business or expand an existing one. Courses should be designed around a
number of activities or situations which are calculated to stimulate either self analysis or
enterprising behaviour. Experiential learning situations might be created to facilitate the
growth of personal awareness that provides the platform from which an informed choice
13
Page, John, INC Magazine, June 1989, taken from Creativity in Business an Entrepreneurial
Approach, Gene Luczkiw and Kenneth Loucks, Copp Clark Pitman Ltd., 1992, Toronto
12
can be made. Enterprising behaviour must be supported, encouraged and given

positive feedback so as to elicit its recall and application in future situations.
These courses try to address the fundamental situations on the road to

enterprise start-up or growth: Do I want to be or continue to be an entrepreneur? Does
being an entrepreneur fit my personality, my family situation, my cultural background or
my present circumstances? Can I succeed? Can I cope with failure? How do I know this
is the right opportunity? How do I put a Business Plan together? How do I make my
business grow? How can I convince the bankers that I have what it takes? These are
all hard questions and extremely difficult to structure and deal with all at the same time.
The average person may address one or two of these questions before making a
choice of whether to proceed or abandon a venture and the processing of these issues
can be superficial particularly when the person has to grapple with them alone. The
courses should telescope or condense the processing of these issues into a
manageable time frame and a supportive environment. By structuring the frequency
and duration of situations that call for either self analysis or the use of enterprising
behaviour and by providing knowledgeable facilitators to assist in the processing of
these questions, these courses can be powerful experiences that do have an impact
beyond business success. Even courses designed for the staff of enterprise support or
regulatory institutions should appreciate the introspection and the chance to develop
their own enterprising behaviour.
Small Enterprise Promotion Models

At this point one would like to step back from the study of Entrepreneurship itself
and look a little bit more at its context, the field of enterprise promotion which has in fact
been the vehicle for the delivery of most Entrepreneurship programmes. This stepping
back and looking at the wider picture is important because in doing so we can
distinguish between the “Entrepreneurial Development Process” which is essentially
the description of what happens to an individual during the formation of a business, and
the “Enterprise Development Process” which analyses critical preconditions for both the
entrepreneur and society that are necessary to improve the successfulness of existing
and potential entrepreneurs.
These days the world has become a global economy, no country can stay
isolated and national economies compete against each other. The effects of this
globalisation on economic growth, on employment and income patterns are dramatic in
industrialised, emerging and still less developed economies. Identifying better ways and
means for stimulating enterprise development and economic growth therefore remains
a strategic goal for all those interested in increasing the pace of better balanced income
and employment growth. Fostering private initiative is the declared option for many
policy makers.
13
The desire of public bodies such as the governments of emerging economies

and donors, to have cost-effective and high impact approaches for ever more difficult
development situations, has stimulated much of the research that has been done.
Enterprise promotional measures executed in developing countries during the late 60s
and 70s were mostly characterised by the view that the small entrepreneur was
someone who required continuous subsidies in the form of free training, ready-made
feasibility studies, purpose-built industrial estates, marketing assistance, below-market
interest rates for credit, and continuous extension service advice. Because of this
common perception of small entrepreneurs as people in need of social welfare it was
considered to be in the best public interest to intervene in the market to support them.
Large institutions were created to see that the subsidies went to the "right" people and
millions of dollars, pesos, rupees, shillings, and pounds were spent on enterprise
promotion schemes that had impacted on , at the best of times, only a fraction of a
percent of the total number of entrepreneur in any given country. The real bottlenecks
inhibiting entrepreneurial success namely policies aimed at a rigid state control of the
market forces, were largely ignored.
This model of providing a complete range of services to a limited number of

businesses became known as the "integrated model"14 and it was not until the early 80s
that alternatives began to emerge in both the field of credit and Entrepreneurship.
These approaches became known as "minimalist", in that they focused on delivering
only one promotional tool as opposed to the whole package. Minimalist programmes
were based on the following assumptions: a) that an entrepreneur does not need, at
any given time, to have the whole range of assistance packages to succeed; b) the
provision of services such as credit, training and industrial space do not necessarily
need to be integrated with each other; c) there will always be sufficient demand for any
one of these services to keep a reasonably small organisation fully occupied; and d)
rather than serving the select few of the integrated approach, the minimalist
organisations are oriented to dealing with thousands of clients. With the specialisation
of services and the resulting economies of scale it is then possible to reduce overheads
and improve product quality which, in turn stimulates demand for the services. When
the demand for the product is sufficiently high the organisation is given the opportunity
to charge its clients a fee for its services. Constant monitoring and evaluation systems
validate whether or not the service is indeed having an impact on the organisation's
14
For a more thorough analysis of the "Integrated Model" see Kilby, Peter, Breaking the Entrepreneurial
Bottleneck in Late Developing Countries: Is There a Useful Role for Government. in, Entrepreneurship
and Economic Development, Harvey Leibenstein and Dennis Ray, Journal of Development Planning No.
18, Department of Economic and Social Affairs, United Nations, 1988. The "Integrated Model" has its
origins in the early writings of Eugene Staley and Richard Morse who proposed "... it is our thesis that the
productiveness of small and medium sized manufacturing plants, like the productiveness of a field of corn
or sugar cane depends on a combination of interacting factors. If a development programme involves
only one of these factors the result may be quite meagre, perhaps not worth the effort and expense.... An
integrated programme that works on a carefully selected combination of factors simultaneously, the exact
combination depending on local conditions, is more likely to prove worthwhile" This model, which is not
without some merit, when it got into the hands of bureaucrats lead to the wasteful provision of services to
small enterprises simply to preserve the appearance of being integrated.
14
clients, and this feedback provides the organisation with information for strategic
decision-making. Examples of such organisations are the Grameen Bank in
Bangladesh, Prodem and BancoSol in Bolivia, and KIE's Informal Sector Programme in
Kenya.
In 1980 GTZ, the German Corporation for Technical Co-operation began

experimenting in earnest with different approaches to small enterprise development.
Much of this was done in Nepal, first in the context of an urban development project in a
town called Bhaktapur and then later through a national project which covered both
urban and rural situations. After an initial three years of following an integrated model
combining access to credit, with extension services, export marketing, industrial space,
technology development, and Entrepreneurship, three aspects of the programme stood
out as being the most cost-effective, these were Entrepreneurship training, business
counselling, and a small revolving credit scheme. The Entrepreneurship development
or what was then called New Business Creation programme became the most popular
of these three because of its high success rates in business start-ups. The average
start-up rate was 12 business for every six week course of 20 participants, with an
average employment size per business of 5.6 employees. The direct cost per training
course was $1,000. In 1987, with both conceptual and operational inputs from a
number of professionals, this particular brand enterprise promotion became known by
its acronym, CEFE, or Creation of Enterprise through the Formation of
Entrepreneurs.15
The programme was subsequently replicated in a number of other countries in

Eastern Europe, Asia, Africa and Latin America and similar success rates were
recorded. In 1994 an independent evaluation of the CEFE method was carried out
across three continents with the evaluators noting: its high effectiveness in stimulating
business growth; its flexibility and adaptability to a wide range of target groups and
cultures, that it is a powerful instrument beyond enterprise promotion; that it is highly
praised by both the beneficiaries and the host institutions implementing the programme,
and that it has generated a pool of highly qualified and motivated people.
Since its inception as an Entrepreneurship development programme, CEFE has

evolved into a comprehensive set of training instruments using experiential learning
methods to develop and enhance the business management and personal
competencies of a wide range of differing actors, mostly in the context of income and
employment generation and economic development.
CEFE which today stands for Competency-based Economies, Formation of

Enterprise has evolved over the years from an approach training individuals who
want to start their own enterprise to a comprehensive training methodology based on
the model presented later, is designed to evoke enterprising behaviour and
15
In addition to the team working in Nepal (Jim Tomecko, Rainer Kolshorn, Devi Gnyawali, Ed Canela
and Deepak Adhikari) the concept benefited from the short term assistance of Paz H. Diaz, Allan Gibb,
Malcolm Harper, Arnulfo Itao, Angelita Resurreccion and Nagendra Singh.
15
competence in a wide variety of situations. The fundamental assumption is that

people with a clearer vision of their goals and equipped with the skills to achieve
them are far more likely to become productive individuals in society.
Although the training methodology has a wide appeal and has been applied in
a variety of situations, its core focus remains the stimulation of growth in the small and
medium enterprise development process. In this context it adresses two sets of actors
which are considered as the most important in the enterprise growth process, namely
entrepreneurs and the personnel of enterprise support and regulatory institutions. The
emphasis with entrepreneurs is on improving their business performance while with
personnel from enterprise support and regulatory institutions more attention is given to
creating a positive enabling environment at the macro and meso level.
CEFE's main objective today is ......
to improve the entrepreneurial performance of economic actors through:
 guided self-analysis
 stimulating enterprising behaviour
 the build up of business competencies
Many training programmes have the objective of transferring needed skills and
know how, with the result that knowledge is acquired but there is very little
subsequent application, because of the absence of working on the motivation to act,
the strengthening of capabilities to act and the testing of the capabilities in "real-life
simulation exercises". This is particularly the case with lower income target groups
whose experience and exposure to more formal business situations such as applying
for a loan from a bank, precludes their competence in handling the rigours of a
sophisticated business environment that comes with growth.
There are essentially six stages in a CEFE training programme regardless of the
target group. The first stage is awareness, in which participants are encouraged to
examine who they are, clarify their own values, and evaluate their own personality,
motivations, capabilities and personal resources. The second stage is acceptance or
recognition of one's own strengths and weaknesses - not everyone has to be a leader
or hero, but being more creative, innovative, and competent is likely to produce rewards
in any profession. The third stage is goal setting, where the emphasis is placed in
developing clarity of purpose in one's short and long term goals of life. The fourth stage
involves developing strategies or action plans which are oriented to generating
growth, this is done after analysing the relevant components of the six factors
mentioned above and includes the upgrading of knowledge about economics and
entrepreneurial decision-making. The fifth is direct experience where the emphasis is
on doing; structured learning experiences and encountering "real life" situations assist
16
in building up this experience in which strategies are tested, evaluated and modified.
The last stage is transformation and empowerment where the competencies
acquired come together into a pattern which matches personal strengths and
weaknesses with goals.
An overall guiding principle to the training is the ownership of the process

which is acquired through the time and energy that participants must invest into the
highly demanding schedule of each course.
By moving through these stages from awareness to transformation, the

participant is given the opportunity to experience personal growth and to develop a
more enterprising approach to life. The amount of empowerment that actually takes
place is in direct proportion to the investment made by the participant and to the
increase of economic opportunities.
The Enterprise Development Process
Most social scientists would agree that given several different societies with
equal resource endowments, those which have a higher proportion of competent,
resourceful and enterprising people are likely to generate the higher levels of output
per capita that stimulate both increased income and the growth of a social
conscience.
The CEFE model is based on the assumption that the enrichment of society is
essentially depending on its human resources, and the more productive and
accountable these people are, the greater will be the wealth of that nation.
The quality, nature and frequency of the interactions and their results is a
function of the capability, motivation and personal resources of the individual on the
one hand combined with the prevailing conditions of their macro, meso and micro
environments on the other. These factors when combined stimulate situations which
may have positive, negative or neutral outcomes for the individual or society (see
figure 1).
Any or all six of these factors can, at any time, be linked in "causal chains" of differing
sequences or combinations setting in motion the activities that open or close a career
opportunity, influence a consumer to buy or not to buy a specific product or make a
business grow, stagnate or decline. For example, an opportunity may arise and be
recognised as one, because of a combination of a person's motivation, capability and
an imperfection or "need" in the meso environment. Or an enterpreneurial family
situation in the micro environment can motivate a person to acquire the competence
needed to start a business. Even non-economic interactions at such mundane levels
17
as discussions with friends will follow the same pattern and their outcome will depend
on these same factors.
There is no single linear relationship between these factors and their sequencing
and combination can be random and appear "chaotic". The strength and character of
their influence can vary in individuals as well as in societies. Each factor is in a
constant state of flux: economies grow, stagnate and decline, only to grow again; in the
meso environment, markets may come and go, competition will sometimes be weak or
strong and resources will vary in their availability; motivation is constantly being shaped
by situations and feedback; capabilities are learned and lost and personal resources
can also grow and decline. But it is this process of change that creates opportunities for
enterprising people to identify and exploit situations that lead to productive outcomes.
The purpose of understanding the process and recognising the factors is to enable the
promoters or the individuals themselves to analyse them and then positively influence
them in given situations.
Figure 1
CEFE International
The Basic Theory
Society Individuals
Interactions
Macro
Capability
Environment
Meso
Environment Motivation
Micro
Outcomes Resources
Environment
16
16
Society:
18
Each factor can be tuned to be more or to be less favourable by the individual or

the promoter within their limits of power, but since situations are permanently dynamic,
those who are involved in promotion must be engaged in a constant balancing act
between going too far and not far enough, between providing incentives on the one
hand and spoonfeeding on the other.
In order to design strategies to increase the productivity of different situations

it is necessary to review the strengths and weaknesses of the relevant components
of each one of the above mentioned factors.
For example, on the society/environmental side of the equation at the macro

level, these components would be: the prevailing culture, the legal and regulatory
system, the global or regional infrastructure, the dominant education system, and the
political economy of the environment; the meso level would be composed of:
resource institutions, markets, and competition or opportunities; while on the micro
level the key components could be: family culture and the immediate domestic
situation.
For strategies targeted to the individual, a review of the components of a

person's capability would include their physical attributes, education, experience and
acquired skills; the components of motivation to isolate would be: the degree of
importance to the individual or the level of commitment to the goal and an evaluation
of the likelihood of success; concerning personal resources, whether these resources
are inherited or acquired the analysis would weigh the relationship of the benefits
against the risks (see figure 2).
The likelihood of "success" or a productive outcome in any given situation is a

function of the endowments of any one of these factors. If the playing field is level
and participation is potentially unlimited, it is in everyone's interest to create as many
productive outcomes as possible.
In principle this theory could apply to any sector whether it is business,

education, health or any field imaginable where interaction between society and
individuals takes place. Even in smaller microcosms such as a large or medium
organisation the successfulness of the organisation and the careers of the
employees will depend on productive outcomes from their interactions within the
Macro Environment, those conditions on which the individual has little or no influence, but at the same time they may have
greater or lesser influence on the individual.
Meso Environment, conditions which may be influenced by the individual and may have a strong impact on the individual.
Micro Environment, those conditions the individual can strongly influence and which have a strong influence on the individual.
Individual:
Capability, the combination of inherited talents and acquired skills
Motivation, the response or reaction to a given situation.
Personal Resources, the tangible assets that individuals have at their immediate disposal.
19
organisation or outside in their environment. Stimulating more productive outcomes

can be achieved by improving the conditions of the six factors mentioned above.
Since the six factors are the product of the interactions of people, improving
the human resource element on both sides of the equation (the individual and the
society) is critical to increasing the proportion of productive outcomes from
interactions in any given economy. This points to a strong need for human
resources development or training as a powerful instrument to raise the competence
of the key actors involved in the interactions so that they could not only generate
more productive results but also deal effectively with the subsequent outcomes.
Figure 2
CEFE International
The Basic Theory
Society Individuals
Interactions
Macro Environment Capabilities
Culture Physical Attributes

Legal Framework Education
Education System Aquired Skills
Mezo Environment Economy Expereience
Motivation
Markets Personal Values

Resource Degree of Importance
Institutions Level of Commitment
Micro Environment Likelihood of Success Resources
Local Infrastructure
Neighbourhood
Likelyhood Inherited
Family Culture of Aquired
Domestic Situation Networking Ability
Success
CEFE training focuses on the circumstances involved in decision-making during

the kind of interactions described above. Its objective is to increase the competence of
key economic actors to generate productive results. By addressing actors on both
sides of the equation (the individual and the society) and equipping them with the
20
understanding, competence and the strategies needed to improve growth, the

frequency of productive interactions should increase.
CEFE's experience shows that human resource development is able to provide

the appropriate answer to encourage private initiative. Economies based on the
competence of its people will not only experience higher economic growth but also will
give a much greater portion of its people the opportunity to participate in the benefits.
For those involved in the decision-making process two very important questions must
be asked:
 What are the most critical factors preventing more productive outcomes? and,
 What are the most cost-effective instruments to turn these factors to generate
more productivity?
Considering for example the promotion of lower income target groups where the legal
and regulatory system in which they operate may be antiquated due to neglect, their
access to resource institutions and education may be limited as well as their
experience in enterprise as a function of their exposure to how a modern economy
works. Some of the instruments of human resource development that may be applied
for the individual could be: rekindling motivation, developing market oriented skills,
and equipping them with the strategic capabilities to propel them out of their cycle of
poverty. On the society side, instruments might include working on legal rights,
improving access to local resource institutions and social programmes oriented
towards improvements of family conditions by equipping those responsible on the
implementation level with the necessary skills to do their job professionally.
Taking the example of an emergency Food-for-Work-Programme, this would be a

typical case where interaction is one-sided. We find a strong donor on one side and a
weak recipient on the other. Communication is reduced to a minimum, competence
of the recipient is not requested, human resource development is not part of the
process. In this situation the long-term impact on economic growth of the society and
on the income or employment of the recipients would be negative, when human
resource development to build up the competence to re-establish one's income base,
isn't incorporated in the programme. The impact of human resource development on
sustainable income, employment and on growth of the economy is very often not in
the mind of the established strata of the population as they themselves are not aware
of all the inequalities that exist in society.
Conversely, if we take the example of the more affluent strata of the economy where
resources are not the major problem and higher education is considered to be the
norm, one might work less on motivation and more on goal setting, opportunity
identification, strategic planning capabilities and the improvement of the regulatory
framework.
21
Such examples are mainly illustrative of the wide range of combinations that
promoters can choose, according to the given situation and the needs of the target
group. Whatever instrument is chosen however, the element of human resources
development will be at the leading edge of the change process for if resources are to
be effectively allocated it will require competent people to instigate and plan their
utilisation.
The CEFE method of enterprise promotion represents the synthesis of enterprise

research, theory and application and links economic growth with more and better
qualified employment and higher individual income. Its strength comes from paying
particular attention to the practical results of its interventions. The "bottom line" has
always been clearly focused on improving the business performance of enterprises but
the method has been widely used in sectors such as education, vocational training,
management training, rural and urban development, reconstruction and privatisation,
refugee and reintegration programmes and in agriculture.
Because of the sustained implementation of CEFE programmes for the last ten years
in four continents and the commitment to monitoring its impact, the method has
evolved into one of the most popular tools for the empowerment of lower income
target groups, the stimulation of enterprising behaviour, the enhancement of
business competencies and the promotion of small and medium enterprise.
Basic Guidelines for Successful CEFE Interventions

 Design
There are two main CEFE product groups, courses aimed at existing or potential
entrepreneurs, and courses for personnel from enterprise support or regulatory
agencies. Both products have the objective of improving the business performance of
entrepreneurs. One is more direct while the other is more indirect working on the
enabling environment rather than entrepreneurs themselves. Both are considered to be
valuable in the design of any CEFE programme. The four primary considerations made
during the design phase are: the preparation for the Appreciation Workshop for
Enterprise Support Personnel to introduce the concept to decision-makers; the
conducting of a needs assessment on the target group to ensure socio-cultural
adaptation are made; the structuring of institutional resources to support participants
with post-course follow-up in order to improve the micro-climate and; and the screening
of participants to achieve better cost-effectiveness.
 Operational
There are five main factors that are important during the operation of the course:
the linking of learning with activity to reinforce enterprising behaviour; providing
adequate space and time for processing the lessons learned; creating a supporting
22
environment for change so that the change is more profound; being sensitive to the
culture of the target group so that practical societal “blocks” can be discussed and
solutions found; and developing the technical competence in business management in
order to think and act profitably
 Sustainability
The CEFE method aims at two levels of sustainability, the first is with the
participants of training courses, and the second is with the national and regional
implementing institutions that are always used as the executing agencies for a CEFE
programme. The sustainability of the results achieved during the training is function of:
how well the training was conducted; the preparations for the course related to the
involvement of the complementary resource institutions; and the follow-up provided by
the host executing agency. At the level of sustaining CEFE within the host executing
agencies there are four factors that are of major importance: the choice of the host
agency; the development of qualified trainers; effective follow-up from international
sponsors of CEFE; and the proper use of monitoring and evaluation systems.
Summary and Conclusion

Identifying better ways and means for stimulating enterprise development and
economic growth remains a strategic goal for those interested in increasing the pace of
income growth in emerging economies. The CEFE method of enterprise promotion
represents the synthesis of enterprise research, theory and application. Its strength
comes from paying particular attention to the practical results of its interventions. The
“bottom line” has always been clearly focused on improving the business performance
of enterprises. Because of the long-standing involvement of GTZ in the funding of
CEFE activities for the last ten years in four continents and the commitment to
monitoring its impact, the method has evolved into one of the most popular tools for
small and medium enterprise promotion. The method is based on a model of the small
enterprise start-up and growth process which assumes that:
 There is a positive correlation between the incidence of Entrepreneurship in a

given society and its economic growth.
 Most people can start or run a small business, it is not necessary to be a social
deviant, high achiever, or a super hero.
 The incidence of entrepreneurship in a given society will be a function of that

society's prevalent culture, macro economic framework, and micro investment
climate on the one hand, and the motivation, capabilities and resources of
individuals to engage in business on the other.
23
 It is possible to positively influence change in any one of these factors, and the
more profound these changes are the higher will be the incidence of successful
Entrepreneurship in a given situation.
 The more people that acquire these attributes in a society the higher will be the
incidence of Entrepreneurship and economic growth.
The CEFE method of enterprise promotion training is based on the following

assumptions:
 The business performance of existing and potential entrepreneurs can be

improved through training.
 The impact of the investment training is dependent on: the skill with which other
enterprise support and regulatory institutions have been co-opted into the
process, the prior orientation of the facilitators to the needs and culture of the
target group the quality of the participants and the quality of the trainers.
 People learn best by doing; the motivation to start and run a business,
enterprising behaviour, and business competencies can be acquired through
carefully designed experiential learning situations that simulate actual business
events.
 Entrepreneurship training can be sustained and expanded in emerging

economies by building up a strong base of qualified trainers in regional and
national institutions
CEFE is a cost-effective, non-interventionist enterprise promotional tool that recognised

the essential roles of both entrepreneurs and a supporting environment. It taps the
creative energy that already exist in individuals and in society and distils this potential in
a manageable form so that it can be replicated in a wide variety of conditions to
produce enterprise growth. CEFE does not create gold from lead nor diamonds from
coal but it does offers prospectors and promoters the possibility of using a better tool to
find what they are looking for.
Rainer Kolshorn
James Tomecko
September 1995
24

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Understanding Entrepreneurship

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gtz Deutsche Gesellschaft für

Technische Zusammenarbeit (GTZ) GmbH

With unemployment looming as the most challenging socio-economic problem of

stimulation of economic growth. Whether in China, South Africa, Germany or a former

A Brief History of Entrepreneurship

 The Evolution of Definitions

 Establishing the Link Between Entrepreneurs and Economic Growth

Naturally such generalisations have attracted a great deal of criticism, but

 The Birth of Entrepreneurship Development

become the motive. These motives are arranged in a hierarchy of strength or

 The Entrepreneurial Process

Allan Gibb, an Entrepreneurship practitioner working out of Durham University

Carol Moore developed a similar linear model of the start-up process in 4

Reducing the key components of success down to the minimum, Jeffrey

" Experienced entrepreneurs exhibit an ability to quickly recognise a

entrepreneur with the information needed for "pattern recognition", opportunity

Promotional interventions that are suited to this element of the enterprise

 Macro Economic Framework

Enterprise development programmes in the context of the macro economic

The micro climate is the immediate circumstances in which entrepreneurs find

A good example of a favourable micro climate and supporting prevalent culture

With this understanding of motivation it is possible to influence peoples'

Competence is a function of knowledge and experience acquired through many

The most important competencies to develop are: awareness of one's own

 The Business Activity or Situation

Consequently some of the training courses for entrepreneurs try to simulate a

can be made. Enterprising behaviour must be supported, encouraged and given

These courses try to address the fundamental situations on the road to

Small Enterprise Promotion Models

The desire of public bodies such as the governments of emerging economies

This model of providing a complete range of services to a limited number of

In 1980 GTZ, the German Corporation for Technical Co-operation began

The programme was subsequently replicated in a number of other countries in

Since its inception as an Entrepreneurship development programme, CEFE has

CEFE which today stands for Competency-based Economies, Formation of

competence in a wide variety of situations. The fundamental assumption is that

CEFE's main objective today is ......

to improve the entrepreneurial performance of economic actors through:

An overall guiding principle to the training is the ownership of the process

By moving through these stages from awareness to transformation, the

The Enterprise Development Process

The Basic Theory

Each factor can be tuned to be more or to be less favourable by the individual or

In order to design strategies to increase the productivity of different situations

For example, on the society/environmental side of the equation at the macro

For strategies targeted to the individual, a review of the components of a

The likelihood of "success" or a productive outcome in any given situation is a

In principle this theory could apply to any sector whether it is business,

organisation or outside in their environment. Stimulating more productive outcomes

The Basic Theory

Macro Environment Capabilities

Culture Physical Attributes

Markets Personal Values

CEFE training focuses on the circumstances involved in decision-making during

understanding, competence and the strategies needed to improve growth, the

CEFE's experience shows that human resource development is able to provide

Taking the example of an emergency Food-for-Work-Programme, this would be a

The CEFE method of enterprise promotion represents the synthesis of enterprise

Basic Guidelines for Successful CEFE Interventions

Summary and Conclusion

 There is a positive correlation between the incidence of Entrepreneurship in a

 The incidence of entrepreneurship in a given society will be a function of that

The CEFE method of enterprise promotion training is based on the following