Presented by:-

Shreyash Bhanvadia (05)

Raunak Bhatia (06)
Amruta Bhatt (07)
Contents discussed.
Sociological theories
Economic theories
Cultural theories
Psychological theories
Models of Entrepreneurship
Theory of religious belief – Max Webber
Theory of religious belief- Max
Weber
According to Max Weber, entrepreneurism is a
function of religious belief and the impact of
religion shapes the entrepreneurial culture.
He emphasized that the entrepreneurial
energies are exogenous supplied by means of
religious belief.
Elements of Weber’s
theory
Spirit of capitalism: Spirit of capitalism is
the guiding factor which guides the
entrepreneur to get engaged in activities that
can bring about more and more profit.

Adventurous spirit: Spirit of capitalism is

influenced by strict discipline, where as,
adventure spirit is affected by the force of
impulse.
Elements of Weber’s
Theory
Protestant ethic: According to Weber,
attitude can be provided by protestant ethic
irrespective of cultural background,
personality type and experiences in the
society. He also adds that, Hinduism lacks this
sort of mental attitude which acts as a
stumbling block in their way to
entrepreneurship
Inducement of profit: The principle of low
prices and large turnovers was the
mechanism of the entrepreneurs to reap
profits. This motive of profit guided protestant
Criticisms and
limitations.
A] There is only one system of Hindu value.
B] The Indian community internalized those
values and translated them in to daily routine.
C] These values remained immune to and
insulated against external pressures and
change.
Theory of Entrepreneurial Supply – Thomas
Cochran
Theory of Entrepreneurial supply-
Thomas Cochran
Beginning with the premise that fundamental
problems of economic development are non-
economic, he emphasizes on the cultural
values, role expectation and social sanctions
as the key elements that determine the
supply of entrepreneurs.
Elements of the Cochran
theory
Entrepreneur as a society’s modal
personality: entrepreneur is neither a
supernormal individual nor a deviant person
but is a role model of the society representing
modal personality.
Modal personality as a derivative of social
conditioning: the role is partly shaped by the
modal personality that is a derivative of social
conditioning of his generation. Further,
innovation and invention go together with
the type of conditioning in the society.
Role expectations and entrepreneurial role:
Primary cultural factor operating on the
personality of the executive and the defining
of his role by those involved must
accommodate to some degree to the
necessities of the operation to be carried out.
The type of childrearing and schooling and its
influence on intrinsic character of the
executive: the executive’s ‘inner character’ is
conditioned by the childrearing and schooling
common to the culture legacies.
Dynamics of entrepreneurship and thrust
upon the social factors for the major changes
Theory of Social Change – E.E. Hagen
Theory of Social Change-
E.E.Hagen
How a traditional society becomes one in
which continuing technical progress takes
place. The theory exhorts certain elements
which presumes the entrepreneur’s creativity
as the key element of social transformation
and economic growth.
Elements of E.E.Hahen
theory
Presentation of the general model of the
society: revels a general model of the society
which considers interrelationship among
physical environment, social culture,
personality and culture.
Economic growth: Product of social change
and political change: He viewed entrepreneur
as a creative problem-shooter who brings
about economic development which is
mingled with political and social changes.
Rejection of follower’s syndrome:
rejecting the idea that the solution to
economic development lies in imitating
western technologies, Hagen insisted that the
follower’s syndrome on the part of the
entrepreneur, is discouraged. This is because
the technology is an integral part of socio
cultural-complex, and super-imposition of the
same into different sociocultural set-up may
not deliver the goods.
Historic shift as a factor of initiating
change: Historic shift is the crucial force
which has brought about the social change
and technological progress thereby leading to
the emergence of entrepreneurial class from
Withdrawal of status respects as the
mechanism for rigorous entrepreneurial
activity: When withdrawal of status respect
occurs, it leads to four different responses and
creation of four different personality types,
namely:
 Retreatist: One who constantly does his work in
the society but remain indifferent to his own
position.
 Ritualist: One who adopts a kind of defensive
personality
 Reformist: One who initiates rebellion and
attempts to establish a new order in the society
 Innovator: A creative individual who converts all
odds into opportunities and is likely to become an
entrepreneur
Example
Dr. Mammohan Singh ( tenure as financial
minister from 1991)
Dr. Manmohan Singh can be termed as a
reformist for Indian Economy.
Theory of Group Level Pattern – F.
Young
Theory of Group Level
Pattern
F. Young has elaborately analyzed the
shortcomings of psychogeneric interpretation
of entrepreneurship and suggested a casual
sequence where transformation codes are
developed by the solidarity groups to improve
their symbolic position in their larger structure
and thus become entrepreneurs.
Features of Group Level
Pattern Theory
Deficiencies in psychogenic mediation
model: According to Young, “Of entrepreneurs in
particular, imitative time taken by the
development process are some of the demerits of
psychogenic interpretation of entrepreneurship”

Solidarity Groups: Young regarded the

solidarity groups as the main agencies for building
entrepreneurship. He mentions that
entrepreneurship characteristics are found in
clusters, ethnic communities, occupational groups
or politically oriented factions.
Features of Group Level
Pattern Theory
Disregarding single-handed concept of
entrepreneurship: According to Young,
entrepreneurship is the product of family
background, experience and exposure of the
individual as a member of the group and as a
reflection of general values. Thus, entrepreneur as a
member of a particular group doesn’t work alone.

Reduction of complex economic problems: The

effort of solidarity group is likely to reduce the
economic problems through the device of
recombination of factors related to production,
higher standards of labor, new technology and
Features of Group Level
Pattern Theory
Incorporation of reactive subgroups:
According to Young, a group becomes reactive
when three important conditions coincide.
These conditions are:
a) When low status recognition is found in a
group
b) When access to important social networks is
denied
c) When the group has better institutional
resources than other groups in the society at
the same level
Example
Dr. Babasaheb Ambedkar
The entrepreneurship quality in Dr. Babasaheb
Ambedkar can be seen during the harijan
movement.
Schumpeter’s Theory of
Innovation
About Schumpeter’s
Theory
It implies that carrying out of new
combinations of entrepreneurship is basically a
creative activity.

According to him, an entrepreneur is one who

perceives the opportunities to innovate.

Innovation involves problem solving and the

entrepreneur is problem solver.
Innovation Cover 5 Cases
The introduction of new goods, that is the
one with which consumers are not yet
familiar, of a new quality .

The introduction of new method of

production, that is yet to be tested by
experience in the branch of manufacture
concerned which need, by no means, to be
founded upon a scientifically new discovery
and can also exist in a way of handling a
commodity commercially.
Innovation Cover 5 Cases
The opening of new market, that is a market in
which the particular branch of manufacture of
the country in question has not previously
entered, whether or not this market is has
existed before.

The conquest of a new source of supply of

raw material or semi-manufactured goods,
again irrespective of whether this source already
exists or whether it has first to be created.

The carrying out of the new organization, of

any industry like the creation of monopoly
position through fructification or breaking up of
a monopoly position.
Features of Schumpeter’s
Theory
Distinction between invention and innovation
Emphasis on entrepreneurial functions
Presentation of disequilibrium situation
through entrepreneurial activity
Entrepreneurship in relation to three
corresponding pairs of opposites
Characteristic motives of the entrepreneurial
condut
Entrepreneurial dream and the will to find a
private kingdom
Criticisms of Schumpeter’s
Theory
It has broaden the scope of entrepreneurism
since it includes the individual businessman
along with the directors and managers of the
company. It is considered narrow in senses
that individuals operates successful business
enterprise but lacks innovation.

His innovating entrepreneur represents the

enterprise with R&D and innovative character.
But developing countries lack these type
entrepreneurs.
Criticisms of Schumpeter’s
Theory
Theory gives too much emphasis on
innovation and excludes the risk taking and
organizing aspects of entrepreneurship which
are equally important from the point of view
of enterprise building.

Shumpeter’s entrepreneurs are large scale

businessmen who introduce new technology,
methods of production, etc. But in
underdeveloped countries entrepreneurs
doesn’t have large scale enterprise, also they
prefer to operate in traditional technology.
Example
Example that can be related to Schumpeter’s
Theory
Tata Group
 Innovation in different industries
 Innovation in Geographical expansion ( eg. Africa)

 Innovation within the Industry ( eg. Tata Nano –

creating new market of middle class people’s
aspiration to own a car)
Leibenstein’s Theory of X-
efficiency
About Leibenstein’s
Theory
Harvey Leibenstein propounded the theory
of X-efficiency which is popularly called Gap
Filling Theory.

According to Leibenstein, entrepreneurial

functions are determined by the X-efficiency
which means the degree of inefficiency on the
use of resources within the firm.
Features of Leibenstein’s
Thoery
Routine Entrepreneur
New Entrepreneurship
Twin roles of entrepreneur
 Gap Filling
 Input completing

X-efficiency factor
Example
Example of Leibenstein’s Thoery
Lalu Prasad Yadav as an entreprenaur for Indian
Railways.
Turned around the Indian Railways by
improving efficiency and innovation.
Some decisions may not have been rational
according to stakeholders ( Eg. Excessive
attention on U.P. and Bihar)
Mark Casson’s Theory
About Mark Casson’s
Theory
Mark Casson thinks it is quite fashionable
now-a-days to be an entrepreneur. His theory
deals with the functional behavior of
entrepreneur and his qualities which are
crucial for his success.
Casson defines and Entrepreneur as “
someone who specializes in taking judgmental
decisions about coordination of scarce
resources”
Decisions differ from other peoples’ decisions
Features of Mark Casson’s
Theory
Demand – Supply Relationship

Identification of qualities

Theory reveals that in development of

successful entrepreneurship the following
things are not to be followed:
 The demand for entrepreneurship need to be
adjusted as per the changing needs of time.
 The deficient qualities of the entrepreneur should be
made good by personal care.
Example
Example of Mark Casson’s Theory
Narayan Murthy
Identified the demand supply relationship and
his qualities and then established Infosys
Used his and his company’s qualities to become
one of the best I.T. Firms in the world.
Papanek and Harris Theory
Features Papanek and
Harris Theory
According to Papanek and Harris, economic
incentives are the integral factors that have
induced entrepreneurial initiatives. Main
Features of this theory are as under:
Economic incentives
Link between economic gains and the inner
urge
Economic gain – sufficient condition
Harvard School Theory
About Harvard School
Theory
Harvard School Contemplated that
entrepreneurship involves any deliberate
activity that initiates, maintains and grows a
profit-oriented enterprise for production or
distribution of economic goods or services,
which is inconsistent with internal and external
forces.
Features of Harvard School
Theory
Internal Forces: These forces refer to the
internal qualities of the individual such as
intelligence, skill, knowledge experience,
intuition, exposure, etc. These forces
influence the entrepreneurial activities of an
individual to a great extent.

External Forces: These forces refer to the

economic , political, social, cultural and legal
factors which influence origin and growth of
entrepreneurship in an economy.
Emphasis on Type of
Entrepreneurial activities
This theory emphasizes on two type of
entrepreneurial activities:

1. Entrepreneurial functions like organization and

combination of resources for creating viable
enterprises
2. The responsiveness to the environmental
condition that influences decision making
function
Emphasis on Type of
Entrepreneurial activities
Besides the above mentioned activities,
Harvard School also emphasizes on following
points:
1. To search and evaluate economic
opportunities
2. To master the process of mobilizing resources
to accomplish the goal
3. To interconnect the different market segments
for creating absolutely an ideal marketing
environment
4. To create or expand the firm or business
enterprise
Example
Example of Harvard theory.
Mr. Laxmi N. Mittal
Came out as a good entreprenaur even during
the time of economic crisis.
Has become the second largest steel producer
in the world
M.Kirzner’s Theory of Adjustment
Features of M. Kirzner’s
Theory
Adjustment of Price: The chief role of
entrepreneur is based upon the adjustment of
price in the market. The buyer may pay higher
price or seller may accept a lower price, which
gives rise to opportunities for profit. Further if
different prices prevail in the same market, there
in an opportunity for profitable arbitrage between
two segments.

Alertness to disequilibrium: Alertness to

disequilibrium enables the entrpreneur to
intervene in the market by changing the price.
Thus, economy in purchase and profitable selling
McClelland’s Theory of Achievement
Motivation
Aspects of David McClelland’s
Theory
Need for Achievement

Need for Power

Need for Affiliation

David McClelland points out that ‘n Ach’ i.e.

Need for Achievement is the factor
responsible for entrepreneurship development
Aspects of David McClelland’s
Theory
Characteristics that governs the economic
behavior of a person to become entrepreneur
are:

Doing things in a novel and excellent manner

Decision making under uncertainity

Example
Karsanbhai Patel of Nirma
Knight’s Theory of Profit
Features of Knight’s
Theory
Knight points out that entrepreneurs are
specialized group of persons who bears risk and
deals with uncertainty. Main features of this
theory are:
Pure Profit
Situation of Uncertainty
Risk Bearing Capability
Guarantee of Specified Sum
Identification of Socio Economic and Psychological
Factors
Use of consolidation techniques to reduce business
Example
Bhai Mohan Singh of Ranbaxy
He run a profitable business for many years
Had high risk bearing capability
Found a golden opportunity to exit Ranbaxy
and he grabbed it
Hayek’s Theory of Market Equilibrium
Feature of Hayek’s
Theory
Postulate of Full Equilibrium: This
postulate presupposes the fact that there is
no need for further information to modify the
decision

Acquisition and Communication of the

Knowledge

Markets as a medium of
Communications: Entrepreneurs through
market communications reach at desired level
Hoselitz’s Theory
Features of Hoselitz’s
Theory
Hypothesis of Marginal Men: Marginal Men
are ambiguous for cultural and social
statement and are particularly suited to make
creative adjustments in situations of change
and in course of this change, they develop
genuine innovations in their social behavior

Emphasis on the functions of managerial

and leadership skill
Features of Hoselitz’s
Theory
Contribution of Specific Social Classes:
Hoselitz reveals that in several countries
entrepreneurial talents are found in persons
having particular socio-economic background.
For e.g.: Christians contributes to
entrepreneurship in Lebanon, Halai Memon
industrialists in Pakistan and Marwadis and
Parsis in India.
Example
JRD Tata
Parsi by religion
Stoke’s Thoery
Stoke’s Thoery
Stoke’s theory portrays that entrepreneurship is
likely to emerge under specific social sanctions,
social culture and economic action. According
to stoke, socio-cultural values channel
economic action. He suggests that personal and
societal opportunities and the presence of
requisite psychological distributions may be
seen as conditions for an individual movement
to get changed into industrial entrepreneurship
Example
Dhirubhai Ambani
From bhajiya seller to textile Trader to
entrepreneur
Theory of Personal Resourcefulness
Implications of Theory of
Personal Resourcefulness
Cognitive Function: Theory presupposes
the activities undertaken by the individuals
who require cognitively mediated behavior
like emotions, sentiments, inner feelings,
thoughts and actions are fully appraised of the
situation and knowledge which is shaded by
risk and motivational involvement

Human aspects of Psychology: Different

aspects of psychology like human volition,
innovation, organization building, will to
power, will to conquer, etc. influences
Theory of Entrepreneurial Supply
Theory of Entrepreneurial
Supply
John H. Kunkel advocated the theory of
Entrepreneurship Supply. According to him,
psychological and sociological variables are
the main determinants for the emergence of
entrepreneurs. According to him,
Entrepreneurism can be dependent upon the
following structures in the economy:
Demand Structure
Limitation Structure
Labor Structure
Opportunity structure
Base of Theory of
Entrepreneurial Supply
Theory of Entrepreneurial Supply has been
depicted under J.H. Kunkel’s Behavioral Model.
Base of Behavioral Model is as under:
Man’s internal state – beyond objective analysis
Conditioning procedure, determinant of
individual activities
Behavioral approach and human spirit
Model contrast with psychogenic approach
Role of ambiguous and inadequate concepts
Example
Verghese Kurien
White revolution
Saw opportunity in uplifting the Dairy farmers
and earn profits at the same time
Kao’s Conceptual Model
Kao’s conceptual model
According to Kao, entrepreneurship and
creativity result from the interrelationship
of the following three elements as shown
in the following figure
The person
The task
The organizational concept
 The person

The Entrepreneurship
Environment

The Task The Organizational

context
Contd. .
Element 1:-
The most important element is the person.
New ideas are not generated/implemented by
organisation or technology but come through
the efforts of dedicated people.
Thus for entrepreneurial talent, it is important
to understand people’s personality, skills,
motivation, level of experience and
psychological preferenes
Contd. .
Element 2:-
The task is what a group of people or
organisation does
They may be determined by an individual’s
personality or private vision & are shaped ,
infulenced by organisational strategy , external
environment respectively
The task includes perceiving of oppurtunities,
marshalling the resources & providing
leadership qualities appropriate for the
entrepreneurial growth
Contd. .
Element 3:-
The organisational context is the immediate
setting in which creative & entrepreneural work
rolls place.
Factors like organizational structure & systems,
the definition of work rolls and group culture
affect significantly the nature of the creative or
entrepreneural environment.
Contd. .
Finally the above elements exist in an
environment which refers to the outside world
surrounding the organisation.
environment includes in it the available
resources, infrastructure, competitive
pressures, social values, rules and regulations,
state of technology.
And as such the environment influences the
enterprise creation significantly and the most
successful entrepreneur is one who adapts
himself to the changing needs of the
environment and makes it hospitable for the
growth of this business enterprise