Theories of ED

Theories of Entrepreneurship
Development
CLASSIFICATION OF ED THEORY
Economic Psychological
Sociological Cultural
Theory of personal
Schumpeter theory of resourcefulness
Theory of religious belief- innovation Hoselitz Theory
Max Weber Theory of
Leibenstien theory X Stoke’s Theory
entrepreneurial
Theory of Efficiency supply
Entrepreneurial Supply –
Cochran Mark Cassons theory
Theory of Social Change- Papanek and Haris

Hagen theory
Theory of group level Harvard school theory

pattern- Young
M. Kirzner’s Theory
David Mc Clelland’s
theory f achievement
Knights theory of profit
Hayek’s theory of
market equillibrium
Theory of Religious Belief – Max Weber
• Spirit of Capitalism
• Adventurous spirit
• Protestant Ethics
• Inducement of Profit
Theory of Entrepreneurial Supply – Thomas

Cochran
• Emphasised on Cultural Values, Role Expectations, Social Sanctions(Key elements)
• Entrepreneur as a society’s role modal
• Moral personality as a derivative of social conditioning
• Role expectations and entrepreneurial role
• The childrearing and schooling and its influence on intrinsic character of the executive
• Dynamics of entrepreneurship and thrust upon the social factors bring major changes
• Individual performance of entrepreneurship is dependent on:
• Attitude towards own occupation
• Role expectations held by sanction groups
• Operational requirements of a job
Theory of Social Change – EE Hagen
• How traditional society grows with technological progress
• Presumes the entrepreneurial creativity as the key of social transformation and economic
growth.
– Presentation of general model of society (interrelation between physical environment,
social structure and culutre).
– Economic Growth (product of social and political changes)
– Rejection of followers syndrome
– Historic shift as a factor of initiating changes
– Withdrawal of status is seen as the mechanism of rigorous entrepreneurial activity.
• Retreat
• Ritualist
• Reformist
• Innovator
Theory of group level pattern - Young
• Micro sociological interpretation of entrepreneurship

• Entrepreneurial characters are found in clusters- solidarity group
• Entrepreneurial activity is the result of family background, experience and
exposure of individual as a member of group
• Entrepreneurs does not work alone but in group.
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Schumpeter theory of Innovation
• Introduction of a new product
• New method of production
• New market
• New source of supply of raw material
• New organisation
Features:
• Difference b/w invention and innovation
• Emphasise on entrepreneurial functions (entrepreneurs are motivated and prime
movers of economy)
• Presentation of disequilibrium situation through entrepreneurial activities
• Entrepreneurs in relation to 3 corresponding pairs of opposition
– Opposition of real process
– Opposition of two statistics and dynamics
– Opposition of two types of conduct
• Characteristics are the main motive of entrepreneurial conduct
• Entrpreneurs dream and have a will to find a pvt kingdom
•
• https://youtu.be/RqEetboK1s4
Leibenstein’s theory of x efficiency
• X Efficiency Factor
• Two roles of an entrepreneur
– Gap Filler
– Input Completer
• Two types of entrepreneurs
– Routine
– Innovative
Mark Casson’s Theory

• Used economic jargons like Demand Supply Relationship
• Demand for entrepreneurs- need to adjust change
• Supply for entrepreneurs- Desired personal characterstic
Papanek and Haris Theory
• The reason behind the growth of economy and entrepreneurship is

economic conditions
Main Features of this Theory:

1. Economic Incentives
1. Link between economic gains and the innerurge
1. Economic gain- sufficient condition

Harvard school of Theory
• Entrepreneurship is any deliberate activity that initiates, maintains and grows a
profit oriented enterprise for production and distribution of goods and services
which is inconsistent with internal and external forces.
• According to A.H.Cole, Entrepreneurs to flourish requires:
– Stable environment
– External security
– Internal Security
• Emphasis of two types of entrepreneurship
– Organising and combining of resources
– Decision Making
M Kirzner’s Theory of Adjustment - Price

• Entrepreneurs keep themselves alert to confront any disequilibrium in market.
• Adjust the price in the market
David Mc Clelland’s Theory of Achievement
Motivation
• N Ach (Found highest among entrepreneurs)
• N Po
• N Aff
• Kakinada Experiment
– Young adults selected and put on a three months training to induce achievement
motivation.
– Asked to think positively about themselves and imagine themselves in need for
challenges and success
– Tried to imitate role models.
• The achievement motivation had a positive impact on the performance of
participants.
• Identified two characteristics of entrepreneurs
– Doing things in a new way/better way
– Decision making under uncertaininty
• Said people with N Ach are more likely to be entrepreneurs
Knight’s Theory of Profit
• Entrepreneur: Specialised group of people who bear risk and deals with
uncertainty.
Features:
• Pure Profit
• Situation of uncertainty
• Risk Bearing Capability
• Guarantee of specified sum
• Identified socio economic and psychological factors for supply of entrepreneurs

• Use of technology to reduce business uncertainity
• Self Confidence
Hayek’s Theory of Profit Market Equilibrium

• The service of entrepreneurs can be of following types:
• To combine means and resources
• To take entrepreneurial fns of planning, scheduling and decision making
• To guarantee a fixed rate of income, profit and interest.
Hoselitz’s Theory
• Supply of entrepreneurship is governed by cultural factors and culturally minority
groups are the spark plugs of entrepreneurial and economic development.
• Chinese in South Africa, Indians in East Africa etc.
• He viewed entrepreneurship supply as:

– Hypothesis of marginal men
– Emphasis on the functions of managerial and leadership skills
– Contribution of specific economic classes
Stoke’s Theory
• Social Cultural Values channel economic action
Theory of Personal Resourcefulness
• PS is the critical factor for the growth and development of the entrepreneurship.
• Entrepreneurship is influenced by the following traits:
– Will to power
– Will to conquer
Theory of Entrepreneurial Supply

• J H Kunkel- sociological and psychological variables are the main determinants for
the emergence of entrepreneurs.
• Entrepreneurship depends on:
• Demand Structure
• Limitation Structure
• Labour Structure
• Opportunity Structre

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Theories of Entrepreneurship

Theory of Social Change- Papanek and Haris

Theory of group level Harvard school theory

Knights theory of profit

Theory of Entrepreneurial Supply – Thomas

• Micro sociological interpretation of entrepreneurship

Mark Casson’s Theory

• The reason behind the growth of economy and entrepreneurship is

Main Features of this Theory:

1. Link between economic gains and the innerurge

1. Economic gain- sufficient condition

M Kirzner’s Theory of Adjustment - Price

• Identified socio economic and psychological factors for supply of entrepreneurs

Hayek’s Theory of Profit Market Equilibrium

• Chinese in South Africa, Indians in East Africa etc.

• He viewed entrepreneurship supply as:

Theory of Entrepreneurial Supply

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