Entrepreneurship has increasingly become popular as the recession keeps on getting worse and worse. Those who have already decided to become entrepreneurs have discovered that there is more to the activity than what is generally assumed. Hence need to know clearly the theories of entrepreneurship.
Entrepreneurship – Introduction
For one to become a successful businessman there is need for that person to know all about the theories of entrepreneurship. However, entrepreneurship (though famous) is not a fully known field to many people.
Hence its theories are very abstract and boring for most people. Therefore, the main purpose of this article is to explain these theories in full depth so that people can really appreciate the whole process of entrepreneurship.
The Neo-Classic Theory Of Entrepreneurship
This is one of the famous theories of entrepreneurship up to date. Advanced by Marshal in 1948, the theory stipulates that there is no exploitation on the business platform.
The theory is of the view that everyone who is a conducting a particular business gets a particular profit margin which is line with his or her levels of labor.
Hence this means that entrepreneurs who work very hard at their various businesses will get more profits than those who don’t. The theory also views the level of knowledge of an entrepreneur as an important factor in whether or not that person will make a lot of profits.
This means that if one entrepreneur has more knowledge in the type of business that he or she is doing than another entrepreneur, then that particular entrepreneur will be more successful. This is one of the theories of entrepreneurship that many people follow.
Innovative Theory Of Entrepreneurship
The innovative theory is one of the most famous theories of entrepreneurship used all around the world. The theory was advanced by one famous scholar, Schumpeter, in 1991. Schumpeter analyzed the theory proposed by Marshall, and he concluded that the theory was wrong.
Schumpeter believes that creativity or innovation is the key factor in any entrepreneur’s field of specialization. He argued that knowledge can only go a long way in helping an entrepreneur to become successful.
However, Schumpeter viewed innovation along with knowledge as the main catalysts of successful entrepreneurship. He believed that creativity was necessary if an entrepreneur was to accumulate a lot of profits in a heavily competitive market.
Many business people support this theory, and hence its popularity over other theories of entrepreneurship.
Alert Theory Of Entrepreneurship
This is probably the most controversial of all the theories of entrepreneurship. The theory was first founded by Kirzner (in 1997) who wanted to bring together the other theories of entrepreneurship advanced by Marshall and Schumpeter.
But he realized that the market itself played the most important role in whether an entrepreneur would be successful or not.
Hence he came up with his own view of entrepreneurship which he called ‘alert’. The theory states that understanding the market is the key to being a successful entrepreneur.