UNIT-2

Entrepreneurial Motives, Motivating

factors of Entrepreneurship, Theories of
Entrepreneurship, Entrepreneurial
culture, Entrepreneurial Knowledge and
Skills, Entrepreneurial Competencies,
Entrepreneurial Process,
Entrepreneurship Development Programs
and Government Support to Entrepreneurs.
 Entrepreneurial Motives

People land in the entrepreneurial world

for many reasons. In analyzing what ends
up driving these entrepreneurs,
researchers and observers find 4
particularly strong motives:
control, freedom, impact and wealth.
Control
• To be the final word on important decisions in my business
• To develop and shape my business as I see fit
• To be the ultimate boss reporting to no one
• To insist on a different approach when I feel staff are making critical
mistakes
• To choose if and how I want to expand the business
• To be able to engage and disengage company advisors as I see fit
• To personally shape the public image of my company
• To personally select that staff I prefer
•
Freedom
• To be my own boss
• To set my own working hours
• To avoid office politics
• To work independently
• To follow my own creative inspirations
• To avoid having to report to someone whom I disrespect or dislike
• To do elements of my work when and where I want to – home, coffee
shop, out of town..
• To escape certain company rituals that I find futile – e.g: endless
meetings, office parties, company bonding trips..
Impact
• To build an innovation that will change the way people do key tasks
• To bring about positive social change
• To create jobs for people
• To help people who are at risk or disadvantaged
• To make certain tasks more efficient or enjoyable with my product or
service
• To be remembered for inventing something long after I’m out of the
workforce
• To build products or services that people can’t wait to rave about
with others
• To be a pioneer in my industry
Wealth
• To accumulate much money over my lifetime
• To never have to worry about having enough money
• To be able to buy what I want when I want it
• To have a fancy house/vacation house and other high ticket items
• To be able to travel the world without worrying about costs
• To build a business that I can sell for a huge profit
• To retire with great wealth I have earned in the business
• To bring in solid strategic partners who can help grow the value of the
business
Entrepreneurial Motives
Motivating factors of Entrepreneurship

• While some researchers have classified the factors motivating

entrepreneurs into ‘push’ (compulsion) and ‘pull’ (choice) factors,
most of the researchers have classified all the factors motivating
entrepreneurs into internal and external factors.
Internal Factors

1. Desire to do something new.

2. Become independent.
3. Achieve what one wants to have in life.
4. Be recognized for one’s contribution.
5. One’s educational background.
6. One’s occupational background and experience in the relevant field.
External Factors
1. Government assistance and support.
2. Availability of labour and raw material.
3. Encouragement from big business houses.
4. Promising demand for the product.
• One research study (Murthy et. al. 1986) reports that entrepreneurs
are motivated to start business enterprises due to the following three
types of factors:

1. Ambitious factors.
2. Compelling factors
3. Facilitating factors.
Theories of Entrepreneurship
1. Innovation Theory of Schumpeter:
A dynamic theory of entrepreneurship was first advocated by
Schumpeter (1949) who considered entrepreneurship as the catalyst
that disrupts the stationary circular flow of the economy and thereby
initiates and sustains the process of development. Embarking upon
‘new combinations’ of the factors of production - which he succinctly
terms, innovation - the entrepreneur activates the economy to a new
level of development.

Schumpeter introduced a concept of innovation as key factor in

entrepreneurship in addition to assuming risks and organising factor of
production. Schumpeter defines entrepreneurship as “a creative
activity”.
 The concept of innovation and its corollary development embraces five
functions:

• The introduction of a new product with which consumers are not yet familiar or introduction of a
new quality of an existing product,
• The introduction of new method of production that is not yet tested by experience in the branch of
manufacture concerned, which need by no means be founded upon a discovery scientifically new
and can also exist in a new way of handling a commodity commercially,
• The opening of new market that is a market on to which the particular branch of manufacturer of
the country in question has not previously entered, whether or not this market has existed before,
• Conquest of a new source of supply of raw material and
• The carrying out of the new organisation of any industry.
2.Need for Achievement Theory of McClelland

• According to McClelland the characteristics of entrepreneur has two

features - first doing things in a new and better way and second decision
making under uncertainty. McClelland emphasises achievement orientation
as most important factor for entrepreneurs. Individuals with high.
achievement orientation are not influenced by considerations of money or
any other external incentives.

• Professor David McClelland, in his book The Achieving Society, has

propounded a theory based on his research that entrepreneurship
ultimately depends on motivation. It is the need for achievement (N-Ach),
the sense of doing and getting things done, that promote
entrepreneurship.
• According to him a person acquires three types of needs as a result of
one’s life experience. These three needs are:

• Need for Achievement. A drive to excel, advance and grow.

• Need for Power. A drive to dominate or influence others and
situations.
• Need for Affiliation. A drive for friendly and close inter-personal
relationships.

• According to McClelland, motivation, abilities and congenial

environment, all combine to promote entrepreneurship.
3. Leibenstein’s X-Efficiency Theory

• This theory, originally developed for another purpose, has recently

been applied to analyse the role of the entrepreneur. Basically, 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. According to Leibenstein, When an input is not
used effectively the difference between the actual output and the
maximum output attributable to that input is a measure of the
degree of X-efficiency.
• X-efficiency arises either because the firm’s resources are used in the wrong way or because they
are wasted, that is, not used at all. Leibenstein identifies two main roles for the entrepreneur: (i)
a gapfiller and (ii) an input completer.
• According to him there are two types of entrepreneurship.
(i) Routine entrepreneurship – deals with normal business functions
like co-ordinating the business activities.
(ii) Innovative entrepreneurship – wherein an entrepreneur is
innovative in his approach. It includes the activities necessary to
create an enterprise where not all the markets are well-established
or clearly defined.
4. Risk Bearing Theory of Knight
• A key element of entrepreneurship is risk bearing. Prof. Knight and
John Staurt Mill saw risk-bearing as the important function of
entrepreneurs.
1. Risk creates Profit
2. More Risk More Gain
3. Profit as Reward and Cost
4. Entrepreneur’s Income is Uncertain
5. Max Weber’s Theory of Entrepreneurial Growth

• Max Weber in his theory says religion has a large impact on

entrepreneurial development. According to Weber some religions
have basic beliefs to earn and acquire money and some have less of
it. He calls them a ‘spirit of capitalism’ and ‘adventurous spirit’. The
spirit of capitalism will be generated when mental attitude in the
society is favourable to capitalism.
• His theory suggests the belief systems of Hinduism, Buddhism ad
Islam do not encourage entrepreneurship. His stand has been
challenged by many sociologists.
Max Weber’s theory suited the colonial rulers who wanted to encourage
European entrepreneurship in India. But it has been criticised by subsequent
researchers. The theory is based on the invalid assumptions, which are:

(a) There is a single system of Hindu value,

(b) The Indian community internalised those values and translated them to
day-to-day behaviour, and

(c) These values remained immune to and insulated against external

pressures and change. The rapid growth of entrepreneurship in India since
independence proves that Hinduism is not averse to the spirit of capitalism
and to adventurous spirit.
 6. Hagen’s Theory of Entrepreneurship

• One important theory of entrepreneurial behaviour has been

propounded by Hagen which is referred to as the withdrawal of status
respect. Hagen has attributed the withdrawal of status respect of a
group to genesis of entrepreneurship. Hagen considers the
withdrawal of status, of respect, as the trigger mechanism for
changes in personality formation.
• Hagen postulates four types of events which can produce status
withdrawal:
• Displacement of a traditional elite group from its previous status by
another traditional supply physical force.
• Denigration of valued symbols through some change in the attitude of
the superior group.
• Inconsistency of status symbols with a changing’ distribution of
economic power.
• Non-acceptance of expected status on migration to a new society
• Hagen further postulates that withdrawal of status respect would give
to four possible reactions and create four different personality types:
(a)Retreatist: Entrepreneur who continues to work in society but
remains indifferent to his work or status.
(b)Ritualist: One who works as per the norms in the society hut with
no hope of improvement in the working conditions or his status.
(c)Reformist: One who is a rebellion and tries to bring in new ways of
working and new society.
(d)Innovator: An entrepreneur who is creative and try to achieve his
goals set by himself.

According to Hagen (1962), the creativity of a disadvantaged minority

group is the main source of entrepreneurship. He developed this thesis
from the case of the samurai community of Japan
7. Thomas Cochran’s Theory of Cultural Values
• The key proportions in Thomas Cochran’s theory are cultural values, role
expectations and social sanctions. According to him, the entrepreneur
represents society’s model personality. His performance is influenced by the
factors of his own attitudes towards his occupation, the role expectations held by
sanctioning groups, and the operational requirements of the job. The
determinants for the first two factors are the society’s values.
• Changes over time in such variables as population, technology, and institutional
drift will impinge on the role structure by creating new operational needs.

• It can be noted that various communities and castes like samurai in Japan, family
pattern in France, Yoruba in Nigeria, Kikuya in Kenya, Christians in Lebanon, Halai
Memon industrialists in Pakistan, Parsees, Marwaries and Gujaratis in India have
been the sources of entrepreneurship.
8. Theory of Change in Group Level Pattern
• Young defines entrepreneurs as that the entrepreneur characteristics are found in
small groups wherein individuals develop as entrepreneurs. Young arrived at the
group level pattern behaviour entrepreneurs based on his studies known as
Thematic Appreciation Test (TAT) on groups of entrepreneurs.
• Young’s theory is a theory of change based on society’s incorporation of reactive
subgroups. A group becomes reactive when the following three conditions
coincide:

1. When denied of access to important social networks;

2. When a group experiences low ‘status recognition; and
3. When the group has better institutional resources than other groups in the
society at the same level.
 9. Economic Theory of Entrepreneurship

• Many economists revealed that entrepreneurship and economic growth will take
place in those circumstances where particular economic conditions are in favour
of the business environment. The main advocates of this theory were Papanek
and Harris. According to them economic incentives are the main forces for
entrepreneurial activities in any country.
• There are a lot of economic factors which promote or demote
entrepreneurship in a country. These factors are:

(a) The availability of bank credit

(b) High capital formation with a good flow of savings and investments
(c) Supply for loanable funds with a lower rate of interest.
(d) Increased demand for consumer goods ad services
(e) Availability of productive resources.
(f) Efficient economic policies like fiscal ad monetary policies
(g) Communication and transportation facilities
 10. Exposure Theory of Entrepreneurship

• Many studies have shown that it is the exposure to new ideas and opportunities
towards creativity ad innovation which leads to create a new venture.

• Education have played very significant role in exposing the Indian entrepreneurs
to Western ideas leading them to entrepreneurship. It is also the differential
responses of the social groups to opportunities provided by the commitment of
the political system to industrialisation that has led the process of
entrepreneurial spread.
11. Political System Theory of Entrepreneurial Growth

• Political system can crate adequate infrastructure, favourable laws,

favourable taxation system and procedures, provide incentives and
subsides, security to entrepreneurs, create promoting policies and
can encourage people towards entrepreneurship. Government can
also build supporting system for potential entrepreneurs.
• Thus, the commitment of political system can contribute significantly
towards entrepreneurial development.
• According to Hoselitz, Japanese entrepreneurs could flourish because their
political system was able to properly integrate with various sectors such as the
industrial and agricultural, large, small and handicraft industries, labour intensive
and capital intensive technology, traditional and modem social structure.

• According to Boulding “political structure was the decisive factor in

entrepreneurial growth of France and Russia. But before 1917 it did not flourish
because the creative ability of masses could not find expression. Hoselitz argued
that France lagged behind entrepreneurially, because his political system did not
provide sufficient incentives and security to entrepreneurs.
Entrepreneurial Culture
• A society that enhance the exhibition of the attributes, values, beliefs
and behaviors that are related to entrepreneurs (Brownson, 2013).

Levels of constituent of entrepreneurial culture (Brownson,

2013)
Entrepreneurial knowledge and Skills
Entrepreneurial Competencies
Entrepreneurial Process
• Discovery: An entrepreneurial process begins with the idea generation,
wherein the entrepreneur identifies and evaluates the business
opportunities.
• Developing a Business Plan: Once the opportunity is identified, an
entrepreneur needs to create a comprehensive business plan.
• Resourcing: The third step in the entrepreneurial process is resourcing,
wherein the entrepreneur identifies the sources from where the finance
and the human resource can be arranged.
• Managing the company: Once the funds are raised and the employees are
hired, the next step is to initiate the business operations to achieve the set
goals. First of all, an entrepreneur must decide the management structure
or the hierarchy that is required to solve the operational problems when
they arise.
• Harvesting: The final step in the entrepreneurial process is harvesting
wherein, an entrepreneur decides on the future prospects of the business,
i.e. its growth and development.
Entrepreneurial Development Programme

• Entrepreneurial Development Programme (EDP) refers to a programme

which is formulated to assist the individuals in reinforcing their
entrepreneurial motives, and attaining competencies and skills which is
essential for performing an entrepreneurial role successfully.

According to N. P. Singh :
• "Entrepreneurship Development Programme is designed to help an
individual in strengthening his entrepreneurial motive and in acquiring
skills and capabilities necessary for playing his entrepreneurial role
effectively. is necessary to promote this understanding of motives and their
impact on entrepreneurial values and behavior for this purpose”.
Objectives of Entrepreneurial Development Programme (EDP)
• To make people learn compliance with law.
• To develop and fortify entrepreneurial quality, i.e., motivation or need for achievement.
• To develop small and medium scale enterprises in order to generate employment and
widen the scope of industrial ownership.
• To industrialize rural and backward sections of the society.
• To understand the merits and demerits of becoming an entrepreneur.
• To investigate the environmental set-up relating to small industries and small businesses.
• To design project for manufacturing a product.
• To increase the supply of entrepreneurs for quick industrial development.
• To prepare individuals to accept the uncertainty involved in running a business.
• To develop managerial skills among small entrepreneurs for improving the performance
of small-scale industries.
• To offer profitable employment opportunities to educated young men and women.
• To expand the sources of entrepreneurship.
Importance of EDP
• Formation of Employment Opportunities
• Provides Adequate Capital
• Proper Utilization of Local Resources
• Increased Per Capital Income
• Improved Standard of Living
• Economic Independence
• Preventing Industrial Slums
• Reducing Social Tension
• Facilitating Overall. Development
Government Support to Entrepreneurs.
• Start-up India
• ATAL Innovation Mission
• e-Biz Portal
• Support for International Patent Protection in Electronics & Information
Technology (SIP-EIT)
• Multiplier Grants Scheme (MGS)
• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
• Software Technology Park (STP)
• Loan For Rooftop Solar Pv Power Projects
• NewGen Innovation and Entrepreneurship Development Centre (NewGen IEDC)
• Dairy Processing and Infrastructure Development Fund (DIDF)
THANK YOU