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& Rodrigues, R., 2012, ‘Global mindset and the internationalization of small firms: The importance of the characteristics of entrepreneurs.’ International Entrepreneurship and Management Journal, vol.8(, no.4, pp.467-485. Judgmental decisions. For these reasons, I am required to examine the range of entrepreneurship theories and how entrepreneurs contribute to our economy and society. There are five theories of entrepreneurship that seek to explain entrepreneurial behaviours and characteristics. Entrepreneurship has increasingly become popular as the recession keeps on getting worse and worse. In this theory, J A Schumpeter states that an entrepreneur is basically an innovator and inventor is one who identifies and introduces new combinations. 3. 1). The ability to create networks is another common feature among successful entrepreneurs. Cultural theories of entrepreneurship. The concept of x-efficiency is also used in the theory of bureaucracy. Relevant questions: What are the economic theories of entrepreneurship? Schumpeter takes the case of a capitalist closed economy which is in stationary equilibrium. The environment is dynamic and entrepreneurs stay close to the environment with the aim of identifying the opportunities presented by the changes in environmental forces. These theories are the oldest entrepreneurship theories and they were developed in the mid-eighteenth century. Successful entrepreneurs are highly regarded in the society and people seek to learn from the entrepreneurs to enhance their entrepreneurial capacities. Entrepreneurs conduct a careful cost benefits analysis aimed at assessing the viability of an opportunity. They seek to establish beneficial networks with individuals and organizations to position their position in the business environment. Theories of Entrepreneurship 1) X-Efficiency Theory by Leibenstein Harvey Leibenstein was a Ukrainian-born American Jewish economist. Hagen’s Theory of Entrepreneurship. Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of something new and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the enterprise. Need Any help? It, therefore, provides a more advanced perspective than the economic theory as it brings into play the different aspects of the environment instead of only focusing on economic conditions. 1. According to Mark Casson, Demand for Entrepreneurship arise from the need to change and the supply of entrepreneurship is limited. The most obvious example of entrepreneurship is the starting of a new business. For instance, an entrepreneur in the field of information technology should be in a position to understand the technical details of processes involved so as to direct employees and other stakeholders properly. They view entrepreneurs as risk takers who monitor the economic conditions with the aim of identifying opportunities (Abosede & Onakoya 2013). Marginal men-Reservoir of entrepreneurial development. These three aspects are nature of opportunities, the nature of entrepreneurs, and the nature of decision making framework within which an entrepreneur functions. According to this theory, business owners needed to give their employees more power in making decisions. Theory of Frank Young (Emphasis on Changes in Group Level Pattern) 5. McCrae and Costa’s Big Five Traits approach, 2. theories of entrepreneurship (Kirzner). Being visionary as a manager enables entrepreneurs to create the right culture in their organization that is in line with the organization’s ideals. Studies conducted to reinforce the theory shows that personal traits such as optimism and creativity influence the success of an entrepreneur. As per entrepreneurial personality emphasized by Economic and social development. They are also aware of the possibility of failure that makes them invest in contingency planning. Martin Ricketts 5 th June 2005 . According to Chaganti & Greene 2002, some of the most successful entrepreneurs in the world were quick at implementing an idea that gave them the first mover’s advantage. 1. These are among the many other roles played by the entrepreneurs in the society. Psychological theories Although this strand of theories is not popular in the literature, it has received significant contributions from Schumpeter, Krunkel and Carland (Mohanty, 2005). Self-belief- aspiring entrepreneurs should believe in themselves and this would enable them to assume risks. A number of theories exist, but all of them fall into one of five main categories The economic theories carry illustrious and a long-established pedigree relating to the study of entrepreneurship. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Introduction Álvaro Cuervo1, Domingo Ribeiro2 y Salvador Roig 2 1Universidad Complutense de Madrid 2Universitat de València The creation of a country’s wealth and dynamism depends upon the competitive- In business, there are normally three types of leadership follows- merchant money lenders, Entrepreneurs, and managers. Examining the theories of entrepreneurship and the characteristics of accomplished entrepreneurs would help to analyze Thompson’s statement. Commitment to getting the right information-aspiring entrepreneurs should remain committed to acquiring the right information regarding the changes in the environment that makes them aware of opportunities and threats. Sorry, you have Javascript Disabled! They establish businesses that employ thousands of people and earn their owners profit. According to Kozubíková, Belás, Bilan,& Bartos 2015 successful entrepreneurs do not feel threatened by changes environment as they use their alertness to gain a competitive edge against inflexible competitors. The theories have substantial differences as they present varying perspectives to understanding entrepreneurship. Entrepreneurial Personality System and, 3. Action orientation is one of the features found in successful entrepreneurs. Hence need to know clearly the theories of entrepreneurship. How to improve internet search engine placement for business? The traits discussed below feature in many studies that make their roles in entrepreneurship clear. The importance of needs will influence the level of motivation. Takes pleasure of creativity and earning experiences of skills for doing various tasks. He argued that knowledge can only go a long way in helping an entrepreneur to become successful. Dept. Principles of Entrepreneurship. Compared to the other two theories, this theory is significantly less criticised. In the n ext five sect ions, the . These three aspects give rise to two logical, consistent theories of entrepreneurship, namely, discovery theory and creative theory. They are not afraid of change and they are always willing to implement beneficial alterations in the processes even when such moves are associated with risk. Entrepreneurship Theories. Successful entrepreneurs seek to realize high efficiency level in the utilization of resources to realize specific goals. The theories of Weber and Cocharan 2. Entrepreneurship. 1:1). This theory asserts that the economy and entrepreneurship are closely linked together. Successful entrepreneurs are risk takers. Successful entrepreneurs are quick actors and they do not take chances when it comes to implementing ideas. If my product or service is good, I’ll be successful. They should make some changes aimed at improving their entrepreneurship skills. Hans Schollhammer (1980) has classified entrepreneurship into five categories such as administrative, opportunistic, acquisitive, incubative and imitative entrepreneurship. According to Chaganti & Greene 2002, there are three types of management skills that determine the success of an entrepreneur. They also pay taxes and other revenues to the government that enhances the government’s ability to provide essential services. Psychological theories – As those developed by McClelland pay attention to personal traits, motives and incentives of an individual and conclude that entrepreneurs have a strong need for achievement. The intent of entrepreneurship is clear as the emphasis is put on creating successful ventures. Economic Theories Economic entrepreneurship theories date back to the first half of the 1700s with the work of Richard Cantillon, who introduced the idea of entrepreneurs as risk takers. 5 no.4, p.160. of Economics and International Studies . According to this theory, successful entrepreneurs have a belief that their actions can influence the environment. According to Kozubíková, Belás, Bilan, & Bartos 2015, successful entrepreneurs are open-minded as they listen to other people with the aim of analysing their ideal and determine whether such ideas are important or otherwise. Felício, J.A., Caldeirinha, V.R. 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. Although a rare few can experience immediate success with their efforts, it is more accurate to describe entrepreneurship as the planting of an acorn. An entrepreneur puts together a business and accepts the associated risk to make a profit. Threats impede the realization of organizational goals thus requiring managers to implement sound strategies to counter the threats. The behavior of an entrepreneur in society is  influenced by: The entrepreneur should reach the expectations of society. According to Felício Caldeirinha & Rodrigues 2012, the success of an entrepreneur is influenced by the ability to deal with environmental forces. As a result, an entrepreneur examines the value a chain of his/ her business and identifies areas that can be improved through networks. Already we have an ample number of theories, but all of them drop into one of five main categories. In economics, x-efficiency is the effectiveness with which a given set of inputs are used to produce outputs. It is possible when the existing entrepreneur improves their performance through imparting proper training and education. Starting your own business as an entrepreneur can be one of the most rewarding experiences that life offers. According to Smith & Chimucheka 2014, businesses are affected by broad dimension factors of the environment and the success of a business is dependent on how best the manager is able to react to the threats and opportunities presented by the environment. Psychological traits of entrepreneurship. Entrepreneurship is a multidisciplinary area. These theories date to different historical times and some were developed to counter the arguments of previous theories. 2.0 Theories of Entrepreneurship. The main motivators are Economic incentives like taxation policy, industrial policy, sources of finance and raw material, Infrastructure Availability, etc. July 12, 2019 . U… Psychological Theory These entrepreneurs are also able to project the end product of a system thus increasing their ability to alter systems to realize the best outcomes. For instance, an idea in the technology sector can easily become obsolete if it is not implemented swiftly. There is a priority of certain needs over others. They might take the shape of a chance to improve operations or an investment opening aimed at giving the entrepreneur money. Flexibility is a common trait among the successful entrepreneurs. This theory was given by J A Schumpeter. The five minds for the entrepreneurial future are: (1) The Opportunity Recognising Mind, (2) The Designing Mind, (3) The Risk Managing Mind, (4) The Resilient Mind and (5) The Effectuating Mind. The economic environment is dynamic and the changes in the economic conditions present opportunities and threats. A universal fact is that entrepreneurship plays an important role in economic development. Sociological Theories of Entrepreneurship. As such, it is usually hard for entrepreneurs to realize growth when the economy is doing poorly. 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