This “Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma- which is living with the result of other people’s thinking.”
~Said by Steve jobs, one of the greatest entrepreneurs of all time. Entrepreneurs find problems as a new opportunity to explore a new product, new mechanism, new ideas, and innovation. Their biggest motivation is to find something new every day or at least search for a new side of themselves. The entrepreneurial side of Steve jobs made him transform the tech and communication industry with his awesome product brand Apple where the iPhone was first introduced.
In simple words, entrepreneurship is accepting challenges and finding innovative solutions to them. Entrepreneurship deals with creating your startup and wishing to follow your dreams/hobbies as a career. Anyone who is running their own business is called an entrepreneur. Entrepreneurs are defined in various unique ways by scholars who are continuously searching the vast field of entrepreneurship based on anthropology, sociology, economics, psychology, and many more. Here’s a list of top entrepreneurship theories you should know as it brings more understanding and clarity for the budding entrepreneurs.
What makes entrepreneurs different from normal businessmen is finding innovative solutions and having foresight. Joseph Alois Schumpeter, one of the greatest economists, put forth the well-known innovative theory which changed the entrepreneur’s perspective. According to Schumpeter, entrepreneurs take the stationary economy to a new level of development by adding innovation and creativity of their own. Schumpeter also stated that entrepreneurs bring innovation in two ways namely:
- By reducing the cost of production
- By increasing the demand for certain products
This theory was proposed by Richard Cantillon who considered the economy as one of the fields affected by entrepreneurship. According to Cantillon, an entrepreneur acts as both ‘producers’ and ‘exchangers’. An entrepreneur’s action greatly affects the supply chain of raw products being collected, to become an end product for consumers. Cantillon included everyone as an entrepreneur from their little actions starting from a beggar to restaurant owners as they also have their source of unfixed income; this counts as a unique factor and made his theory stand out from other entrepreneurship theories.
Yes, you are right! This theory talks about the social aspects of entrepreneurship. If an entrepreneur considers all the social aspects such as social taboos, customs, culture, and other religious beliefs, they might have a well-established business that is up to mark with every consumer’s expectation. Max Weber propounded the sociological entrepreneurship theory and stated that entrepreneurs should accept the system of a society for the development of themselves as well as their startup.
Psychological theories are of three sections. They are based on the personal characteristics of a typical entrepreneur.
- Locus of control:- Any entrepreneur’s success can be an outcome of internal locus of control as well as the outer locus of control i.e., his or her Inside abilities and support from outside.
- Theory of personality traits: The inborn qualities of an individual are the one that naturally makes them an entrepreneur.
- Theory of need for achievement:- Entrepreneurs are driven by a need for achievement and it eventually makes them succeed.
Now, these three characteristics distinguish various types of entrepreneurs based on psychological entrepreneurship theories.
Peter Drucker in his theory stated that “this defines entrepreneur and entrepreneurship, the entrepreneur always searches for change, responds to it and exploits it as an opportunity”. Peter Drucker and Howard Stevenson focused on a wide-ranging conceptual framework of entrepreneurship and hence contradicted Schumpeter’s theory which stated entrepreneurship as change.
This theory states that entrepreneurs need resources to start and carry their businesses. Money and time alone are not sufficient for a blooming startup; hence Entrepreneurs require resources to make their efforts productive. Also, the theory’s main focus is on showing the importance of financial, social, and human resources and in the process enhance an individual’s abilities.
It relates to the cultural model of entrepreneurs. Anthropologists study the human aspects within the past and present. This makes them good observers of society and hence according to them, to have a successful venture, entrepreneurs should consider the social and cultural contexts. Entrepreneurs can find possibilities that present themselves as difficulties because of the social aspects of business activities (social or environmental). It pushes them to come up with new ways to solve difficulties, or at the very least contribute to their solutions.
This theory is once again divided into five stages describing the development journey of an entrepreneur. It is a widely accepted theory by Venkat Rao. The five steps of entrepreneurship development according to this theory are:-
- Simulation for stimulation of entrepreneurship
- Identifying abilities and capacities of entrepreneurship
- Expansion and development stage
- Publicity foundation/Promotion
We hope we have gathered enough knowledge about entrepreneurship theories and also their different outcomes based on each. Therefore, all these theories are very interesting and considered important for the future of entrepreneurship.