RICHARD CANTILLON MARK CASSONS ECONOMIC THEORY LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
Richard Cantillion Richard Cantillion (1755) the first person to recognise the role of an entrepreneur in economic theory. The farmer is an entrepreneur who promises to pay the land owner for his farm or land, a fixed sum of money without assurance for the profit he will derive from his enterprise. Hence entrepreneur is always at risk of bearing losses if he is unable to sell the goods at a higher price. 3
Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSONS ECONOMIC THEORY LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
An Economic Theory Mark Casson is a professor of Economics The Entrepreneur An Economic Theory(1945) Demand for entrepreneurship stems from: Need to adjust to change Supply of entrepreneurship is limited by: Scarcity of the requisite personal qualities Difficulty of identifying them when they are available Four major qualities which are crucial for successful entrepreneur are: Imagination (innate) judgemental Self confident persuasive 5
Economic factors that encourage or
discourage entrepreneurship include: Taxation policy Industrial policy Easy availability of raw materials Easy access to finance Access to information on markets Available technology and infrastructure Market opportunities
Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
LEIBENSTEINS X EFFECIENCY THEORY Harvey Leibenstein (1922-1994) propounded the theory of X-efficiency which is popularly called Gap Filling Theory. According to Leibenstein, entrepreneurial functions are determined by the X-efficiency which means the degree of inefficiency on the use of resources within the firm. He identifies two main roles for the entrepreneur: Input completion (improve efficiency of existing production methods or introduce new ones) Gap filling (allocative efficiency) 8
Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
HARVARD SCHOOL THEORY
Harvard School Contemplated that entrepreneurship involves any deliberate activity that initiates, maintains and grows a profitoriented enterprise for production or distribution of economic goods or services, in interaction with internal and external forces. 10
Features of Harvard School Theory
Internal Forces: These forces refer to the internal qualities of the individual such as intelligence, skill, knowledge experience, intuition, exposure, etc. These forces influence the entrepreneurial activities of an individual to a great extent. External Forces: These forces refer to the economic ,political, social, cultural and legal factors which influence origin and growth of entrepreneurship in an economy. Emphasis on two types of Entrepreneurial activities 1. Organization or coordination activity: Entrepreneurial functions like organization and combination of resources for creating viable enterprises 2. Sensitivity to environmental factors that affect decision making The responsiveness to the environmental condition that influences decision making function
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Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
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HAGENS THEORY OF SOCIAL CHANGE Everett Hagen (1964) Theory of Social Change: How economic growth begins Creative personality characterised by high need of achievement, order and autonomy Withdrawal of status triggers changes in personality Factors responsible for withdrawal of status: Displacement of a traditional elite group Changing distribution of economic power Non-acceptance of expected status on migration
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Theories 1) 2) 3) 4) 5) 6)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE 7) KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION 14
THEORY OF ADJUSTMENT OF PRICE KIRZNER (2006)
Adjustment of Price: The chief role of entrepreneur is based upon the adjustment of price in the market. The buyer may pay higher price or seller may accept a lower price, which gives rise to opportunities for profit. Further if different prices prevail in the same market, there in an opportunity for profitable arbitrage between two segments.
Alertness to disequilibrium as a distinguishing
characteristic: Alertness to disequilibrium enables the entrepreneur to intervene in the market by changing the price. Other individuals simply respond by changing their buying and selling plans in lieu of the new price Thus, economy in purchase and profitable selling results in economic gain 15
Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
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THEORY OF ENTREPRENEURIAL SUPPLY KUNKEL BEHAVIOURIST MODEL JOHN KUNKEL(1965) According to him, psychological and sociological variables are the main determinants for the emergence of entrepreneurs. Individual activities are related to both past and present and surrounding social structures and physical conditions Determinants of individual activities are both: Deliberate Accidental
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According to him, Entrepreneurship can be
dependent upon the following structures in the economy: Demand Structure Limitation Structure (barriers) Labour Structure Opportunity structure His model is based upon experimental psychology, identifying sociological variables as the determinants of entrepreneurial supply. 18
Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION 19
Schumpeters Innovation Theory Joseph Schumpeter (1949) Dynamic Entrepreneurship Innovation Theory Entrepreneurship is a creative activity of doing things that are generally not done in the ordinary course of business
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Five Point Theory:-
Creates a new product/new quality of
product Introduces a new method of production Discovers a new market Finds a new source of raw material Finds new way of making things/ breaking up of monopoly
Inventor and innovator - difference
Entrepreneur change agent
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Criticisms: The theory ignores organising skills Innovations are routine Large scale entrepreneur not possible since beginning Lack of Capital and skilled labour, imperfect markets results in SSIs Not applicable in LDCs
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Theories 1) 2) 3) 4) 5) 6) 7)
RICHARD CANTILLON MARK CASSON LEIBENSTIENS X-EFFICIENCY THEORY HARVARD SCHOOL THEORY HAGENS THEORY OF SOCIAL CHANGE KIRZNERS THEORY OF ADJUSTMENT OF PRICE KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY 8) JOSEPH SCHUMPETERS INNOVATION THEORY 9) DAVID McCLELLANDS THEORY OF MOTIVATION
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Theory of High Achievement (1953)
NEED FOR ACHIEVEMENT
Three types of motivational needs
Achievement Motivation (n-ach) Seeks achievement, attainment of realistic but challenging goals, advancement in the job Authority/power Motivation (n-pow) need to be influential, effective and make an impact. Strong need to lead and ideas to prevail Affiliation Motivation (n-affil) need for friendly relationships, motivated interactions with other people. TEAM PLAYERS
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Mix and combination of all these qualities
Need for achievement is the most important need which can be used effectively for economic progress. This is developed in the family itself. McClellands views on entrepreneurship: Entrepreneurs are made, not born
Through Entrepreneurship development
programmes Two characteristics:-
Doing things in a new and better way
Decision making under uncertainty
Get a KICK out of winning or solving a difficult
problem than money
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Key points: 1) RICHARD CANTILLON (Entrepreneur is the RISK BEARER and he is not the supplier of capital) 2) MARK CASSON (Entrepreneurship is a result of conducive economic conditions. 4 qualities-imagination, judgemental, confident, persuasive)
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3) LEIBENSTIENS X-EFFICIENCY THEORY (X-efficiency is the degree of inefficiency in the use of resources within the firm: it measures the extent to which the firm fails to realise its productive potential) 4) HARVARD SCHOOL THEORY (Purposeful activity which initiates, maintains and grows an enterprise in interaction with internal and external environment) 27
5) HAGENS THEORY OF SOCIAL
CHANGE (An entrepreneur is a creative problemsolver interested in things in practical and technological realm driven by duty to achieve. Withdrawal of status triggers changes in personality) 6) KIRZNERS THEORY OF ADJUSTMENT OF PRICE (Entrepreneur is the ARBITRAGEUR who makes profit due to differences in the prices prevailing in the market) 28
7) KUNKELS THEORY OF ENTREPRENEURIAL SUPPLY (Individuals exhibit Entrepreneurial behavior on the basis of their psychological and sociological environment) 8) JOSEPH SCHUMPETERS INNOVATION THEORY (Innovation is the only key to economic progress) 29
9) DAVID McCLELLANDS THEORY OF
MOTIVATION (Intense, prolonged and repeated efforts to accomplish something difficult)
