COS

STATE UNIVERSITY

Rank 2
A pp l i e4 HE "
PUBLICIJfiIVERSITY RA//KIIiS:› \SFñ’T?0
/› r rin the RANK.’ AMONGPHILIPPINESUCs
Philippines
Rank 6o1-800 in the world Rank 101s’ -200"
Rank 3 among Philippine
SU Cs
I The WORLD UNIVERSITY
RANKINGS for INNOVATION
 SOCSC 12 – The Entrepreneurial Mind

Unit II.Perspectiveson
Entrepreneurship
 Content
A． Historical Perspective on Entrepreneurship
B． The Emergence of Entrepreneurship
C． Theories of Entrepreneurship
D． Entrepreneurship Globally

COLLEGE OFARTS& SCIENCES

 Objectives
At the end of the unit the student must have:
1. traced the historical development of entrepreneurship;
2. differentiated the various perspectives on
entrepreneurship;
3.explained and differentiate various theories
the entrepreneurship on
4. described global
entrepreneurship

COLLEGE OFARTS& SCIENCES

A. Historical PerspectivesonEntrepreneurship
ENTREPRENEURSHIP
• creation of value through fusion of
capital, risk taking, technology and human talent;
multidimensional concept
Distinctive features:
• innovation
• a function of high achievement
• organization building
• group level activities
• managerial skills and leadership
• gap filling activity
• entrepreneurship – an emerging class
Timetable
of theDevelopment
of Entrepreneurship
Theory
B. The Emerąence of
Entrepreneurship

Staąe in Evolution
of Entrepreneurship
ECONOMIST’S VIEW
• Historical Context:
▶ Entrepreneurship - term introduced by Cantillon, popularized by Say
▶ Early terms: Merchant, Adventurer, Employer
▶ James Stuart Mill popularized in England
• Key Points:
▶ Economic conditions favoring entrepreneurship
▶ Economic incentives drive entrepreneurial activities
▶ Advocates: G.F. Papanek and J.R. Harris
• Market Imperfections:
▶ Lack of entrepreneurship due to market imperfections and inefficient
policies
SOCIOLOGIST’S VIEW
• Influencing Factors:
▶ Social system’s impact on entrepreneurship
▶ Custom, values, rigidity, and intellectual curiosity
Key Theorists:
▶ Cochran: Society’s model personality; role expectations and
attitudes
▶ Weber: Religious beliefs and drive for entrepreneurial growth
▶ Hoselitz: Culturally marginal groups promoting
entrepreneurship
▶ Stokes: Socio-cultural values channeling economic action
PSYCHOLOGIST’S VIEW
Historical Context:
▶ focuses on how different psychologists and economists explained the
behaviors and motivations behind entrepreneurial success.
▶ These theories developed over time and tried to pinpoint what drives
people to become entrepreneurs, highlighting different factors such as
personality traits, social influences, and motivations.
Key Theorists:
▶ Joseph Schumpeter: Entrepreneurs are driven by the desire to have
power, control, and make something new or solve problems.
▶ David McClelland: People become entrepreneurs because they have a
strong need to achieve and succeed, often developed through upbringing
and support from their family.
PSYCHOLOGIST’S VIEW
Key Theorists:
▶ Everett Hagen: People might turn to entrepreneurship if they feel
disrespected or lose social status. They start businesses to gain back
respect or improve their standing.
▶ Kunkel: Entrepreneurial behavior is shaped by the social and
economic environment. People respond to the conditions around them, and
entrepreneurship can be encouraged through incentives and support.

Market Imperfections: Entrepreneurs notice in the market

that . These gaps can be caused by changes in society, economics, or
unmet needs.
PSYCHOLOGIST’S VIEW
Influencing Factors:
▶ Social status: A loss of respect
or social standing can push
individuals to entrepreneurial
activities.
▶ Psychological traits: Traits like
a high need for achievement,
strong vision, and resilience
against social pressure can drive
entrepreneurship.
▶ Economic incentives: Changes
in the economy and available
incentives can trigger
entrepreneurial behavior.
According to Psychologists, entrepreneurship is most likely to emerge
when a society has sufficient supply of individuals possessing
particular psychological characteristics. The main characteristics are:

• an institutional capacity to see things in new way

(vision),
• energy of will and mind to overcome fixed habits of
thought,
• an urge to do something,
• to fulfil a dream,
• he capacity to withstand social opposition; and
• the high need for achievement.
 TheoriesofEntrepreneurship
1. Innovation Theory of 7. Thomas Cochran’s Theory of
Schumpeter Cultural Values
2. Need for Achievement Theory 8. Theory of Change in Group Level
of McClelland Pattern
3. Leibenstein’s X-efficiency 9. Economic Theory of
Theory Entrepreneurship
4. Risk Bearing Theory of knight. 10.Exposure Theory of
5. Max Weber’s Theory of Entrepreneurship.
Entrepreneurial Growth 11.Political System Theory for
6. Hagen’s Theory of Entrepreneurial Growth.
Entrepreneurship
1. InnovationTheoryofSchumpeter
Schumpeter's Dynamic Theory of Entrepreneurship focuses on how
entrepreneurs drive economic development through innovation.
• Entrepreneurs as Catalysts: Schumpeter saw entrepreneurs as key players
who by introducing new ideas,
products, and services. This disruption leads to economic growth and
development.
• Innovation is Central: Schumpeter believed that the most important role
of an entrepreneur is innovation— bringing something new to the market.
This could be a new product, a new way of producing things, or entering a
new market.
• Entrepreneurship as a Creative Activity: He defined entrepreneurship as a
creative activity where entrepreneurs take risks, organize resources, and
innovate to introduce new combinations in production.
Five Key Functions of Innovation
1. New products: Introducing products that consumers are not
familiar with or improving existing ones.
2. New production methods: Using new ways to produce goods,
even if they’re not necessarily based on new scientific discoveries.
3. New markets: Entering markets that a particular industry

4. New sources of supply: Finding new sources of raw materials or

resources.
5. New industry organization: Restructuring how an industry works.
Innovation Theory of
Entrepreneurship
 Wilken and Schumpeter's entrepreneurship theories:

Wilken’s Contribution:
Entrepreneurs bring change by:
• Expanding goods and products.
• Improving productivity of resources like labor, finance,
and materials.
• Innovating in production with new technology and
processes, which increases human productivity.
• Innovating in marketing by exploring new markets and
changing market size or composition.
Wilken and Schumpeter's entrepreneurship
theories:
Schumpeter’s Entrepreneur:
• Entrepreneurs are motivated by a desire for power and
success.
•
▶ Find the right answers.
▶ Push past old ways of thinking.
▶ Overcome social resistance.
Schumpeter’s Influence:
• Innovative entrepreneurs have been key in driving modern
capitalism.
• Entrepreneurs are the prime movers in economic
development.
2. Need for Achievement Theory of
McClelland
Key Points of McClelland’s Theory:
1.Two Key Entrepreneurial Traits:
▶ Doing things in a new and better way (innovation and
improvement).
▶ Making decisions under uncertainty (handling risks).
2. Achievement Orientation:
▶ Need for Achievement (N-Ach): McClelland emphasizes that the
is a strong drive for
achievement.
▶ People with high N-Ach are motivated by the desire to succeed and
excel,
▶ Profit is just a measure of success for high-achieving
entrepreneurs, not the main motivation.
Need for Achievement Theory of
McClelland
3. How N-Ach Develops:
• Childhood experiences shape
N-Ach through:
▶ Family practices that encourage
excellence.
▶ Providing emotional support
(material warmth).
▶ Training in self-reliance.
▶ Low father dominance
(allowing independence).

https://www.g oogle.com.ph/url?sa=i&url=https%3A%2F%2 Fshapingmilestones.com%2F&psig =AOvVaw2YfQ

OXKrzLcyw6 svoDghEs&ust=17268044 43034000&source=images&cd=vfe&opi=899 78449&ved=0CBQQjRxq
FwoTCLi1if-Nzog DFQAAAAAdAAAAABAI
According to him a person acquires three types of needs as a result
of one’s life experience. These three needs are:

1. Needfor Achievement. A drive to

excel, advance and grow.
2. Need for Power. A drive to dominate
or influence others and situations.

3. NeedforAffiliation. A drive for friendly

https://crowjack.com/storage/blogs/36/mcclellands-achievemen
and close inter-personal t- motivation-theory.jpg

relationships.
McClelland’s work indicated that there are five
major components to the N-ach trait:
(a)responsibility for problem solving
(b) setting goals
(c) reaching goals through one’s own effort,
(d) the need for and use of feedback, and
(e) a preference for moderate levels of
risk-taking.
The individual with high levels of need achievement is a potential
entrepreneur. The specific characteristics of a high achiever
(entrepreneur) can be summarized as follows:

1. They set moderate realistic and attainable goals for them.

2. They take calculated risks.
3. They prefer situations wherein they can take personal
responsibility for solving problems.
4. They need concrete feedback on how well they are doing.
5. Their need for achievement exist not merely for the sake of
economic rewards or social recognition rather personal
accomplishment is intrinsically more satisfying to them.
3. Leibenstein’s X-Efficiency Theory:

▶ Leibenstein's X-efficiency theory explains how inefficiency within

a firm arises when resources are not used to their full potential.
▶ The difference between actual and maximum output measures
the level of X-efficiency.
Leibensteinidentifiestwokeyrolesforentrepreneurs:
▶ Gap-filler: Entrepreneurs fill gaps in the market when factors of
production are not fully utilized or when market imperfections
exist. They step in to ensure the firm functions efficiently.
▶ Input completer: Entrepreneurs provide necessary inputs that
enhance the efficiency of current production methods or enable
new methods.
 According to him there are two types
of entrepreneurship.
(i) Routine entrepreneurship – deals
with normal business functions like co-
ordinating the business activities.
(ii) Innovative entrepreneurship –
wherein an entrepreneur is innovative in
his approach. It includes the activities
necessary to create an enterprise where
not
all the markets are well-established or
Leibenstein X-efficiency Theory
clearly defined.
4.RiskBearingTheoryofKnight:
Some important features of this theory are as follows:
1.Risk creates Profit: According to the risk-bearing theory, the entrepreneur
earns profits because he undertakes risks.
2.More Risk More Gain: The degree of risk varies in different industries.
Entrepreneurs undertake different degrees of risk according to their ability and
inclination. The risk theory proposes that the more risky the nature of business,
the greater must be the profit earned by it.
3.Profit as Reward and Cost: Profit is the reward of entrepreneur for assuming
risks. Hence, it is also treated as a part of the normal cost of production.
4.Entrepreneur’s Income is Uncertain: He identifies uncertainty with a situation
where the probabilities of alterative outcomes cannot be determined either by
a priori reasoning or by statistical inference.
5. Max Weber’s Theory of Entrepreneurial Growth:
▶ Max Weber’s theory emphasizes that religion plays
a significant role in entrepreneurial development.
▶ He argues that

▶ Weber refers to this mindset as the "spirit of

capitalism", where a society’s beliefs and values
support the growth of capitalism.
▶ According to him, religions like Hinduism,
Buddhism, and Islam don’t promote
entrepreneurship as much. However, this view has
been challenged by other sociologists, who believe
that these religions can also foster entrepreneurial
activity.
 Weber’s theory, which links religion
to entrepreneurship, is based on
some flawed assumptions:

(a) There is a single system of Hindu value,

(b) The Indian community internalized those
values and translated them to day-to-day
behavior, and
(c) These values remained immune to and
insulated against external pressures and
change.

Max Weber’s Theory

 6. Hagen’s Theory of entrepreneurship

• Hagen’s theory of entrepreneurial

behavior focuses on the idea of
status withdrawal, which he sees as a
key factor in the development of
entrepreneurship.
• According to Hagen, when a social
group feels that their values and
purpose in life are not respected by
others in society, this feeling of loss
of respect can lead to changes in
personality and behavior, sparking
entrepreneurship.
Hagen further postulates that withdrawal of status respect would give
to four possible reactions and create four different personality types:

(a) Retreatist: Entrepreneur who continues to work in society but

to his work or status.
(b) Ritualist: One who works as per the norms in the society but with

(c) Reformist: One who is a and tries to bring in new ways of

working and new society.
(d) Innovator: An entrepreneur who is and try to achieve his
goals set by himself.
7. Thomas Cochran’s Theory of Cultural Values
Key Components:
▶ Cultural Values: The beliefs and values of a society
shape entrepreneurship.
▶ Role Expectations: Society’s expectations influence
how entrepreneurs act.
▶ Social Sanctions: Rewards or punishments from
society affect entrepreneurial behavior.
Entrepreneur as a Model Personality:
• Influences on Performance:
▶ Personal attitudes towards the job.
▶ Role expectations from societal groups.
▶ Operational demands of the job.
Impact of Societal Changes:
• Factors Affecting Role Structure:
▶ Changes in population, technology, and institutions create new needs.
Socio-Economic Background of Entrepreneurs:
• Entrepreneurs often come from specific socio-economic classes.
Examples:
• Western Context: Protestant ethic led to the rise of industrialists.
• Global Examples: Samurai in Japan, family patterns in France, Yoruba in Nigeria, Kikuyu
in Kenya, Christians in Lebanon, Halai Memon in Pakistan, and various communities in
India like Parsees, Marwaris, and Gujaratis.
8. Theory of Change in Group Level Pattern:
Young’s Definition of Entrepreneurs Characteristics of Entrepreneurs:
• Group-Level Behavior: Entrepreneurs often develop within small groups.
• Findings from Thematic Appreciation Test (TAT):
▶ Problem-Solving: Entrepreneurs tend to see situations as problems
to be solved.
▶ Pragmatic Effort: They are aware of the practical efforts needed to
solve these problems.
▶ Confidence: They have confidence in their ability to solve problems.
▶ Perspective-Taking: They analyze situations from different
viewpoints before suggesting solutions.
Young’ s Theory of Change:
• Reactive Subgroups: Groups become reactive under certain
conditions:
▶ Lack of Social Networks: When they are denied access to
important networks.
▶ Low Status Recognition: When they experience low
recognition or status.
▶ Institutional Resources: When they have better resources
than other groups at the same social level.
9. Economic Theory of
Entrepreneurship
Key Idea:
• Economic Conditions: Entrepreneurship and
economic growth thrive when economic conditions
support a favorable business environment.
Main Advocates:
• Papanek and Harris:
• Economic Incentives: They argue that economic
incentives are crucial for encouraging
entrepreneurial activities in any country.
There are a lot of economic factors which promote or
demote entrepreneurship in a country. These factors are:

(a) The availability of bank credit

(b) High capital formation with a good flow of savings and
investments
(c) Supply for loanable funds with a lower rate of interest.
(d) Increased demand for consumer goods and services
(e) Availability of productive resources.
(f) Efficient economic policies like fiscal and monetary policies
(g) Communication and transportation facilities
10. Exposure Theory of Entrepreneurship
• exposure to new ideas and opportunities fosters creativity and
leads to the creation of new ventures.
• Tripathi found that were
influenced by new ideas and values, which guided them toward
entrepreneurship.
• Additionally, education played a crucial role by introducing Indian
entrepreneurs to Western ideas, further promoting their
entrepreneurial activities.
• The spread of entrepreneurship also depends on how different
social groups respond to opportunities and political support for
industrialization.
ExposureTheoryof Entrepreneurship
11. Political System Theory of Entrepreneurial Growth:
• Political system can create adequate infrastructure, favourable laws, favourable taxation
system and procedures, provide incentives and subsides, security to entrepreneurs, create
promoting policies and can encourage people towards entrepreneurship.
• Government can also build supporting system for potential entrepreneurs. Thus, the
commitment of political system can contribute significantly towards entrepreneurial
development.

Political System Theory of Entrepreneurial

Growth
 ATTENDANCE/ACTIVITY
• How do theories
different of
entrepreneurshipandexplain
motivations success
of entrepreneurs the in driving
economic growth?
Entrepreneurship
Globally
A variety of socia1, economic, political and cultural factors
are stimulating entrepreneurial activity and
consequently generating economic development. These
stimulants are as follows:

• An increasing focus on capital formation.

• The ability to transform scientific and technical
developments through new institutional
development.
•• The supportive government programs.
Availability of required training and inputs.
• A collaborative relationship between business and
research and their direct attempts to transfer
technology to the market place will be an
opportunity for entrepreneurs who commercialize
their ideas.
• Finally, an endeavor to create an environment
conducive to innovation will provide a
much-needed stimulant to entrepreneura1
activities.
Get in Touch
With Us
Send usamessageor visit us
City of Batac, IlocosNorte,
Philippines
(63) 77-600-0459
[email protected]

Follow usfor updates

facebook.com/MMSUofficial
www.mmsu.edu.ph