Entrepreneurship Theories And Max Model Essay

Question:

Discuss About The Entrepreneurship Theories And Max Model?

Answer:

Introducation

Generally, the sociological theories state that how the sociological factors drive the growth of entrepreneurs in the competitive business environment. Max Weber proposed the theory of religious beliefs. According to the author, entrepreneurship is a function of religious beliefs and influence of religion builds the entrepreneurial culture in an organization (Alvarez, Audretsch & Link, 2016). He focused that entrepreneurial drives are exogenous, which are supplied by the religious beliefs. There are some important elements of this theory, which are stated below;

Theory of religious belief by Max Weber

  • Adventurous spirit
  • Spirit of capitalism
  • Inducement of profit
  • Protestant ethics

Thus, it can be said that Weber’s theory of religion is one of the most basic theory to understand the values and motivations, which inform the acts of individuals.

Theory of social change by Everett E. Hagen

This theory of Everett E. Hagen proposed how a traditional society becomes one in which ongoing technical development takes place. This theory encourages some specific features, which believe the creativity of an entrepreneur as a key factor of economic growth and social transformation. Economic development is generally seen as a process of technological changes, which are carried about by the technological innovation of people in the society (Aghion et al, 2017). This theory of entrepreneurship reveals a general model of society that considers relationship among social structure, physical atmosphere, culture and personality. According to Everett Hagen, some of the economic theories of underdevelopment are insufficient. He sees the entrepreneur as an innovative problem solver, who is interested in the things in technological and practical empire and driven by an obligation to attain. Creative personality of Hagen is the combination of McClelland’s high need for achievement and Schumpeter’s innovation theory.

Economic theory

Theory of innovation by Schumpeter

Joseph Schumpeter believes that an entrepreneur assists in the process of development in an economy. According to him, entrepreneur is the person, who is creative, innovative and possesses a foresight. He states that innovation occurs when the entrepreneur launches a new product, introduces a new method of production and establishes a new market and a new business entity in any industry. This theory of entrepreneurship focuses on innovation, avoiding taking risks and managing the abilities of en entrepreneur (Bae et al, 2014). This theory separates the entrepreneurs from workers and capitalists. Schumpeter does not define the reason for differences in the entrepreneurial pool across the countries. According to this author, entrepreneur is a large scale businessman, who is hardly found in the developing nations, in which the entrepreneurs are small business man, who require copying rather than innovating.

Theory of achievement motivation by McClelland

The theory of McClelland identified 2 different characteristics of entrepreneurships, i.e. performing things in a better and new way and decision making power under the situation of uncertainty. In this theory, McClelland stressed that the person with high achievement orientation have more opportunities to become entrepreneurs. These types of people are not affected by external incentives and money. This theory states three motivational aspects of behaviors of entrepreneurs, i.e. Need for achievement, Need for Power and Need for affiliation. McClelland states that among all the above aspects need for achievement is the most considerably responsible for development of entrepreneurs. This theory also offers an insight in the entrepreneurial behaviors. There are two important characteristics of an entrepreneur, which govern economic behavior of an entrepreneur (Kuratko, 2016). First is to perform the jobs in an innovative, excellent and flawless way and another is to make the best decisions when running the business in an uncertain the environment.

Cultural theories

Theory by Hoselitz

The cultural theories indicate that entrepreneurship is the product of culture. In his theory, Hoselitz states that the entrepreneurship supply is regulated by the cultural factors. There are some culturally minority groups, which are stimulants of economic and entrepreneurial development. In many nations, entrepreneurs have developed from a specific socio-economic category (Zucchella & Magnani, 2016). In this theory, he focuses on the role of culturally slightly groups, like; Greeks and Jews in Europe.

Theory by Stoke

This theory of Stoke indicates that entrepreneurship is likely to develop under some economic actions and social culture. According to Stoke, socio-cultural values connect with the economic actions. The author recommends that societal and personal opportunities and the presence of required psychological supplies may be seen as the circumstances for a particular movement to get transformed into industrial entrepreneurship (Sapra, Subramanian & Subramanian, 2014). An example of this entrepreneur is Dhirubhai Ambani.

Psychological theories

Theory of personal resourcefulness

Personal resourcefulness is a significant factor for growth of entrepreneurship. This theory has got some implications as far as the delivery of entrepreneurs is related in the society. These implications are given below;

  • Cognitive Function

This theory presumes that the actions, undertaken by the people, who need the cognitively intervened behavior like; sentiments, emotions, inner feelings, actions and thoughts. In all these circumstances, entrepreneur is completely assessed of the knowledge and situation that is covered by motivational engagement and risk.

  • Human Aspect

There are so many authors, who have given their ideas and opinions on human aspect of psychology. These human aspects of psychology include organization building, human preferences, innovation, wishes to power etc. These aspects affect the level of entrepreneurship.

  • Theory of entrepreneurial supply by John H. Kunkel

John H. Kunkel introduced the theory of entrepreneurship supply. According to the author, sociological and psychological factors are the major determinants for the development of entrepreneurs (Roy, 2009). This author considered that entrepreneurial knowledge and talent can be seen in the ethnic, religious, minority and some other groups. There are some structures in the economy, on which the entrepreneurism is dependent; these structures are given below;

  • Limitation Structure

This is socio-cultural in the nature. In this structure, the entrepreneur is considered as the most unusual individual in society.

  • Demand Structure

This structure implies economic demand with changes in the policies of government and economic growth. It can be enhanced with the help of some material rewards that can affect the behavior of entrepreneur.

  • Labour Structure

This structure refers to the supply of skillful labor. This structure is regulated by various factors; like movement of labor, racial stock etc.

  • Opportunity Structure

It is the most significant structure that is regulating the supply of entrepreneurs. It includes managerial and technological skills, market structure etc.

Models Of Entrepreneurship

Kao’s Conceptual Model

According to Kao, a successful entrepreneur is one who adapts himself to the transforming requirements of the environment and creates it more useful in the development of business organization. This framework of entrepreneurship, creativity and organization developed and abstracted by John J. Kao adds a great deal to the development of entrepreneurship and entrepreneurial skills and knowledge in the business environment (Fayolle & Li??n, 2014).

Under this model of entrepreneurship, Kao stated that creativity and entrepreneurship emerge from the relationship among three components, i.e. the task, the person and organizational concept.

From all the elements, the most significant element is the person. It states that new ideas and thoughts cannot be implemented by the technologies and organizations; they come by the efforts and skills of human resources of organization.

Second element of entrepreneurship is the task. The task is the actions, which the people and team in an organization perform (Drucker, 2014). These people may be determined by the personality of an individual and vision. These are built and affected by the strategy of an organization.

Third one is organizational context. It is the direct setting in which entrepreneurial and creative tasks take place. Some factors, like; organizational systems and structures impact the nature of innovative and entrepreneurial atmosphere. These factors are present in the environment that refers to the outside the organization. This environment includes infrastructure, social values, resources, technology and rules and regulations. This environment affects the creation of enterprise considerably.

References

Alvarez, S. A., Audretsch, D., & Link, A. N. (2016). Advancing our understanding of theory in entrepreneurship. Strategic Entrepreneurship Journal, 10(1), 3-4.

Aghion, P., Bergeaud, A., Lequien, M., & Melitz, M. (2017). The Impact of Exports on Innovation: Theory and Evidence. working paper.

Bae, T. J., Qian, S., Miao, C., & Fiet, J. O. (2014). The relationship between entrepreneurship education and entrepreneurial intentions: A meta?analytic review. Entrepreneurship theory and practice, 38(2), 217-254.

Drucker, P. (2014). Innovation and entrepreneurship. Routledge.

Fayolle, A., & Li??n, F. (2014). The future of research on entrepreneurial intentions. Journal of Business Research, 67(5), 663-666.

Kuratko, D. F. (2016). Entrepreneurship: Theory, process, and practice. Cengage Learning.

Roy R. (2009). Entrepreneurship. Oxford University Press.

Sapra, H., Subramanian, A., & Subramanian, K. V. (2014). Corporate governance and innovation: Theory and evidence. Journal of Financial and Quantitative Analysis, 49(4), 957-1003.

Zucchella, A., & Magnani, G. (2016). International entrepreneurship: theoretical foundations and practices. Springer.

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