THEORIES of ENTREPRENEURSHIP

Entrepreneurship-and-Communication-Skills-notes

These refer to the various approaches, which have been advanced to give an explanation as to why entrepreneurs behave the way they do. They are also known as the perspectives of entrepreneurship.

The theories try to explain whether entrepreneurs are born or made. The born entrepreneurs inherit the entrepreneurial behaviour from their parents and grandparents while made entrepreneurs acquire entrepreneurial behaviour from the behaviour in which they live in.

The following are some of the entrepreneurial theories:

Economic theory

The theory holds that entrepreneurial behaviour is determined economic factors.Thus entrepreneurs are greatly influenced economic activities. From an economic point of view an entrepreneur  is a person who brings together the factors of production into a combination to make their value greater than before.

According to Schumpeter, entrepreneurs are innovators who bring together the various resources to produce a new product/service through new ways/methods of production, finding new markets, finding new sources of materials to create a new business.

The economic theory provides basic data in the economic environment – activities for business start-ups. Thus entrepreneurial activities take place where conditions are supportive/conducive to investment. This theory revolves around an entrepreneur being an innovator, combining the various resources/ factors of production to create new products/wealth.

Psychological theory 

The theory holds that entrepreneurs possess unique needs, values and attributes, which drive them into entrepreneurial behaviour. It holds that people have personal traits and attributes, mental desires to be independent.

The main proponent of this theory is McClelland who attributed entrepreneurial behaviour to the high need for achievement. Entrepreneurs are characterised high need for achievement, which tends to give them high desire to take personal responsibility in risks. They have little interest in routine activities, which are not challenging. According to this theory, entrepreneurial behaviour is environmentally determined and is inherent during childhood, where parents have certain high standards achievement.

Sociological theory

The sociological theory maintains that environmental factors such as values and beliefs influence entrepreneurial behaviour. (Max Weber, 1904). According too this theory, beliefs and societal aspects such as social status and recognition influence entrepreneurial behaviour.



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