Entrepreneurship Theories, Principles and Concepts

Entrepreneurship Theories.pptx

1. Theories of ENTREPRENEURSHIP

2. Innovation Theory Keynesian Theory Alfred Marshall Theory Risk and Uncertainty-bearing theory Other theories on Entrepreneurship Theories of Entrepreneurship

3. The Innovation theory was contributed by Joseph Schumpeter, an Austrian economist and Political scientist. It regards economic development as the product of structural change or innovation. Schumpeter argued that the chances for economic development to take place would be slim unless revolutionary change is deemed to be static and cannot expect any economic development. Innovation Theory

4. Entrepreneur is ‘one who seeks to reform or revolutionize the pattern of production by exploiting an innovation’ Assigns the role of an innovator to an entrepreneur Different from an Inventor who creates a new product Innovator utilises inventions and discoveries in order to make new combinations Shumpter’s Innovation Theory

5. Existence of sufficient availability of capital Developed financial system Existence of high level developed technology Private initiative Therefore, more applicable in developed economies Shumpeter’s Assumptions

6. Entrepreneur ceases to exist when he is running a business Ignores risk taking and organising Focuses on large scale Limitations of Shumpeter’s Theory

7. New product New production method New market New supplier New industry structure Entrepreneur to introduce innovation in any ff form:

8. John Meynard Keynes a british economist. The theory put so much emphasis on the role of the government in entrepreneurial and economic development, most especially when the economy was experiencing depression. It suggest that entrepreneurial activity may be not favor in the future not unless the short-term problem of economic disequilibrium is finally resolved through the active participation of the government. Keynesian Theory

9. As he asserted that there is four factors in the production (land, labor, capital, and organization) of goods and services in the economy, he considered organization as a coordination element. Marshall regarded the entrepreneur’s as the prime movers in the organization. They’re expected to create new commodities or improve the existing ones. Alfred Marshall Theory

10. Frank Hyneman Knight, an american economist, conceptualized the risk and uncertainty-bearing theory of entrepreneurship in his book, Risk, Uncertainty and Profit. Entrepreneur as an agent of the production process where he/she connects the producers and the consumers. Uncertainty is an important factor in the production of goods and services. He believed that the entrepreneur must anticipate possible random events to happen while shouldering the risk at the same time. Risk and Uncertainty-bearing Theory

11. Weber’s sociological theory Kaldor’s technological theory Leibenstein’s gap-filling theory Kirzner’s learning-alertness theory Other Theories on Entrep

12. Max Weber’s theory of social change Hoselitz socio-cultural theory Trait theory of entrepreneurship Economic theory of entrepreneurship Schumpeter’s innovation theory McClelland’s psychological theory Theory of social behaviour X- Efficiency theory Different Theories

13. Entrepreneurial growth dependent upon ethical value system Spirit of capitalism central to entrepreneurial growth Spirit of rapid industrial growth depends upon rational use of resources, which ultimately depends upon the value orientation of individuals….the tendency of acquisition and rational economic attitude towards action which are generated by ethical values Important to distinguish between ‘spirit of capitalism’ and ‘adventurous spirit’ Max Weber’s theory of social change

14. Necessary condition for spirit of capitalism: Favourable mental attitude in society toward acquisition of wealth Critiques of Weber’s theory: There is a single system of Hindu Values ‘ Paritha ’ Indian community internalised those values and translated those into behaviour Immune to external pressures and change Max Weber’s theory of social change

15. Specific social culture leads to growth in entrepreneurship Social sanctions, cultural values and role expectations are responsible for the emergence of entrepreneurship Three important factors on which his performance depends: His own attitude towards his own occupation Role expectations held by the sanctioning groups Occupational requirements of the job Hoselitz Sociological Theory

16. Society’s values are most important determinant of the attitudes and role expectations Grows in societies that permits variability in choice of paths of life and non standard socialisation of individuals Hoselitz Sociological Theory

17. F.A.Walker believed in the individual’s traits/capacities as the main determinant for entrepreneurial growth An entrepreneur is one who is endowed with more than average capacities in the task of organising and coordinating the factors of production Eg of traits- Creativity, self confidence , risk taking ability etc Trait Theory of Entrepreneurship

18. G.F.Papanek and J.R.Harris , chief proponents of this theory attributed the main reason for entrepreneurial activities to economic incentives Inner drive of individuals associated with economic gains Eg of economic factors: Market incentives, availability of sufficient capital etc Economic Theory of Entrepreneurship

19. Locates entrepreneurship in individuals possessing certain psychological traits Dependent on certain learnt and socially acquired needs that motivates/drive individuals towards entrepreneurial activities Type of needs Need for achievement Need for power Need for affiliation Exercise McClelland’s Theory

20. Behavioural model of entrepreneurship by Kunkel Activities of individuals are related to the previous and present surroundings, social structures and physical conditions Attributes entrepreneurial activity to rewards which act as positive reinforcing stimulus Theory of Social Behaviour

21. Four structures in society on which entrepreneurship depends: Limitation structure Demand structure Opportunity structure Labour structure Theory’s limitation evident from its neglect towards situational factors and assumption of ideal structures which ignores discrepancy between objectives, structures etc Theory of Social Behaviour

22. As per Liebenstein , gap filling is the most significant feature of entrepreneurship Innovative entrepreneurs come forward/take the leap to check inefficiencies in utilisation of resources through novel ways X-Efficiency Theory

23. Every theorist has looked at the entrepreneur and entrepreneurship on the basis of his perception, and therefore ,can at best ,provide only a limited view of entrepreneurial phenomenon. No view is right or wrong or more or less . Conclusion