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THEORIES OF ENTREPRENEURSHIP

MAX WEBERS THEORY OF SOCIAL CHANGE Max Weber contended that entrepreneurial growth is dependent upon ethical value system of the society concerned. The spirit of rapid industrial growth depends upon rational use of technology, acquisition of money and its rational use of productivity and multiplication of money. Weber analyzed his theoretical formulation by the relationship that he found between protestant ethic and the spirit of capitalism.

He analysed the religion and its impact on entrepreneurial culture.

MAX WEBERS THEORY OF SOCIAL CHANGE Webers theory has been criticized on various grounds that it was based on invalid assumptions such as: 1.There is a single system of Hindu values 2. The Indian Community internalized those values and translated them to day-to-day behaviour. 3. These value remain immune to and insulated against external pressure and change.

HOSELITZ SOCIOLOGICAL THEORY


Sociologists have argued that entrepreneurship is most likely to emerge under a specific social culture. They feel that social sanctions, cultural values and role expectations are responsible for the emergence of entrepreneurship. According to Cochran (1965), the entrepreneur represents societys model personality. His performance depends upon three factors: (i) his own attitude towards his occupation, (ii) the role expectations held by the sanctioning groups, and (iii) the occupational requirements of the job.

HOSELITZ SOCIOLOGICAL THEORY

Hoselitz (1964)formulated his socio-cultural theory on the assumption that certain persons are endowed with creative power in any cultural or social group and they develop different attitudes while practising social conduct. Hoselitz argued that entrepreneurship can develop in a society when its culture permits a variety of choices and where social processes are not rigid and in such a situation which encourages the development of personalities interested in enterprise the suggested that culturally marginal groups promote entrepreneurship.

HOSELITZ SOCIOLOGICAL THEORY

Everett Hagen (1968) considered an entrepreneur to be a product of social change and in many cases, the social change may cause a loss in the status of certain social groups. There are five ways of responding to such a loss of status i.e., retreatism, ritualism, innovation, reformisms and rebellion. Randall Stokes (1974) argued that values channelize economic action.He said that an individual moves into industrial entrepreneurship due to such conditions as personal and social opportunity and the presence of the requisite psychological gains

TRAIT THEORY OF ENTREPRENEURSHIP

According to FA Walker, an entrepreneur is one who is endowed with more than average capacities in the task of organising and co-ordinating the factors of production. A entrepreneur is a pioneer, a leader and a captain of the firm. The trait theory holds that entrepreneurship developed the individuals called entrepreneur possessed certain specific traits or characteristics or competencies which made them capable of generating new ideas and creating a new venture. The major traits responsible for the emergence of entrepreneurs include: creative and innovative skills, propensity to take risk, ability of building on organization perseverance and foreseceability.

ECONOMIC THOERY OF ENTREPRENEURSHIP

G.F. Papanek (1962) and J.R.Haris (1970) hold the view that the economic incentive are the main drive for the entrepreneurial activities. Incentives and gains are regarded as sufficient conditions for the emergence of industrial entrepreneurship. The economic theory holds that when favourable economic conditions are prevailing , entrepreneurship develops at a faster arte and come forward to establish new ventures and bring resources, labour, materials and other assets and put them together to increase their wealth. Economic factors include: (a) market incentives(b)availability of sufficient capital and(c) institutional support.

SCHUMPETERS INNOVATION THEORY

Joseph Schumpeter (1934) has defined entrepreneur as the one who seeks to reform or revolutionize the pattern of production by exploiting an innovation or more generally , an untried technological possibility for producing a new commodity or producing an old one in a new way, opening up a new source of supply of material or a new outlet of products. According to Schumpeter, an entrepreneur is one who innovates, raises money, collects inputs, organises talent, provides leadership and sets the organization. Schumpeter has made a distinction between an inventor and innovator. Inventor discovers new methods and raw materials and an innovator utilizes discoveries in order to make new combinations.

SCHUMPETERS INNOVATION THEORY

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According to Schumpeter, innovation leads to the following changes: Introduction of new goods Introduction of new method of production Opening of a new market Finding a new source of raw materials Recognition of process or enterprise

SCHUMPETERS INNOVATION THEORY Schumpeter proposed that innovation is guided by the following principles: i) innovation must be purpose oriented and systematic ii) It must be conceptual and perceptual iii)It should be simple, easy and subjective iv) A successful innovation flows towards creation of leadership v) It exerts influence on economy and society vi) It is organized on the basis of innovating knowledge and capacity

SCHUMPETERS INNOVATION THEORY

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Schumpeters theory is based on the following assumptions: Existence of sufficient availability of capital Existence of developed banking system to avoid scarcity of capital Existence of a high level developed technology Existence of private initiative and broad based entrepreneurial process.

LIMITATIONS OF SCHUMPETERS THEORY


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A person is an entrepreneur when he innovates but he ceases to be so when he settles down and runs the established business. Schumpeters theory ignores risk-taking and organizing aspects of entrepreneurship. Schumpeters entrepreneur is a large scale businessman who create something new. An entrepreneur cannot have large scale operations from the very beginning.

MCCLELLANDS PSYCHOLOGICAL THEORY

According to this theory, entrepreneurship is most likely to emerge when a society has sufficient supply of individuals possessing particular characteristics. He argued that certain needs are learnt and socially acquired as the individual interacts with the environment.

David Mc Clelland (1961) has identified three types of needs: a. Need for Achievement (n Ach): a drive to excel, advance and grow. b. Need for power (n Pow): a drive to influence others and situations c. Need for Affiliation (n Aff): a drive for friendly and close inter personal relationships

MCCLELLANDS PSYCHOLOGICAL THEORY


NEED FOR ACHIEVEMENT: Mc Clelland found that high achievers differentiate themselves from others by their desire to do things better. High achievers are not gamblers: they dislike succeeding by chance. Achievers seek situations where they can assume personal responsibility for finding solutions to problems, where they can receive rapid feedback on their performance so that they can set moderately challenging goals.

MCCLELLANDS PSYCHOLOGICAL THEORY


NEED FOR POWER: a. The need for power is a drive to have impact to be influential and to control others. b. Individuals high in nPow enjoy being in charge, strive for influence over others, prefer to be placed into competitive and status oriented situations and tend to be more concerned with gaining influence over others and prestige than with effective per

MCCLELLANDS PSYCHOLOGICAL THEORY


NEED FOR AFFILIATION: This need can be viewed as the desire to be liked and accepted by others. People with high n Aff display the following characteristics: 1. a strong desire for approval and reassurance from others. 2. A tendency to conform to the wiser and norms of those whom they value 3. A sincere interest in the feelong of others.

MCCLELLANDS PSYCHOLOGICAL THEORY


NEED FOR AFFILIATION: Individuals with a high need for achievement thrive on jobs and projects that tax their skills and abilities. Such individuals are goal-oriented in their activities, seek a challenge and want task relevant feedback. Individuals with high affiliation needs value interpersonal relationships and exhibit sensitivity towards other peoples feeling. Mc Clelland found that the combination of a moderate to high need for power and a lower need for affiliation enables people to be effective entrepreneurs they can use power to influence and control others behaviour and can make difficult decisions without undue worry of being disliked.

THEORY OF SOCIAL BEHAVIOUR Kunkel developed this model and purported that the overtly expressed activities of individuals and their relations to the previous and present surroundings, social structure and physical conditions. According to Kunkel, individuals perform various activities of which some are accepted by the society while others are not.The accepted ones are rewarded and are reinforced to increase the probability of repeating the behaviour pattern.

THEORY OF SOCIAL BEHAVIOUR


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The supply of entrepreneurship depends upon four structures founded in the society: Limitation Structure: the society limits specific activities and this limitation structure affects all the members of a society. Demand Structure: material rewards are necessary to lay the foundation for future social gains. Behaviour of people can be made entrepreneurial by manipulating certain selected components of the demand structure. Opportunity Structure: it consists of the availability of capital, management and technological skills, information concerning production methods, labour and market. Labour Structure: it is concerned with the supply of competent and willing labour

X-EFFICIENCY THEORY
Many firms face the problem of inefficient utilization of various inputs or resources.Innovative entrepreneurs come forward to check inefficiencies in the utilisation of variuos resources. According to Liebenstien, the most significant feature of entrepreneurship is gap filling. It is the job of the entreprenuer to fill the gap or make up the deficiences which always exist in the knowledge about the production function i.e. utilisation of various resources.