Theories of entrepreneurship

Theory of entrepreneurship helps us to comprehend phenomena better. Understanding theory one can apply the same in practice more effectively. Various theories of entrepreneurship have been propounded by thinkers. They can be classified in three categories:

  1. Sociological.
  2. Economic.
  3. Cultural.

Sociological theories of entrepreneurship

  1. 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.
  2. 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.

Economic theories of entrepreneurship

  1. 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.
  2. Harvard Business School considers entrepreneurship as the outcome of the combination of internal and external forces.
    1. Internal forces- Individual’s  traits and qualities viz:
      • Intelligence.
      • Skill.
      • Knowledge.
      • Intuition.
      • Exposure & experience.
    2. External forces– Surrounding’s conditions  viz:
      • Economic.
      • Political.
      • Social  & cultural.
      • Legal frame-work: Stable Govt. External security, law & order and legal process are the influencing factors.

Cultural theories of entrepreneurship

  1. Hoselitzs theory: He explains that the supply of Entrepreneurship is governed by cultural factors & culturally minority groups are the spark – plugs of entrepreneurial economic development.
    • Marginal men- Reservoir of entrepreneurial development. Ambiguous positions from a cultural or social statement make them creative.
    • Emphasis on skills- Who possess extra-ordinary skills. Function of managerial additional personal traits & leadership skills. Additional personal traits. Exportation of profit ability to lend.
    • Contribution of social classes- Socio-economic economic background of specific classes make them entrepreneurs. Family patterns in France, protestants in UK/USA & Parsees in India.
  2. Peter F Drucker onentrepreneurship: “An entrepreneur is one who always searches for change, rapidness to it and exploits it as an opportunity.” He emphasizes on:
    1. Innovation.
    2. Resource: A thing is regarded as resource when its economic value is recognized. Example- Fixed salary can also be an opportunity. Thus installment purchase was introduced.
  3. ECO  model
    • Entrepreneurship.
    • Creativity.
    • Organization.
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Discussions

7 Comments.

  1. Your news very interesting but the only thing are too short, have no more clarification.Try to over look this. Thanks.

  2. Nancy Njuguna

    The feedback to the theories are quite short,more further clarification will improve the system.

  3. details on the theories of entrepreneurship

  4. Your content coverage on the theories is too shallow for research and entrepreneurship history.Please give more details.

  5. Please your feed backs are good but does not include a good detailed of the topic.thank you!

  6. too short

  7. interprenuer motivation

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Priya Chetty

Priya Chetty writes frequently about advertising, media, marketing and finance. In addition to posting daily to Project Guru Knowledge Tank, she is currently in the editorial board of Research & Analysis wing of Project Guru. She emphasizes more on refined content for Project Guru's various paid services. She has also reviewed about various insights of the social insider by writing articles about what social media means for the media and marketing industries. She has also worked in outdoor media agencies like MPG and hotel marketing companies like CarePlus. She has attained MBA degree from Indian Institute of Planning and Management, New Delhi.

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