Lesson 3

• Theory is a GENERALIZATION that explains a set of FACTS or PHENOMENA. It can be supported by another observation or proven to be otherwise.
• Entrepreneurship Theories

  1. Innovation Theory
  2. Keynesian Theory
  3. Alfred Marshall Theory
  4. Risk and Uncertainty-Bearing Theory
  5. Weber's Sociological Theory
  6. Kaldor's Technological Theory
• Innovation Theory is proposed by Joseph Schumpeter who believed that innovation is the force that will PROPEL CHANGE.
• Joseph Schumpeter also wrote The Theory of Economic Development.
• Innovation Theory regards ECONOMIC DEVELOPMENT as the product of STRUCTURAL CHANGE or INNOVATION.
• Primary Role of Entrepreneur in Innovation Theory

  • New Product or services

  • Opening a new Market

  • New Supplier

  • New Industry Structure
• Keynesian Theory was proposed by Jhon Maynard Keynes in 1936
• Keynesian Theory puts so much emphasis on the role of the GOVERNMENT in entrepreneurial and economic development, most especially when the economy is experiencing DEPRESSION.
• Alfred Marshall Theory talks about his book Principle of Economics, he firmly asserted that the Four Factors of Production are: Land, Labor, Capital and Organization. And considered ENTREPRENEURSHIP as the driving factor that brings this factor together.
• Characteristics of a Successful Entrepreneur by Alfred Marshall

  • Thorough understanding of the industry

  • Good Leadership Skills

  • Foresight of demand and supply changes and the willingness to act on such risky foresights.
• Risk and Uncertainty-Bearing Theory was proposed by Frank Hyneman Knight and published the theory in his book: Risk, Uncertainty and Profit.
• Knight viewed, considered, and believed that...

  • ... entrepreneur as an AGENT of the PRODUCTION PROCESS where he or she connects the producers and consumers.
  • ... UNCERTAINTY as an important factor in the production of goods and services.
  • ... the entrepreneur must ANTICIPATE possible random events to happen while shouldering the RISK at the same time
• Weber’s Sociological Theory was proposed by Max Weber.
• Weber’s Sociological Theory stresses the importance of CULTURE as the PRIMARY driving element of entrepreneurship.
• Kaldor’s Technological Theory was proposed by Nicholas Kaldor who considered MODERN TECHNOLOGY as an essential factor in production.
• In Kaldor's Technological Theory, the entrepreneur is expected to KEEP UPDATED with MODERN TECHNOLOGY and find ways to apply the same in the entrepreneurial endeavor
• Arthur H. Cole associated entrepreneurship with PURPOSEFUL ACTIVITY and the CREATION OF ORGANIZATION.
• Arthur H. Cole states that those organizations would initiate, organize, and aggrandize a PROFIT-ORIENTED business unit for the production or distribution of economic goods.
• Peter F. Drucker is the Father of Modern Management
• Peter F. Drucker defined entrepreneurship as a DISCIPLINE something that is capable of being LEARNED and PRACTICED.
• Peter F. Drucker viewed entrepreneurship in terms of PRACTICE rather than as a personality.