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04 - Chapter 1
04 - Chapter 1
INTRODUCTION
1
https://www.asianage.com/amp/india/all-india/080719/unemployment-rates-increase-in-major-states.html
2 https://wap.business-standard.com/article-amp/opinion/jobs-debate-ingenuity-or-insinuation-119032600013_1.html
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company which was incorporated in India in less than 10 years and has an annual turnover of
less than 100 crore since its incorporation. A start-up is based on an innovative idea which
disrupts what exist today. The start-up ecosystem in India is on its nascent stage. A start-up
ecosystem consists of different variables to support a start-up. There are external and internal
variables contributing to the venture creation. The novelty introduced at each variable
distinguishes a venture from other. With the central and state government proposing separate
policies, there is an upswing in the number of youngsters taking up entrepreneurship. As on
2018, there are 21 states and Union territories in India having its own start-up policy.
Uttarakhand, Maharashtra, Meghalaya and Jammu and Kashmir are the states that introduced
start-up policy in the year 2018. The flourished start-up ecosystems in Silicon Valley, Tel Aviv
and Los Angeles is an evidence which shows how the growth of businesses has created a well-
developed economy.
Kerala is a state in the southern part of India. The state is a popular tourist destination in India.
Kerala is known for its high literacy rate and human development index. The educated
youngsters in Kerala either preferred a government job or migrated to other states or foreign
countries in search of a job. The state was not considered business friendly due to labour issues,
lack of funding etc. But post liberalization period has witnessed minor changes in the business
atmosphere. Research conducted worldwide shows that, along with internal factors like
psychological attributes, money and resources, there are host of external factor like government
policy, economy, institutional support etc which influence the entrepreneurship development
in a region. Kerala is the first and only state in the country to have one per cen of he S a e
annual budget ear-marked for entrepreneurship development activities of youth (Kerala
Technology Start-up Policy, 2015). Go e nmen endea o i o b ild an en ep ene ial
society in Kerala. For the purpose, the government has introduced Kerala Technology start-up
policy and established a nodal agency, Kerala Start-up Mission (KSUM), to coordinate the
entrepreneurial development activities of the state and to implement the schemes introduced
by the government (Kerala Technology Start-up Policy, 2015).
India is one among the fastest growing start-up ecosystem with approximately 8900- 9300 tech
start-ups incorporated between 2014- 2019, out of which 1300 are incorporated in 2019. In
total there are 29,761 DPIIT registered start-ups in India as on 12th March 2020. India
echnolog epicen e Bangalo e confi m i po i ion a he co n leading a -up hub, with
a global Index rank of 18 in the year 2019. From 3,100 start-ups in 2014 to more than 29,000
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by 2020, this is certainly not a passing trend. It is a revolution. And it is going to change the
way the markets are working in India today.
Teaming with the right service providers can have a huge impact on a start-up abili o cale
up. Service providers include financial institutions, lawyers and human resource service
providers. Lawyers make the entrepreneurs aware of the legal formalities to be complied. Start-
ups often find it difficult to recruit right person for the right job. The human resource
professionals help to locate the right talent and design good compensation packages. An
ecosystem is mutually beneficial for corporates and start-ups. On one hand, corporates will be
benefitted as they can adopt an innovative model brought out by start-ups. The corporates at
this stage might not be fast enough to respond to the dynamic world and adopt changes with
their traditional inadequate models. On the other hand, contacts with the corporates helps start-
ups in raising fund to create a better financial climate.
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1.2 Start-Up India
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Start-up India is an initiative of the Government of India, intended to build a strong eco-system
to nurture the start-ups in the country that could drive sustainable economic growth and
generate large scale employment opportunities. The Government through this initiative aims
to empower the start-ups registered in the country. A o lined in he Polic , To simplify the
registration process of start-ups, the policy allows self- certification for compliance with labour
and environmental laws. It allows the registration of start-ups through Start-up India App in a
day. The policy provides 80 per cent rebate in patent filing. In order to provide funding support
to start-ups, Government will set up INR 2,000 crore credit guarantee fund for start-ups through
National Credit Guarantee Trust Company / SIDBI over 4 years. Start-ups registered under
Department for Promotion of Industry and Internal Trade (DPIIT) are exempted from income
tax for three years. Start-ups under the scheme enjoy tax exemptions also on capital gains and
on Investments above Fair Market Value. To foster innovation and to promote start-up
ecosystem, NITI Aayog plans to set up 100 incubation centres across the country. The
incubation centres organize start up fests and set up new research parks. The government has
also announced plans to make it easier for start-ups to close their businesses if they are winding
up operations. The programme is off to a decent start with some challenges on the execution
and implementation front.
To enhance Ease of Doing Business in India, the central government boost the state
governments and nurture cooperation among them. 4With an objective to increase transparency
and efficiency of various Government regulatory functions the DPIIT, Ministry of Commerce
and Industry released a 340-point Business Reform Action Plan (BRAP) for states/UTs in
October, 2016 which includes suggestions to amend the regulations on crucial areas in the
lifespan of a business. The average implementation of business reforms undertaken by the
states/UTs has increased over the years. The state of Kerala has implemented 157 out of 187
suggested reforms .
3
https://www.orfonline.org/research/the-indian-startup-ecosystem-drivers-challenges-and-pillars-of-support-
55387/
4
https://eodb.dipp.gov.in/StateReport?year=2019&state=18
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Kerala Start-up Mission
Along with the central government, the state government of Kerala has created an ecosystem
that would empower and enable the youth within the state to take up entrepreneurship as a
calling. A o lined in he polic , Government of Kerala is determined to nurture a culture of
entrepreneurial spirit among the youth of the State. Kerala is the first and only state in the
co n o ha e one pe cen of he S a e ann al b dge ea -marked for entrepreneurship
development activities of the youth. The initiatives of the Government have created an interest
among the youth to become an entrepreneur. The authorities aim to create an entrepreneurial
society in Kerala.
As mentioned in the website of Technopark, Kerala, Kerala Start-up Mission which started as
Technopark Business Incubation Centre (TBIC) in Technopark in 2002 was later recognized
as Technopark Technology Business Incubator (T- TBI). Since 2006, T-TBI has been actively
promoting the start-up and innovation activities in Kerala through various initiatives. In the
year 2012, T- TBI was recognized as the nodal incubator in the state and in the year 2015, T-
TBI was rebranded as Kerala Start-up Mission.
Government of Kerala has framed the Youth Entrepreneurship Development Programme
(YEDP) in the year 2012, which caters in developing technology led innovation and
entrepreneurship among schools, college students and aspiring entrepreneurs. The programme
includes training for start-up CEOs.
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KSUM has built the Kerala Technology Innovation Zone (KTIZ) in 13.2-acre land at
KINFRA Hi-tech Park, Kochi, which is a single roof infrastructure for multiple sector
incubators. Started in April 2015, the aim of KSUM is to support 1,000 start-ups over the next
ten years and start the search for an elusive unicorn. It focuses primarily on student start-ups.
It is India's first incubator that is funded jointly by the public and private sector. Presently KTIZ
comprises of a Biotech incubator called BioNest, an electronics Incubator called Maker Village
and extended incubation facility of Kerala Start-up Mission. There is entrepreneurial scope in
all the sectors including agribusiness, tourism, IT, ITES traditional industries, Ayurveda, etc.
which is currently untapped. There are in total 2414 registered start-ups in Kerala as on 12
March 2019, out of which 565 are registered under KSUM (Kerala Start-up ecosystem report,
2019).
According to the words of Sanjay Vijayakumar, former chairman of start-up village, scarcity
of funds accounted for eighteen per cent of the mortality of the start-ups in Kerala. Lack of
5
https://kerala.gov.in/start-up-mission
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family support (10.5 per cent), well-placed jobs (43 per cent), unviable business idea (11 per
cent), competition from a better player (7 per cent) and pursuit of higher studies (3.5 per cent)
were among the other major factors that aborted some of the start-ups in Kerala.
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Start-up Village entered its second phase with Kerala Chief Minister Pinarayi
Vijayan launching the online platform SV.CO that aims to provide a fully digital incubation
framework to five million students in 3,500 engineering colleges across the country. The start-
ups registered in Kerala are provided with Infrastructure facilities, mentorship support,
entrepreneurship development programmes, seed fund assistance and exposure. The
Government has brought out a policy to encourage young minds in pursuing their start-up
dreams. To promote the spirit of entrepreneurship among engineering students in Kerala, the
state government has said that students who have completed two years of their course, can
take a break for a year (Gap year facility) to pursue their entrepreneurial dreams. The students
will be supported through grace marks and attendance if they are availing the gap year facility.
Out of the total population in India, more than 20 million people are in the work age group of
15-59 years7. According to Census 2011, Kerala has the highest total literacy rate of 93.91 per
cent8. High literacy has resulted in a situation where the educated refuses to start their career
from a humble job. Everybody wants to kick-start their career with a blue-collar job. At 7.4 per
cent, three times the national level, Kerala has the highest rate of unemployment among the big
states in the country. For years now, there has been migration of people from the state to
diffe en pa of he o ld. Belie ing ha hi ha e l ed in a ignifican b ain d ain hich,
in turn, has affected the knowledge economy of Kerala, the government of Kerala has
formulated the Kerala Start-up Policy which assists in building an entrepreneurial ecosystem
in the state. In order to bolster employment and job creation for young people, entrepreneurship
is increasingly accepted as an important means and a highly valuable additional strategy to
improve livelihoods and economic independence of young people.
The Kerala Start-up Policy is split into nine parts namely, Infrastructure, Incubators and
Accelerators, Human Capital Development, Funding, State Support, Governance of Policy,
6
https://www.business-standard.com/article/pti-stories/kerala-s-startup-village-ranked-india-s-best-incubator-
116072201221_1.html
7
http://www.emergingkerala2012.org/human-resource.php
8
https://kerala.gov.in/web/guest/literacy-rate-2011
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Public-Private Partnership, Scaling Existing and Establishing New Incubators and Start-up-
Bootup-Scaleup model for moving fast from ideas to IPO.
A study by Start-up Genome (2019), on the Global Start-up Ecosystem has reported that,
measures to increase the access to finance and creation of start-up support organizations are
the major policy action taken by government all over the world. In a d done b Nikhil e
al (2015), it was observed that he main problems faced by start-ups in Kerala are lack of
mentoring, lack of returns over time and fund and poor product market fit. KSUM provides
mentoring, infrastructural facilities, entrepreneurship development programmes, seed fund
assistance and exposure programmes. Understanding the efficiency of ecosystem services in
nurturing the start-ups in Kerala assist the policy makers and government the possibility to act
upon it. The study may help entrepreneurs and investors gain insight about the opportunities
and risk. There are a few literature available about the start-up sector in Kerala. Studying the
impact of the policies initiated by the government is the need of the hour. It helps the
policymakers to take corrective measures if any.
The e ha been a con ide able change in Ke ala b ine en i onmen o e he la decade.
The Government of Kerala, through its nodal agency KSUM, has taken many initiatives to
nurture the start-up sector in Kerala. The government provides fiscal and non- fiscal support to
improve the ease of doing business in Kerala. The state was selected as the top performer in
the State Start-up Rankings 2018 and 2019 conducted by Department for Promotion of Industry
and Internal Trade, Government of India. 9Start-up Policy and Implementation, Incubation
Support, Seed Funding Support, Angel and Venture Funding, Simplified Regulations, Easing
Public Procurement, Awareness and Outreach were the factors assessed for ranking the states.
Research are conducted in this regard globally and in other states in India. However, very little
research was found to be conducted regarding the start-up sector in Kerala. The proposed study
helps in estimating the outcome of the schemes on the performance of start-ups. It aims at
analysing how far the policy initiative has reached the target population. The study also
emphases on the resource- based capability of the start-ups, which is an important aspect in the
growth of the business.
9
https://www.startupindia.gov.in/content/dam/invest-india/compendium/Startup%20India%20-
%20State%20report_Goa_Final.pdf
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1.5 Scope of the Study
Aim of the government in Kerala is to build an entrepreneurial society in Kerala. The proposed
study analyses the impact of initiatives of government on the performance of start-ups in
Kerala. Apart from external factors, the performance of a business is impacted by internal
factors like personnel, financial resources and the competitive advantage possessed by a
business. The proposed study analyses the resource-based capability and competitive strategy
adopted by start-ups in Kerala. Start-ups registered under KSUM were only considered for the
study. Majority of the entrepreneurship development activities are taking place at Kozhikode,
Ernakulam and Thiruvananthapuram districts in Kerala. Therefore, the response of the start-up
entrepreneurs has been elicited from these three districts. The primary data collection from the
respondents were done during the period from 1st May 2019 to 31st October 2019.
The present study proposes to analyse the impact of policy initiatives of the Kerala government
on start-ups in Kerala. The study also focuses on the resources possessed by the start-ups in
Kerala. To achieve this objective the following research questions are analysed in this study.
1. How has the state supported the start-ups after formulating a start-up policy?
2. Does the support provided by the government create a positive perception about
Ke ala start-up ecosystem?
3. Do the incubated start-ups receive more government support than the others?
4. What is the resource- based capability of the start-ups in Kerala?
5. What are the key inadequacies in the ecosystem impeding the growth of start-ups in
Kerala?
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2. To a ce ain he pe cep ion of en ep ene abo he go e nmen ppo p o ided o
a - p in Ke ala.
3. To anal e he Re o ce-ba ed Capabili of he a - p in Ke ala.
4. To iden if he ke inadeq acie in he eco em impeding he g o h of a - p in
Ke ala.
5. To gi e gge ion and ecommenda ion on he ba i of he abo e objec i e .
1.8 R a M
1.8.1 R a D
The survey questionnaire consists of three section viz- Owner- Manage Demog aphic
Characteristics, Information about the start-ups and Government Policy Initiatives. The
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researcher has used Nominal scale, Ordinal Scale and Interval Scale to measure different
variables in the questionnaire. There are multiple tick questions and single tick questions in the
questionnaire. The questions on Performance and Perception are measured on a 5-point Likert
Scale with 1 representing Strongly Disagree, 2 representing Disagree 3 representing Partially
agree/ Neither Disagree nor Agree, 4 representing Agree and 5 representing Strongly Agree.
Before entering into the full-fledged data collection, a pilot study was done with randomly
selected 30 respondents in the month of April, 2019. This helped in making necessary
modifications to the questionnaire before entering into the final data collection. Some of the
modifications made to the questionnaire are:
The reliability of the instrument was examined with a widely used measure of Cronbach
Alpha. The value of Cronbach Alpha ranges between 0 and 1. Any value above 0.6 is an
acceptable reliability coefficient. It is used when there are questions measured in Likert
scale in the questionnaire. The able belo ho he C onbach Alpha al e of various
constructs in the questionnaire.
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Table 1.1 C a A a for Pilot Study
Sl. No Factors C a A a
1. Performance of start-ups 0.678
2. Perception of entrepreneurs 0.648
3. Government Schemes 0.724
4. Managerial Capability 0.784
5. Technical Capability 0.775
6. Marketing Capability 0.614
7. Input Sourcing Capability 0.626
8. Competitive Strategy 0.597
Source: Primary Data
It can be inferred from Table 1.1, all the constructs used have a reliability value above 0.6.
Hence it can be concluded that all the constructs have a good internal consistency and further
data collection can be done using the constructs.
Sampling design is the method used by the researcher to select sample from the total
population. Judgemental sampling and Simple Random sampling are used to select the
samples. Samples are chosen from Calicut, Ernakulam and Trivandrum districts based on the
judgement of the researcher. Entrepreneurship development activities conducted by Kerala
Start-Up Mission are mainly concentrated on these three districts. Majority of the start-ups in
Kerala are registered in Calicut, Ernakulam and Trivandrum District. Due to these reasons, the
researcher considers Calicut, Ernakulam and Trivandrum districts for data collection. A
proportionate number of start-ups are chosen randomly from these three districts for the
purpose of data collection.
Start-ups which are registered under KSUM are considered to be the sample unit of the
proposed study. These start-ups are benefitted by the schemes and activities conducted by
KSUM for the start-ups in Kerala.
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1.8.7 Sample Size
As of April 2019, there are in total 565 start-ups registered under KSUM out of which 32 were
found to be operating in other states. It was decided to collect data from 200 start-up
entrepreneurs (one third of the total population rounded to the nearest hundred). Expecting
some rejection from the respondents, owners of 240 start-ups registered in Kerala were
personally contacted at first to collect required data. 19 respondents rejected the request, as
they were not interested in participating in the research. 13 entrepreneurs reported to have
winded up their start-up due to various reasons. 208 respondents were personally met to collect
required information. Due to incomplete response, data collected from 7 entrepreneurs are not
considered for data analysis. Useful response from 201 entrepreneurs were finally used in this
study. The sample size represents 35.57 per cent of the total population.
Ta 1.2 D W D a Sa - R K aa
R D T a Sa
No he n Ka a agod 4
Wa anad 2
Kann 15 Ko hikode - 24
Ko hikode 53
12
Malapp am 4
Palakkad 5
Cen al Th i 11
Ko a am 10
So he n Alapp ha 13
Pa hanam hi a 2
T i and m - 87
Kollam 15
The reliability of the instrument is measured after the final data collection.
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1.8.9 T S
1.8.10 T Da a A a
1.9 H S
The n ll h po he e of he e ea ch a e a follo :
H04: There is no significant association between Government Support received and the
incubation Status of the Start-up.
H05: There is no significant difference in the mean value of performance of start-ups which
have an intention to migrate from Kerala with those having intention to stay.
H06: There is no significant difference in the mean value of perception of entrepreneurs who
have an intention to migrate from Kerala with those having intention to stay.
H07: There is no significant relationship between the resource- based capability and
performance of start-ups.
1.10 L a S
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1. The d a limi ed o he a - p egi e ed in Ke ala and he policie implemen ed
b he go e nmen of Ke ala.
1.11 C a a
Chap e I
Chap e II
Chap e III
Chap e IV
Thi chap e con ain he ocio- economic p ofile of he e ponden . The chap e al o anal e
he cha ac e i ic of a - p in Ke ala.
Chap e V
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Chap e VI
Chap e VII
Chap e VIII
Figure 1.1 depicts the process adopted to complete this research work.
References:
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2. Nambiar, R. S., & Balasubramanian, P. (2017). Prospects of Start- Up Ecosystem - A
Review. International Journal of Business Research, 17(2), 165-172.
3. Nikhil, N. K., Joy, V., & Santha, S. (2015). Problems and prospects of start-ups in Kerala-
A study with special reference to Cochin start-up village. International Journal of Physical
and Social Sciences, 5(9), 276-289.
Websites
1. https://www.asianage.com/amp/india/all-india/080719/unemployment-rates-increase-in-
major-states.html
https://wap.business-standard.com/article-amp/opinion/jobs-debate-ingenuity-or-insinuation-119032600013_1.html
2.
3. https://www.orfonline.org/research/the-indian-startup-ecosystem-drivers-challenges-and-
pillars-of-support-55387/
4. https://eodb.dipp.gov.in/StateReport?year=2019&state=18
5. https://kerala.gov.in/start-up-mission
6. https://www.business-standard.com/article/pti-stories/kerala-s-startup-village-ranked-
india-s-best-incubator-116072201221_1.html
7. http://www.emergingkerala2012.org/human-resource.php
8. https://kerala.gov.in/web/guest/literacy-rate-2011
9. https://www.startupindia.gov.in/content/dam/invest-
india/compendium/Startup%20India%20-%20State%20report_Goa_Final.pdf
17