Entrepreneurial Mindset PDF

Module #1 Passion and Vision: A strong commitment to one's goals and a clear vision of what one wants An entrepreneurial mindset is a set of to achieve...

Module #1 Passion and Vision: A strong commitment to one's goals and a clear vision of what one wants An entrepreneurial mindset is a set of to achieve. This passion drives entrepreneurs to attitudes, skills, and behaviors that drive work hard and stay motivated even during individuals to identify opportunities, innovate, tough times. take risks, and persist in the face of challenges. It is characterized by a proactive approach to Resourcefulness: The ability to make the most solving problems and a strong desire to create of available resources and find creative ways to value in various forms, whether through overcome limitations. Entrepreneurs often starting a business, improving processes within leverage their networks, skills, and knowledge an organization, or developing new products to solve problems. and services. Self-Confidence: Belief in one's abilities to Key Components of an Entrepreneurial achieve goals. Entrepreneurs need to trust their Mindset: instincts and decisions, even when faced with skepticism from others. Opportunistic Thinking: The ability to spot opportunities where others might see obstacles. Learning Orientation: A continuous desire to This involves being curious, observant, and learn and improve. Entrepreneurs seek willing to explore new ideas. knowledge, stay updated with industry trends, and are always looking for ways to enhance Innovation and Creativity: A willingness to think their skills and business practices. outside the box and come up with unique solutions to problems. This includes a readiness Benefits / Advantages of a person with an to experiment and embrace change. Entrepreneurial Mindset: Risk-Taking: Comfort with uncertainty and the Enhanced Problem-Solving Skills - People with willingness to take calculated risks to achieve an entrepreneurial mindset can find creative goals. Entrepreneurs often make decisions with solutions to problems. incomplete information but rely on their Increased Adaptability and Flexibility - judgment and experience. Entrepreneurs are quick to adapt to changing Resilience and Perseverance: The capacity to circumstances. bounce back from failures and setbacks. Greater Opportunity Recognition - An Entrepreneurs understand that failure is often a entrepreneurial mindset enables individuals to part of the journey and use it as a learning identify emerging trends and opportunities that experience. others might overlook. Proactiveness: Taking initiative and acting Improved Risk Management - Entrepreneurs are rather than waiting for things to happen. This skilled at assessing risks and making informed involves setting goals, planning, and executing decisions. strategies to achieve desired outcomes. Enhanced Leadership and Initiative - Adaptability: Being flexible and responsive to Entrepreneurs often develop strong leadership changing circumstances. Entrepreneurs are qualities, such as the ability to inspire and open to pivoting their approach when necessary motivate others, communicate effectively, and to align with market demands or new make decisive actions. information. Economic and Social Impact - Entrepreneurs experiences, supporting the idea that mindsets create jobs and contribute to economic growth are not fixed but can be developed over time. by starting new businesses and expanding Cognitive and Emotional Processing: existing ones. Neuroscience explores how the brain processes Personal Growth and Satisfaction - The journey cognitive tasks and emotional responses. This of entrepreneurship involves continuous knowledge helps in understanding how positive learning and personal development, enhancing or negative experiences shape our attitudes and skills and knowledge. beliefs, contributing to the formation of fixed or growth mindsets. Increased Financial Rewards - Successful entrepreneurs have the potential to generate Impact of Stress and Trauma: Studying the significant financial returns, both for themselves neurological effects of stress and trauma and their stakeholders. provides insights into how adverse experiences can influence mindset. Chronic stress can lead Stronger Networking and Collaboration - to a more negative outlook, while resilience- Entrepreneurs actively seek out and build building activities can foster a more positive networks, connecting with mentors, investors, mindset. customers, and other entrepreneurs. Reward Systems and Motivation: Neuroscience Empowerment and Independence - An examines the brain's reward systems, including entrepreneurial mindset fosters a sense of the role of neurotransmitters like dopamine. independence and self-reliance, empowering Understanding these systems helps explain how individuals to take control of their careers and motivation and reward influence behavior and lives. mindset, reinforcing certain thought patterns Neuroscience in the context of the and actions. entrepreneurial mind refers to the study of how Genetics and Epigenetics: Research in these the brain's structure and function influence areas reveals how genetic predispositions and entrepreneurial behavior, decision-making, environmental factors interact to shape brain creativity, and mindset. function and, consequently, mindsets. This Several ways neuroscience contributes to our interplay can explain why some individuals may understanding of mindsets: be more inclined towards certain mindsets than others. Brain Structure and Function: Neuroscience studies the different regions of the brain and Social Neuroscience: This field studies how their specific roles. For instance, the prefrontal social interactions and environments affect cortex is crucial for decision-making, self- brain function. Insights from social control, and complex thought processes, which neuroscience help understand how group are essential for developing and maintaining dynamics, culture, and relationships influence mindsets. individual mindsets. Neuroplasticity: This concept refers to the By integrating these neuroscientific insights, we brain's ability to change and adapt in response can better understand the biological to new experiences. Understanding underpinnings of mindsets and develop more neuroplasticity helps explain how mindsets can effective strategies for promoting positive be altered through learning and new change and personal growth. Brain plasticity or neuroplasticity - refers to the Open to Feedback: brain's remarkable ability to reorganize itself by Individuals with a growth mindset are more forming new neural connections throughout a open to constructive feedback. They see person's life. This adaptability allows the brain feedback as a tool for growth and are less likely to adjust in response to new experiences, to take it personally. learning, and injury. Lifelong Learning: 2 Types of Brain Plasticity: A growth mindset encourages continuous Synaptic Plasticity - This is the process by which learning and development. People are more the strength and efficacy of synaptic likely to seek out new knowledge and skills, connections are adjusted in response to activity. staying adaptable in a rapidly changing world. Structural Plasticity - Structural plasticity Improved Problem-Solving: involves changes in the brain's actual structure. Embracing a growth mindset leads to better Neurogenesis is the process by which new problem-solving abilities. Individuals approach neurons are formed in the brain. This process problems with a can-do attitude, experimenting primarily occurs in the hippocampus, a region with different solutions until they find what critical for learning and memory. works. Hippocampus is a small, curved formation in Implications for Development the brain that plays a crucial role in several functions, particularly in the formation and Career Advancement: retrieval of memories. It is part of the limbic system, which is involved in emotions and Employees with a growth mindset are more motivations, particularly those related to likely to take on new challenges, seek out survival such as fear, pleasure, and anger. professional development opportunities, and advance in their careers. They are proactive Growth mindset: Implications for Learning and about their growth and development. Development: Innovative Thinking: Implications for Learning: A growth mindset promotes innovative Increased Motivation and Effort: thinking. When people believe they can improve, they are more likely to experiment, Students with a growth mindset are more likely take risks, and come up with creative solutions. to put in effort and persist in the face of challenges. They understand that effort leads to Better Leadership: improvement and view failures as opportunities to learn. Leaders with a growth mindset are more effective. They are open to new ideas, Enhanced Resilience: encourage their team to develop, and create a culture of continuous improvement. A growth mindset fosters resilience. Individuals are more likely to bounce back from setbacks Improved Relationships: because they see them as part of the learning process rather than as a reflection of their In the workplace and educational settings, a abilities. growth mindset improves relationships. People are more supportive of each other's development, leading to a more collaborative Significance of Intuition in Decision-Making and positive environment. Speed and Efficiency: Intuitive decision-making Higher Achievement: is faster than analytical reasoning, which can be crucial in situations requiring immediate action, Overall, adopting a growth mindset leads to such as emergency responses or competitive higher levels of achievement. Individuals and environments. organizations that embrace this mindset are more likely to reach their goals and succeed in Complex Problem Solving: In complex or their endeavors. ambiguous situations where not all information is available, intuition can help fill in the gaps Strategies to Foster a Growth Mindset: and provide a direction or solution when Encourage a Love of Learning: analytical methods fall short. Promote curiosity and a love of learning by Expertise Utilization: Experts often rely on providing diverse and engaging learning intuition because their extensive experience opportunities. allows them to make accurate judgments quickly. This is evident in fields like medicine, Praise Effort, Not Just Outcomes: where experienced doctors can diagnose based Recognize and praise the effort and process on intuitive assessments. rather than just the end result. This reinforces Creativity and Innovation: Intuition can lead to the value of hard work and persistence. innovative solutions and creative problem- Model Growth Mindset Behavior: solving, as it allows for thinking outside conventional logic and linear reasoning. Leaders and educators should model growth mindset behaviors by embracing challenges, Interpersonal Decisions: In social and learning from failures, and continuously seeking interpersonal contexts, intuition helps in improvement. understanding and responding to the nuances of human behavior, which might not be Provide Constructive Feedback: captured fully by objective analysis. Give feedback that focuses on how individuals Practical Steps to Enhance Intuition through a can improve and grow rather than just pointing Growth Mindset: out mistakes. Set Learning Goals: Focus on continuous Create a Safe Learning Environment: improvement and learning rather than solely on Establish a safe and supportive environment outcomes. where individuals feel comfortable taking risks Engage in Diverse Experiences: Actively seek out and making mistakes as part of the learning new and varied experiences to expand your process. knowledge base. Intuition is often described as a form of Reflect Regularly: Dedicate time to reflect on knowing or understanding without the need for your decisions and experiences. conscious reasoning. It's an immediate, instinctive feeling or response to a situation, Embrace Feedback: Actively seek and welcome derived from one's accumulated experiences feedback on your decisions and actions. and internalized knowledge. Cultivate Self-Compassion: Be kind to yourself when your intuition leads to mistakes. Techniques to Cultivate Intuition Mindfulness and Meditation Journaling Trust Your Gut Feelings Seek Solitude Practice Active Listening Develop Emotional Awareness Engage in Creative Activities Body Awareness Learn from Experience Seek Feedback Module # 2 Empowerment: Entrepreneurship empowers individuals to take control of their economic Entrepreneurial development refers to the future and achieve financial independence. process of enhancing the skills, knowledge, and resources needed to create and grow new Personal Development: business ventures. This process involves Market Expansion: Entrepreneurs drive market identifying opportunities, generating ideas, and expansion, reaching global markets and transforming those ideas into viable and increasing the country’s global economic sustainable businesses. presence. Key Components of Entrepreneurial Adaptability: A strong entrepreneurial sector Development: enables economies to adapt to changing global 1. Education and Training conditions and remain competitive. 2. Mentorship and Support 3. Access to Capital 4. Innovation and Creativity 5. Market Analysis 6. Regulatory and Legal Framework Stone Age / Paleolithic Era (5 million – 10,000 7. Infrastructure and Technology B.C.) Importance of Entrepreneurial Development: The Paleolithic era witnessed the evolution of early hominids like Australopithecus, Homo Economic Growth: habilis, and Homo erectus. These species gradually developed bipedalism, larger brain Job Creation: New businesses create sizes, and more sophisticated tool use. The later employment opportunities, reducing part of this era saw the emergence of Homo unemployment rates. sapiens, the ancestors of modern humans. Innovation: Entrepreneurs drive innovation, Early humans used simple tools made from leading to new products, services, and stone, bone, and wood, usage of flint knives, technologies that improve quality of life. hand axes, and spears. These tools were Social Impact: primarily used for hunting, gathering, and processing food. The development of these Community Development: Entrepreneurs often tools represents the first known human efforts contribute to community development through to modify the environment to meet survival social enterprises and local initiatives. needs. Problem-Solving: Addressing social, Evidence of early human culture is found in cave environmental, and economic challenges with paintings, carvings, and burial practices. The innovative solutions. famous cave paintings of Lascaux in France and Personal Development: Altamira in Spain suggest that early humans had a deep connection to their environment and Skill Enhancement: Entrepreneurs develop a possibly believed in spiritual or religious wide range of skills that are valuable both concepts. personally and professionally. Paleolithic societies were likely organized into small, mobile bands of hunter-gatherers. These groups were egalitarian, with shared maize. These crops were responsibilities for hunting, gathering, and selected for their ability to be caring for young and elderly members. stored for long periods, which helped create food surpluses. Key Developments o Selective Breeding: Over time, Tool Making: Early humans created humans practiced selective tools from stone, bone, and wood, breeding of plants to improve laying the foundation for future yield, taste, and resilience. This technological advancements. process led to the development of more productive and reliable Trade: Evidence of trade networks crop varieties. suggests that early humans exchanged Domestication of Animals: goods, such as tools, raw materials, and o Animal Husbandry: Alongside food. plant cultivation, the Innovation: The creation of tools like domestication of animals such hand axes, spears, and bows and arrows as sheep, goats, cattle, and pigs indicates the beginning of problem- provided a steady supply of solving and innovation. meat, milk, leather, and wool. Animals also played a crucial Impact on Entrepreneurship role in labor, especially in plowing fields and transporting Resource Utilization: Early humans goods. demonstrated an understanding of o Impact on Human Diet: The utilizing available resources to create inclusion of domesticated tools, an early form of entrepreneurial animals in agriculture thinking. diversified the human diet and Survival Skills: The need for survival provided new sources of drove innovation and the development nutrition, leading to healthier of new tools and methods, highlighting and more sustainable the primal roots of entrepreneurial populations. spirit. Formation of Permanent Settlements: o Village Life: As agriculture took Agricultural Revolution (10,000 B.C. – 5,000 root, humans began to form B.C.) permanent settlements, leading The Agricultural Revolution, occurring during to the growth of villages. These the Neolithic era, was a transformative period communities were often in human history. It marked the transition from centered around fertile land nomadic lifestyles to settled agricultural and water sources, which were communities and laid the foundation for the essential for farming. rise of civilizations. o Social Hierarchies: The accumulation of surplus food Domestication of Plants: allowed for the specialization of o Crop Cultivation: Early farmers labor, with some people began to cultivate staple crops focusing on crafts, trade, or such as wheat, barley, rice, and  governance. This led to the monumental architecture, emergence of social hierarchies laying the foundations for the and the division of society into complex societies that would different classes, such as follow. farmers, artisans, and leaders. Technological and Cultural Key Developments Innovations: o Advances in Farming Domestication of Plants and Animals: Technology: The invention of Humans began to cultivate crops and the plow, irrigation systems, domesticate animals, leading to surplus and crop rotation techniques production. greatly increased agricultural productivity. Pottery became Permanent Settlements: The widespread, enabling the establishment of permanent storage and transport of food settlements allowed for the and other goods. development of complex societies. o Cultural Developments: The Specialization of Labor: Surplus Agricultural Revolution also saw production led to the specialization of the rise of religious practices labor, as not everyone needed to be related to agriculture, such as involved in food production. fertility rituals and the worship of deities associated with the Impact on Entrepreneurship harvest. Additionally, the Economic Systems: The creation of construction of monuments and surplus goods necessitated the temples reflected the increasing development of trade and barter complexity of social and systems, early forms of economic religious life. transactions. Impact on Population and Civilization: o Population Growth: With stable Innovation in Agriculture: Innovations food sources and increased such as irrigation, plowing, and storage agricultural output, human techniques increased efficiency and populations grew rapidly. This productivity. population boom led to the Social Structure: The emergence of expansion of settlements and social hierarchies and organized the eventual development of communities fostered the development the first cities and states. of leadership and management skills. o Birth of Civilization: The Agricultural Revolution set the stage for the rise of the earliest civilizations in regions such as Industrial Revolution (1800 – 1950 A.D.) Mesopotamia, Egypt, the Indus The Industrial Revolution was a period of Valley, and China. These dramatic change that began in the late 18th civilizations developed writing, century and continued into the 19th and 20th centralized governments, and centuries. It marked the transition from agrarian economies to industrialized and little protection or rights. These urbanized societies. conditions eventually led to the rise of labor unions and the Technological Innovations: fight for workers' rights. o Mechanization and Factories: o Social Class Structure: The The invention of machines like Industrial Revolution gave rise the steam engine, spinning to new social classes, including jenny, and power loom the industrial bourgeoisie revolutionized industries such (factory owners and capitalists) as textiles and manufacturing. and the working class (factory Factories became the centers of laborers). The growing wealth production, leading to mass disparity between these classes production of goods at led to social tensions and unprecedented scales. movements advocating for o Transportation Revolution: reform. Innovations in transportation, Economic and Global Impact: including the steam locomotive, steamship, and later the o Capitalism and Global Trade: automobile, drastically reduced The Industrial Revolution fueled travel time and expanded trade the growth of capitalism and networks. The development of global trade. Industrialized railways and canals facilitated nations, particularly in Europe the movement of goods and and North America, sought raw people, contributing to materials from colonies and economic growth. other regions, leading to the expansion of imperialism and Urbanization and Social Change: global economic networks. o Growth of Cities: The Industrial o Scientific and Technological Revolution caused a massive Progress: The period also saw shift from rural to urban living. significant advancements in People flocked to cities in science and technology. search of work in factories, Innovations in chemistry, leading to the rapid expansion physics, and engineering of urban areas. Cities like contributed to further London, Manchester, and New industrialization and the York became bustling industrial development of new products hubs. and industries, such as o Working Conditions: The rise of chemicals, electricity, and factories brought harsh working telecommunications. conditions, with long hours, low Cultural and Ideological Shifts: wages, and dangerous environments. Child labor was o Changing Lifestyles: The widespread, and workers had Industrial Revolution brought  about significant changes in Corporate Structures: The rise of daily life, from how people corporations and limited liability worked to how they lived. The companies provided new opportunities rise of consumer culture, leisure for investment and business growth. activities, and new forms of entertainment, such as cinema and radio, transformed society. Information Age (1950 – to the Future) o Ideological Movements: The The Information Age, also known as the Digital period also witnessed the rise Age, is marked by the rise of digital of new ideologies and technology, information systems, and the movements, including internet. socialism, communism, and labor movements. These The Information Age, beginning in the mid- ideologies were often a 20th century, is defined by the rapid response to the inequalities and development of digital technology and the challenges posed by shift towards an information-based economy. industrialization, advocating for This era has seen unprecedented workers' rights and social advancements in computing, communication, justice. and data processing, transforming every aspect of human life. Key Developments Advancements in Computing: Mechanization: The introduction of machinery and factories revolutionized Early Computers: The development of the first production processes. electronic computers, such as ENIAC and UNIVAC, in the 1940s and 1950s, marked the Urbanization: Mass migration to urban beginning of the digital revolution. These early centers facilitated the growth of cities machines, though large and expensive, laid the and new markets. groundwork for the development Transportation and Communication: Key Developments Advances in transportation (railways, steamships) and communication Digital Revolution: The development of (telegraph, telephone) expanded computers, the internet, and digital communication transformed industries markets and facilitated global trade. and everyday life. Impact on Entrepreneurship Globalization: Enhanced connectivity Mass Production: The ability to produce facilitated global trade, outsourcing, goods on a large-scale reduced costs and the rise of multinational and increased accessibility. corporations. Innovation and Patents (copy right): Innovation Ecosystem: The The period saw a surge in inventions proliferation of start-ups and tech and the establishment of patent laws, companies fostered a culture of encouraging innovation. continuous innovation and disruption. Impact on Entrepreneurship Digital Platforms: The rise of digital platforms like e-commerce, social media, and cloud computing democratized access to markets and resources. Venture Capital: The growth of venture capital and angel investors provided funding for innovative start-ups. Remote Work: Advances in technology enabled remote work and virtual collaboration, expanding opportunities for global entrepreneurship. Module #3 sized enterprises, making it more challenging to operate profitably. What is the Economic theory of Entrepreneurship? Lower Consumer Confidence: In a struggling economy, consumers are often cautious about The economic theory of entrepreneurship is a making large purchases or investing in new theory that explores the relationship between products and services. Low consumer economic conditions and entrepreneurial confidence leads to weaker sales and less activity. It states that when an economy is doing demand for new business ventures. well, there are more opportunities for businesses to succeed, while a poor-performing Higher Unemployment Rates: High economy limits the opportunities for unemployment often accompanies a poor businesses. economy, reducing the overall purchasing power in the market. Businesses may also The economic theory of entrepreneurship firmly struggle to maintain their workforce, reducing states that the economy and entrepreneurial productivity and growth potential. activity are intertwined, with entrepreneurs needing prosperous conditions to be able to Unstable Business Environment: Poor- thrive. In other words, if an economy is doing performing economies are often marked by well then positive outcomes in terms market volatility, unpredictable government of business growth can follow; conversely, a policies, and instability in financial markets. This poor-performing economy equates to limited uncertainty makes it difficult for businesses to opportunities for businesses. plan and execute long-term strategies, discouraging investment and expansion. Seven problems that prove a poor-performing economy equates to limited opportunities for Competitive Pressures: In a weak economy, business. businesses often face increased competition for a smaller pool of customers. This can lead to Reduced Consumer Spending: In a weak price wars, lower profitability, and an overall economy, individuals often face lower incomes, strain on business growth. job insecurity, or unemployment, leading to reduced discretionary spending. This decreases demand for goods and services, making it Different theories that are part of the harder for businesses to generate revenue. economic theory of entrepreneurship: Limit Access to Credit: Economic downturns 1. Theory of Functional Behavior (Mark often result in tighter lending standards by Christopher Casson): banks and financial institutions, making it more difficult for businesses to secure loans or attract Entrepreneurs identify, track, and manage investment. Without access to capital, market volatility. They utilize information businesses struggle to expand, invest in networks and adapt to unpredictable innovation, or even maintain operations. environments, interpreting industry trends differently based on insight. The theory Increased Costs and Inflation: Poor economic integrates classical economics with performance can lead to inflation or rising costs entrepreneurial behavior in dynamic, volatile of raw materials and inputs. This squeezes environments. profit margins, especially for small and medium- 2. Theory of Economic Incentives (G.F. Papanek successful entrepreneurs, motivated by & J.R. Harris): achievement rather than external rewards. Economic incentives drive entrepreneurship(its 7. Theory of Profit (Frank H. Knight): either monetary or non-monetary). These incentives link personal motivations with Entrepreneurs bear uncertainty and risk in financial gains, fostering a sense of return for profit. They make informed decisions achievement, recognition, and economic using intuition and knowledge, navigating security, motivating individuals to overcome uncertainty to minimize risk while maximizing challenges. profit. 8. Theory of Market Equilibrium (Friedrich 3. Theory of Price Adjustment (M. Kirzner): Hayek): Entrepreneurs are responsible for adjusting Entrepreneurs drive market equilibrium by prices based on supply and demand, profiting interpreting market trends and making from price discrepancies across markets informed business decisions. Unlike the through arbitrage. They must constantly neoclassical model, which assumes market monitor market fluctuations to capitalize on equilibrium, Hayek emphasizes the role of opportunities. entrepreneurs in maintaining this balance by responding to market signals. 4. Theory of Innovation (Joseph Schumpeter): Economic Theories of Entrepreneurship Innovation is the cornerstone of entrepreneurship. Entrepreneurs disrupt Economic theories help in examining and market equilibrium by creating new exploring economic factors that affect or enable combinations of resources and introducing entrepreneurial behaviour. Economic theories innovations. Schumpeter distinguishes between of entrepreneurship can be divided into three invention (creating something new) and different time periods: innovation (applying inventions in the market). The three major periods in the evolution of 5. Theory of Harvard School: entrepreneurship theory are the Classical Theories, Neo-classical Theories, and the Entrepreneurship is shaped by both internal Austrian Market Process, each represent (skills, motivation, knowledge) and external distinct phases in the understanding of factors (economic, social, and political forces). entrepreneurship and its role in the economy. Entrepreneurs must organize resources and These periods reflect how economic thought adapt decision-making processes in response to evolved from early risk-based models to more environmental pressures. complex theories involving uncertainty, market dynamics, and innovation. 6. Theory of High Achievement (David McClelland): Classical economic theories of entrepreneurship Entrepreneurs are driven by a high need for achievement, control, and social recognition. Classical theories of entrepreneurship majorly McClelland emphasizes that individuals with focused on the virtues of free trade, these traits are more likely to become competition and specialization. These theories defined the role of an entrepreneur in terms of the production and distribution of goods in a MARSHALLIAN THEORY competitive marketplace (Tiryaki, 2013). The study of entrepreneurs is far from new. In Richard Cantillon’s theory (1755) the year 1755, Cantillon described entrepreneurs as agents who undertake risks Richard Cantillon provided one of the earliest for profits. Early theorist Adam Smith presented contributions regarding the economic strand of the concept of entrepreneurship which was not thought about entrepreneurship. Richard different from a company owner. described an entrepreneur as a speculator who conducts all exchanges, and bears risks as a Alfred Marshal in his work combined both result of buying at certain prices and further concepts and presented the entrepreneur as an selling them at uncertain prices. Centillion individual who is both, a risk-taker and an named it the risk theory of profit where anyone administrator. He identified entrepreneurs who who receives an uncertain income can be are responsible for ensuring production regarded as an entrepreneur. function in a company, identifying opportunities, reducing costs and increasing Furthermore, the theory stated the importance profits. of entrepreneurs as people who play a key role in the economy by relieving the paralysis Marshall further in his theory classified engendered by uncertainty and along with it entrepreneurs as: allowing the exchange and production of goods Active entrepreneurs (those who find and services so that market equilibrium can be new ways, and attained. Cantillon further stated that an entrepreneur is not an innovator. They cannot Passive entrepreneurs (those who tend change the demand and supply trends. Rather, to follow the existing road) (Fernandez, they are perceptive, intelligent and willing to 2009). take risks. Their main role in the process is to bring two sides of the market together (Parker, Furthermore, the concept of Marshallian 2018). agglomeration economies tends to have a significant impact on entrepreneurial activities. Contributions: Here ‘agglomeration’ refers to the tendency of Introduced the entrepreneur as a key economic increasing returns as a result of the agent. accumulation of resources in a geographical location. Emphasized risk-taking and the role of uncertainty in entrepreneurial decision-making. Marshall mentioned that there are two main forms of agglomerations which are as follows: Neoclassical economic theories of entrepreneurship Urbanization of economies results from the accumulation of the population at The neo-classical theories emerged as a result one point. of the criticism levelled against the classical theories. The neoclassical theory maintains the Localization of economies resulting impact of diminishing marginal utility and from the accumulation of a specific entrepreneurial response to them as another industry or sector. major aspect which was missing in the classical works (Gimmnez Roche, 2017). Alfred Marshall (1842-1924), from the English insurable because they have occurred enough School of thought, was one of the founders of times in the past that the expected loss from neoclassical economics. His research involved such risks can be calculated. Uncertainty, on the distinguishing between the terms capitalist, other hand, is not subject to probability entrepreneur, and manager. Marshall saw calculations. According to Knight, entrepreneurs capitalists as individuals who “committed can’t share the risk of loss by insuring themselves to the capacity and honesty of themselves against uncertain events, so they others, when he by himself had incurred the bear these kinds of risks themselves, risks for having contributed with the capital” and profit is the reward that entrepreneurs get (Zaratiegui & Rabade, 2005, p. 775). An from assuming uninsurable risks (Casson & entrepreneur took control of money provided Godley, 2005). by capitalists in an effort to leverage it to create Frank Knight made several contributions to more money; but would lose less if something entrepreneurship theory, but another of note is went wrong then would the capitalists. An how he distinguished an entrepreneur from a entrepreneur, however, risked his own manager. He suggested that a manager crosses reputation and the other gains he could have the line to become an entrepreneur “when the made by pursuing a different opportunity. exercise of his/her judgment is liable to error Marshall recognized that the reward capitalists and s/he assumes the responsibility for its received for contributing capital was interest correctness” (Chell, 2008, p. 33). Knight said income and the reward entrepreneurs earned that entrepreneurs calculate the risks was profits. Managers received a salary and, associated with uncertain business situations according to Marshall, fulfilled a different and make informed judgments and decisions function than either capitalists or entrepreneurs with the expectation that – if they assessed the – although in some cases, particularly in smaller situation and made the correct decisions – they firms, one person might be both an would be rewarded by earning a profit. Those entrepreneur and a manager. Managers “were who elect to avoid taking these risks choose the more inclined to avoid challenges, innovations relative security of being employees (Chell, and what Schumpeter called the ‘perennial 2008). torment of creative destruction’ in favour of a Contributions: more tranquil life” (Zaratiegui & Rabade, 2005, p. 781). The main risks they faced from firm Expanded on the entrepreneur’s role in failure were to their reputations or to their organizing production and resource employment status. Managers had little allocation. incentive to strive to maximize profits (Zaratiegui & Rabade, 2005). Introduced the distinction between risk and uncertainty, with a focus on Frank Knight’s Risk and Uncertainty Theory uncertainty as the core entrepreneurial Frank Knight (1885-1972) founded the Chicago challenge. School of Economics and belonged to the Tied entrepreneurship more closely to American School of thought. He refined the market equilibrium framework, Cantillon’s perspective on entrepreneurs and emphasizing optimization and risk by distinguishing insurable risk as efficiency. something that is separate from uncertainty, which is not insurable. Some risks can be Austrian market process theories of both these aspects that gives rise to entrepreneurship opportunities for individuals. This act of imagination helps entrepreneurs in the The Austrian market process theories were identification of potential market opportunities. proposed in order to provide answers to This, when compared with the resources questions that remained unanswered in the available, can lead to effective decision-making. neo-classical school of thought regarding entrepreneurship. These theories mainly focus Shackle presented entrepreneurs’ education on human actions based on their knowledge levels, personal backgrounds, experiences and regarding the economy. attitudes as the major factors that tend to affect their imagination and creativity. Kirzner’s Alert Entrepreneurship Schumpeter (1934) viewed innovation as arising Kirzner in his work provided an Austrian from new combinations of materials and forces. approach to the concept of entrepreneurship. The main focus of Kirzner was to answer Creative Destruction: Schumpeter’s famous whether a market economy works, and if so, concept of creative destruction refers to the then what leads to an equilibrium situation. process by which entrepreneurs introduce Kirzner further accepted that a market is not innovations that disrupt existing markets, always perfectly clear, and there do not exist displacing older products, industries, and perfectly informed representative agents. For economic structures. This continuous cycle of entrepreneurs to bring any change they need destruction and creation is seen as the primary incentives and these incentives come in the source of long-term economic growth. form of knowledge and information (Tiryaki, Contributions: 2013). Defined the entrepreneur as an innovator, Furthermore, he stated that an entrepreneur is responsible for technological progress and one who sees a profitable opportunity. For economic transformation. them, it is majorly profit opportunities that stimulate entrepreneurship. He said that the Introduced the concept of creative destruction pure entrepreneurial function consists of buying as central to entrepreneurship and economic products for cheap and selling them at higher growth. prices. In simple terms, it means discovering the fact that the market has undervalued Shifted the focus from equilibrium models to a something and now its real value has to be dynamic, disequilibrium-based process where realized. entrepreneurial innovation drives economic change. Shackle’s theory According to Shackle’s theory, entrepreneurs are creative and imaginative in their work. It states that entrepreneurs imagine opportunities and have the creative ability to make choices. Furthermore, according to this theory, uncertainty and imperfect information play an important role because it is the presence of Key Differences Summarized Austrian Market Process Aspect Classical Theories Neo-classical Theories Theory Entrepreneur's Risk-taker and market Organizer and manager of Innovator, disruptor, agent of Role coordinator risk/uncertainty creative destruction Risk-taking in Resource organization, risk Innovation, creative Focus uncertain markets vs. uncertainty destruction, market dynamics Dynamic, capitalist economy Economic Pre-industrial, Industrial economy, large- with rapid technological Environment agricultural economy scale production progress Risk-taking, market Market equilibrium, risk Creative destruction, market Key Concept coordination management, uncertainty disequilibrium, innovation Entrepreneurs create Understanding of Entrepreneur adjusts Entrepreneurs bring disequilibrium through Markets supply to demand markets into equilibrium innovation Profit from bearing Profit from managing Profit from innovation and Profit Source risk uncertainty market disruption Central to the theory; Emphasis on Minimal (mostly resource Limited entrepreneurship is innovation- Innovation optimization) driven