FEATURES

THEORIES
OF
C

ENTREPRENEURSHI
P
TOP 10 MOST SUCCESSFUL
ENTREPRENEUR

C
 Features:
Entrepreneurship is a set of activities performed by an
entrepreneur . The main features of entrepreneurship are as
follow :-
 Economic activity:- entrepreneurship is primarily becoming
an economic function because it involves creation and
operation of an enterprise. It involves conscious decision-
making about resource allocations . It also implies seeking
the best opportunities for using resources for their highest
commercial yields.
 Innovative activity:- innovation is the process of doing new
things. Entrepreneurship is innovations where new
products , services, ideas and information is produced, new
efficient production techniques are introduced by the firm,
new market opportunities are indentified and better ways of
meeting existing demands are looked into. Whenever a new
idea occurs, entrepreneurial efforts are essential to convert
the idea into practical application.

 A function of high achievement:- people differ not in their

ability to do but also in their will to do, or motivation.
McClelland identified two features of entrepreneurship (a)
doing things in different and better way. (b) decision-making
under uncertainty. Thus people having high need for
achievement and power are more likely to succeed as
entrepreneurs and this is a very critical factor that leads one
towards entrepreneurship.
Creative and Purposeful activity:- creativity is
the ability to bring something new into existence.”
Entrepreneurship is virtually a creative and a
purposeful activity. The entrepreneur passes
through the five stages during the process of
entrepreneurship viz idea germination,
preparation, incubation, illumination and
verification. Earning profits is never the sole
objective but to introduce something new and
creative is the purpose of entrepreneurship.
• An Organizing function. Acc. to J.B. Say,
an entrepreneur is one who combines the land of
one, the labor of another, and capital of yet another,
and thus pro dukes a product. By selling the product in
the market, he pays interest on capital, rent on land,
wages to laborers and what remains is his profit.
 A function of risk-bearing: Entrepreneur
makes decisions about obtaining and using
resources while consequently assuming the
risk of enterprise. Acc. to Cantillion, risk-
bearing forms an unique constitututive
function of entrepreneurship.
 Here is an example of a farmer. The farmer pays out
contractual income which are “certain” to the
landlords and laborers and sells at prices that are
“uncertain”. It is illustrated as follows :-
Transformatio
investment n Profit or loss

Enter. Buys farm enter. repacks enter. Sells

farm
product at certain and transports product at
Prices. farm products uncertain
to the market in the city .
 Invention and innovation:-
Invention implies creating something new not merely any new
product but new technological processes , new designs, new
technical knowledge, etc. for example ,
Edison’s invention of bulb illustrates the point.
Innovation , is the mean by which the entrepreneur either
creates new wealth – producing resources or endows
existing resources or endows existing resources with
enhanced potential for creating wealth.

Invention is conceiving new ideas while

innovation means to put these ideas into
action.
invention Creating Resulting in new
something knowledge
new
Resulting in new
Transforming an idea
innovation into application
products, services or
processes

Innovation is process requiring analytical ability to work out

the details in order to carry on the project. An
entrepreneur has to obtain , material , select site, arrange
staff, acquire manufacturing abilities and then establish his
organization in order exploit the idea commercially.
Invention can open up huge markets but the secret lies in
spotting the application. Thus we can say that in order to be
inventive, one has to be creative and in order to become an
innovator , one has to be entrepreneurial. However just to
be innovative is not enough unless that innovation is carried
into production to benefit consumers.
Entrepreneurship and enterprise:
Entrepreneurship :
 It is more than mere creation of business
 Entrepreneurship is a process of innovation and
new venture creation through four major
dimensions – individual, organizational,
environmental and process.

 Entrepreneurship is a process involving various

action to be undertaken to set up an enterprise
.
 Acc. to J.B. an entrepreneur is one who
combines the land of one , labor of another and
capital of yet another to set up an enterprise to
produce a product.
Joseph Schumpeter's contribution to
entrepreneurship:-Joseph A Schumpeter (1883-1950) is
the main figure in the literature of entrepreneurship as it was gave a well
rounded picture of the theory of an entrepreneur.

 Acc to Schumpeter ,” entrepreneurship is essentially a

creative activity or it is an innovation function . The process of
innovation may be in the form of
a) introduction of new product
b) use of new methods of production opening of new market
c) opening of a new market
d) the conquest of new source of supplying raw material
e) a new form of organization.
 Theories of
Entrepreneurship
 Economic Theory
 Sociological Theory
 Psychological Theory
 Anthropological Theory
Economic theory
• Entrepreneurship and economic growth take place
when the economic conditions are favorable.
• Economic incentives are the main motivators for
entrepreneurial activities.
• Economic incentives include taxation policy, industrial
policy, sources of finance and raw material,
infrastructure availability, investment and marketing
opportunities, access to information
about market conditions, technology etc.
• Lack of incentives, unattractive economic policies
and unfavorable market conditions tend to reduce
the vigor of entrepreneurship
 a) Schumpeter’s Theory of innovation
 Development implies carrying one of
new combinations of entrepreneurship.
‘Entrepreneur’. is an innovator – who carry
new combination of:
 New goods/ services.
 New method of production.
 New market.
 New source of supply of raw materials.
 New organization.
 b) HBS ( Harvard Business School) considerntrepreneurship
is the outcome of the combination of internal and external
e Forces
.
Internal forces – Individual’s traits and qualities via :
 Intelligence
 Skill
 Knowledge
 Intuition
 Exposure & Experience

External forces – Surrounding’s conditions via :

 Economic
 Political
 Social & Cultural
 Legal frame-worK
  Stable Govt. External security, law & order and

legaprocess are the influencing factors.

Sociological theory

Entrepreneurship is likely to get a
boost in a particular social culture
 Society’s values, religious beliefs,
customs, taboos influence the behavior
of individuals in a society
 The entrepreneur is a role performer
according to the role expectations by the
society
a) Max Weber’s Theory
Salient features of his theory are -
 Spirit of Capitalism is highlighted
 Adventurous spirit facilitate taking risk
 Protestant ethic embodying rebellion is conducive
 Inducement of profit is the criterion

b) E.E. Hagen’s Theory

 Reveals general model of the social- interrelationship among physical

environment, social structure, personality and culture.
 Thinks economic theories are inadequate
 Political & social change – catalyst for entrepreneurs.
 Rejects follower’s syndrome imitating western technology.
Technology is an integral part of socio- cultural complex .
 Historic shift as a factor initiates change
Psychological Theory
Psychological theory of entrepreneurship has fairly high status among
social scientists who study entrepreneurship because it is very difficult to
single out one or several psychological traits as typical for the
entrepreneurial personality. However ,
• Entrepreneurship gets a boost when society has sufficient supply of
individuals with necessary psychological characteristics.

• The psychological characteristics include need for high achievement, a vision

or foresight, ability to face opposition.

•These characteristics are formed during the individual’s upbringing which

stress on standards of excellence, self reliance and low father dominance.
Anthropological Theory

Fredrick Barth made his first attempt to develop an

anthropological theory of entrepreneurship. Acc. To him,
entrepreneurship has essentially to do with connectingtwo
spheres in the society, between which there exists a
difference in value. Barth, one of the leading
anthropologists of the world, states that entrepreneurial
behaviour means to connect
two different spheres in the society , between which
there is a huge discrepancy in value.