BBME/BAAIS/BMPR/BMIS YEAR 1

ENTREPRENEURSHIP FUNDAMENTALS
(ENF123)
COURSE LECTURER: MS FAITH KACHOKA
TITLE: SENIOR LECTURER
COMPILED BY: MS FAITH KACHOKA
SEMESTER: APRIL TO SEPTEMBER 2022
 Unit Four: Growth of
Entrepreneurship
 EMERGENCE OF ENTREPRENEURSHIP
◦ Looking at the emergence of entrepreneurship; we will focus on two theorists: Schumpeter and McClelland
Schumpeter developed the Innovation Theory of Entrepreneurship; and we know that for innovation to happen
there must be creativity and this may be an economic development or an economic activity (combination of factors
of production).
◦ For economic development to happen, there should be an economic activity taking place and the entrepreneur should
be at the center of the economic development.
◦ Schumpeter has tried to establish a correlation between the economic activity and economic development of a
country.
◦ According to him the innovation function of entrepreneurs is responsible for the rapid economic development of any
country.
◦ For someone to become an entrepreneur, he or she needs to be innovative and innovation is responsible for economic
development.
• According to Schumpeter’s Innovation Theory of Entrepreneurship, for someone to qualify as an entrepreneur then he
must:

 Introduce a new product or service which consumers are not familiar with.
 Introduce new materials.
 Introduce new technology for production.
 Carry out a new form of organization

• This view of Schumpeter’s was criticized in the following ways:

 The theory is only emphasizing on innovation and there are other factors that can make someone a successful
entrepreneur apart from being innovative.
 It does not consider others who are using established enterprises as entrepreneurs.
 If you are not innovative, you cease to be an entrepreneur.
 Schumpeter has given undue emphasis on the innovative function of entrepreneurs and has ignored the other
equally important functions.
 The theory neglects the role of small entrepreneurs in economic development. It stresses on establishment of large
enterprises based on new combinations of production.
 The theory fails to give satisfactory answers to questions like why some countries have more entrepreneurship
talent than others.

• In spite of the above criticisms, Schumpeter’s theory is regarded as a milestone in the development of entrepreneurship
theories.
 On the other hand let us look at what David McClelland says about entrepreneurs.
• His theory is known as the Achievement Motivation Theory of Entrepreneurship.
• McClelland looks at the motive; he says high achievement motives make or induce one to become an entrepreneur.
 McClelland’s theory states that:
 If a person has a high achievement motive then he is likely going to become an entrepreneur.
 Individuals with a high level of achievement will be motivated to become entrepreneurs because they have a
tendency of striving for excellence; achieving high levels of success for the sake of personal accomplishments and
not the rewards.
 The motive of high achievement, guides the actions of people and induces them towards entrepreneurship and
they are very likely going to succeed in their venture.
 There is need to develop the need for high achievement in people by making deliberate efforts of making the
person, from childhood have the desire to achieve high.

• This theory too has been criticized as follows:

 It is not possible to teach or train all children to have high achievement desires.
 After training, someone he may still decide to change as he grows older.
 The focus of this theory is only on psychological factors and ignores the other factors of development.
 ECONOMIC AND NON-ECONOMIC FACTORS NECESSARY FOR ENTREPRENEURSHIP DEVELOPMENT
 ECONOMIC FACTORS
 Storage of capital
 Lack of infrastructure facilities e.g. good road networks, ports, communications infrastructure, etc.
 Skilled labor shortage
 Defective tax structures e.g. high tax rates
 Non-availability of raw materials
 Lack of technology

 NON-ECONOMIC FACTORS
 Social factors: the customs and traditions that a country has.
 Personal factors: this may be a lack of creativity and low achievement motives.
 Other factors: these include increasing competition, lack of political will, complex laws.

 OBJECTIVES OF ENTREPRENEURSHIP DEVELOPMENT

 To promote entrepreneurial qualities and traits among youths through training and expert consulting.
 To provide managerial skills, marketing techniques and technical knowledge for existing and prospective entrepreneurs.
 To provide information regarding different facilities and schemes sponsored by the government or institutions promoting
entrepreneurship.
 To motivate and guide individuals to launch new business undertakings.
 To search for and develop entrepreneurial opportunities and business ideas for potential entrepreneurs.
 OBSTACLES TO ENTREPRENEURSHIP GROWTH IN MALAWI
 Social structures
o In Malawi, there is a very big gap between the rich and the poor.
o Those that are poor erroneously believe that there is nothing they can do to change their status or circumstances.
o They believe they cannot reach the top.
o With this mentality, it will be the rich who will be creative and innovative; the poor will only be working for those that have got their own
businesses.
 Age
o In most western countries, businesses are run by older people and most of the renowned business people are older people; whereas in
Malawi there is the belief that entrepreneurs are supposed to be young.
o The youth however, are often in the prime of their lives and will give little or no attention to running a business.
 Attitude towards work and achievement
o In Malawi, people have been conditioned to believe that they have to be trained in order to get a good job, to work in an office; and that
this is the highest possible achievement.
o As such, most Malawians think that their job will give them the greatest reward and they will achieve everything they want; which in fact
is not the case.
o There are greater rewards and achievements to be gained from entrepreneurship compared to being in formal employment.
 Attitude towards risk
o Most Malawians are not risk takers and this is ingrained within our culture.
o Most people do not have the urge to go into a challenging business for fear of failing; i.e. “What will people say?”.
 Attitude towards time
o Most Malawians do not value time.
o It is said that time in Malawi is elastic.
o People spend a lot of time doing nothing rather than working. If people were to devote more time to working you would see that our
outlook on a number of things, including entrepreneurship would change.