Unit 1: Concept & theories of entrepreneurship
Entrepreneurship Development notes · PTU syllabus (BBAGE 401-18)
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Unit summary
Entrepreneurship creates businesses, jobs and innovation. This unit covers the definition and concept of entrepreneurship, its theories and myths, entrepreneurial traits and motivation, its role in economic development, types of entrepreneurs, barriers, and the entrepreneurship development cycle.
After this unit you can
- Define entrepreneurship and explain its theories
- Distinguish myths from realities about entrepreneurship
- Describe entrepreneurial traits, motivation and types
- Explain the role of entrepreneurship, its barriers and the development cycle
PTU syllabus topics
- Definition and concept of entrepreneurship
- theories and myths about entrepreneurship
- entrepreneurial traits and motivation
- role of entrepreneurship in economic development
- types of entrepreneurs
- barriers
- the Entrepreneurship Development cycle
Innovative
Introduce new products or methods
Imitative
Adopt successful innovations
Fabian
Cautious, change only when forced
Drone
Refuse to change even at a loss
Topic 1
Concept and theories
Entrepreneurship is the process of creating something new with value by devoting time and effort, assuming financial, psychological and social risks, and receiving monetary rewards and personal satisfaction (Hisrich).
Innovation theory
Joseph Schumpeter
Entrepreneurs innovate: new products, methods, markets, sources, organisation
Need for achievement
David McClelland
A high need for achievement drives entrepreneurship
Risk-bearing theory
Richard Cantillon, Frank Knight
Entrepreneurs bear uncertainty and earn profit for it
Sociological theory
Max Weber and others
Values, religion and social structure shape entrepreneurship
Topic 2
Myths and realities
| Myth | Reality |
|---|---|
| Entrepreneurs are born, not made | Entrepreneurial skills can be learned |
| You need a lot of money to start | Many start small with bootstrapping |
| Entrepreneurs are reckless gamblers | They take calculated risks |
| It's all about luck | Preparation, persistence and planning matter most |
| Only young people start businesses | Entrepreneurs come from all age groups |
Topic 3
Traits, motivation and types
Traits: need for achievement, risk-taking, innovativeness, self-confidence, persistence, leadership, vision and decision-making. Motivation: independence, wealth, recognition, achievement, family tradition, and sometimes necessity (unemployment).
Innovative
Introduce new ideas
Imitative
Copy and adapt successful ideas
Fabian
Cautious, change only when forced
Drone
Resist change
Others
Social, women, rural, technopreneur, intrapreneur
Topic 4
Role, barriers and the development cycle
Role in economic development: employment, capital formation, balanced regional development, innovation, exports and improved standard of living. Barriers: lack of finance, lack of skills and information, fear of failure, social and cultural attitudes, regulatory hurdles and poor infrastructure.
- 1. Stimulation: Awareness and motivation
- 2. Support: Training, finance, infrastructure
- 3. Sustaining: Mentoring, market linkages
- 4. Growth and new ventures:
Key terms
- Entrepreneurship
- Creating new value by taking risk for reward
- Innovation theory
- Schumpeter's view that entrepreneurs innovate
- Need for achievement
- McClelland's drive to succeed
- Imitative entrepreneur
- One who adopts others' innovations
- Intrapreneur
- An employee who acts entrepreneurially inside a firm
Quick revision
- Schumpeter (innovation), McClelland (achievement), Knight (uncertainty).
- Entrepreneurs take calculated risks; skills can be learned.
- Types: innovative, imitative, Fabian, drone.
- Cycle: stimulation → support → sustaining.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define entrepreneurship.
- Q2.State Schumpeter's innovation theory.
- Q3.List four traits of an entrepreneur.
- Q4.Name Danhof's four types of entrepreneurs.
- Q5.State three barriers to entrepreneurship.
Long-answer questions
- Q1.Explain the theories of entrepreneurship.
- Q2.Discuss the myths and realities of entrepreneurship.
- Q3.Explain the role of entrepreneurship in economic development and the barriers it faces.
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