Entrepreneurship Innovation theory. Routine entrepreneurship – deals with normal business functions like co-ordinating the business activities. Capitalism refers to the economic system where market forces of demand and supply are allowed to play freely. Supply of entrepreneurs has a functional relationship with the social, political and economic structure. On the other hand, the innovator is the one who utilizes these inventions and discoveries in order to make new combinations. Schumpeter’s theory has been subjected to the following criticisms: Despite of all the above criticisms Schumpeter’s theory is considered as a landmark in the expansion of entrepreneurship theories. Young disapproves the notion of an entrepreneur working individually. However, Schumpeter viewed innovation along with knowledge as the main catalysts of successful entrepreneurship. Harvey Leibenstein had mentioned that for allocative efficiency the whole economy was considered whereas in case of X-efficiency just specific companies and industries are to be considered. The theory suggests that the more risky the nature of enterprise, the higher level of profit earned by the entrepreneurs. The simplest situation in which spontaneous learning can occur is a Crusoe situation. He stated that the entrepreneur has been read out of the model because the economic models are based on well-defined variables like output and price. To Schumpeter, entrepreneurs are individuals motivated by a will for power; their special characteristic being an inherent capacity to select correct answers, energy, will and mind to overcome fixed talents of thoughts, and a capacity to withstand social opposition. The concept of innovation and its corollary development embraces five functions: Schumpeter is the first major theorist to put the human agent at the center of the process of economic development. •He says that an entrepreneur is the one who is innovative, creative and has a foresight. Schumpeter had completely ignored the risk-taking function of the entrepreneur, which cannot be ignored. Similarly, there is a distinction between an innovator and an inventor. Leibenstein’s Theory (Emphasis on X-Efficiency): The exact influence which the X-efficiency has on output of an organisation cannot be determined. Uncertainty is due to unforeseeable or non-insurable risk. Value addition –He does not … The role played by the entrepreneur is highly influenced by the model personality that crops up depending on the social conditioning. Protestant ethic granted them the rational economic attitude, accumulating assets, and permitted them to take pleasure in the material life. Thomas Cochran in his theory had tried to discuss the supply of entrepreneurship from the sociological point of view. Document Information. The entrepreneur is born with the desire to establish his own industry, also2. •The theory emphasizes on innovation, ignoring the risk taking and organizing abilities of an entrepreneur •Schumpeter’s entrepreneur is a large scale businessman, … Often, there is a dichotomy between ownership and management. The entrepreneur functions as a member of a group. Joseph Schumpeter propounded the well-known innovative theory of entrepreneurship. He felt that religion had a profound influence on the growth of entrepreneurship. The concept of x-efficiency is also used in the theory of bureaucracy. 2) The dynamic role of Small Business / Industry in Economic Development 3) Personality of an Entrepreneur / Entrepreneur 4) Innovation and Entrepreneurship … Say on entrepreneur. These deficiencies and gap arise because all the factors of production function cannot be marketed. If a firm is producing the maximum output it can, given the resources it employs, such as men and machinery, and the best technology available, it is said to be technical-efficient. Need and importance of Entrepreneurship Development, Emergence of Entrepreneurial Class, Theories of Entrepreneurship, ... Theories of Entrepreneurship, 7; 26; 5798; Promotion of an enterprise/company Free. The entrepreneurs and the other members come within the ambit of this structure. Leibenstein identifies two main roles for the entrepreneur: (i) a gap filler and (ii) an input completer. The religious belief and ethical value associated with the society plays a vital role in determining the entrepreneurial culture. The entrepreneur has to mobilize all the available inputs in order to improve the efficiency of existing production methods. Download with Google Download with Facebook. When an entrepreneur develops a new combination of factors of production, there is enough risk involved. This theory, originally developed for another purpose, has recently been applied to analyse the role of the entrepreneur. Mark Casson in his book ‘The entrepreneur- An Economic Theory’, published in 1982, talks about the entrepreneur. Innovations of entrepreneurs are responsible for the rapid economic development of any country. Joseph A. Schumpeter is the propounder of innovation theory. The second chapter is devoted to discuss the topics like nature of entrepreneurship, the different facets of entrepreneurs, entrepreneurial profits. Further, Kirzner calls the state of mind that enables spontaneous learning to occur alertness. Entrepreneurship is genuinely associated with risk bearing. The Protestants had advanced at a faster rate in establishing capitalism in Europe owing to the value system professed by Protestant ethic. 11. This structure is regarded as one of the most significant structure that influences the supply of entrepreneurs in an economy. The entrepreneurs expect rewards for their contributions and their behaviour is influenced by the rewards. Most of the full-time MBA Programs feature two semesters each year and it takes 2 years to finish the entire Master of Business Administration Course. This paper. (ii) Innovative entrepreneurship – wherein an entrepreneur is innovative in his approach. It ignored the organizing aspects of entrepreneurship. He regards innovation as a tool of entrepreneur, The entrepreneur is viewed as the ‘engine of growth’, He sees the opportunity for introducing new products, new markets, new sources of supply, new forms of industrial organization or for the development of newly discovered resources. 3. The theory is more applicable in developed countries only. Peter Ferinand Drucker was an Austrian born American multifaceted management consultant, author, professor who described himself as a social ecologist. PDF. In his theory, Hoselitz had highlighted the importance of the culturally marginal groups in development of entrepreneurship and their contribution to economic development of the economy. Cochran’s theory despite having earned high appreciations has been criticized on the following counts: Hagen in his theory had accredited the withdrawal of status respect of a group as the starting point for entrepreneurship development process. Baumol’s approach to entrepreneurship within the economy shows that the entrepreneur is basically nonexistent in the models of economics. A Micro-sociological interpretation of entrepreneurship as coined for the theory propounded by Frank Young emphasizes that the entrepreneurial initiatives are conditioned by group level pattern. 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