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Transcript
Hello!! Friends, in this class we will be discussing about some theories of entrepreneurship. It is not that entrepreneurship is being discussed as a part of the curriculum because of the globalization and the privatization and liberalization era. So this is the issue which is in practice since centuries in our society. But we have tried to identify and frame it in this particular frame work and that is how it became an area of discipline. For bringing it under academic arena so there were good number of postulates, there were good numbers of hypothesis, and all these postulates and hypothesis were tested over a period of time and we came to certain conclusions and those things that we are presenting as a theory. The first theory that we are discussing under theories of entrepreneurship is the theory given by the Schumpeter, Schumpeterian theory. So while discussing the concept of entrepreneurship we said that the entrepreneur is a basically an economic man which the definition of the Schumpeter said that an entrepreneur is a person who destroys the existing economic order and he is going to establish a new economic order. What exactly does it mean and that is also reflected in his theory aspects also. The Schumpeterian theory or the dynamic entrepreneurship theory. So wherein he says that basically the process of entrepreneurship is going to introduce a new good or a theory. The moment new element is introduced into the environment the local ecology is going to be disturbed. And the disturbance may end with some positive aspects as well as some negative aspects. In either case we said that he is going to destroy the existing economic order. So the distraction of economic order may be there is increase in sale or may be in some cases there is decrease in sale. Means we are going to influence the ongoing processes with the introduction of a new goods or services which is invariably a product of innovation. Or it maybe introduction of a new method of production or opening up of a new market. So now we are moving away from traditional market system and now we are entering into the new market system what is that, that is electronic marketing system and that is what is the introduction of a new market which was only a dream few years back but now it is a reality and firstly we are moving towards that and that is how it is also disturbing the existing economic order. Means it is bringing some innovations into the existing economic orders. Then conquest of the new source of supply of raw materials because we are in search of different raw materials because we want to combine and want to come out with new products and carrying out new organizations of any industry. So establishment of an institution for carrying out the operations is another important aspect. Basically, these innovations create a new demand and entrepreneurs brings these innovations to the market and that is what is the basic aspect of dynamic entrepreneurship therein as proposed by Schumpeter.
Then the second theory that we are going to discuss is Classical entrepreneurship theory which is basically dependent on classical economic theory. The classical economic theory consists of two basic issues:
- Creation of wealth in the society and
- distribution of wealth in the society.
Time and again we are all aware that Creation of wealth is the basic issue and it is happening since the beginning of the human civilization and it has changed its form from time and again with the introduction of the technologies and all those things. But very important and pertinent issue is distribution of wealth in the society. And it has its merit relationship with the creation of wealth in the society also and for both of these issues entrepreneur is the key person who is involved in this process. It is basically based on the private ownership of the society because we are talking of the classical theories of entrepreneurship wherein capitalism plays an important role. So where private ownership is going to be dominant. And this private ownership creates and distributes the wealth which are done through the exchange of goods and services under open and uncontrolled markets. And it is open to all buyers and sellers means it is enhanced to competition in the market because of the private place. So in this completion who so emerges as a winner so he will be the gainer. That is what is the Classical entrepreneurship theory is going to propose.
Then the next theory that we are going to discuss is the Neoclassical entrepreneurship theory. So which is having little bit modification over the classical theory which is basically based upon the Neoclassical economic theory. The key concept of this theory is that there are many buyers and sellers in the market. It is not limited to few players as it is only limited to the people who are acting as capitalist, NO, there are many people. Then they interact and ensure that the supply equals the demand. So there should not be any inequality and that is what the Neoclassical entrepreneurship theory takes care of. Then, the capitalized market create the wealth and distribute wealth among the buyers and sellers. Again it is through the process of exchange of goods, as well as services. So there should be the distribution of wealth among the farmers. And this theory is based on basically the economies of skill because it says that the cost of production per unit decreases with the increase of the size of the firm. As we have the larger production units so the cost of production of that particular commodity is going to be reduced. This was the basic idea of the first prime minister of our country Pandit Jawaharlal Nehru ji. And the Gandhian theory of economics was little bit different from the Nehru theory and that was the ideological differences both the leaders were having. Basically Nehruji proposed that there should be mass production. The basic idea behind the emphasis on mass production is the as we discussed about the new classical theories wherein if we are going for the mass production so then the cost of the output is going to be reduced. On the contrary Gandhiji said there should be production by masses. So this was the basic ideological demands. So Nehru used to tell mass production and Gandhi used to abdicate about the production by the masses. What are the advantages of this production by masses? Where in we are involved in maximum number of primary producers. Through that process the entire population is involved in one or the other way into the production process. And in that process the distribution of the belt is taken care of accordingly. So as per the capacity of each and every individual who is involved in this production process is going to be the gainer. If we are going for mass production wealth is accumulated with certain individuals or certain organizations so that can have a better distribution when we go for the production by the masses. So these were the difference between these two basic issues.
Now coming to the Axiomatic theory of entrepreneurship development. So this particular theory is basically on entrepreneurial behavior of the farmers wherein the theory consists of the propositional statements ranging from the postulates to hypothesis with a built – in logical system for explaining and predicting the entrepreneurial behavior of the farmers. A range of items were taken up in the form of postulates and hypothesis and they were put into study according to the behavior of the farmers and the theory reveals that the axiomatic theory of entrepreneurship reveals that higher the value orientation, higher the marketing facilities and education and the socio economic status lead to thehigher entrepreneurial behavior of the farmers. If these factors that is value orientation, marketing facilities, education and the socio economic status is high if these factors are found among the individuals he will be having higher entrepreneurial behavior and he can emerge as most successful agricultural entrepreneur that we can prove with the help of this particular theory that is proposed by De and Rao in the year 2001.
So with this now we are moving on to the next theory which is popularly known as the Harvard School Theory. This particular theory is emphasizing on two basic activities, what is that – the organization or the coordination of activities and the environmental characteristics. So these are the two important activities that since beginning of the discussion on this entrepreneurship we have been emphasizing upon. The internal forces basically the characteristics of entrepreneurs namely the risk taking, innovativeness, achievement orientation then the personal resourcefulness, opportunity seeking, strategic reasoning and the external forces include surrounding the business, and economic and social and political, cultural and legal framework are going to influence the process of entrepreneurship. This is what the Harvard School Theory wherein the theory also explains that entrepreneurs are engaged in the purposeful activity of developing a profit oriented business in interaction with the internal and external forces. Wherein the environmental factors come into picture and for achieving this thing the organization and coordination activity comes into the picture. So this is about the Harvard School Theory. So with this we had discussion on different theories of entrepreneurship wherein we try to find out that there are different theories proposed by different scientists based on certain assumptions and the hypothesis which were proven over a period of time in under certain environments so this is about the theories of entrepreneurship which we discussed in this class and in the next class we will be discussing some promising models of entrepreneurship.
Thank You
