Theories of entrepreneurship

Entrepreneurship is an important matter in the society. Entrepreneurs starts a kind of business that can
employ so many people and can contribute in eradicating unemployment of a country. Also, the
employers contributing in increasing owner’s profit. Entrepreneurs also contribute in government’s fund
increasing by paying taxes and other revenues. Entrepreneurs take initiatives to make their business drive
into success. These initiatives are followed towards primary initiatives, managing resources, making
relationships among employers to ensure the business is driving towards its goal. Successful
entrepreneurs are the role model in the society, people follow them to boost their entrepreneurial
capabilities. the scholars explained their entrepreneurial attempts. The interventions of those scholars
have provided a knowledge system that has structured the entrepreneurship over the years. The theories of
entrepreneurship explain why the enterprises does the way how they do. About the successful
entrepreneur characteristics, scholars have given different arguments. The theories of entrepreneurship
according to Thompson are explained as follows

There are five theories of entrepreneurship that explains the entrepreneurship and the behavior of
entrepreneurs. These theories are from different historical period and some are opposed to the previous
theories. The theories have different perspectives to understand entrepreneurship.

I. Economic theory:
Economic theories are the oldest theory of entrepreneurship. Economic theories were
developed in the mid eighteen centuries. In this theory entrepreneurs were viewed as risk
takers who keep an eye on the economic condition and seek for the opportunities.
Economic condition was dynamic back then and was full of opportunities and risks.
Economic theorists stated successful entrepreneurs keep themselves ready to catch the
opportunity in the changes of economic conditions. Critics thinks that economic theory
fails its other importance because it gives too much emphasize on economic conditions.
So, this theory is not that effective.

II. Resource-Based Theory:

This theory argues that a person’s success as an entrepreneur depends on leverage on

resources of different types. The types of resources include information, finance, human
resources. a person who is capable of utilizing these resources can be a successful
entrepreneur.

III. Opportunity-based Theory:

Opportunity based theory refers to that entrepreneurs seek the opportunities that is
presented with all the aspects of the environment that consists of social, economic and
 technological aspects. It’s a more advance theory than economic theory as it focuses on
all the aspects of the environment rather than only focusing on a specific aspect.
Entrepreneur has the aim of opportunity identification presented in the environment. The
success of the entrepreneur relies on how best they can react on the opportunity and
threats of the changes of environment.

IV. Sociological Theories:

Entrepreneurship viewed as a social context according to this theory. the social and
political environment is considered as unstable according to the sociology theorists.
Social network is a crucial resource according to the theory, so successful entrepreneurs
create right network to peruse their goal.

V. Psychological theories:

These theories are about emotional and mental characteristics of entrepreneurs. this
theory reflects that the actions of entrepreneurs can affect the environments. Optimism
and creativity that an entrepreneur possess, influence the success of the entrepreneur.

Traits of an Entrepreneur
Successful entrepreneurs possess certain similar characteristics into themselves the shows the importance
of following those characters for the future entrepreneurs.

These traits are briefed as follows:

Action oriented

Action orientation is one of the most common traits that found in most of the entrepreneurs. Successful
entrepreneurs are used to grab the opportunity whenever it appears without wasting any time or giving
anything any chance. And they very much centered to their goal, and focuses on the goal to achieve it.

Ability to Create Networks

The second most common trait of an entrepreneur is the ability to create network. Successful
entrepreneurs understand the necessity of network so they create a strong network of beneficial
individuals and organization to grab the opportunity and establish their position in the business
environment.

Flexibility

Flexibility is the basic trait of the entrepreneurs. Flexibility refers to the ability to cope with any
condition. Entrepreneurs often has to face difficulties or threats. If they are flexible, they can adjust the
threats and turns the threats into opportunity.
Strong vision

The entrepreneurs have a clear vision in their organization that leads them to achieve their goal with the
vision and mission of the organization.

Management skills

Successful entrepreneurs possess three types of management skill which are the interpersonal skills,
conceptual skills, technical skills

Risk takers

the successful entrepreneurs are risk takers. They used to invest in high risk high returns projects. They
also aware of the future so they plan a careful cost benefit. They take the failure as learning for the future.