Topics for Unit 1

• Definition
• Theories of
Entrepreneur
ship
• Emergence of
Entrepreneu
rial class
• Characteristi
cs of
Entreprneurs
 Theories of
Entrepreneurship

Presented by:

Prof.B.Manchanda
 What is Entrepreneurship?

• Organizing a business venture and assuming the risk for it.

• “An entrepreneur is a person who is willing and able to

convert a new idea into a successful venture.”

• Entrepreneurship is a process of converting a new idea into

a successful venture.
 Definition of Entrepreneurship

• Entrepreneurship involves not only the process that

leads to the setting up of a business entity but also
the expansion and development of an on going
concern.

• The study of entrepreneurship is concerned with the

entrepreneurial behavior, the dynamics of business
set up and expansion and development.
 DEFINITION OF ENTREPRENEURSHIP
 It is more than a mere creation of business
 Entrepreneurship is a process of innovation
and new venture creation through four major
dimensions – individual, organizational,
environmental and process.
 The Entrepreneurship process is aided by
collaborative networks in government,
education and institutions.
 DEFINITION OF ENTREPRENEUR

• Functional definition of Entrepreneurs

offers the following definition:
“Entrepreneurs are individuals who
actively form or lead their own business
and nurture them for growth and
prosperity”.
Characteristics of an Entrepreneur

• Drive • Vision
• Perseverance • Motivation
• Ambition • Self-confidence
• Leader • Self Satisfaction
• Survivor status • Extrovert
• Competitive • Results orientated
• Interpersonal skills • Committed
• Innovative skills • Risk taker
• Ability to bounce • Sociable
back
 THEORIES & CONCEPTS OF
ENTREPRENEURSHIP
Objectives
At the end of the session, students should be
able to:
• understand the various theories and concepts
on entrepreneurship
• have a deeper understanding of the discipline
of entrepreneurship
 Definition of an Entrepreneur
as per Richard Cantillon

• “ An Entrepreneur is a person who undertakes to do

a job ”…… Richard Cantillon (1755).

• The term Entrepreneur is a French word and was first

coined by Richard Cantillon.
 Theory of Richard Cantillon
• Cantillon's is a risk theory of profit: anyone who
receives an uncertain income can essentially be
regarded as an entrepreneur.
• According to Cantillon, successful entrepreneurs
perform a key role in the economy by relieving the
paralysis engendered by uncertainty, allowing
production and exchange to occur and market
equilibrium to be attained.
• Richard Cantillon stressed the importance of the
entrepreneur as an arbitrageur or speculator, who
conducts all exchanges and bears risk as a result of
buying at certain prices and selling at uncertain
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ones.
 Theory of Richard Cantillon

• Richard Cantillon was the first person who

recognise the role of entrepreneurship.
• He said that farmer is an entrepreneur who
promise to pay landlord for his land without any
assurance of profits he can drive from his
enterprise i.e. land.
• He said that there is always a risk factor of
fluctuation of prices in market for an entrepreneur.

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 Other Theories

• Adam Smith (1776) - An entrepreneur is a person

who acts as agent in transforming demand into
supply.

• Jean Babtiste Say (1803) - An entrepreneur is a

person who shifts resources from an area of low
productivity to high productivity.
 Other Theories

• John Stuart Mill (1848) - An entrepreneur is a

prime mover in the private enterprise.The
entrepreneur is the fourth factor of production
after land ,labor and capital.
• Carl Menger (1871) - The entrepreneur acts
as an economic agent who transforms
resources into products and services.The
entrepreneur transforms and gives added
value.
 THEORY
JOSEPH SCHUMPETER
Joseph Aloysius Schumpeter (1934)

An entrepreneur is an innovator.
The economy moves through leaps and bounds
and the prime mover is the entrepreneur through
the process of creative destruction.
 THEORY
JOSEPH SCHUMPETER
• In his book “The Theory of Economic
Development “he said that art, political,
innovative activities are on one side & repetitive
and mechanical activities are on other side.
• He developed theories of interest, profit, credit &
business cycle. He said that entrepreneur doesn’t
have to be a single person but can be an
organization.
• He stressed more on technological innovations
rather than on organizational innovations

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 THEORY
JOSEPH SCHUMPETER

JOSEPH SCHUMPETER was the person who gave a well-

rounded picture of an entrepreneur. He disclosed the various
aspects of entrepreneurship and produced the competent
history of entrepreneurship in economic theory.
Joseph Schumpeter states that entrepreneur is motivated &
driven by 3 things:-
(a) ‘The dream and the will to found a private kingdom’ that
means the desire for power & independence.
(b) ‘The will to conquer’ that means the will to succeed.
(c) ‘The joy of creating’ that means satisfaction of getting
things done.
He asserts that matter is behaviour not the actor. 17
 THEORY
Alfred Marshall

• Alfred Marshall (1936) - The process of

entrepreneurship or business development is
incremental or evolutionary . It evolves from sole
proprietorship to a public company.

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 THEORY
David McClelland
(May 20, 1917 – March 27, 1998)

• David McClelland - The entrepreneur is a

person with a high need for achievement.
This need for achievement is directly related
to the process of entrepreneurship.
 THEORY
FREDRIK BARTH

FREDRIK BARTH developed this Anthropological theory.

According to Barth, entrepreneurship has two connecting
spheres in the society between which there exists a difference
in values.
These spheres are as follows:-
 Something which is cheap and
 Something which is expensive.
Barth states that entrepreneurial behaviour means to connect
2 different spheres in the society, between there is a huge
discrepancy in the value.

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 THEORY
Bert hoselitz

Sociologists suggests that entrepreneurship can be a social

movement. Economists of this theory believes that cultural
values deeply affect the entrepreneurship and economic
development.
If strong family support is with entrepreneur than this will be
fruitful but if family does not care ,then it can cause adverse
affect.
According to Hoselitz the persons who introduces innovative
ideas reject the traditional ways of doing the things.
Economists believes that special attention given to society can
improve the relations between the enterprise and its
surroundings.
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