Entrepreneurship is one of the four mainstream economic factors–

land, labour, capital and entrepreneurship. During 14th century,

references speak about tax contractors- individuals who paid a fixed
sum of money to a government for the license to collect taxes in their
region. Known as tax contractors they used to take the risk of
collecting taxes. If they collected more than the sum paid for their
license, they made profits and kept the excess. The concept of
entrepreneurship was existing in 17th century and was a common topic
in economic essays for much of the 18th and 19th centuries.
• Entrepreneurship refers to a process of actions an
entrepreneur undertake to establish his business. It is a
creation and innovative response to the environment and
an ability to recognize, initiate and exploit an economic
opportunity .
• In today’ s world of modernization and development the
term entrepreneurship is a well known term.
Entrepreneurship is the ability to foresee or ascertain the
various opportunities related with investment and then to
evaluate these various opportunities and forming
enterprise, the purpose of which is to give the maximum
contribution in the national’s growth. When we combine
these activities performed by entrepreneurs the resultant
is known as entrepreneurship.
1. Innovation is an important function of entrepreneurship. Innovation
means doing something new or doing old things in new or different way.
It is the introduction of new methods and ways of doing the work. an
entrepreneur should be innovative.
According to DRUCKER, INNOVATION IS THE MEANS BY
WHICH ENTREPRENEURES CREATES NEW WEALTH
PRODUCING RESOURCES OR ENDOWS EXISTING
RESOURCES WITH NEW PRODUCTS, SERVICES, IDEAS, AND
INFORMATION”
2. Risk bearing.
Risk bearing is also an important function of entrepreneurship. Prof knight
in his theory ‘ RISK UNCERTAINTY AND PROFITS’ DEFINES there
are two types of risk;
• Foreseeable risk – is the risk which can be insured and capable of being
calculated.
• Unforeseeable risk.- is the risk which can’t be insured and it is tough to
calculate it.
3. Organizing function
entrepreneurship can also be defined as an organizing function.
Organization means organizing all the factors of production and
directing them towards the attainment of the goal of organization.
4. Management skills.
Entrepreneur must posses managerial skills like motivation and
leadership. Motivation is inner urge that emerges the behaviour
towards achievement of goals. It can be positive and negative,
financial and non-financial and leadership is to direct the people
to do what you want your men to do.
5. Economic activity.
Entrepreneurship is an economic activity as it is concerned with
earning more and more profits.
6. Goal oriented.
Entrepreneurship is an goal oriented activity. It is undertaken to
achieve the predetermined goals of the entrepreneur.
• Decision Making: Entrepreneur takes decisions regarding activities
of enterprise. He decides about the type of business to be done and the
ways of doing it. An entrepreneur has to make decisions to take
actions with unknown and unpredictable results.
• Function of High Achievement: People for high need for
achievement are more likely to succeed as entrepreneur.
• Resource Mobilisation: Gap filling is the most significant feature of
entrepreneurship. The job of entrepreneur is to fill the gap or make up
the deficiencies which always exist in the production function. He has
to perform the functions of input completing and gap filling.
OBJECTIVES OF ENTREPRENEURSHIP
• The role of Entrepreneurship in development of an economy in
discussed from the following points;
1. Entrepreneurship and balanced regional development.
Imbalanced regional development means a few sectors of an
economy are developed and others remained undeveloped. This is
a major problem faced by an under developing country. These
sectors remain backward because entrepreneurs are not willing to
invest in these sectors due to lack of availability of infrastructural
facilities. It is the government who can encourage entrepreneurs
to invest in these sectors by giving then subsidies and
concessions. So the balanced regional development can be
ensured with the help of entrepreneurs.
2 Increase in per capita income.
due to over population in developing countries per capita income
is low as compared to the other developed nations. Per capita
income can be increased either by reducing population or by
increasing national income. Entrepreneurs play an important role
in the growth of national income by utilizing the resources land,
labour and capital. As they are innovators they can device new
methods and techniques with minimum of cost and maximum
profits which leads to increase in national income , increase in per
capita income.
4.Generation of employment.
Entrepreneurs offer solution of the grave unemployment problem confronting the
economy. Entrepreneurs firstly generate self employment and secondly be employing
others in their enterprise , solve unemployment problem of others. Small scale units
need less investment and absorb a large number of unemployed persons.
5.Raise standards of living.
Entrepreneurship help in rising the standard of living of people of the country. As
entrepreneurs invest in small scale and large scale industries which leads to industrial
growth in the country and industrial growth in turn leads to availability of abundance of
goods for the consumers. As supply of goods increase it will lower the price of
commodities become accessible to every walk of people in order developed countries
and improves their standard of living.
6. Self Sufficiency.
Self sufficiency means a stage where a country is not dependent on world economy for
its needs. Tools of self sufficiency are export promotion and import substitution. With
the help of developed entrepreneurial structure a nation can increase its production.
When the production of goods in the country is increased, the surplus which will left
over after satisfying the domestic consumption can be exported, and with this we can
earn foreign currency.
THEORIES OF ENTREPRENEURSHIP
Four Categories of
Entrepreneurship:

Entrepreneurial history is felt to be

interdisciplinary in approach and thus, it
is difficult to label entrepreneurship as
purely a theory of economics or
sociology or psychology or a
anthropology. The concept of
entrepreneurship is as old as civilization
while theories of entrepreneurship have
been evolved from over a period of more
than two centuries.
1). Economic Theory – The entrepreneur in economics
• Richard Cantillion (1755) was the first person to recognise the role
of entrepreneurs in economic theory. He stated that, “the farmer is an
entrepreneur who promises to pay the land owner for his farm or land,
a fixed sum of money without assurance for the profit he will derive
from his enterprise”. Hence entrepreneur is always at risk of bearing
losses if he would unable to sell the goods at a higher price.
• He stated, ‘Entrepreneurs work on uncertain wages, whether they
establish with or without capital.’ (Cantillon, 1755) Cantillon
included beggars and thieves in his definition of entrepreneurs, as
these were not working for an employer and therefore faced economic
uncertainty..
• He classified the economic agents into three groups: (1) landowners
(2) entrepreneurs and (3) hirelings. He identified the first and the third
group as being rather passive; He found that the entrepreneurs play
the central part. They play the role of the coordinator connecting
producers with consumers, and, additionally, the role of the decision
maker engaging in markets to earn profits and struggling with
2. Economic Theory Contn’d
•Jacques Turgot (1766) According to Turgot, the
entrepreneur is the outcome of a capitalist investment
decision: The owner of capital either can simply lend his
money and just be a capitalist, or decide to buy land for lease
and, hence, become a landowner, or he decides to buy goods
to run a business and thus become an entrepreneur
automatically. ( Grebel et.al.,2001, ).
•Turgot's capitalist was a capitalist-entrepreneur. He not only
advanced savings to workers and other factors of production,
he also, bore the risks of uncertainty of the market (New
World Encyclopedia, 2006)
3. Economic Theory Contn’d
•Nicolas Baudeau (1771): Baudeau was the first to suggest the function of the
entrepreneur as an innovator and thus brought invention and innovation into the
discussion. Furthermore, he emphasized the ability to process knowledge and
information, which makes the entrepreneur a lively and active economic agent. (Grebel
et.al, 2001)
•Jean Baptiste Say, 1803: Say continued Turgot’s ideas and elevated the entrepreneur
to a key figure in economic life (Grebel et.al.,2001) . Say identified tripartite division:
(1) Philosopher who identifies theory, (2) the entrepreneur who makes application by
creating useful products and (3) the workman who supplies manual labour (execution).
•Entrepreneur coordinates and combines the factors of production. where inputs and
markets are to be successfully combined, and also with other factor markets of raw
materials, labour, land, plant and equipment. In return for this coordination, s/ he earns
wages which can be theoretically differentiated from the interest earned by the
capitalist (Kalantaridis, 2004).
•Say was the first to distinguish the function of entrepreneur and capitalist. Say also
identified the role of uncertainty. He realised that it is the uncertainty that makes the
role of entrepreneur difficult. (Kalantaridis, 2004). In this sense, Say paved the road to
Schumpeter’s theory on entrepreneurship. (Grebel et.al, 2001)
4. Economic Theory Contn’d
•Alfred Marshall (1881): devoted attention to the entrepreneur. Marshall introduced
the innovating function of the entrepreneur by emphasizing that the entrepreneur
continuously seeks opportunities to minimize costs (Iversen et.al., 2008)
•Frederic Barnard Howley (1907): attempted to integrate entrepreneur in the classic
theory. The enterpriser has the key function of production process—decides what to do
in using the means of production. But at the same time he operates in uncertainty,
therefore assumes the responsibility for production.
•Howley conceptualized the enterpriser as the motivator and uncertainty bearer who
will decide what shall be produced how much of it and by what method in order to
attain his/her own ends.
5. Economic theory contn’d
•Joseph Alois Schumpeter 1928: revolutionised the horizon of
Economics by introducing the novel concept of Creative Destruction by
Entrepreneurship. He defined Entrepreneur as the innovator, the
individual who introduces new combinations of production factors.
•Schumpeter opposed the existing views of the entrepreneur as a risk
bearer and a manager of a company. Instead, Schumpeter argued that an
entrepreneur is an innovator--an individual who carries out one of the
following five tasks: (1) the creation of a new good or a new quality; (2)
the creation of a new method of production; (3) the opening of a new
market; (4) the capture of a new source of supply; or (5) the creation of a
new organization or industry (Schumpeter, 1949, p. 66, ). Anyone who
does this as an individual or as director of an organization is an
entrepreneur. The innovation replaces the old and destroys the
equilibrium (creative destruction). Innovations are made by talented
entrepreneurs who enjoy greater profits. Schumpeter detached risk from
entrepreneur and assumed that it is the function of capitalists and/or the
banking sector
6. Economic theory contn’d
•Frank Knight 1921: Knight distinguished between uncertainty and
risk and relating them to profit and entrepreneurship. Risk can be
covered with some kind of insurance. But uncertainty is ubiquitous
aspect of business decisions because production takes some time.
Decisions regarding inputs should be taken now in order to create output
in future.
•The presence of uncertainty leads the economic agents to voluntary
specialization of decision making on the basis of (1) their knowledge and
judgments, (2) their degree of foresight, (3) their superior managerial
ability (foresight and ability to control others) and (4) their confidence in
backing their judgment with actions. Entrepreneurs can foresee the
future, develop correct hypothesis, and take responsibility and control.
7 Economic theory contn’d
•Ludwig von Mises 1949: Mises defined entrepreneur as
the acting individual. Entrepreneur is the economic agent
who applies reason to changes occurring in the market.
This conceptualization of entrepreneurship is inclusive
encompassing all action in the market economy that is
human.
•Mises considered the entrepreneurial actions as the
manifestation of his mind, as a special quality of man to
transform the raw material of sensation into perception
and perception into an image of reality. It is this power of
intellect of man that provide the faculty of seeing more in
the world.
•Misesian entrepreneur is driven by the structure of his
mind and experiences
8 Economic theory
•G. L. S. Shackle 1970: emphasised
entrepreneurship to decision-making. He was a
student of Hayek. His theoretical construct is
more radical and close to that of Schumpeter.
•According to him past is irrevocable and future
is unknowable. Like all humans, businessman is
prisoner of time (path dependent), unable to
derive certainties for the future, and to reverse
or repeat events that happened in the past. It is
not knowledge but the uncertainties caused by
the effect of time on decisions of economic
agents.
9 Economic theory contn’d
•Israel Kirzner 1997: emphasised entrepreneurial
discovery in the phase of disequilibrium. Krizner rejected
the equilibrium theory and argues that the economy is in a
constant state of disequilibrium due to shocks constantly
hitting the economy. Furthermore, economic agents suffer
from "utter ignorance"—they simply do not know that
additional information is available. (Grebel et.al.,2001)
•Entrepreneurial alertness is therefore an attitude of
receptiveness to, available, but hitherto overlooked
opportunities. Each discovery is a sense of surprise of what
the entrepreneur had previously overlooked. This
previously unthought-of knowledge is the result of
entrepreneurial boldness and imagination in a market
defined by ‘Knightian uncertainty’. (Kalantaridis, 2004)
10 Economic theory
•T. W. Schultz 1975: Schultz recognized that markets do not
automatically and instantaneously regain equilibrium
following an exogenous shock. “Regaining equilibrium takes
time, and how people proceed over time depends on their
efficiency in responding to any given disequilibrium and on
the costs and returns of the sequence of adjustments
available to them. (Klein & Cook, 2006)
•Schultz argues that entrepreneurship is closely connected to
situations of disequilibria and that entrepreneurship is the
ability to deal with these situations. In disequilibrium, agents
are acting sub optimally and can reallocate their resources
to achieve a higher level of satisfaction. Entrepreneurship is
the ability to coordinate this reallocation efficiently, and it
follows that agents have different degrees of entrepreneurial
ability. (Iversen, 2008)
• William Baumol 1995: Baumol distinguishes between two
entrepreneurial prototypes:
• 1. Firm organizers who create, organize, and operate a business
enterprise; can be analysed using the conventional tools of price
determination in perfectly competitive, or contestable markets.
• 2. Innovative and entrepreneurial . The Schumpeterian
entrepreneur does not fit into neo classical theoretical concepts,
Baumol pointed out that the discovery of the attributes of an
entrepreneurial personality is promising but is outside the
purview of economic theory. (Kalantaridis, 2004)
• Mark Casson 1995: He also developed the modern economic
theory of entrepreneurship through a synthesis of the ideas of
Joseph Schumpeter, Friedrich Hayek and Frank Knight. According
to this theory, successful entrepreneurs demonstrate good
judgment in making risky innovations, and are rewarded
through either profits or salaries depending on whether they act
as owners or managers of their firms (Wikipedia).
• D. H. Harper 1996: Harper was Student of Casson; according
to him learning process is crucial to most of the phenomena that
economists seek to explain. He develops a dynamic theory on
entrepreneurial learning.
• He defined Entrepreneurship as ‘profit seeking activity aimed
at identifying and solving ill specified problems, structurally
uncertain and complex situations. It involves the discovery of
and creation of new end-means frameworks, rather than the
allocation of given means in the pursuit of given ends.
• Entrepreneur is an agent who seeks to break outside the
established routine and the framework of ideas.
According to economists, G.F Papanek and J.R.
Harris, economic incentives bring forward a
favourable drive for entrepreneurial activities.
A desire to have more economic gain sparks the
entrepreneurial instinct. Lack of incentives,
unattractive economic polices and unfavourable
market conditions tend to reduce the vigour of
entrepreneurship.
 Sociological Theory of Entrepreneurship
• The Pioneering Work of Max Weber 1904-06:
Weber did a wider research exploring origins of
economic consciousness and specific contents of
religious faith, drawing comparison between
capitalistic and non-capitalistic societies.
• Webber brought out the theory that entrepreneurs with
social background as protestants were influenced by
the religious belief: it stresses the goodness of work—
the individuals work is regarded as ‘calling’—literal
concept of vocation. Financial rewards are considered
as God’s blessings. Protestant values called for self-
restraint, and the accumulation of productive assets.
• Weber distinguished capitalistic entrepreneur from
Christian entrepreneur
2 Sociology of entrepreneurship contn’d
•Leland Jenks 1949: Jenks proposed theorization of entrepreneurial roles in society.
He defined the roles as probable action patterns of social contexts. These roles are
learned by individuals during childhood experiences and in the context of other adult
roles. No two roles are identical as the two personalities are different. Jenks identified
four roles:
•First is the agent’s perception of the expectation that other individuals have of him/her
during the process of social interaction.
•Second involves learning by reward/punishment for appropriate/inappropriate
responses respectively.
•Third is the adaption of role models.
•Fourth is recognition of socially available roles into new combinations. The fourth one
offers scope for diversity and change both between personal roles and personal and
social roles. The solution in the latter situation may take the form of distinctive
phrasing of the role, which, if socially accepted, may end in modification of the social
role.
3 Sociology of entrepreneurship contin’d
•Social Marginality - The influence of social marginality upon the emergence of
entrepreneurship is viewed as very strong.
•According to Sombart (1911) creativity and the ability to break social values
associated with entrepreneurship is more frequent among marginal and minority
groups. Non-acceptance in societies within which they live, enables individuals,
to avoid traditional values, and norms, that regulate economic behavior. Hoselitz
(1963) and Young (1971) provided theoretical base which were proven
empirically in 1980s and 90s. (Kalantaridis, 2004)
•Bert F. Hoselitz 1963: Hoselitz was influenced by the work of Sombart by the
observation that minority groups like Jews, and Greeks, in Europe, Lebanese in
West Asia, Chinese in Southeast Asia, and Indians in S. Africa, become
successful entrepreneurs because of their ambiguous position.
•F. V. Young 1971: referred to group solidarity, reactive when (1) group
experience low status recognition, (2) denial of access to important social
networks and (3) and it possesses a greater range of institutional resources than
other groups in society at the same system level.
•Other instances are when one is fired from work, denied promotion,
discriminated or other injustices present at work may force someone
to take up entrepreneurship as a career.
4 Sociological Theory of Entrepreneurship contn’d
Sociologists suggests that the entrepreneurship can conceptualized as a social
movements and entrepreneurs exist not only in the economy but in other spheres
of society as well.

S.M Lipset argues that cultural values deeply effects entrepreneurship and the level
of economic development.

Mark Granovetter points that family ties may create an obstacle for a businessman.

According to Hoselitz, the approach which emphasizes the theory of deviance

assumes that those who introduce changes must be deviants since they reject the
traditional elite’s way of doing things. For example , in Latin America , recent
immigrants , members of minority groups have formed a considerable section
emerging business elite.

A great land mark in entrepreneurial studies is represented by study conducted at

Harvard University (1948-1958). A journal of the centre Explorations in
Entrepreneurial History, states that entrepreneurship should not be studied by
focusing on individual entrepreneur but rather by looking at the enterprise. Special
attention was often paid to the social relations within the enterprise and to the
relations between the enterprise and its surroundings.
 Psychology of the Entrepreneur
• David C. McClelland 1961: McClelland’s work was influenced by Weberian
protestant ethics in which an intermediating psychological dimension is
introduced.
• McClelland stressed the importance of Middle childhood as the formative period
of entrepreneurial attitudes. Parents imposing high standards of excellence in
early childhood, allowing him to attain them without interference, and real
emotional pleasure in his attainment short of overprotection and indulgence, is the
environment which helps to develop entrepreneurial mindset. This develops in
certain individuals, a need for achievement: which indicates little interest in
routine as well as high risk tasks; desire for tasks of moderate risks, where skill
counts, desire for responsibility, and concrete measure of task performance. High
need for achievement is the psychological factor that induces economic growth and
decline.
• He proposed views to the effect that children of Western Industrialized societies
and in contrast underdeveloped societies where fewer people with N-Ach.
• Entrepreneurial pursuits represent the desired moderate risk situations, for
individuals with high need for achievement, coming from lower/lower middle
classes.
• In his later contribution, he altered his stand on importance of child rearing
practices, and he emphasized the arousal of latent need for achievement, typically
Psychology of entrepreneurship contn’d
•Hagen E. E. 1962: According to Hagen, entrepreneur is an
individual, interested in solving practical and technical problem, and
is driven by a duty to achieve. Entrepreneurs occupy the creative
end of his personality dichotomy. The other end of the dichotomy is
authoritarian, noncreative personality.
•Creative personality is the result of historical process that may go to
several generations back. Up-bringing in traditional authoritarian
families produce non-innovative personalities. Diminishing influence
of the father’s authority, and increasing influence of nurturing and
protective mother resulting in emergence of individualism, and self
reliance, favour creativity and entrepreneurial activity leading to
entrepreneurial pursuits.
•This theory explains the phenomenon that entrepreneurs frequently
belong to ethnic or religious minority groups. Concerns are that
whether authoritative-creative dichotomy and association between
authoritarian personality and non-innovative behaviour applies in all
contexts
Psychology of entrepreneurship contn’d
•Rotter J. B. 1954 - Locus of Control: Another psychology of the
entrepreneur is Social learning theory which suits the study of
Entrepreneurial personality which analyses the interaction of
individual with his/her environment.
•The degree to which the economic agents believe in what happens
to them is dependent on
•(1) their own behaviour and it is controlled by their own actions
known as internal locus of control
•(2) it is contingent upon luck, chance, fate, or as under the control
of powerful others etc. is known as external locus of control
•It is empirically accepted that those with internal locus of control
will give heightened alertness which is essential for incidental
learning (recognition of opportunities) with spontaneous learning
resulting into entrepreneurial behaviour. Those with external locus
of control are assumed to be less proactive in entrepreneurial
ventures
Psychology of entrepreneurship contn’d
•Kets de Vries, 1977—Psychodynamic Model : A study
into the psyche of the entrepreneur and has given a
convincing explanation how it was formed.
•He recognised that there is no single entrepreneurial type
and tried to understand the deviant Entrepreneur, close to
Schumpeterian admiration.
•Kets de Vries sees entrepreneur as tormented, scared by
early childhood experiences, a loner, in isolation from
his/her context, misfit displaced in own environment, a
reject, a marginal man.
•The entrepreneur translates his anger, anxiety, and
rebelliousness into innovative activity.
•He conceptualises the entrepreneur as highly complex
with no resemblance to the ‘economic’ man
Psychological Theory of Entrepreneurship contn’d
Joseph Schumpeter states that the entrepreneur is mainly motivated and
driven by three things:
a. “The dream and the will to found a private kingdom.”
b. “The will to conquer.”
c. “The joy of creating.”
J. Schumpeter formulation can be translated as:
a) The desire of power and independence ;
b) The will to succeed;
c) The satisfaction of getting things done.
d) According to him , money is not what ultimately motivates the
entrepreneur. Thus he supports the psychological theory and not the
economic theory. He asserts that what matters is the behaviour and not
the actors.
Behavioural approach to entrepreneurship
•Dissatisfaction with the psychological and sociological constructs
in explaining the entrepreneur led to the emergence of the
behavioural/situational approach. The following are some of the
important ones among them
•Glade W. P. 1967: advocates a shift of the study from the
entrepreneur him/herself to the behaviour of the entrepreneur.
Confronting entrepreneurial opportunity structures includes general
economic, social, technological and political conditions. As these
change over time, it provides new opportunities which some take
advantage and others not.—an objective structure of given
opportunity and a differential advantage based on the capacity of
the participants
Behavioural approach to entrepreneurship contn’d
•Greenfield S. M. and Stickon A., 1981: Greenfield and
Strickon developed a new theory based on ‘learning by
doing’. The individual fails to get successful outcomes from
some alternatives due to lack of sufficient information or
misjudge the situation. By omitting wrong selections and
trying new selections, the economic agent attains his/her
goals.
•For understanding the importance of interaction and
communication, Greenfield and Strickon introduce the term,
‘symbols’. Symbols bring together communities, the
definition and notion common to agents who participate in
the community. Symbolic ability—language helps the agent
to understand the events and situations that he has not
directly experienced – the role of tacit knowledge
Behavioural approach to entrepreneurship contn’d
•Social Constructionism
•Elizabeth Chell, 2000: what distinguishes entrepreneurs from
non-entrepreneurs is their motivation for wealth creation and
capital accumulation, as well as their ability to recognise
opportunities and their judgment.
•In this context the future orientation of the entrepreneurial
actions is readily acknowledged, as entrepreneurs ‘envision a
future and attempt to realize it.
•The social Constructionist solution is concerned with how
individuals create their reality and make sense of it. Entrepreneur
emerges as an active economic agent and creates his own reality.
•Entrepreneur is simultaneously the driver of entrepreneurial
process within a reality which sets limits on choice and action
possibilities.
Anthropological Theory
Anthropological research is one of the answers to these doubts.
Anthropologists study people, social groups, their narratives and
practices as products and producers of culture; as part of a social
whole that we help to build, but at the same time, builds us. Thus,
the analyzes we generate remain in constant movement between
the micro (individuals) and the macro (cultures, institutions, power
relations, ideologies, etc.). For this reason, the anthropological
perspective allows tackling problems with a holistic approach,
finding the existing interrelations between the parties involved
and the context that surrounds them.
The anthropological theory says that for someone to successful
initiate a venture the social and cultural contexts should be
examined or considered. Here the emphasis is on the cultural
entrepreneurship model. The model says that new venture is
created by the influence of one's culture
• Anthropology illuminate the wider socio-cultural
implications of entrepreneurialism, a moral order and
social practice that is profoundly shaping contemporary
society. Revisiting classic works in anthropology from a new
angle, this book provides an exciting introduction to diverse
conceptual framings of economic agency. The author also
examines a wide range of 21st century ethnographies from
the Global South, alongside his own research from across
Europe. Readers meet ordinary people struggling with new
social landscapes, including neoliberal urbanism, informal
credit, heritage marketing, social enterprising, gift
competition, and silicon utopias. With sensitivity to
different theoretical, temporal, and ethnographic
perspectives, the author presents a thorough cultural
history of the entrepreneur―this ubiquitous, yet
ambivalent contemporary character.
 Each of the above theories is incomplete and none of
them is right or wrong. Theories of entrepreneurship
are inter-disciplinary and are influenced by multitude
of factors. It is the integration of external
environment , achievement motivation, ability and
ambition which largely determines whether an
individual become an entrepreneur.
 A summary of economic theories of entrepreneurship
a) Richard Cantillon – a Cantellonean entrepreneur is a
coordinator, he/she connecting produces with consumers &
speculates during uncertainty
b) Jean Baptiste Say – in the midst of uncertainty, an
entrepreneur coordinates & combines the factors of production
to obtain greater yield
c) Joseph Schumpeter – a Schumpeterian entrepreneur is an
innovator, he/she generates change in a market system
through creative destruction
d) Frank Knight – Knightetian entrepreneur makes decisions to
start business by bearing uncertainty associated with it
e) Ludwig von Mises – Misesean entrepreneur is an economic
agent acting in the market place without which the market
wouldn’t function properly
f) Israel Kirzner – a Kirznerian entrepreneur is constantly alert to
disequilibria in the market system. He/she is an arbitrageur
A summary of economics to Sociology of entrepreneurship
• The proponents of sociology of entrepreneurship argue that
sociological events or social forces are the major motivation
factor in the creation of new venture
• Max Weber – Weber identified causal factors to
entreprenuering as sociological events, social forces, cultural
factors such as:
a) Social marginality – marginal & minority group,
b) Family ties,
c) Discrimination or injustice present at work,
d) Cultural values,
e) Being fired or denied promotion at work,
f) Theory of deviance,
As causal factors for one to engage or disengage in
entrepreneurial activities.
• From cultural point of view, sociologist see small business
ownership as a group phenomenon, heavily dependent
upon social resources available from group support
networks. The entrepreneur is seen as a member of
supportive kinship, peer, and community subgroups (Bates,
1993, p250).
• Dykeman (1990, p8) goes beyond subgroup to the
community as a whole. Sustainable communities are also
entrepreneurial communities. This suggests that
sustainable community approaches must involve a process
that will motivate, build self-confidence, be committed to
the long-term, reflect high energy levels, be a persistent
problem solver, demonstrate initiative, be willing to
establish goals, and be committed to objectives, and be a
moderate risk taker. Strategic planning is an important
• A significant distinction between the economics and sociology
of entrepreneurship exist.
• Economists generally, view entrepreneurship as an
independent variable, thus downplaying the role of the
entrepreneur in economic growth and development while the
economic conditions receive greater attention.
• Sociologists, on the other hand, view entrepreneurs as the
dependent variable. Herein, entrepreneurship is a necessary
condition of economic growth and development (Wilken 1979).
• This is a chicken and egg question; which came first?
A summary of economics to psychology of entrepreneurship
• These are often referred to as Trait theory or personality or
psychological profile or traits. The proponent of trait theory is
David McClelland, 1961. According to McClelland,
entrepreneurs posses the following traits:
a) Need for achievement
b) Internal locus of control
c) Creative personality
d) Self reliance
e) deviance that lead to anger, anxiety & rebellion leading to
innovation
f) Desire for responsibility
g) Duty to achieve
h) Moderate risk taking etc.
PROS AND CONS OF ENTREPRENEURSHIP
Pros includes various points of Benefits, advantages or importance
of entrepreneur Whereas cons refers to various adverse affects or
dark side of entrepreneurship.
ADVANTAGES OF ENTREPRENEURSHIP:
1) Generation of Employment.
2) Increasing per Capita Income.
3) Helping in Capital Formation.
4) Balanced Regional development.
5) Optimum Utilisation of Resources.
6) Promoting Self reliance.
7) Helps in raising living standards .
8) Mobilise the Idle savings & formation of capital.
9) Dispersal of economic wealth.
10)Economic independence.
11) Life line of Nation.
 CONS OF ENTREPRENEURSHIP
There are various factors responsible for the failure of entrepreneurship.
Karl H Vesper has identified following entrepreneurship:
1) Lack of Viable concept.
2) Lack of market Knowledge.
3) Lack of technical skill.
4) Lack of seed Capital.
5) Lack of Business Knowledge.
6) Complacency-Lack of motivation.
7) Social Stigma.
8) Time pressure and distractions.
9) Legal constraints and regulations.
10) Monopoly and protectionism.
11) Inhibitions due to patents.
12) Low Level of Commitment
13) Shortage of Resources
14) Inferior Communication Network
• INVENTION.
Means creating something new. Creative persons conceives an idea, work on it,
collects the related information. Then test the idea to prove its importance. By
passing through various stages of inventions, the creative persons become inventors
e.g., Edison invented the bulbs.
Invention is creating not only products rather new ways or methods of production,
new technologies, new processes, new designs etc, an invention when made up open
new markets. As consumers tastes and preferences go on changing day by day, they
demand new things every time. They want something different, which is not in use
by others.
• INNOVATION.
is to put the ideas of inventors in action. Innovators transforms the ideas into useful
application and resultant is new products, methods procedures, services etc.
innovation requires analytical ability to work. Entrepreneurs are innovators, to
exploit the ideas entrepreneurs makes the arrangement of materials, staff site etc.
and establish an enterprise. Entrepreneurs are gifted with some competencies talents
and qualities which make them different from others.
• INTRODUCTION
The term ‘entrepreneurship’ emerged in America in late
seventies. In late seventies many big business executives in
America left their jobs and started their own small scale
ventures. The reason behind this was that their innovative
ideas killed because these cannot be put in use by the higher
authorities of the corporations. Such persons achieved
success and their success became a cause rivalry among the
corporation which they left. Such class of people were
recognized as entrepreneurs. An American management
expert, Gifford Pinchot III wrote his famous book resigned
from their well paid executive position to launch their own
ventures .
 INTRAPRENEURSHIP
Employees of an organisation who have entrepreneurial
talent and are motivated to use their abilities and
initiatives and do something on their own business are
known as intrapreneurs.

Intraprenurship implies that entrepreneurial activities are

explicitly supported within established organizations,
provided with organisational resources and accomplished
by company employees.

In the words of Pinchot “Intrapreneur, also termed as

corporate entrepreneur, as someone who violates policy,
ignores the chain of command, defies established
procedures, and perhaps, comes up with a new product for
the company in which he is employed.”
• Employees who give innovative ideas should be
rewarded and they should not be punished if they
make some mistake.
• There should be team spirit, cooperation,
knowledge, sharing and spirit of encouragement
within an organization.
• Interaction between employees and employers must
be free. It is most essential feature of
entrepreneurship.
• It is essential for entrepreneurship to identify skills
of employees and give them proper training to
develop their skills and talents.
• Employees should be motivated by giving them
rewards , in the form of bonus, promotions etc.
 Essentials of Intraprenurship :
1. Fradette and Michaud(1998) describe four main elements essential for
the success of intraprenurship:
2. Right strategic and structural environment within the organisation.
3. Talents of employees are recognized and their key skills are
trained. They should be motivated and rewarded from time to time.
4. Support system, team working, information sharing and learning
are essentials for invoking the dormant talents of employees.
5. Successful employees should have be suitably rewarded while they
should not be penalised for their mistakes to such extent that they are
dissuaded from further initiatives.
As intrapreneurial organisation should have a magnetic feeling in
which style of management is more coaching than infrastructure.
Employees should fond of their workplace. The enthusiasm and
excitement will start spreading to others if the work culture
encompasses sharing and trust.
JOSEPH A.SCHUMPETER’S CONTRIBUTION TO ENTREPRENEURSHIP

Joseph A. Schumpeter (1883-1950) is the main figure in the

literature of entrepreneurship as it was him who gave a well-
rounded picture of theory of an entrepreneur.
 His book entitled Theory of Economic Development (1911),
argued that all the important changes in the economy are set off by
an entrepreneur and these changes then slowly work themselves
through the economic system, in the form of business cycle.
 In the second attempt of his book, Schumpeter attempts to
develop a number of economic theories- of interest, capital,
credit , profit and the business cycle by relating them to the theory
of entrepreneurship.
 Schumpeter’s work on entrepreneurship is much richer and
distinct. His research inspired people to be innovative. He
emphasised more on technological innovations rather than on
organisational innovations.
 Incompetence and poor management
 Low level of commitment
 Restrictions imposed by custom and tradition
 Involvement of high risk
 Socio-cultural rigidities
 Lack of motivation
 Lack of infrastructural facilties
 Lack of communication network
 Absence of entrepreneurial aptitude
 Low status of businessmen
 Market imperfections
 Legal formalities involved to set up a unit
 Low quality products
 Low package of salaries to employees.
 Difficulties :

Terazano states that it is not so easy to achieve effective

intraprenurship, some of the difficulties are as follows:
1) Efficient implementation of facilties and controls are difficult
to implement without conflicts.
2) Fair remuneration and reward system is difficult to establish
to ensure justice.
3) Even employees may feel extremely disappointed if they face
difficulties and failures while trying their new ideas
Inspite of all odds, business have to take risks and allow and
encourage their employees to take up intraprenurship.
 CONCLUSION:
To sum it up, it can be said that Intrapreneurs
are the executives who develop commercially viable
ideas, new divisions, new subsidiaries, new products
or new business within existing and established
business.
Both entrepreneurs and intrapreneurs are the
innovators and both perform the function of
management. But entrepreneurs set up their own
business and give shape to the ideas of
intrapreneurs.