Max Weber’s Theory of Social Change:
Max Weber supported a sociological explanation for the development of entrepreneurship in his social change theory. He felt that religion had a profound impact on the development of entrepreneurship. Religious beliefs and ethical values associated with the community play an important role in determining entrepreneurial culture.
Max Weber commented that the entrepreneurial energies of a community are created externally and by religious beliefs. Some religions claim the basic values of making and receiving money, while some religions place less emphasis on it. To understand the summary of Max Weber’s theory, we must understand some basic points of the theory.
1. Max Weber argued that the development of entrepreneurship depends on the ethical value of the community involved.
2. The spirit of rapid industrial growth depends on the rational use of technology in the acquisition of money and the rational use of productivity and the proliferation of money.
3. Weber analyzed his theoretical formula by the relationship he found between the opposing ethic and the spirit of capitalism.
4. He studied religion and its impact on entrepreneurial culture.
Weber’s theory has been criticized for various reasons, based on incorrect assumptions:
- The theory is based on unrealistic and false assumptions.
- The theory has been found to be empirically incorrect.
- Max Weber has been criticized by many sociologists for his views on Hinduism and entrepreneurship. The rapid expansion of entrepreneurship in post-independence India demonstrates that Hinduism despises the spirit of adventure and adventure.
- The views of the Protestant Protocol are not entirely correct. Capitalism flourished in areas where there were no Protestant norms.
Hoselitz’s theory emphasized cultural factors and the role of culturally marginalized groups in the development of entrepreneurship. In his theory, Hoselitz highlighted the importance of culturally marginalized groups in the development of entrepreneurship and their contribution to the economic development of the economy. Fringe groups are a minority in society and they yearn to raise their conditions and promote economic growth in the process.
In many countries, entrepreneurial interest is associated with individuals of particular socio-economic classes. The importance and contribution of culturally marginalized groups such as Lebanon in West Africa; Jews in Europe reflect a summary of the doctrine towards the economic growth of those regions.
Hoselitz commented that marginalized men are placed in an ambiguous position and therefore they are best suited to make constructive changes in the circumstances of the change. They bring true adaptations in their behavior. They become entrepreneurs and promote economic growth.
The Economic Theory of Entrepreneurship:
G.F. Papanek (1962) and J.R. Harris (1970) conclude that entrepreneurship is an important factor that influences entrepreneurial activity. Economic gains spontaneously develop the desire to pursue diverse entrepreneurial ventures among entrepreneurs. The relationship between a person’s intrinsic motivation and desired economic gains has a profound influence on the development of entrepreneurial skills. Whenever certain economic conditions are favorable, entrepreneurial growth and economic growth take place.
Entrepreneurial incentives are a major motivator for entrepreneurial activities. Economic incentives include access to information such as taxation policy, industrial policy, sources of finance and raw materials, infrastructure availability, investment and marketing opportunities, market conditions and technology.
Schumpeter’s theory of discovery:
Joseph Schumpeter presented a well-known innovative theory of entrepreneurship. Schumpeter takes up the case of a capitalist closed economy that is in stable equilibrium. He believed that the introduction of innovation would disturb the steady flow of the entrepreneurial economy and bring the economy to a new level. The activities of the entrepreneur refer to the pathological condition as it breaks the usual circular flow.
The entrepreneur’s findings are responsible for the rapid economic growth of any country. Speaking of innovations, he noted the new combination of factors of production, Schumpeter gave the entrepreneur the role of innovator, who was not just an ordinary executive, but an innovator.
According to Schumpeter’s theory, innovation leads to the following changes:
- Introduction of new products.
- Introduction of a new production system.
- Opening a new market.
- Finding a new source of raw materials.
- Approval of the process or organization.
Schumpeter’s theory is based on the following assumptions:
- Adequate availability of capital.
- The existence of the developed banking system to avoid capital shortage.
- Presence of high-level advanced technology.
- Private initiative and broad-based entrepreneurship process.
Limitations of Schumpeter’s Theory:
- Schumpeter completely ignored the entrepreneurial risk-taking process, which cannot be ignored. Whenever an entrepreneur creates a new combination of production factors, there is enough risk.
- This principle applies only in developed countries. In developing countries, there is a shortage of innovative entrepreneurs.
- This theory does not explain why some countries have more entrepreneurial talent than others.
McClelland’s Theory of Psychology:
According to McClelland’s theory of psychology, entrepreneurship emerges when society has an adequate supply of individuals with specific characteristics. He argued that some requirements are learned and socially acquired by interacting with the individual environment.
David McClelland (1961) has identified three types of needs:
1. The need for achievement: A motivation to excel, to thrive and to grow.
2. The need for power: A motivation that affects others and situations.
3. The need for affiliation: Motivation for friendly and close interpersonal relationships.
Need for Achievement:
1. McClelland found that high achievers differentiate themselves from others by their desire to do things better.
2. High achievers are not gamblers: they dislike succeeding by chance.
3. Achievers seek situations where they can assume personal responsibility for finding solutions to problems, where they can receive rapid feedback on their performance so that they can set moderately challenging goals.
Need for Power:
1. The need for power is a drive to have an impact to be influential and to control others.
2. Individuals high in now enjoy being in charge, strive for influence over others, prefer to be placed into competitive and status-oriented situations and tend to be more concerned with gaining influence over others and prestige than with effective per.
Need for Affiliation:
1. This need can be viewed as the desire to be liked and accepted by others.
2. Individuals with high affiliation need value interpersonal relationships and exhibit sensitivity towards other people’s feelings.
3. McClelland found that the combination of a moderate to the high need for power and a lower need for affiliation enables people to be effective entrepreneurs they can use power to influence and control others’ behavior and can make difficult decisions without the undue worry of being disliked.
John H. Kunkel had built up his theory on the edifice of entrepreneurship supply. He was of the opinion that the sociological and psychological factors influence the emergence of entrepreneurs. The supply of entrepreneurs has a functional relationship with the social, political and economic structure. In order to understand Kunkel’s theory, let us understand a few concepts associated with his theory:
1. Demand Structure: This refers to the demand situation prevailing in the economy. The entrepreneurs expect rewards for their contributions and their behavior is influenced by the rewards. The demand structure of an economy can be enlarged by rewarding the entrepreneurs with material rewards for their entrepreneurial activities.
2. Limitation Structure: This structure influences the entrepreneurs and other members of society. The society in this structure restricts specific activities. The entrepreneurs and the other members come within the ambit of this structure.
3. Opportunity Structure: This structure is regarded as one of the most significant structure that influences the supply of entrepreneurs in an economy. This structure includes the existing market structure, the available managerial and technical skills, information about production techniques, the supply of labor and capital.
4. Labour Structure: This structure relates to the availability of skilled labor willing to work. The labor structure is influenced by the number of factors like the mobility of labor, available alternatives of employment, level of traditionalism and prevailing work culture.