This article critically evaluates the alignment of industrial policies with public aspirations and their impact on enterprise development. Dr. P.M. Mathew examines the limitations of traditional policy frameworks and the need for evidence-based approaches that engage diverse stakeholders, including governments, financial institutions, and civil society. By highlighting the importance of stakeholder collaboration, development communication, and grassroots-level data, the article underscores the transformative potential of sustainable and inclusive enterprise strategies. Practical insights and examples illustrate how mobilizing stakeholders, rather than merely increasing public funding, can drive meaningful economic progress and entrepreneurial growth.
Do Industrial Policy Statements at the national level, and in the States, reflect the thinking and aspirations of the people? Following such Statements that are often comprehensive and all-embracing, pubic schemes come into existence. They, in turn, connect between the government and the citizen beneficiary. Claims on the number of new businesses started, as also the additional employment created therein, are considered to be the performance indicators of the government in power. Are they valid claims, where the growth of the private sector is often driven by the investment decisions of the entrepreneur, and much less by such public policy pronouncements? While, in the case of social infrastructure, such as hospitals, drinking water and toilets, the outcomes are better measurable, what justifies the industrial/enterprise development policies that have only indirect outcomes? Since such outcomes are not clearly quantifiable, Industrial Policy often end up in structurally inconsistent statements such as, “a conducive environment through an enabling Policy and regulatory framework to drive sustainable industrial growth …”.Could such statements be demystified and made intelligible to the understanding of the common man? What are the methods, tools and techniques by which such a simple understanding can be ensured to the common man? Such a simple understanding is important in a democracy where the electorate has the right to make informed choices. ‘Development communication’ is a strategic approach that can ensure such an outreach, with the participation of relevant stakeholders.
The perception of enterprise development and the role of the relevant stakes (or interests) is a subset of the overall perception of economic development/human development. The theory of economic development, since its early beginnings in the 1950s, has undergone major changes over time. In the early days, development was largely perceived as a top- down exercise wherein the government played the lead role. Since underdevelopment was considered to be resulting from lack of capital and technology, governments were perceived with the role of providing capital and technology, mostly imported from outside.
Modern thinking on Economic Development
Over time, the traditional theoretical perception, as above, has undergone major changes. Today, economic development is considered as a process wherein stakeholders have an important role to play. The ‘Stakeholder Theory’ considers not simply the role of the government, but also of all other stakes that are related to the development process, such as, financial institutions, promotional agencies, business associations/ chambers, media, and civil society organisations. Such perception is more relevant in the context of industrialisation and enterprise development. While industrialisation is a generic term used to denote structural changes in the economy towards a greater GDP share of industrial output and employment, enterprise development is considered more as a practical micro-meso phenomenon that directly contribute to the supply of entrepreneurs.
‘Stakeholder Theory’ stresses on the interconnected relationships between a business and its customers, suppliers, employees, investors, communities and others who have a stake in the organization. The theory argues that a firm should create value for all stakeholders, not just for shareholders.
Irrespective of the changes in perception, as noted above, the importance of action for development is now universally recognised. For such action to take place, the stakeholders need to come together and communicate. The term “Development Communication” was first coined in 1972 by. Nora C. Quebral, who defined it as “the art and science of human communication linked to a society’s planned transformation from a state of poverty to one of dynamic socio-economic growth that makes for greater equity and the larger social interest. Such a transformation, leading to income opportunities and employment, necessitate an enhanced and sustained supply of job creators or entrepreneurs. Numerous articles and books written on stakeholder theory generally credit Freeman as the “father of stakeholder theory.”
Strategic Approach
Stakeholder theory posits that the essence of business primarily lies in building relationships and creating value for all its stakeholders. This value proposition needs to be transmitted among the stakeholders. A development strategy that uses communication approaches can reveal people’s underlying attitudes and traditional wisdom. Such an understanding is a precondition for helping people to adapt their views and to acquire new knowledge and skills. Besides, such a social message needs to be addressed to large audience, such that it unleashes the energies of people towards action.
From Theory to Practice
Moving from the theoretical premises, as above, there is a need for a practical understanding of stakeholder roles and ways of engaging stakeholders in an agenda of enterprise development. There are two critical stages in having such a practical understanding. The first stage is a stakeholder analysis. What does the stakeholders actually do? What role do they perform in the enterprise development process? Or, does it simply mean such roles are less important and the autonomous decisions of the entrepreneur are decisive? A stakeholder analysis will provide answers to these questions. Alternatively speaking, it implies the process of collecting information about any person that will be impacted by (or can impact) an initiative meant for enterprise development, as also the needs and expectations of such persons.
The outcomes of SMEs are important to customers, employees, management, owners, as well as shareholders. On the other hand, there are several stakeholder groups with limited or no stake in their outcomes – competitors, media, transporters and education institutions.
As there are a large number of stakeholder groups in SMEs, it is important to be able to identify who the key stakeholder groups are and to prioritize them.
There are three essential steps in stakeholder analysis: 1) Identifying the key stakeholders and their interests (positive or negative) in the project; 2) Assessing the influence of, importance of, and level of impact upon each stakeholder; and 3) Identifying how best to engage them.
Stakeholder Engagement
Engaging the stakeholders is a major step in evolving strategies for development action. It implies the systematic identification, analysis, planning and implementation of actions designed to influence stakeholders. A stakeholder engagement strategy identifies the needs of key groups and the sponsor plays a vital role in ensuring those business needs are met. It is designed to take account of all the individuals and groups impacted by the proposed change and to achieve a deeper understanding of their various interests.
Stakeholder engagement has a purpose. The key purpose is to harness the capabilities and potential of each stakeholder for a common good. However, such a mobilization of capabilities and potential is dependent on the stake holder perceptions, on the one hand, and their willingness to be engaged in an initiative that leads to a common good.
There are different levels of stakeholder engagement. It depends on the actual attitudes of stakeholders. One can identify five different forms: Unaware; Resistant; Neutral; Supportive; and Leading. Engagement strategies need to be specific to the context. Depending upon the levels of engagement, and changes in circumstances, strategies need to undergo changes from time to time. Such changes would mean additional inputs or components upon the original strategy.
Evidence base
Evidences, a prerequisite for stakeholder engagement, obviously, have to come from below. How do one collect data from stakeholders? The simplest and most widely used method is surveys. Standardized instruments, such as questionnaires, allow one to gather quantitative and qualitative information from a large number of respondents. Such data, along with all other relevant inputs, such as, press report, documents, narrations, and participant impressions, form raw materials for the evidence base.
Role of Development Communication
Where enterprise development is considered as the outcome of the joint action of various stakeholders, it is important to understand the thinking and expectations of each of them. The reactions are dependent on the perceived individual benefits. Unless they are willing to share at least a part of such perceived benefits for a common cause, apart from the business case that is central to their decisions, stakeholders are not likely to contribute to the process of enterprise development. The logic of the above thinking is that, there needs to be some means of communication among these stakeholders. But unless there is some platform of such communication along with relevant instruments that facilitate their functioning, such communication is not likely to take place. This is the context where development communication arises as a powerful instrument of economic development.
A development strategy that uses communication approaches can reveal people’s underlying attitudes and traditional wisdom. It helps them to adapt their views and to acquire new knowledge and skills, and spread new social messages to a larger audience.
Examples and best practices in the area of enterprise development communication vary. In the Indian context the first such experiment was initiated by the ISED Small Enterprise Observatory (ISED-SEO), a unique knowledge hub at the Institute of Small Enterprises and Development. Started in its small beginning as a development reporting exercise in 1997, it has grown and matured into a full-fledged Development Communication Program, the India MSME Communication Programme (IMCP). The program involves a regular reporting on the state of MSMEs in India on an annual basis, followed by its backward and forward linkage exercise involving all major MSME stakeholders, both at the national level and in the states. Originally mooted as a program with very limited resources, it has gradually grown into a programme backstopped by a ‘National Partnership Network’, involving all major MSME-sensitive agencies, across stakes.
The Number Game and its Pitfalls
Entrepreneurship mentors and trainers often speak of the relevance of numbers in business projections, because numbers are the building blocks of a successful business. The art of reading numbers and understanding what they are trying to tell, is at the core of a successful business. If one can’t make the numbers work for oneself, then no matter how great the idea, he/she will just not hit its maximum potential.
In the case of governments and promotional agencies seeking to promote enterprises in a specific locality, this logic can work, but only at margin. More number of business units need not lead to greater employment and income opportunities. However, more capital formation can lead to such results. A high GDP growth also creates forward growth linkages in the form of self-employment and ancillaries, providing both wage goods and intermediate goods. It is such linkage effects that explain the success story industrially advanced States like Maharashtra, Gujarat and Tamil Nadu.
Which States in India have the highest rate of growth of MSMEs? According to data from the Ministry of MSME, the States with the highest rate of growth of MSMEs, in the order of rank and growth, are: Gujarat: 18.9%; Maharashtra: 18.5%; Tamil Nadu: 18.4%; Andhra Pradesh: 17.9%; and Karnataka: 17.4%, Karnataka is the fifth-highest state in terms of MSME growth. This indicates that the growth of the bottom layer of the enterprise system in the country, including SMEs and self-employment, is shaped and sustained by growth linkages rather than by government schemes. Such a finding has significant implications for the new strategic approach based on districts, as outlined by the NITI Aayog .
If particular stakes are able to articulate their full potential on the basis of a strong evidence-base, entrepreneurship development strategies at the ground level can be kick-started. Mobilising the stakes, rather than stepping up public funding ,is the key to India’s much needed regeneration on the enterprise and entrepreneurship front.
Author Profile
- The author is Senior Fellow & Director, Institute of Small Enterprises and Development. He can be reached at: director@isedonline.org.
