ENTREPRENEURS

THEORIES
OF
ENTREPRENEURSHIP

What is Theory ?

facts do not speak for themselves,they

are read in the light of theory
Stephen Jay Gould
According to Oxford Dictionary
it is supposition or systemof ideas
explaining something, esp. one based
on general principles.

An

Economic theory

Given by Mark Casson in his book

The EntrepreneurAn EconomicTheory

Demand for entrepreneurship arise from the need to change and the
supply of entrepreneurship is limited.
Four Qualities of Entrepreneur

1. Judgmental decisions.

2. Co-ordination of Scarce resources.

3. Motivated by Self Interest.

4. Imaginationentirely innate.

economic theory cont :

Entrepreneurship and economic growth take place

whenthe economic conditions are favourable

Economic incentives are the main motivators for

entrepreneurial activities

Economic incentives include taxation policy, industrial

policy, sources of finance and raw material,
infrastructure availability, investment and marketing
opportunities, access to information about market
conditions, technology etc

performer accordi
Sociological Theory
s by the society
Entrepreneurship is likely to get aboost
in a particular socialculture
Societys values, religious
beliefs,customs, taboos influence the
behaviour of individuals in asociety
The entrepreneur is a role performer
according tothe role expectations by
the society

Psychological
Theory

Entrepreneurshipgetsaboostwhensociety
hassufficientsupplyofindividuals
withnecessarypsychologicalcharacteristics
Thepsychologicalcharacteristicsinclude
needforhighachievement,avisionor
foresight,abilitytofaceopposition
Thesecharacteristicsareformedduringthe
individualsupbringingwhichstresson
standardsofexcellence,selfreliance
andlowfatherdominance

Entrepreneurship Innovation
theory

Theory by Joseph Schumpeter whobelieves that

entrepreneur helps the process of development in an economy
He says that an entrepreneur is the one who isinnovative,
creative and has a foresight
According to him, innovation occurs when the entrepreneur

Introduces

a new product
Introduces a new production method
Opens up a new market
Finds out a new source of raw material
supply
Introduces new organisation in any industry

Innovation theory cont:

Thetheoryemphasisesoninnovation,
ignoringtherisktakingandorganising
abilitiesofanentrepreneur

Theory of High Achievement/Theory

ofAchievement Motivation

McClelland identified 2 characteristics

of entrepreneurshipDoing things in a
new andbetter wayDecision making
under uncertainty
He stressed that people with high
achievement orientation (need to
succeed) were more likely tobecome
entrepreneurs
Such people are not influenced by
money orexternal incentives
They consider profit to be a measure of
success and competency

Motivation theory by McClelland

(Acquired Needs theory)

According to McClelland, a person has

three typesof needs at anygiven time,
which are:Need for achievement (get
success with ones own efforts)
Need for power (to dominate, influence
others)
Need for affiliation (maintain
friendlyrelations with others
The need for achievement is the highest
for entrepreneurs

The Kakinada Experiment

ConductedbyMcClellandinAmerica,
MexicoandMumbai
Underthisexperiment,youngadults
wereselectedandputthroughathree
monthtrainingprogramme
Thetrainingaimedatinducingthe
achievementmotivation

The course contents were

Traineeswereaskedtocontroltheir
thinkingandtalktothemselves,positively
Theyimaginedthemselvesinneedof
challengesandsuccessforwhichtheyhad
tosetplannedandachievablegoals
Theystrivedtogetconcreteandfrequent
feedback
Theytriedtoimitatetheir
rolemodels/thosewhoperformedwell

Conclusions of the experiment:

Traditionalbeliefsdonotinhibitanentrepreneur
Suitabletrainingcanprovidenecessary
motivationtoanentrepreneur
Theachievementmotivationhadapositive
impactontheperformanceoftheparticipants.
It was the Kakinada experiment that made
people realisethe importance of EDP
(Entrepreneurial Development Programme) to
induce motivation and competence in young ,
prospective entrepreneurs

Every theorist has looked at

theentrepreneur and
entrepreneurship on the basis of
hisperception, and therefore ,can at
best ,provide only a limited view of
entrepreneurial phenomenon. Noview
is right or wrong or more or less

He loves practice without theory is like the

sailor who boards ship without a rudder
and compass and never knows where
he may cast
Leonardo Da Vinci