Theories of Entrepreneurship

1.
Innovation theory of entrepreneurship- Joseph Schumpeter
The innovation theory is also called as dynamic theory. According to this theory
entrepreneurs emerge due to psychological characteristics like will power, self-
intuitions, tolerance capacity. This theory states that innovative entrepreneurs thrive
in the market rather than survive. This theory helps markets understand how market
trends are changing and will give insight to marketers about the likelihood success or
failure of the products they introduce in the market.
The theory emphasis that if there is no innovation, there will be no progress and the
company will not be able to stay relevant in the market. Through creativity and
innovation, the business is taken to a new level. The creativity and innovation are
carried out namely in five ways i.e. reducing cost of production, enhancing features
of an existing product / service, discovering new markets, new (alternative) raw
material for production of goods and introducing new products in the market.
The theory suggests that entrepreneurs desire to earn profits through innovations. It
makes a distinction between an inventor and an innovator. An inventor discovers
new methods and new material whereas an innovator is one who utilises or applies
inventions and discovers to produce better quality goods that give greater
satisfaction to customer and high profit to entrepreneurs. In this way, an
entrepreneur is an innovator. This type of entrepreneurs drives the economy to a
new high level. Such entrepreneurs are restless and creative always striving for
innovations. Such kind of entrepreneurs lead to progress of the society and mankind.
Theory of High Achievement-David McClelland
The need for high achievement trigger people to excel in their endeavour. Individuals
who are driven by the need of high achievement generally tend to avoid low reward
low risk situations. This is because such situations lack the real challenge. Individuals
who are driven by the need of high achievement enjoy and derive thrill from high
risk situations. They are prepared for all the hardships and struggle to reach their
goals.
The sense of achievement is considered to be more significant than the financial

rewards. Such individuals usually work alone and take calculated risk in order to
achieve their goals. They enjoy work-oriented environment and encourage feedback
and take criticism of their work in stride.
Status, prestige and recognition are aspects such individuals desperately seek and
hate being tagged as losers / failures. Individuals who fall under this theory are
extremely hard working and self-disciplined. They have very high expectations from
the people they work with. Many employees feel pressurised working under them
due to the high demanding atmosphere. Entrepreneurs in this category tend to exert
extreme control and try to influence others they are associated with in the business
ventures they carry out. Such individuals intend to win desire to win at all cost, even
if it means the others must lose.
Theory of Social Change-Everett Hagen
The socially concerned entrepreneur through his creativity brings about social
transformation and economic development. Political and social changes are
associated with economic development. According to this theory when members of
the society feel their values and status are not respected by the society, they turn to
innovation to get respect of the society.
The theory states that the entrepreneur is driven by a sense of duty and is a creative
problem solver. Technological creativity of the entrepreneur brings about social
change and economic development. There is a massive transformation in the
traditional set-up of the society. Due to the innovation brought about by the
entrepreneurs the society evolves into higher levels.
Biological Theory of Entrepreneurship
According to this theory the genetic make-up of human beings encourages some
individuals to come up with new business ideas, start new business ventures and
engage in other entrepreneurial activities more than the others. The genes of an
individual greatly impact the attraction to turn an entrepreneur. The genes of the
individual instigate a natural progression towards becoming an entrepreneur.
Individual genes may also be correlated with behaviours through the action of the mind-
brain complex.
The theory states that the choice of being self-employed is largely driven by a
person’s genetic make-up. The genes are an important reason why some individuals
are fascinated by entrepreneurial ventures.
Even in India, individuals from certain business communities are more attracted
towards entrepreneurship as compared to others. Individual belonging to such
business families display strong characteristics of an entrepreneur like risk taking
ability, leadership qualities etc.

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1.

Innovation theory of entrepreneurship- Joseph Schumpeter

Theory of High Achievement-David McClelland

The sense of achievement is considered to be more significant than the financial

Biological Theory of Entrepreneurship

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