Contemporary Theories Of Entrepreneurship (Prof.Harvey Leibenstein )

Here we discussed the different types theroies of entrepreneurship by prof. Harvey Leibenstein.

1. Contemporary Theories Of Entrepreneurship Prof. Harvey Leibenstein  

2. Prof. Harvey Leibenstein   Harvey Leibenstein was an American economist and economic demographer. Born in Russia, educated in Canada and the United States (Ph.D. from Princeton University, 1951), he served on the faculties of the University of California, Berkeley (1951–1967) and Harvard University (1967–1992).

3. According to Prof. Harvey Leibenstein   X-efficiency Theory Critical Minimum Theory

4. X-EFFICIENCY X-efficiency is the degree of inefficiency in the use of resources within the firm: it measures the extent to which the firm fails to realize its productive potential. X-efficiency arises either because the firm’s resources are used in the wrong way or because they are wasted, that is not used at all.

5. Leibenstein identifies two main roles for the entrepreneur:1)a gap filler and (2)an input completer. I f not all factors of production are marketed or if there are imperfections in markets, the entrepreneur has to fill the gaps in the market. To put the enterprise in motion, the entrepreneur should fill enough of gaps . X-EFFICIENCY THEORY

6. The second role is input completion ,which involves making available inputs that improve the efficiency of existing production methods or facilitate the introduction of new ones .The role of the entrepreneur is to improve the flow of information in the market.

7. CRITICAL MINIMUM EFFORT THEORY According to Prof. Harvey Leibenstein the overpopulated and underdeveloped countries are characterized by the vicious circle of poverty. “In order to achieve the transition from the state of backwardness to the more developed state, where we can expect steady secular growth, it is necessary, though not always sufficient condition, that at the same point or during the same period, the economy should receive a stimulus to growth that is necessary than a certain critical minimum size”.

8. According to Leibenstein, every economy is under the influence of two forces—’shocks’ and ‘stimulants’. Shocks refer to those forces which reduce the level of output, income, employment and investment etc.Stocks depress development forces which reverse the wheel of development. Stimulants refer to those forces which raise the level of income, output, employment and investment etc. In other words, Stimulants impress and encourage development forces. They are called ‘Income Generating forces’ which lubricate the wheel of development. Stimulants have the capacity to raise per capita income above equilibrium level.

9. GROWTH AGENTS According to Leibenstein, the generation of stimulants depends on attitudes and motivation of the people and the incentives given to them. However, the motivation and incentives are useless without the main factors of economic development.

10. According to Leibenstein, there are two types of incentives that are found in the underdeveloped countries: Zero-sum Incentives. Positive sum Incentives. ( i ) Those incentives which do not increase national income, but they bring a change in the distribution of income. He calls them "Zero-Sum incentives". (ii) Those incentives which result in expansion of national income. He calls them "Positive Sum incentives". INCENTIVES