Entrepreneurship Entrepreneurship: Concept & Theories Concept & Theories Concept & Theories Concept & Theories

ENTREPRENEURSHIP
CONCEPT & THEORIES
Dr. Allan Thomas

Kerala Agricultural University
DR ALLAN THOMAS, KERALA
27-Jul-2020 AGRICULTURAL UNIVERSITY 1
The word “Entrepreneur” is derived from the French verb ‘entrepredre’.
It means ‘to undertake’.
In the early 16th century the Frenchmen who organized and led
military expeditions were referred as ‘Entrepreneurs’.
In the early 18th century French economist Richard Cantillon used

the term entrepreneur to business.

Entrepreneur: An entrepreneur is an innovative
person who maximizes his profits by following
new strategies or venturing into new products or
services. A good entrepreneur is one who is capable
of inspiring confidence in people, and has the ability
to motivate them.
He undertakes:
 introduction of a new quality in a product,
 introduction of a new product,
 discover fresh demand and fresh source of supply,
 changes in the organization and management.

The characteristics of an unique entrepreneur are :
 - Need for achievement
 - High need for power
 - Independence
 - Propensity to take risk
 - Personal modernity
 - Support
 - Leadership
Qualities / Skills of an Entrepreneur
 Ability to organize :
 Professional approach :
 Risk bearer :Innovative :
 Decision Making : Delay in decisions may increase cost of
project and reduce the profits.
 Negotiation skills : Businessman regularly comes into contact
with various persons like consumers, workers, government
officials, etc. so he should communicate tactfully.

 Entrepreneur initiates the business activity
 Entrepreneur organizes the factors of
production
 Entrepreneur is a decision maker
 Entrepreneur co-ordinate things effectively
 Entrepreneur tries to introduce innovations
 Entrepreneur handles budget of his business
 Entrepreneur bears risk and uncertainty

 Entrepreneurship is a process of combining
various factors of production, processes raw
material, converts the raw material into a
finished product and creates utility and sells
the produce in the market to earn profit with
an element of risk.

Following are the classification of entrepreneurs on the basis of common characteristics
TYPES OF ENTREPRENEURS
Clarence Danhof Arthur H. Cole On the basis On the basis of

Classification Classification of ownership scale of enterprise
Aggressive/
Innovative
Empirical Private Small
Imitative/
Adoptive Rational Public Medium
Fabian Cognitive PPP Large

Drone
Fabian-Cautious or dilatory, as in taking action
Drone- refusal to adopt opportunities to make changes in production formulae even at

the cost of severely reduced returns.
1. He/She likes innovation and enjoys 2. personal satisfaction of
working on something new or creative simply being a business
or something personally meaningful. owner.
3. persons who enjoy putting in

long hours to build a larger more
profitable business.
4. likes the concept that the 5. people who like the

business gives them a chance to thought of balancing work
handle everything themselves. and a personal life.

FUNCTIONS OF ENTREPRENEURS
1. Idea generation:
2. Determination of objectives- should be clear about nature and type of business
3. Raising of funds: full knowledge of different government sponsored schemes such

as PMRY, SGSY, REGP, etc.
4. Procurement of raw materials:
5. Procurement of machinery:
6. Market research:
7. Determination of form of enterprise- based upon the nature of the product,
volume of investment, nature of activities,
types of product, quality of product,
quality of human resources, etc.
8. Recruitment of manpower:
9. Implementation of the project: (i) Innovation

(ii) Risk bearing
(iii) Organization and
27-Jul-2020
(iv) Management
AGRICULTURAL UNIVERSITY 10
The process of establishing a business and further sustenance
is a complex process and it involves several activities
Creativity and creative problem solving

IDEA GENERATION Environmental scanning
Focus groups
Brainstorming The Role of Intuition:
IDEA INCUBATION- bringing ideas into reality

• Help with business basics
Business incubators • Networking activities
• Access to angel investors or venture capital • Marketing assistance
• Comprehensive business training programs • High-speed Internet access
• Advisory boards and mentors • Help with accounting/financial management
• Management team identification • Access to bank loans, loan funds and guarantee programs
• Help with business etiquette • Help with presentation skills
• Technology commercialization assistance • Links to higher education resources
• Help with regulatory compliance • Links to strategic partners
• Intellectual property management
COMMERCIALIZATION OF BUSINESS IDEAS

When, where and whom to its products
Entrepreneurship is an evolved thing. With the
advancement of science and technology it has undergone
metamorphosis change and emerged as a critical input for
socio-economic development.
The theories propounded by them can be categorized as

under-
•Sociological theories
•Economic theories
•Cultural theories
•Psychological theories

Sociological Theories
The following theories explain how sociological factors

accelerates the growth of entrepreneurs:
1- Theory of religious beliefs
2- Theory of social change
Theory of religious beliefs
Max Weber has propounded the theory of religious belief.

According to him, entrepreneurism is a function of religious
beliefs and impact of religion shapes the entrepreneurial
culture.

1- Spirit of Capitalism-
economic freedom and private enterprise are glorified
influenced by strict discipline
2- Adventurous Spirit-
Influenced by free force of impulse.
Entrepreneurship culture is influenced by both 1 & 2.
3- Spirit of protestant ethic-

mental attitude in the society is favorable to capitalism
4 – Spirit Inducement of profit-

The spirit of capitalism intertwined with the motive of profit
resulted in creation of greater number of business
enterprises.
This theory was vehemently criticized by

many researchers because of the
27-Jul-2020
unrealistic assumptions'.
Theory of Social Change
Everett E. Hagen. The theory exhorts the following feature which
presumes the entrepreneur’s creativity as the key element of social
transformation and economic growth.
Hagen in his book, How Economic Growth Begins,

depicts historic shift as the crucial force which has
brought about social change and technological progress
thereby leading to the emergence of entrepreneurial
class from different castes and communities.

Historic shift as a factor of initiating change- Hagen
in his book, How Economic Growth Begins, depicts historic
shift as the crucial force which has brought about social
change and technological progress thereby leading to the
emergence of entrepreneurial class from different castes and
communities.
Limitations
Withdrawal of status respects as the mechanism for rigorous

entrepreneurial activity-
Hagen’s thesis of disadvantaged minority groups have its own
limitations. There are many disadvantaged minority groups in India
which have not supplied a good number of entrepreneurs.

ECONOMIC THEORIES
Schumpeter’s Theory of Innovation

Covers the following 5 cases-
1- The introduction of new goods (i.e. is the one with which consumers
are not yet familiar, of a new quality.)
2- The introduction of new method of production
3- The opening of new market
4- the conquest of new source of supply of raw material
5-The carrying out of new organization
Schumpeterian theory of entrepreneurship has got the following features-

1- Distinction between invention and innovation
Schumpeter makes a distinction between innovation and invention. Invention means
creation of new things and innovation means applicable of new things onto practical use
2- Emphasis on entrepreneurial function- in his views, development means basic
transformation of the economy that is brought about by entrepreneurial functions.
3- Presentation of disequilibrium situation through entrepreneurial activity-the
entrepreneurial activity represents a disequilibrium situation, a dynamic phenomenon
and a break from the routine or a circular flow or tendency towards equilibrium.
4- Entrepreneurialism dream and the will to found a private kingdom- the motives of
creating things and applying these
27-Jul-2020
things
DR ALLAN intoKERALA
THOMAS, practice inspire the entrepreneur
to
undertake innovation.
Limitations
Developing countries lack R&D models for innovative entrepreneurs
Emphasis on large scale business man
Schumpeter remained silent about as to why some economics had

more entrepreneurial talent than others.

David McClelland identified several motivating needs
Need for Achievement
Need for Independence
Need for Power

CULTURAL THEORIES
Entrepreneurial talents come from cultural values and
cultural system embedded into the cultural environment.
Hoselitz’s Theory
Hoselitz explains that the supply of entrepreneurship is
governed by cultural factors, and culturally minority groups
are the spark-plugs of entrepreneurial and economic
development. in many countries, entrepreneurs have
emerged from a particular socio-economic class. He
emphasized the role of culturally marginally groups like
Jews and the Greeks in medieval Europe, the Chinese in
south Africa and Indian in East Africa and Middle East in
promoting economic development.
Psychological Theories
 Psychological theories centre's around the
psychological characteristic so the individual in
a society. Psychological characteristics affect
the supply of entrepreneurs in the society.
 Maslows needs hierarchy theory
 Theory X and Theory Y of motivation

DRUCKER ON ENTREPRENEURSHIP
Peter F. Drucker opined that “an entrepreneur is one who always searches for
change, responds to it and exploits it as an opportunity.”
According to Drucker, successful entrepreneurship involves the following

things-
•Value and satisfaction obtained from resource by the consumer are increased
•New values are created
•Material is converted into a resource or exiting resources are combined in a
new or more productive configuration
•Entrepreneurship is the practice which has a knowledge base.
•Entrepreneurship is not confined to big businesses and economic institutions,
it is equally important to small business and non-economic institutions
•Entrepreneurship behavior rather than personality trait is more important to
enhance entrepreneurship
•The foundation of entrepreneurship lies in concept and theory rather than in
intuition. DR ALLAN THOMAS, KERALA
Thus, Drucker has given his views that
“an entrepreneur need not be a capitalist or an

owner. He is a banker who mobilizes other’s
money and allocates it in areas of higher yield is
very much an entrepreneur though he is not the
owner of the money.

•What is a business plan?
A business plan is a written description of the goals

and objectives of the business and how they are
going to be achieved.
It includes the mission of the business along with the

production, organizing, marketing, and financing
intentions –
Is it feasible to operate my own business?
Is my business idea feasible?

BUSINESS PLAN PROCESS
Preliminary Investigation
Idea Generation
Environmental Scanning
Feasibility Analysis
Project Report Preparation
Evaluation Control and Review

COMPONENTS
OF A
BUSINESS
PLAN

KEY COMPONENTS OF A BUSINESS PLAN
The business plan covers six key areas:
The Industry, the Company, and the Products
Market Research and Analysis
Marketing Plan
Operating Plan
Management Team
Financial Plan

THANK YOU


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ENTREPRENEURSHIP

CONCEPT & THEORIES

Dr. Allan Thomas

In the early 18th century French economist Richard Cantillon used

DR ALLAN THOMAS, KERALA

DR ALLAN THOMAS, KERALA

 - Need for achievement

 - High need for power

 - Propensity to take risk

 Risk bearer :Innovative :

 Decision Making : Delay in decisions may increase cost of

project and reduce the profits.

 Negotiation skills : Businessman regularly comes into contact

with various persons like consumers, workers, government

officials, etc. so he should communicate tactfully.

DR ALLAN THOMAS, KERALA

DR ALLAN THOMAS, KERALA

DR ALLAN THOMAS, KERALA

Clarence Danhof Arthur H. Cole On the basis On the basis of

Fabian Cognitive PPP Large

Fabian-Cautious or dilatory, as in taking action

Drone- refusal to adopt opportunities to make changes in production formulae even at

3. persons who enjoy putting in

4. likes the concept that the 5. people who like the

DR ALLAN THOMAS, KERALA

2. Determination of objectives- should be clear about nature and type of business

3. Raising of funds: full knowledge of different government sponsored schemes such

9. Implementation of the project: (i) Innovation

Creativity and creative problem solving

IDEA INCUBATION- bringing ideas into reality

COMMERCIALIZATION OF BUSINESS IDEAS

The theories propounded by them can be categorized as

DR ALLAN THOMAS, KERALA

The following theories explain how sociological factors

Theory of religious beliefs

Max Weber has propounded the theory of religious belief.

DR ALLAN THOMAS, KERALA

Entrepreneurship culture is influenced by both 1 & 2.

3- Spirit of protestant ethic-

4 – Spirit Inducement of profit-

This theory was vehemently criticized by

Hagen in his book, How Economic Growth Begins,

DR ALLAN THOMAS, KERALA

Withdrawal of status respects as the mechanism for rigorous

DR ALLAN THOMAS, KERALA

Schumpeter’s Theory of Innovation

Schumpeterian theory of entrepreneurship has got the following features-

Developing countries lack R&D models for innovative entrepreneurs

Emphasis on large scale business man

Schumpeter remained silent about as to why some economics had

DR ALLAN THOMAS, KERALA

Need for Achievement

Need for Independence

Need for Power

DR ALLAN THOMAS, KERALA

 Theory X and Theory Y of motivation

DR ALLAN THOMAS, KERALA

According to Drucker, successful entrepreneurship involves the following

“an entrepreneur need not be a capitalist or an

DR ALLAN THOMAS, KERALA

A business plan is a written description of the goals