Entrepreneurship is the process in which an individual or group of people create an original plan to create a business or startup company. Typically, there are numerous challenges along the way, but entrepreneurship revolves around finding unconventional and innovative ways to solve those problems. Throughout this process, numerous entrepreneurs use 8 theories along their journey in order to further develop their precision and understanding of being an entrepreneur. These theories are all fundamental principles that connect the facets of business, such as innovation, markets, and management.
8 Theories of Entrepreneurship
Innovation Entrepreneurship Theory
In order to make their businesses financially successful, entrepreneurs have to depend on finding innovative solutions and the ability to anticipate and prepare for future events. This theory was popularized by renowned economist Joseph Schumpeter, who believed that substantial economic growth will occur only when entrepreneurs create original, innovative solutions through the use of problem-solving skills. According to Schumpeter, this innovation is created in 2 ways: decreasing production costs and increasing certain product demands.
Economic Entrepreneurship Theory
The Economic Entrepreneurship Theory states that entrepreneurs are both considered producers and exchangers. This theory was created by economist Richard Cantillon, who described how in the supply chain of production, where raw materials are turned into finished goods, an entrepreneur’s actions, and thoughts have a major impact on the development of the product.
Psychological Entrepreneurship Theory
The Psychological Entrepreneurship Theory highlights the mental aspects of an entrepreneur, which can be broken into 3 sections: their internal and external control facets, which include their deft skills and support systems, their personality and traits, which are their successful entrepreneurial qualities, and their mindset to achieve their goals, which includes their passion and desire to attain success.
Sociological Entrepreneurship Theory
This theory describes the social parts of entrepreneurship, as it highlights how an entrepreneur can create a prosperous business if they consider social prohibitions and religious customs to satisfy numerous customers' expectations. This would be essential for their business or startup, as it would increase their overall customer diversity.
Opportunity-based Entrepreneurship Theory
This theory states how an entrepreneur has to search for change and use it to gain new opportunities and benefits for their business or startup to further develop and become successful.
Resource-based Entrepreneurship Theory
This theory emphasizes the importance of resources; besides money and time, an entrepreneur needs to start and develop a business or startup. These can include crowdfunding platforms, startup apps, business websites, etc. Thesecan go hand in hand with money and time to facilitate the development of an entrepreneur’s business or startup.
Anthropological Entrepreneurship Theory
This theory focuses on the importance of understanding social and cultural factors and connections throughout the process of entrepreneurship. This will enhance the entrepreneur’s observational skills, which will help them create new problem-solving skills, when in difficult situations.
Process of Stage Entrepreneurship Theory
This theory describes the 5 stages of entrepreneurship development: The need for entrepreneurship, the identification of an entrepreneur’s abilities, the process of business development, public funding and promotion, and constructive criticism and feedback.
Conclusion
In conclusion, the 8 theories of entrepreneurship provides individuals with a basic foundation to establish and develop a potentially successful business or startup company. They provide entrepreneurs with the necessary clarity and understanding they need to gradually develop their business, as well as their entrepreneurial abilities and characteristics. As numerous people start to become entrepreneurs and there is an increase in the creation of startup companies and self-made businesses, many entrepreneurs will use these theories as a basis for their short and long-term success. Therefore, not only do the 8 theories of entrepreneurship enhance the prosperity of an entrepreneur’s business, but they will also provide an entrepreneur with a new skill set they will eternally use to further develop their business until they have achieved their goals and become successful.
References
- SugarMint - Header Image
- NCFE India
- Stanford University
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