UNIT - I

ENTREPRENEUR

A person who sets up a business or businesses, taking on financial risks in the hope of profit.

An entrepreneur is an individual who creates a new business, bearing most of the risks and
enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of
new ideas, goods, services, and business/or procedures.

CHARACTERISTICS OF ENTREPRENEURS

People may lack the personality and skills necessary for successful entrepreneurship. There are
some general characteristics and skills that many successful entrepreneurs have:

Problem-solving: Entrepreneurs often start their businesses after identifying a problem and
then coming up with a way to address it. Entrepreneurs are also able to figure out how to
solve problems that will occur during the development of the business.

Innovation: Entrepreneurs are innovators, and are often engaged continuously in the
process of conceiving new products and services, renewing and improving current offerings,
and developing new business processes.

Risk-taking: Entrepreneurs are not risk-averse. They are willing to risk their time, money and
even their reputation to get the business started and take their products or services to market.
Entrepreneurs are also willing to take risks even after they establish a business, developing
new products and approaches that can grow their businesses.

Contrariness: Entrepreneurs are often people who are eager to question why and how things
are being done
– even if these processes are clearly "industry-standard." This doesn't mean an entrepreneur
should ignore industry best practices, but the entrepreneur is also willing to challenge these
practices if she believes that there is a better way to do them.
Persistence: Entrepreneurs are persistent. They aren't easily discouraged and are willing to
work through discouragement and challenges. Entrepreneurs are willing to attend trade shows,
meet with bankers, call on clients and do what it takes to get the business started, and then to
make it successful.

Leadership: Successful entrepreneurs are strong leaders. Leadership is an essential

entrepreneurial skill, as the entrepreneur will need to be able to cultivate trust and support from
the people who join his business as managers and workers. Many new businesses are cash-
poor and experience significant challenges – but a
good leader can inspire loyalty in workers who may not yet be receiving high wages, as well as
in employees who are facing roadblocks in their efforts to build the company.

FUNCTIONS OF ENTREPRENEUR

The following points highlight the top five functions of an entrepreneur. The functions are:

 Decision Making
 Management Control
 Division of Income
 Risk-Taking and Uncertainty-Bearing
 Innovation.

1. Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is

to determine what to produce, how much to produce, how to produce, where to produce, how to
sell and so forth. Moreover, he is to decide the scale of production and the proportion in which
he combines the different factors he employs. In brief, he is to make vital business decisions
relating to the purchase of productive factors and to the sale of the finished goods or services.

2. Management Control:
 Earlier writers used to consider the manage•ment control one of the chief functions of the
entrepreneur. Management and control of the business are conducted by the entrepreneur
himself. So, the latter must possess a high degree of management ability to select the right
type of persons to work with him. But, the importance of this function has declined, as
business nowadays is managed more and more by paid man•agers.

3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the division
of total income among the different factors of production employed by him. Even if there is a
loss in the business, he is to pay rent, interest, wages and other contractual incomes out of the
realised sale proceeds.

4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern production is

very risky as an entrepreneur is required to produce goods or services in antici•pation of their
future demand.

Broadly, there are two kinds of risk which he has to face. Firstly, there are some risks, such
as risks of fire, loss of goods in transit, theft, etc., which can be insured against. These are
known as measurable and insurable
risks. Secondly, some risks, however, cannot be insured against
because their probability cannot be calculated accurately. These constitute what is called
uncertainty (e.g., competitive risk, technical risk, etc.). The entrepreneur undertakes both these
risks in production.

5. Innovation:

Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is to make

frequent inventions — invention of new products, new techniques and discovering new markets
— to improve his competitive position, and to increase earnings.
 Types of Entrepreneurship

Classic entrepreneurs: The so-called "classic" entrepreneur is someone who observes a gap in
the market or takes note of a business or consumer need, and develops a company that
addresses the deficit or the need. In some cases, the entrepreneur may also be an inventor,
although some classic entrepreneurs will team up with someone who has invented a product. In
many cases, the classic entrepreneur starts the business and continues to own and manage it
for many years.

Serial entrepreneurs: A serial entrepreneur enjoys getting businesses started, and then sells
the business to another person or company. This type of entrepreneur is typically somebody
who is excited about starting something new and taking risks. Once the business is doing
well, however, this entrepreneur wants to move on to another new and different challenge.

Social entrepreneurs: Social entrepreneurs incorporate social conscience with business.

While their businesses may still be for-profit, there is typically a strong mission statement
connecting the business with a social cause. For example, a social entrepreneur may import
fair trade goods for resale while also educating the public about the importance of activism in
the area of sustainably and responsibly sourcing products.

COMPARISON BETWEEN ENTREPRENEUR VS MANAGER

BASIS FOR ENTREPRENEUR MANAGER

COMPARISON
Meaning Entrepreneur refers to a person Manager is an individual
who creates an enterprise, by who takes the responsibility
taking financial risk in order to of controlling and
get profit. administering
the organization.
Focus Business start-up On-going operations
Primary Achievement Power
motivation
Approach to Informal Formal
task
Status Owner Employee
Reward Profit Salary
Decision making Intuitive Calculative
Driving force Creativity and Innovation Preserving status quo
Risk orientation Risk taker Risk averse

COMPARISON BETWEEN ENTREPRENEUR VS INTRAPRENEUR

BASIS ENTREPRENEUR INTRAPRENEUR

FOR
COMPARISO
N
Meaning Entrepreneur refers to a Intrapreneurrefers to an employee
person who set up his own of the organization who is in
business with a new idea or charge of undertaking innovations
concept. in product, service, process etc.
Approach Intuitive Restorative

Resources Uses own resources. Use resources provided by

the company.
Capital Raised by him. Financed by the company.

Enterprise Newly established An existing one

Dependency Independent Dependent

Risk Borne by the Taken by the company.

entrepreneur
himself.
 Works for Creating a leading position Change and renew the
in the market. existing organizational
system and culture.

Entrepreneurship

Definition: Entrepreneurship refers to the process of creating a new enterprise and bearing any
of its risks, with the view of making the profit.

Reasons to Become an Entrepreneur

Entrepreneurial efforts are like biological experiments in nature: Many variations are tried, but
only a small percentage of those go on to thrive. You, however, have an advantage over nature.
As an entrepreneur, you can set up your experiment with forethought. Entrepreneurs work
under the constraints of their environment – the political economy.

Advantages of Entrepreneurship

1. Learning to See Possibilities Everywhere

 When you have to rely on yourself and your imagination in order to generate income,
this awareness goes with the territory.
 An entrepreneur has to develop the skill and train his or her mind to stay open and
receptive to potential ideas and possibilities.
 This doesn’t mean they get involved in everything that comes their way. They must also
learn the skill of discernment – which is also of tremendous value.
 But whatever the case, being open to many possibilities gives entrepreneurs a
tremendous amount of choice.

2. Defining Your Income

 Who decides how much you’re getting paid?

  Chances are, there are several factors at play including your boss, your company’s
financial budget, the board of directors, the economy, etc.
 These factors also determine whether you’ll be staying at your job.
 So even if you’re working really hard and giving 110%, your salary might not reflect it.
 But when you’re an entrepreneur, you create the relationship between your efforts and
your income.
 Plus, the only two factors that determine and define your income are the market forces and
you.
 Even though the market can be a harsh judge of your entrepreneurial skills, once you pay
attention to, and understand the market’s signals, following the current marketing trends,
you’ll be able to make informed decisions to keep your business moving in the right
direction.

3. Flexibility in Your Schedule

 There are morning people and night owls and others somewhere in between.
 As an entrepreneur you can ditch the rigid schedule.
 So if you’re a night owl, you can start work at 4pm. If you love the morning, maybe
works starts at 4am. Take a break when the need arises. You are the master of your
scheduling domain.
  The power of creating your own schedule isn’t just liberating, but it
could be healthier too.
 Entrepreneurs focus on results rather than on hours worked. And one
study found that a results-based work atmosphere leads to greater
mental and physical wellness.

4. Enjoying Your Work

 Even though, as an entrepreneur, you can create your own schedule,

it doesn’t necessarily mean there won’t be long hours.
 But unlike those energy-draining hours spent working overtime for
someone else, it will be long hours spent working toward something
you love. And you will reap the rewards.

5. Learning to be in the Moment

 How much of your day at work is spent counting the hours and
minutes before your lunch break or the end of the day?
 One of the great advantages of entrepreneurship is being able to
abandon the predictable and monotonous schedule of a traditional
office job.
 Instead, you plan and schedule your day, set regular goals and work to
achieve them.
 Of course there will be unexpected situations you’ll have to handle.
But in learning how to handle these situations, you get the added
benefit of being more present and learning how to live in the moment.
 Is It Time For You To Be Your Own Boss?

Drawbacks of Entrepreneurship

Although managing a business offers numerous benefits and bestows many

 opportunities, anyone planning to take a plunge into the world of
entrepreneurship must be aware of its potential drawbacks. Entrepreneurship
is a strict no for people who fancy the security of a fixed monthly paycheck,
paid vacations, and benefit packages, among others. Some of the major
disadvantages of entrepreneurship are as follows –

Risk of Loss — Business failure can ruin an entrepreneur financially, and

yes, the failure rate of small business is relatively high when compared to
established businesses. Entrepreneurs should ask themselves if they are
prepared to cope psychologically with the failures associated with
entrepreneurship.

Uncertainty of Income — Starting and running an enterprise provides no

guarantee of earning money. Many small businesses barely earn enough to
give the owner adequate income. During the initial days of a start-up, a
business often cannot provide an attractive salary for its owner and meet all
its financial obligations. If you are willing to live on your savings, then
entrepreneurship is for you.

Lower Quality of Life in Initial Stage — Long hours and hard work are
needed to launch a business but this can take their toll on the life of the
entrepreneur. Entrepreneurs often find their personal roles diverging and
taking a backseat. Owning a business requires to make a lot of sacrifices. As
a result, personal life suffers.
High Levels of Responsibility — Entrepreneurs often have to take decisions
beyond the domain of their knowledge as many of them have difficulty
finding advisers. When there is no one to ask, the pressure can build quickly.
The realisation of making the right decisions can have an effect on some people.
High Stress Levels — Starting and managing a business on one hand may
seem highly rewarding but on the other, it can be extremely stressful as well.
Apart from significant investments and leaving a secure monthly income,
entrepreneurs constantly thrive under the stress of failure leading to financial
ruin. In addition, the turbulences in the personal lives also add to the stress
levels.

Long Working Hours — Start-ups often demand long working. In many

start-ups, the demands of owning a business make achieving a balance
between work and life difficult for entrepreneurs. It becomes a full-time
commitment where there are always some things that need to be done.

Five factors will be key to entrepreneurial success: creativity, tolerance

for risk, responsiveness to opportunities, leadership and the ability to take
advantage of the rights afforded to you.

Creativity and Accumulation of Ideas

Do not be dissuaded by the challenge to be creative. You need not be the

original wheel creator to improve upon a stone cylinder. By standing on the
shoulders of giants, you can take existing ideas and make small
improvements upon them. Your best ideas may come to you as you are
falling asleep or while you are taking a shower. Recognize when you have a
fresh idea and do not let them get away from you. Write them down! Not
every idea has to be a home run. By accumulating your ideas, you will be
able to dis-till the great ones from the rest and be ready to run with the best.

Risk Tolerance and Taking Advantage of Opportunity

Rewards rarely come without risk. Your ability to take advantage of an

opportunity will depend, in part, on your tolerance for risk. As the founder
of a start-up, investors will expect you to have a vested interest in your
business. If you will not bet on your idea, why should anybody else?

If you cannot afford the risk, financially or emotionally, then you might
 make decisions that are too tepid to be successful. To do well, an
entrepreneur needs the strong sense of self-efficacy to believe the risk will be
surmountable.

Responsiveness to Opportunity

Opportunity can leave quickly. With the internet, the spread of information
and ideas has led to deeper, faster competition to be the first mover. The
ability to respond to the market and new business opportunities can be the
difference between a successful entrepreneur and a failed business model.
To be responsive, an entrepreneur must have the
flexibility of mind and resources necessary to see and take advantage of new
and upcoming possibilities. Learning from your mistakes and those of others to
implement change can keep businesses afloat. Calcifying rigidity, on the other
hand, can turn a start-up into dust.
Leadership and Inspiring Others

It is up to the entrepreneur to marshal assets. Leaders are challenged with

taking possibilities and turning them into inspiring visions for others. You
will inevitably have to sell either your idea or your product to begin your
entrepreneurship. It will be up to the entrepreneur to take the idea and turn it
into actions and products to capitalize on the opportunity. Leadership can
come in many forms, but it is nevertheless essential to entrepreneurship. You
must take the lead for your ideas to come to fruition.

Intellectual Property Rights

Intellectual property laws can provide you with exclusive business rights to
your ideas. If you do not protect your ideas, they may be copied – cheaply.
Once an idea is in the public domain, it may no longer be possible to use that
idea as a competitive advantage. Society values ideas being shared.
 In exchange for sharing ideas, governments provide limited monopolies that
will allow you to capitalize on them for a period, making up in part for the
costs you have incurred in research and development. Intellectual property
professionals can aid you in seeking such rights.

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

Entrepreneurs initiate and sustain the process of economic development in the

following ways:

1. Capital Formation:

Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in
productive utilization of national resources. Rate of capital formation
increases which is essential for rapid economic growth. Thus, an
entrepreneur is the creator of wealth.

2. Improvement in Per Capita Income:

Entrepreneurs locate and exploit opportunities. They convert the latent and
idle resources like land, labour and capital into national income and wealth in
the form of goods and services. They help to increase net national product
and per capita income in the country, which are important yardsticks for
measuring economic growth.

3. Generation of Employment:

Entrepreneurs generate employment both directly and indirectly. Directly,

self-employment as an entrepreneur offers the best way for independent and
honorable life. Indirectly, by setting up large and small scale business units
they offer jobs to millions. Thus, entrepreneurship helps to reduce the
unemployment problem in the country.
4. Balanced Regional Development:

Entrepreneurs in the public and private sectors help to remove regional

disparities in economic development. They set up industries in backward
areas to avail various concessions and subsidies offered by the central and
state governments.

Public sector steel plants and private sector industries by Modis, Tatas, Birlas
and others have put the hitherto unknown places on the international map.

5. Improvement in Living Standards:

Entrepreneurs set up industries which remove scarcity of essential

commodities and introduce new products. Production of goods on mass
scale and manufacture of handicrafts, etc., in the small scale sector help
to improve the standards of life of a common man. These offer goods at
lower costs and increase variety in consumption.

6. Economic Independence:

Entrepreneurship is essential for national self-reliance. Industrialists help to

manufacture indigenous substitutes of hitherto imported products thereby
reducing dependence on foreign countries. Businessmen also export goods
and services on a large scale and thereby earn the scarce foreign exchange
for the country.

Such import substitution and export promotion help to ensure the economic
independence of the country without which political independence has little
meaning.

7. Backward and Forward Linkages:

 An entrepreneur initiates change which has a chain reaction. Setting up of an
enterprise has several backward and forward linkages. For example- the
establishment of a steel plant generates several ancillary units and expands
the demand for iron ore, coal, etc.

These are backward linkages. By increasing the supply of steel, the plant
facilitates the growth of machine building, tube making, utensil
manufacturing and such other units.

Entrepreneurs create an atmosphere of enthusiasm and convey a sense of

purpose. They give an organization its momentum. Entrepreneurial behavior
is critical to the long term vitality of every economy. The practice of
entrepreneurship is as important to established firms as it is to new ones.
Theories of Entrepreneurship

Everything you need to know about the theories of entrepreneurship. It is a

universal fact that entrepreneurship is an important factor in economic
development.

An Entrepreneur is the risk bearer and works under uncertainty. But no

attempts were made by economists for formulating systematic theory of
entrepreneurship.

According to William J. Baumol, the economic theory has failed to provide a

satisfactory analysis of either the role of the entrepreneurship or its supply.

However, different theoretical assumptions of entrepreneurship focus on

three major aspects of entrepreneurship. These three aspects are nature of
opportunities, the nature of entrepreneurs, and the nature of decision
making framework within which an entrepreneur functions. These three
aspects give rise to two logical, consistent theories of entrepreneurship,
namely, discovery theory and creative theory.

Some of the theories of entrepreneurship are:-

1. Innovation Theory 2. Need for Achievement Theory 3. Status Withdrawal
Theory 4. Theory of Social Change 5. Theory of Social Behaviour 6. Theory
of Leadership

7. Theory of Model Personality 8. Theory of Systematic Innovation 9.

Creation Theory 10. Psychological Theory 11. Sociological Theory 12.
Economic Theory 13. Cultural Theory.

Theories of Entrepreneurship: Cultural Theory, Economic Theory,

Sociological Theory and Psychological Theory

Theories of Entrepreneurship – 8 Major Theories with Critical

Evaluation

It is a universal fact that entrepreneurship is an important factor in economic

development. An Entrepreneur is the risk bearer and works under
uncertainty. But no attempts were made by economists for formulating
systematic theory of entrepreneurship. According to William J. Baumol, the
economic theory has failed to provide a satisfactory analysis of either the
role of the entrepreneurship or its supply.

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The traditional notion of an entrepreneur is that he brings together the factor

inputs and organises productive activity. The traditional models treat the
entrepreneurial function like a managerial function.

Similarly, in modern growth theory also, any contribution of

entrepreneurship is typically contained in a residual factor. This residual,
variously termed as ‘technical change’ or ‘coefficient of ignorance’. It
includes among other things, technology, education, institutional
organisation and entrepreneurship.

Different thinkers have evolved different theories of entrepreneurship.

Salient features of these theories are as follows:

Theory # 1. Innovation Theory:

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This theory was propounded by J.A. Schumpeter. According to Schumpeter,
entrepreneur is basically an innovator and innovator is one who introduces
new combinations.

In practice, new combination theory covers five cases which are given
below:

(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 (for example, through trustification) or the breaking
up of a monopoly position.

Critical Evaluation:

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.

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In economic development process, entrepreneurs have been assigned a

crucial role so that tempo of growth is maintained effectively. Development
requires basic changes and entrepreneurs carry out the required changes.
Thus, entrepreneurial development brings economic development.
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.

However, Schumpeter’s theory suffers from following limitations:

(i) It excludes individuals who merely operate an established business

without performing innovative functions.

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(ii) Innovating entrepreneur represents the most vigorous type of enterprise.

However, this type of entrepreneur is rarely available in developing
countries like India.

(iii) It laid too much emphasis on innovative functions. But it ignores the
risk taking and organising aspects of entrepreneurship.

(iv) It assumes an entrepreneur as a large scale business man. He is a person

who creates something new. But in practice, an entrepreneur cannot have
large scale operations from the very beginning,

(v) It fails to provide a suitable answer to question like— why some

countries had more entrepreneurial talent than others?

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According to Schumpeter, entrepreneurs are not a class in themselves like

capitalists and workers. 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.

According to Schumpeter, an entrepreneur exists only if the factors of

production are combined for the first time. Maintenance of a combination is
not an entrepreneurial activity. In this way, combination theory differs from
the theory of rent formulated by Ricardo. Ricardo included the term
“entrepreneurial ability” as an independent factor of production and it is
concerned with profit. Thus, this theory fails to provide suitable solutions to
the problems.

Theory # 2. 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).

The n-achievement is called as “a desire to do well, not so much for the sake
of social recognition or prestige, but for the sake of an inner feeling of
personal accomplishment.”

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. In practice, n-achievement motive is inculcated
through child rearing practices, which stress standards of excellence,
material warmth, self-reliance, training and low father dominance.

McClelland identified two characteristics of entrepreneurship. First doing

things in a new and better way. Secondly, decision making under
uncertainty.

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This motive is called as the tendency to strive for success in situations

involving an evaluation of one’s performance in relation to some standard of
excellence. People having high need for achievement are more likely to
succeed as entrepreneurs.

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. That is why McClelland suggests that in order to
raise the level of achievement motivation, parents should set high standards
for their children.

Critical Evaluation:

Research studies on the psychological roots of entrepreneurship reveal that

high achievement orientation ensures the success of entrepreneurs. But the
empirical tools of concept used by McClelland are found to be highly
suspect and one wonders how many of the individuals who are judged to
have high n-achievement could succeed in utilising it in practice in the
present day developing countries unless strengthened by other reinforcing
circumstances.

At the same time, empirical investigations also need the following:

(i) It is necessary to create a climate (especially in educational institutions at

various levels) to enable the children to grow to become individuals with
high n-achievement.

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(ii) It is possible to improve the performance of existing entrepreneurs

through imparting proper training and education.

Theory # 3. Status Withdrawal Theory:

E. Hagen attempted to formulate a theory of social change. The theory of

social change explains that when members of some social groups feel that
their values and status are not respected by the society, they turn to
innovation to get the respect of the society. According to Hagen,
entrepreneurship is a function of status withdrawal. This theory provides that
a class which lost its previous prestige or a minority group tends to show
aggressive entrepreneurial drive.

Hagen postulates four types of events which can produce status

withdrawal:

(i) Displacement of a traditional elite group from its previous status by

another traditional group by physical force.

(ii) Denigration of values, symbols through some change in the attitude of

superior group.

(iii) Inconsistency of static symbol with a changing distribution of economic

power and.

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(iv) Non-acceptance of expected status on migration to a new society.

Hagen further opined that creative innovation or change is the basic feature
of economic growth. He describes an entrepreneur as a creative problem
shooter interested in things in the practical and technological realm. Such
type of individual feels a sense of increased pleasure when facing a problem
and tolerates disorder without discomfort.

In traditional societies, positions of authority are granted on the basis of

status, rather than individual ability. That is why, Hagen visualised an
innovative personality.

There are four responses which assess the personality-

(i) Retreatist – One who combines to work in the society but remains
indifferent to his work and position.

(ii) Ritualist – One who adopts a kind of defensive behaviour and acts in the
ways accepted and approved in his society but with no hopes of improving
his position.

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(iii) Reformist- One who foments a rebellion and attempts to establish a new
society?

(iv) Innovator- A creative individual who is likely to be an entrepreneur.

Innovation requires creativity and such creative individuals cause economic

growth. In practice creative personalities emerge when the members of some
social groups experience the withdrawal of status respect. Whenever there is
any withdrawal of status respect, it would give rise to innovation—a creative
individual who is likely to be an entrepreneur.

Critical Evaluation:

The theory acts to distinguish between entrepreneurship and intra-

preneurship. There are different factors within the organisation which
motivate the executives and professionals to do some innovative behaviour
leading to new products and services. Actually, they are not governed by
status withdrawal.

The theory only suggests that the people, who had enjoyed social standing at
some stage in their histories fall into a retreatist phase and with an urge to
regain that lost status emerge as entrepreneurial personality. The theory also
presupposes a long term perspective for entrepreneurial growth about three
to five generations for the emergence of entrepreneurship.
But actually it does not happen. In India, first generation entrepreneurs are
quite successful in their entrepreneurial behaviour. J.P. Gour of Jai Prakash
Industries and Sunil Mittal of Bharti group etc. can be cited in this context.

Theory # 4. 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.

Max Weber opined that the spirit of rapid industrial growth depends upon a
rationalised technology, acquisition of money and its rational use for
productivity and multiplication of money. These elements of industrial
growth depend upon a specific value orientation of individuals i.e. the
tendency of acquisition and rational attitude towards action which are
generated by ethical values.

Weber analysed his theoretical formulation by the relationship that he found

between protestant ethic and the spirit of capitalism. He found his thesis true
about other communities also, e.g. Hindu, Jain and Juda. He held that
Protestants progressed fast in bringing capitalism because their ethical value
system provided them with rational economic attitude, while the Jews and
Jains 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 exogenously supplied religious beliefs. It is these beliefs
which produce intensive exertion in occupational persecutes, the systematic
ordering of means to ends and the accumulation of assets.

For people who believe in this belief (Protestant ethic] hard-work in their
walk of life is not only to enable them to have their worldly desires met but
also to have their spiritual needs satisfied. Thus, in the Weberian system, the
motivating force for entrepreneurial activity is provided by Calvinist ethic
irrespective of the cultural background, personality type of the individual
and the social environment to which he lives.

Critical Evaluation:
The theory of social change propounded by Max Weber is based on the
invalid assumptions. So expected results are not valid in all cases.

These assumptions are as follows:

(i) There is a single system of Hindu value.

(ii) The Indian community internalised those values and translated them in to
day to day behaviour and

(iii) These values remained immune to and insulated against external

pressures and change. The studies further show that Hinduism is not averse
to the spirit of capitalism and to adventurous spirit. The Hinduism has
contributed a lot in entrepreneurship development in India which is based on
capitalism.

Theory # 5. Theory of Social Behaviour:

Kunkel presents a behavioural model of entrepreneurship. Supply of

entrepreneurs is a function of social, political and economic structure.
Behavioural model concerned with the overtly expressed activities of
individuals and their relations to the previous and present surroundings,
social structures and physical conditions.

According to Kunkel, Individuals perform various activities of which some

are accepted by the society while others are not. The accepted are rewarded.
The rewards act as reinforcing stimulus increasing the probability of
repeating that behaviour pattern. This pattern of social behaviour is
entrepreneurial behaviour. The supply of entrepreneurship depends upon
four structures found in a society.

That are as follows:

(i) Limitation Structure – The society limits specific activities and this
limitation structure affects all the members (including entrepreneurs) of a
society.

(ii) Demand Structure- Material rewards are necessary to lay the foundation
for future social gains. Moreover, behaviour of people can be made
entrepreneurial by manipulating certain selected components of the demand
structure.
(iii) Opportunity Structure – It consists of the availability of capital,
management and technological skills, information concerning production
methods, labour and markets.

(iv) Labour Structure – It is concerned with the supply of competent and

willing labour. The supply of labour is governed by several factors such as
available alternative means of livelihood, traditionalism and expectations of
life.

Critical Evaluation:

The theory assumes the ideal structures for the supply of entrepreneurs. But,
generally, there is discrepancy between objectives, structures and the actual
incidence of entrepreneurs. It is due to the fact that there are inadequate or
incorrect perceptions attached with these perceptions. In practice,
entrepreneurship is also governed by the specific combinations of
circumstances which are generally not available in the environment.

Theory # 6. Theory of Leadership:

According to Hoselitz, entrepreneurship is a function of managerial skills

and leadership. Business also requires finance but that is of secondary
importance. He further explains that a person who is to become an industrial
entrepreneur must have more than the drive to earn profits and amass wealth.

In this process, he has to show his ability to lead and manage. In business,
there are generally three types of leadership—merchant money lenders,
managers and entrepreneurs. In practice, money lenders are market oriented
and managers are authority oriented. But entrepreneurs have in addition to
these a production orientation.

The merchant money lenders deal in goods/services which is generally

acceptable to everyone. However, an entrepreneur creates his own
commodity and its acceptability is uncertain. Therefore, the entrepreneur
assumes more risk as compared to a trader or a money lender.

In this context, it is important to note that making profit is not enough to

succeed in entrepreneurship. Hoselitz opined that entrepreneurship can
develop in a society where its culture permits a variety of choices and where
social processes are not rigid. The social conditions should ensure the
development of enterprise-oriented personalities.
Hoselitz emphasised the role of culturally marginal groups like Jews and
Greeks in Medieval Europe and the Lebanese in West Africa, the Chinese in
South Asia, the Indians in West Africa in promoting economic development.

Making use of the work of Stonequist and Park, Hoselitz formulated the
hypothesis that marginal men, because of their ambiguous position from a
cultural or social stand point, are peculiarly suited to make creative
adjustments in situations of change and in the course of this adjustment
process too, they are able to develop genuine innovations in social
behaviour.

Critical Evaluation:

It is quite true that marginal men or groups enjoying an ambiguous culture

and social position having no bondage of tradition to inhibit them from
entrepreneurship development. But there are certain economic and political
factors also which encourage the people to initiate entrepreneurial
behaviour.

For example, Government of India and State Governments are trying to

encourage first generation entrepreneurs by offering them various types of
incentives and subsidies. Potential entrepreneurs are also opting for
enterprise development without cringe for social or cultural restrictions.

Theory # 7. Theory of Model Personality:

The theory of Cocharn is a sociological theory of entrepreneurial supply.

Cocharn emphasises cultural values, role expectations and social sanctions
as the key elements that determine the supply of entrepreneurs. According to
him, an entrepreneur is neither a super normal individual nor a deviant
person but represents a society’s model personality.

His performance is influenced by three factors:

(i) His own attitudes towards his occupation.

(ii) The role expectations held by sanctioning groups and

(iii) The operational requirements of the job. In this context, society’s values
are the most important determinant of the attitudes and role expectations.

Critical Evaluation:
The theory deals with only social factors. Profit is the most important factor
for encouraging entrepreneur to assume risky behaviour. Even need for
achievement starts from profit making process. It is implied in need for
achievement process. Besides, entrepreneur is also expected to assume
managerial functions. But theory fails to incorporate all these requirements.

Theory # 8. Theory of Systematic Innovation:

Prof. Drucker has developed the theory of systematic innovation. According

to him “Systematic innovation consists in the purposeful and organised
search for changes and in the systematic analysis of the opportunities such
changes might offer for economic or social innovation.” Specifically,
systematic innovation means seven sources for innovative opportunity.

The first four sources lie within the enterprise, whether business or public
service institution, or within an industry or service sector. They are therefore
visible primarily to people within that industry or service sector. They are
basically symptoms. But they are highly reliable indicators of changes that
have already happened or can be made to happen with little effort.

These four source areas are:

(i) The unexpected—the unexpected success, the unexpected failure, the

unexpected outside event;

(ii) The incongruity—between reality as it actually is and reality as it is

assumed to be or as it ought to be;

(iii) Innovation based on process need;

(iv) Changes in industry structure or market structure that catch every one
unawares.

The second set of sources for innovative opportunity, a set of three involves
changes outside the enterprise of industry-

(i) Demographics (Population changes);

(ii) Changes in perception, mood and meaning;

(iii) New knowledge, both scientific and non-scientific.

Prof. Drucker, further remarked that the lines between these seven sources
areas of innovative opportunities are blurred, and there is considerable
overlap between them. They can be likened to seven windows each on a
different side of the same building. Each window shows some features that
can also be seen from the window on either side of it. But the view from the
center of each is distinct and different.

Critical Evaluation:

The theory of systematic innovation is quite comprehensive one. The

entrepreneur is required to identify different sources of change. Thereafter,
he is expected to coordinate these changes with the opportunities available in
the environment. But the most important problem attached with this theory is
the question of reliability and predictability of seven sources.

For example, new scientific knowledge is not the most reliable or most
predictable source of successful innovations. However theory tries to
provide a comprehensive framework to the entrepreneurship.

Thus, on the basis of above theories, we can say that entrepreneurship is a

multidisciplinary area. Actually, entrepreneurship is governed by human
factor living in an ever-changing society pursuing simultaneously economic,
social and psychological objectives. So unless a theory of entrepreneurship
is woven into sociological, cultural, psychological, political and managerial
fibre, it cannot give a sense of economic web.

Theories of Entrepreneurship – 2 Major Theories: Discovery Theory

and Creation Theory (With Assumptions)

In spite of several attempts by various scholars, there is no generally

accepted theory of entrepreneurship. There are different theories of
entrepreneurship, based on the assumptions of various management experts.
In the words of Gartner, “We in the field of entrepreneurship are unaware of
the assumptions that we make, in our theoretical perspectives.”

However, different theoretical assumptions of entrepreneurship focus on

three major aspects of entrepreneurship. These three aspects are nature of
opportunities, the nature of entrepreneurs, and the nature of decision making
framework within which an entrepreneur functions. These three aspects give
rise to two logical, consistent theories of entrepreneurship, namely,
discovery theory and creative theory.

The two theories of entrepreneurship are as follows:

1. Discovery Theory:

It includes Individual/Opportunity (I/O) nexus view, which lays emphasis on

the identification, existence, and exploitation of opportunities and their
influence of individuals. The individuals and the opportunities have
influence on each other. For example, an opportunity comes into existence
only when an individual identifies it, simultaneously an individual takes up
the entrepreneurial activity because of the existing opportunity.

This theory approaches three assumptions in entrepreneurship, which

are as follows:

a. Opportunities have an objective component and their existence does not

depend on whether the individual identifies these opportunities or not.

b. Every individual is different from others. Therefore, different individual

has different ability of recognizing opportunities. In addition, according to
the discovery theory, individuals are always alert to the existing
opportunities and this alertness is not a deliberate search, but the constant
scanning of environment by individuals.

c. Risk bearing is an essential part of the entrepreneurial process. The first

and second assumptions of the discovery theory also support the risk bearing
condition of entrepreneurship. As per these two assumptions, individuals can
only discover and avail opportunities, but cannot create opportunities. They
apply a unique combination of resources, means they do things differently to
bring innovation.

As there is no certainty about the success of discovered opportunity,

entrepreneurs bears risks by availing opportunity on the estimated
probability of its success. Thus, the discovery theory states that
opportunities are objectives, individuals are unique, and entrepreneurs are
risk bearers.

2. Creation Theory:

Creation theory focuses on entrepreneurs and the creation of enterprises.

Similar to the individual/opportunity nexus, the creation theory also
approaches three assumptions in entrepreneurship.

The three assumptions are as follows:

a. Opportunities are subjective in nature. The creation theory also

emphasizes that opportunities are created through a series of decisions to
exploit a potential opportunity. This theory asserts that opportunities do not
have an existence without the actions of entrepreneurs. The creation theory
is opposite to I/O nexus.

The I/O model asserts that opportunities are discovered by scanning the
business environment and analyzing the market and industry structure. On
the other hand, the creation theory supports the view that opportunities are
created by hypothesis testing and learning.

For example, consumer electronics organizations, such as Samsung, creates

opportunities by developing new products, trying out those products in the
market, finding out the products that are reasonably successful, and filtering
the successful products and improving their marketability.

b. Opportunities are not recognized by individuals, but created by them. The

creation theory suggests that entrepreneurship does not require differences in
individuals, but differences in their decision making under uncertainty.
According to the creation theory, an entrepreneur is someone, who organizes
resources after evaluating the value of probable outcomes.

c. Individuals bear uncertainty not risk. The creation theory suggests that
entrepreneurs create opportunities and act on them after estimating the
probability of their success. Thus, bear uncertainty not risk.

Thus, the creative theory suggests that opportunities are subjective,

individuals are ordinary, and entrepreneurs are uncertainty-bearers.

Theories of Entrepreneurship – Top 3 Theories According to Eminent

Authors

The entrepreneurial behaviour is likely to emerge when a society has

sufficient number of people who possess certain sociological, psychological
and economical features. Entrepreneurial behaviour is an innovation action
taking behaviour that involves various risks and attracts good returns.

The theories of entrepreneurship development are divided into three

theories.

The brief description of each theory are as follows:

1. Psychological Theory – Entrepreneurship is a psychological process and

concept. According to this concept, psychological factors are the primary
source of entrepreneurship development. When there are sufficient number
of persons having the same psychological characteristics in the society, then
there are bright chances of development of entrepreneurship.

2. Sociological Theory – Entrepreneurship is a sociological concept and

process. According to this concept, the sociological factors are the secondary
source of entrepreneurship development. As such, the social factors like
social attitudes, values and institutions significantly influences the
entrepreneurial supply in a society.

3. Economic Theory – According to this theory, an entrepreneur executes all

activities due to economic incentives. The main aim of this theory is profit
motive.

Theory # 1. Psychological Theories:

The entrepreneurship is termed as psychological concept and process.

According to this theory, psychological factors are the primary source of
entrepreneurship development. Few authors like Schumpeter, McClelland,
Hagen and John Kunkell have expressed their opinion about psychological
factors affecting entrepreneurship.

According to this theory, an entrepreneurship is important to emerge when

the society has sufficient supply of individuals possessing particular
psychological elements.

The main psychological theories are as follows:

(i) Joseph A. Schumpeter Theory

(ii) David C. McClelland Theory

(iii) Everret E. Hagen’s Theory

(iv) John Kunkell Theory.

The brief description of each theory are as follows:

(i) Joseph Alois Schumpeter Theory:

According to Joseph A. Schumpeter, the effective function of an entre-

preneur is to start innovation in venture. This theory is also called innovation
theory or dynamic theory. According to this theory, the entrepreneurs
emerges because of individuals having certain psychological elements i.e.,
will power, self-intuitions, tolerance capacity. The entrepreneur is a person
who has creative nature.

He regarded the entrepreneurship as a catalyst who checks the static

conditions of the economy, there by initiates and thrusts a process of
economic development i.e., innovation. He carries economy to new height of
development.

This innovation includes:

1. Introduction of new goods,

2. Introduction of new methods of production,

3. Opening of a new market,

4. Discovering a new source of raw materials,

5. Carrying out a new source of an organisation.

Although, this theory also included other characteristics i.e., risk taking,
superintendence and coordination, he emphasised that these attributes
without the ability to innovate will not make an individual as an
entrepreneur.

According to him, the following characteristics that appear in the

behaviour of an entrepreneur are as follows:

1. An institutional capacity to see the things in a way which afterwards

proves to be true.

2. Energy of will and mind to overcome static habits, desires and emotions.

3. The capacity to withstand social opposition.

According to him, an entrepreneur is an innovator who desires to earn profit

through innovation. An entrepreneur is neither technical man nor a capitalist
but simply an innovator. He introduces something new in the economy. He
is motivated by establishing his psychological power. An entrepreneurship is
formed for establishing his industrial empire. He has burning desires for
creative activities.

He makes a distinction between innovator and inventor. An inventor

discovers new methods and new material whereas an innovator is one who
utilises or applies inventions and discovers to produce better quality goods
that give greater satisfaction to customer and high profit to entrepreneurs. In
this way, an entrepreneur is an innovator.

Schumpeter made it clear that an entrepreneur doesn’t have a single person

but equal to an organisation. “What matter is the behaviour not the actor?”
He emphasised more on technological innovations rather than on orga-
nisational innovations. “Entrepreneurs are certainly not economic men in the
theoretical sense.”

Critical Evaluation of J. A. Schumpeter Theory:

In this 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 discovers in order to make new combination.

With the help of new combination, he produces newer and better goods
which yields satisfaction as well as profits. Schumpeter’s concept of
entrepreneurship is quite broad based. It includes not only the independent
businessmen but also executives and managers who actually undertake
innovative functions.

(ii) David C. McClelland’s Theory:

David C. McClelland has given a particular concept of entrepreneurship.

According to him, needs for high achievement is an essential feature of
entrepreneurial behaviour. According to McClelland, “Burning desire of
need for achievement attracts an entrepreneur for activities.”

The primary basis of the development of an entrepreneurship is achievement

orientation. The capacity of becoming an entrepreneur develops due to
desire of reaching heights of excellence and specific performance.

For achieving heights of excellence and specific performances, an entre-

preneur needs rational thinking, new combinations, deep thinking, power
etc. The achievement motive is uncalculated through child rearing practices,
which stress standards of excellences, material warmth, self-reliance training
a low, further dominance. Individuals with high achievement motive tend to
take keen interest in situation of high risk desire for responsibility and a
desire for a Concrete measure of task performance.

His views can be expressed by means of the following points:

a. Ideological Values,

b. Family Socialisation,

c. Need for Achievement,

d. Entrepreneurial Behaviour.

The following elements which are focused by McClelland are as follows:

a. Achievement Orientation,

b. Height of Excellence,

c. Imagination Power,

d. New Combination.

According to McClelland, needs for high achievement drives individual

towards entrepreneurial activities. High achievement need can be developed
through child rearing and schooling practices. People with high achievement
need are not motivated by monetary rewards only, such people regard profit
as a measure of success whereas people with low achievement needs are
motivated by monetary rewards.

People with a high need for achievement derive satisfaction from achieving
goals. High achievers want immediate feedback on their power
performances. He has been able to establish the desirability of high need for
achievement for entrepreneurial success in the economic development of
country.

A drive to influence others and situations. It refers to one’s desire to

influence and dominate other through use of authority. Goal’s achievement
is less important than the means by which goals are achieved. McClelland
and his associates have found that people with high power needs have a
great concern for exercising influence and control.

McClelland theory is not free from criticism:

1. There is strong evidence to indicate from politics and religion that adult
behaviour can be moulded or drastically altered in a relatively short time.

2. The contention that needs are permanently acquired.

Inspite of the above discussion, this theory highlights the importance of
matching the individual and the job. People with high achievement needs
success on work i.e., challenging, satisfying, stimulating and complexing.
People with low achievement needs stability security and predictability.

Critical Evaluation of David McClelland’s Theory:

The psychological roots of entrepreneurship reveal that high achievement

orientation ensures the success of entrepreneurs. But the empirical tools of
concept used by McClelland are found to be highly suspect.

Empirical investigation also need the following:

(1) It is necessary to create a climate to enable the children to grow and

become individuals with high achievement.

(2) It is possible to improve the performance of existing entrepreneur

through imparting proper training and education.

(iii) Everett E. Hagen’s Theory:

Everett E. Hagen has also given a particular concept about an entre-

preneurship. He has developed the theory of withdrawal of status. Hagen
says, “Entrepreneurship is a function of status withdrawal.”

“Creativeness of disadvantaged minority group is the main source of

entrepreneurship.” —Everett E. Hagen

Hagen considers “withdrawal of status respect as the trigger mechanism of

change in personality formation” as entrepreneurship status withdrawal is
the act of seeing on the part of some social group. The origin of this concept
of psychological theory of entrepreneurship is based on Samurai community
of Japan.

According to Hagen’s concept status withdrawal as fall of status of social

group is the primary cause of personality development. Hagen identifies the
following four types of events that can produce status withdrawal and
prestige fall.

(1) Displacement of valued symbols.

(2) Denigrations of status symbols with a changing distribution of economic

power.
(3) Inconsistency of status symbols with a changing distribution of economic
power.

(4) No acceptance of expected status on migration to a new society.

Hagen opined that creative innovation or change is the basic feature of

economic growth. He describes an entrepreneur as a creative problem
shooter interested in things in the practical and technological realm. Such
type of individual feels a sense of increased pleasure when facing a problem
and tolerates disorder without discomfort. In traditional societies, position of
authority are granted on the basis of status, rather than individual ability.
That is why he visualised an innovative personality.

There are 4 responses:

(1) One who combines to work in the society but remains indifferent to work
and position is called Retreatist.

(2) One who adopts a kind of defensive behaviour and acts in the ways
accepted and approved in his society but with hopes on of improving his
position is called Ritualist.

(3) One who forms a rebellion and attempts to establish a new society is
called Reformist.

(4) A creative individual who is likely to be an entrepreneur is called

Innovator.

Innovation requires creative and such creative individuals cause economic

growth. Whenever there is a withdrawal of status respect, it would give rise
to birth of innovation of a creative individual who is likely to be an
entrepreneur.

Critical Evaluation of E. Hagen’s Theory:

This theory acts as distinction between entrepreneurship and

intrapreneurship. There are different factors within the organisation which
motivate the executives and professionals to do some innovative behaviour
leading to new product and services.

Actually, they are not governed by status withdrawal. The theory only
suggests that the people who had enjoyed social standing at some stage in
their histories fall into a retreatist phase with an urge to regain the lost status
and emerge as an entrepreneurship personality.
(iv) John H. Kunkel’s Theory:

John H. Kunkel has also given a particular concept about entrepreneurship.

He has presented a theory of entrepreneurial behaviour in connection to the
development of entrepreneurship. Kunkel’s theory is concerned with the
expressed activities of individuals and their relations to the previous and
present surroundings, social structures, physical conditions and behavioural
patterns determined by reinforcing and opposing present in the context.

Hence, entrepreneurial behaviour is a function of surrounding and social

structures, both past and present and can be readily influenced by the
manipulative economic and social incentives.

Kunkel, “The supply and development of an entrepreneur depends upon the

existence and extensiveness of four structure i.e., limitation structure,
demand structure, opportunity structure, and labour structure.”

He has given stress on the following four types of structure for the deve-
lopment of entrepreneurship:

1. Demand structure,

2. Opportunity structure,

3. Labour structure,

4. Limitation structure.

The description of each point is given as follows:

1. Demand Structure- The demand structure is of economic nature. This

structure is changing day by day according to economic progress and
government policies. The behaviour of individual can be made enterprising
by affecting the main elements of demand structure.

2. Opportunity structure- The opportunity structure is formed by

combination of supply of capital, managerial and technical skill production
methods, labour and market, training opportunity establishment of an
enterprise and conducting different activities.

3. Labour structure- The labour structure is directed by several factors such

as source of livelihood, traditional outlook and life ambitions. The quality of
labour influences the emergence and growth of entrepreneurship. Rather
than capital intensive, labour intensive will serve our interest in a better
manner. The problem of labour immobility can be solved by providing
infrastructural facilities including efficient transportation wherever an
entrepreneurship is promoted.

4. Limitation structure- We can say that the limitation structure is social and
cultural. This structure affect the development of an entrepreneur.

Critical Evaluation of Kunkel Theory:

The theory assumes the ideal structures for the supply of entrepreneur. But
generally there is discrepancy between objectives, structures and the actual
incidence of entrepreneurs. It is due to the fact that there are inadequate or
incorrect perception. In practice, entrepreneurship is also governed by the
specific combination of circumstances which are generally not available in
the environment.

At last but not the least, we conclude that all the authors i.e., J. A.
Schumpeter, David C. McClelland, Everett E. Hagen and John H. Kunkel
have given their own opinion on concept of psychological theory of
entrepreneurship. This theory presents the certain psychological motives that
are responsible for the evolution of entrepreneurship.

Schumpeter’s theory is one of the most important concepts of entre-

preneurship which is richer and relevant. He has laid emphasis on
innovativeness or creativity of an individual which makes him an
entrepreneur.

McClelland theory has numerous practical implications. The person with

high need achievement needs great concern for exercising influence and
control.

Hagen’s theory laid more stress on technological changes which is the result
as individual’s creativity. His concept depended upon withdrawal of status.

John H. Kunkel theory laid more stress on types of structure i.e., demand,
opportunity, labour and limitation. All the structure affects development of
an entrepreneur.

The main point which is focussed on all the theories is on the individual and
his personality inference by environment factors in general and internal
values in particulars.

Theory # 2. Sociological Theory:

The supporters of sociological theory says that the entrepreneurial activities
is affected from social status hierarchy and values. Individuals’ position,
tradition, cultural values, mobility and social status etc. are thoroughly
effected to entrepreneurship development. The sociological theories depend
on this concept.

The main sociological theories are as follows:

i. Frank W. Young Theory

ii. B.F. Hoselitz Theory

iii. Max Weber Theory

iv. Cochran Theory

v. Stocke’s Theory.

The description of each theory are as follows:

i. Frank W. Young Model/Theory:

Frank W. Young is not the supporter of role of individual in entre-

preneurship development. They think that only group entrepreneurs have the
capacity of extension of entrepreneurial activities due to the character of
capacity to react. He believes on the concept of changeable society.

A group comes in reactive status when the following circumstances happen

at one attempt.

a. When group experiences minority situation in society.

b. When group do not make approach upto effective social machinery.

c. When group is having sound and more institutional resources rather than
other groups.

Overall, when a group sees their lower positional conditions & experience,
they grow an entrepreneurial tendency due to reactive capacity. According to
this theory, set of supporting instructions are the primary determinant factors
of entrepreneurship development.

ii. B. F. Hoselitz Theory:

According to Hoselitz, “The development of industrial entrepreneur is based
on only which type of society are there.”

a. Social process is not static.

b. Sufficient employment pattern is available.

c. Encourage to entrepreneurs for personality development.

Hoeslitz says, “Culturally marginal groups plays an important role in

encouraging the economic development of any nation.”

He think that the marginal persons are more able in making creative
adjustment in changed situatio