Successful joint entrepreneurship can lead to higher employment generation
India has around 60 million MSMEs (micro, small & medium enterprises), with 75% of them being in the industrial sector and a quarter of the same, around 10 million, in the manufacturing space. Also, 93% of these manufacturing enterprises are estimated to be micro. While the number of MSMEs has increased steadily, percentage wise, this domination of micro enterprises, by number, has changed marginally over the last two decades.
Simultaneously, the share of manufacturing MSMEs as part of GDP and manufacturing output has seen a decline during a significant part of this period. As many as 72% of these units have no hired worker, and only 0.002% of these units are definitely of joint nature, i.e. cooperatives and self-help groups, and 95% are private proprietary. Interestingly, while per-unit employment of private proprietary manufacturing units is about 2.5 persons, for those units that are of joint nature, per-unit employment is around 11 persons.
This implies that the growth of successful joint entrepreneurship has much higher scope for employment generation, and there are valid reasons for the same. Firstly, joint entrepreneurship brings in a knowledge pool, at times with specialisation. Secondly, the risk of each single entrepreneur reduces significantly. Thirdly, the volume brings in an optimal size of business that can more easily handle the increasing requirement of formalisation. Fourthly, it becomes a more attractive working option for value chain partners, both in the forward and backward linkages.
India—or for that matter the global development phenomenon—has witnessed both successful as well as unsuccessful growth of joint entrepreneurship. Among the many attributes, four things are critical for such units to both run and prosper—a market linked to a global value chain, a suitable chief executive, a transparent organisation, and sufficient time to mature.
While the global value chain acts as an on-the-job skill provider to an aggregated group of otherwise individual entrepreneurs, an empowered and neutral chief executive channelises market and skills to them and, most importantly, ensures transparency and eases out misunderstandings that always occur in creating such institutions.
The creation of such models can follow the public-private-community partnership route addressed to, say, each taluka (block) of the country. Based on historical competitive advantage and likely competitive advantage a taluka or even a city or a group of villages has, unorganised operators can be grouped into formal joint organisations in one or more numbers at taluka level. One can also follow a hub-and-spoke model, wherein one can start with the most prospective area and slowly take in less-developed areas around. But such agglomerations should start with a business-cum-learning opportunity by linking with higher order value chain partners who are on lookout for such agglomerations.
Needless to say, as opposed to promotion of amoebic entrepreneurship, the creation and promotion of joint entrepreneurship will demand development fund. While local, state and Union governments can provide such funds, they have to admit the superior role of the private sector in promoting market conditions and skills thereof, and keep out of these activities directly. Secondly, there is a need to optimally support the skilling and market opening opportunities by the private sector as well as the important task of creating the chief executive (often by a promoting organisation), who will provide a transparent organisation and act as the developmental link between the joint entrepreneur model and the private sector, i.e. value chain partners.
Over a period of time, as the joint organisation matures, the promoting organisation can also become a value chain partner in this process. Lastly, the government or any other supporting organisation needs to have the patience of promoting such growth models that do take time, from 4-5 years. One can start the process with the 2 million handloom and handicraft enterprises, involving over 4 million persons. At the policy level, one also needs to create appropriate tax and suitable subsidy incentives for such existing and likely joint entrepreneurship models.
The author is Executive director, Foundation for MSME Clusters. Views are personal