Theories of Entrepreneurship PDF

Theories of Entrepreneurship Innovation Theory: This theory was propounded by J.A. Schumpeter. According to Schumpeter, entrepreneur is basically an innovator and innovator is one who introduces new combinations which are as follows: (i) The introduction of a new good which consumers, are not...

Theories of Entrepreneurship Innovation Theory: This theory was propounded by J.A. Schumpeter. According to Schumpeter, entrepreneur is basically an innovator and innovator is one who introduces new combinations which are as follows: (i) The introduction of a new good which consumers, are not yet familiar— or of a new quality of a good. (ii) The introduction of a new method of production, that one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new and can also exist in a new way of handling a commodity commercially. (iii) The opening of a new market i.e. a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (iv) The conquest of a new source of supply of raw materials or half manufactured goods, irrespective of whether this source already exists or whether it has first to be created. (v) The carrying out of the new organisation of any industry like the creation of a monopoly position or the breaking up of a monopoly position. In Schumpeterian theory, the main theme is the innovation. He makes a distinction between an innovator and an inventor. According to him, an inventor discovers new methods and new materials. But, an innovator is one who applies inventions and discoveries in order to make now combinations. With the help of these new combinations, he produces newer and better goods which yield satisfaction as well as profits. Schumpeter’s concept of entrepreneurship is quite broad based. Entrepreneurship includes not only the independent business men but also executives and managers who actually undertake innovative functions. According to Schumpeter, an individual is an entrepreneur only when he actually carries out new combinations and ceases to be an entrepreneur the moment he settles down to running the established business. Need for Achievement Theory: This theory was developed by David. C. McClelland. McClelland concerned himself with economic growth and the factors that influence it. In this context, he tries to find the internal factors i.e. “human values and motives that lead man to exploit opportunities, to take advantage of favourable trade conditions.” That is why he gives importance to the innovative characteristics of entrepreneurial role. The entrepreneur is concerned with need for achievement (n-achievement). It is this motive of n-achievement that guides the actions of entrepreneur. People with high n-achievement behave in an entrepreneurial way. So it is better to develop n-achievement among individuals to ensure high scale of economic development. According to McClelland, individuals with high need achievement will not be motivated by monetary incentives but that monetary rewards will constitute a symbol of achievement for them. Similarly, they are also not interested much for social recognition or prestige but their ultimate goal is personal accomplishment. Theory of Social Change: It was Max Weber who first of all took the stand that entrepreneurial growth was dependent upon ethical value system of the society concerned. The central figure of the Weber’s theory of social change consists in his treatment of the protestant ethic and the spirit of capitalism. Moreover, this theory provides an analysis of religion and its impact on entrepreneurial culture. Weber analysed his theoretical formulation by the relationship that he found between protestant ethic and the spirit of capitalism. He held that Protestants progressed fast in bringing capitalism because their ethical value system provided them with rational economic attitude, while the Jews failed to develop industrial capitalism because of their value of ‘Pariha’ (the restriction on having any contact with other communities). According to this theory, driving entrepreneurial energies are generated by the adoption of religious beliefs. _______________________________________