ENTREPRENEURSHIP AND

ITS THEORIES
 Table of Content

1. The Theories of Entrepreneurship Education.

2. Describe the Theories and how to Apply this

theories in Managerial Life.

3. Article: 224 (DOI-10.1177/1042258720913017)

Do Stringent Bankruptcy Laws Always

Determine Entrepreneurial Activities?
A Study of Cultural Influences
 Entrepreneurship

Entrepreneurship:
An entrepreneur is an individual who creates new business, bearing the
greater part of the dangers and appreciating a large portion of rewards.
The most common way of setting up a business is known as
entrepreneurship. The entrepreneur is normally seen as an innovator, a
source of new ideas, goods, services, and business/or procedures.
Number of Theories in Entrepreneurship Education

1. Innovation Entrepreneurship theory:

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”.
An innovator who brings new products or services into economy is given
the status of an entrepreneur. He regards innovation as a tool of
entrepreneur, The entrepreneur is viewed as the ‘engine of growth’, He
sees the opportunity for introducing new products, new markets, new
sources of supply, new forms of industrial organization or for the
development of newly discovered resources. 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 organization of any industry.
Schumpeter is the first major theorist to put the human agent at the centre
of the process of economic development. He is very explicit about the
economic function of the entrepreneur. The entrepreneur is the prime
mover in economic development; his function, to innovate or carry out
new combinations. Schumpeter makes a distinction between an innovator
and an inventor. An inventor discovers new methods and new materials.
On the contrary, an innovator is one who utilizes or applies inventions
and discoveries in order to make new combinations. An inventor is
concerned with his technical work of invention whereas an entrepreneur
converts the technical work into economic performance. An innovator is
more than an inventor because he does not only originate as the inventor
does but goes much farther in exploiting the invention commercially.

Innovation Theory of Entrepreneurship

Wilkes had added the concept of the changes that an entrepreneur
brings:
 Expansion of goods, products.

 Productivity of factors of production such as finance, labour,

material.

 Innovation in production such as, technology, process changes

and increase in human resource productivity.

 Innovation in marketing area such as the composition of the

market, size of the market and new markets.

To Schumpeter, entrepreneurs are individuals motivated by a will for

power; their special characteristic being an inherent capacity to select
correct answers, energy, will and mind to overcome fixed talents of
thoughts, and a capacity to withstand social opposition. The factors that
contribute to the development of entrepreneurship would essentially be a
suitable environment in grasping the essential facts. It can be noted that
this theory’s main figure, the “innovating entrepreneur” has played an
important role in the rise of modem capitalism. The entrepreneur has
been the prime mover - for economic development process. On the
criticism side, this theory seems one-sided as it puts too much emphasis
on innovative functions. It ignores the risk taking and organizing aspects
of entrepreneurship. An entrepreneur has not only to innovate but also
assemble the resources and put them to optimum use. While stressing
upon the innovative function of the entrepreneur, Schumpeter ignored the
risk-taking function, which is equally important. When an entrepreneur
develops a new combination of factors of production, there is enough
risk involved. In spite of these lacking, the theory supports the
“enterprising spirit” of entrepreneur to innovate. It is the act that endows
resources with a new capacity to create wealth. Drucker says, “Innovation,
indeed, creates a resource. It endows it with economic value.”
Schumpeter’s views are particularly relevant to
developing countries where innovations need to be encouraged. The
transformation of an agrarian economy into an industrial economy
required a great deal of initiative and changes on the part of businessmen
and managers.
2. Economic Entrepreneurship theory:
The economic theories carry illustrious and a long-established
pedigree relating to the study of entrepreneurship. Furthermore,
entrepreneurship can be broadly defined as the ability and the
readiness to develop, organize and run the business along with
handling the uncertainties in order to make the profits. In economics,
entrepreneurship is closely related to the land, labour, natural
resources and capital that can help to generate profit.
An entrepreneurial vision involves discovery and risk-taking that are
critical for nations in order to succeed in the ever-changing and
competitive global marketplace (McFarlane, 2016). Different
schools of thoughts have been established on the theories of
entrepreneurship from
the psychological, sociological and cultural perspectives.
Economic theories help in examining and exploring economic factors
that affect or enable entrepreneurial behaviour. Economic theories of
entrepreneurship can be divided into three:

1. Classical,
2. neo-classical,
3. Austrian market process,
The classical, neo-classical and the Austrian market processes are
different approaches in explaining entrepreneurship. Classical theorists
confined the role of an entrepreneur to producers and distributors of
goods in the marketplace. Neo-classical theorists, on the other hand,
described an entrepreneur as the people who, along with the production
and the distribution of goods, undertake business risk, identify new
opportunities, and simultaneously reduce costs for a business.
The Austrian market process theorists focused on human actions based
on their knowledge regarding the economy. These theorists defined an
entrepreneur as the one who is creative and imaginative in his work
and one who sees a profitable opportunity.

Economic Theory Circular flow:

3. Sociological Entrepreneurship theory:

This sociological theory proposes that the entrepreneurial qualities of an

individual or a group remain ingrained within the society the person
belongs to. This perspective of the society is in turn influenced by
religious and ethical beliefs it subscribes to. In addition to this, the
Weberian theory of social change also talks about the integral role of
capitalism in the process of developing entrepreneurial qualities in an
individual.

Sociological theories are different from other theories because they

analyze entrepreneurial activities from the standpoint of social contexts
and corresponding processes and effects. They subscribe to the notion
that construction of entrepreneurship is narrowly a purposive action that
leads to the formation of a new formal organization. They also broadly
indicate various efforts that help introduce robust innovations in routines,
technologies, organizational structures and social institutions.

The identifying feature of sociological entrepreneurship theories is that

they focus on the social context of entrepreneurship development.
Among some of the prominent theories include Max
Weber’s theory of social change, EE Hagen’s theory, Theory of Frank
Young, Cochran theory, and Attention-Motivation Theory of
McClelland. Some of them are discussed in this section.

EE Hagen introduced the theory of social change as an endeavour to

explain how individuals change their social status in order to gain
societal respect. The core notion that drives this sociological theory
is that when individuals feel that they are no longer respected by the
society, they tend to implement innovative ways by means of which
their social status can get positively transformed. The aim is to
regain their lost status.

This desire to change the prevailing social status can be indicated as

the acquired tendency of an individual to become an entrepreneur.
This happens in three situations:

1. When the individual loses their existing social status to

someone who has suddenly regained superiority and enhanced
social respect.

2. If there is any form of defamation of the values and position

of the individual by someone superior to him.

3. If the individual is unable to accept the newly acquired social

status due to the transformation of the existing society into a
new social order.

4. This theory emphatically shows that withdrawal from existing

social status acts as a driver which influences entrepreneurial
qualities in an individual. Eventually, this transforms an
individual from an ordinary person to an entrepreneur.
4. Psychological Entrepreneurship theory:
Psychological theories of entrepreneurship put emphasis on the
emotional and mental aspects of the individuals that drive their
entrepreneurial activities.
Three of the most popular psychological theories of entrepreneurship
today include:

1. McClelland’s theory,

2. Rotter’s locus of control theory and,

3. Action regulation theory.

McClelland’s theory explains the needs for achievement that often

regulate the actions of an entrepreneur. Consequently, Rotter’s
theory puts light on the locus of control whether internal or external
that influence entrepreneurial actions. Finally, the action regulation
theory elucidates that the performance of entrepreneurs depends on
their actions

Rotter’s locus of control has garnered prominent attention amongst

personality theories of entrepreneurship. This theory was formulated
in 1954 by Julian Rotter. Furthermore, locus of Control offers people
the belief that control resides within them i.e. internally or can be
created externally.
Michael Frese outlines the application of Action theory with
relation to entrepreneurship. It is elaborated as the meta-theory
which regulates the goal-directed behaviour. This theory explains
how individuals control their cognitive behaviour with the help of
cognitive processes which consist of selection and development,
orientation, monitoring and planning and processing feedbacks.

In order to examine human action according to this theory there are

three dimensions:

1. Sequence highlights the path taken from goals to feedback.

2. Focus extends from activities to self.

3. Structure outlines the level of actions which are often

regulated.
How to apply the entrepreneurship theory in
managerial life:

Managerial task is too think how to increase an revenue of the

Company or organisation

The first step is how the innovation has to bring to the present
Situation and which the background research and development
(R&D).

Process should be taken before entering into the market. Here the
innovation theory has should be implemented by the Manager in the
company.

Upon ‘new combinations’ of the factors of production - which he

succinctly terms,

Innovation - the entrepreneur activates the economy to a new level of

development.

 The new product

 The new method
 The new market
 How new sources of supply
 How to carry out a new organisation or existing organisation

The above skills should be having for managerial in innovation and

creativity for exploiting, profitable, business, opportunities in
organisation, in this way the Innovation Theory is helpful for
managerial skills in life.

“Innovation is the Market introduction of a technical

Or organisational novelty, not just its invention"

--Joseph Schumpeter
The economic theory states that how the process and the investment
should be done and according to the Indian economy or budget
declaration we need to decide how to invest and were to invest the
amount it may include firms and households and government sectors The
imports and exports are also included in the economy.
Economic theories help in examining and exploring economic factors
that affect or enable entrepreneurial behaviour. Economic theories of
entrepreneurship can be divided into three:

1. Classical,
2. neo-classical,
3. Austrian market process,

The above mentioned things should be followed by the manager. In the

organization to achieve an more revenue and choose an appropriate
decision on investment,
Sociological theories are different from other theories because they
analyze entrepreneurial activities from the standpoint of social contexts
and corresponding processes and effects.
The sociological theory mainly effect an surrounding institutions if we
don’t care about the environment accepts and the managerial skills
needed mainly how to eradicate the problems faces in sociological
aspects,
Resources theory is how to create a resources from existing revenue
from the company.
Opportunity Theory defines entrepreneur and entrepreneurship, the
entrepreneur always searches for change, responds to it, and exploits it
as an opportunity”. This need to implement by the manager,
Anthropology theory which says that for an individual to initiate a
successful venture, the social and cultural contexts should be considered
or examined. This above theories should follow in the managerial life to
be a successful Entrepreneur.
3.Article: 224 (DOI-10.1177/1042258720913017)

Do Stringent Bankruptcy Laws Always Deter Entrepreneurial

Activities? A Study of Cultural Influences

There's growing interest among strategy and entrepreneurship students in how

institutions affect the level of entrepreneurial pastime in a rustic. The results of
two dimensions of those institutions have acquired special attention: the effect of
bankruptcy legal guidelines on entrepreneurial pastime, and the impact of
dimensions of way of life on entrepreneurial hobby. Empirically, it has been
shown that stringent financial ruin laws, that is, laws that increase the fees of
discharging bankruptcy, are related to low tiers of entrepreneurial activity in a
rustic, and that certain components of lifestyle.

BUSUNESS REASEARCH IN ENTREPRENEURSHIP ON

BANKRUPTCY:
Theory Development and Hypotheses Bankruptcy Laws and Entrepreneurial
Activity Declaring bankruptcy makes business failure visible and imposes legal,
social, and psychological costs.

Ingebrigtsen captures the personal and emotional dimensions associated with

entrepreneurial failure in his description of the consequences of a business
failure: “Following the death of the dream comes the nasty publicity and often
the litigation, the calls from irate creditors, the moments of terror and self-doubt.
And all that is just for starters. Worst of all might be the loss of privacy and
dignity that results when news surfaces that a business is about to crash and burn.
When that happens, suddenly your life becomes an open book, the butt of jokes,
a continuing story on the nightly news.” In light of the visible nature of
bankruptcy, the degree of “forgiveness” or “punishment” entailed by bankruptcy
laws is an important factor that determines the consequences of failure and
entrepreneurial activity. For example, Lee et al. Argue that stringent bankruptcy
laws, that is, laws that involve greater punishment for failure, increase the fear of
failure and therefore create ex-ante barriers for engaging in entrepreneurial
activity. Also, stringent bankruptcy laws which entail costly bankruptcy
procedures are likely to deter business exit. Lack of business exit in an economy
locks productive resources from being channelled into better opportunities, thus
dampening societal level entrepreneurial activities. Consequently, prior work has
argued that less stringent bankruptcy laws minimize the downside of failure and
act like real options for entrepreneurs where the downside of failure is minimized
but the upside of engaging in entrepreneurial activity can be encouraged.

RESULTS OF BUSINESS RESEARCH OF BANKRUPTCY

The data form an unbalanced panel. The study period is from 1995 to 2013.
Table 1 shows the summary statistics for two subsamples. Subsample A
comprises those countries in which bankruptcy is not discharged.11 Subsample B
includes those countries in which bankruptcy is discharged after a certain time
period. For the purposes of this study, these subsamples A and B represent
countries with stringent bankruptcy laws (i.e., higher costs of bankruptcy/failure)
and those with relatively less stringent or lenient bankruptcy laws (i.e., lower
costs of bankruptcy/ failure), respectively. It appears the level of entrepreneurial
activity is higher in countries where bankruptcy is discharged as compared to
countries in which bankruptcy is not discharged. The result from the t-test for
difference in means is significant (in the last column).12 This suggests that, in
general, a lenient (or less stringent) bankruptcy law regime is likely to be
conducive for entrepreneurial activity, which is the baseline argument on which
the hypotheses of this paper are developed.13 Further, the countries with no
discharge from bankruptcy (i.e., stringent bankruptcy laws) have higher GDP per
capita growth, are more collectivistic, are more feminine, have greater
uncertainty avoidance, have greater power distance, less favourable legal system
and property rights, less favourable business regulation, and less favourable
credit market controls. These countries also have lower tax rates, lower levels of
education (secondary level), and higher proportion of unemployed compared to
countries where bankruptcy was discharged (i.e., countries with lenient
bankruptcy laws.
EXAMPLE:

Kingfisher Airlines Losses and liabilities: Rs 6,000 crore

Until December 2011, Kingfisher Airlines had the second largest share in India's
domestic air travel market. Owned by the now beleaguered liquor baron Vijay
Mallya, the airline, was set up in 2003. By 2009, Kingfisher was heading towards
a downward spiral, and laid off around 100 pilots. After several rounds of raising
funds and large loans, the airline's debt stood at over 6,000 crore. In 2011,
Mallya decided to exit the business, not without several more layoffs and delayed
salaries, leading to protests and cancelled flights. After failure to repay loans and
debts, the DGCA revoked the airlines licence in 2013 and a case of wilful
defaulting of loans worth Rs 9,000 crore was registered against Mallya.
CONCLUSION

By this assignment we got to know about the entrepreneur and each entrepreneur
theory. Each entrepreneur should follow the theories and reach a vision in long
term goal and follow the rules and regulations given by the society.

The bankrupt was gone due to the investment decisions and the financial crises
has been happened due to the no investor in the stocks.

So, entrepreneur should look after all the aspect’s and follow the rules of the
society.