Jan 12, 2018 in Business

Entrepreneurship: Theory And Practice

The formation of entrepreneurship as a special kind of activity is connected with the development of the market relations though its some elements took place in a period of a planned economy. Entrepreneurship is among the difficult concepts subjected to multiple interpretations. Economists, as a rule, define entrepreneurship rather impersonally. They view it as the function necessary for successful economic development, whether it is a formation of the new enterprises or a risk execution, implementation of innovations or economy of transactional expenses. According to such interpretation, entrepreneurship acts as the fourth subordinated organizational factor of production or as an independent regulatory mechanism. The figure of entrepreneurship remains indistinct. The function is realized with a fair share of automatism.

Entrepreneurship is an integral part of an economic activity of heads and specialists of the enterprises, commercial and financial organizations. There are many theoretical approaches to studying entrepreneurship.

The Economic Approach

The economic approach of entrepreneurship is expressed in the main motive to receive profit; freedom and autonomy of decision-making; the independence expressed in a personal risk and responsibility of the entrepreneurs. One of the basic elements of an economic component of entrepreneurship is profit. It is achieved through the realization of the following stages of the business process: development of qualitative enterprise idea, emergence of an impulse due to the beginning of its realization, a positive expert assessment of the business project, an idea of materialization, search for the resources for its realization, their association, the materialized result, and determination of its social efficiency. On the one hand, all stages are mediated by the corresponding institutional mechanisms, but on the other hand, they are connected by the existence of the obvious and hidden abilities of a person involved in the entrepreneurship activity.

According to Schumpeter, entrepreneurship is presented as creative activity, and the image of the entrepreneur has a desperate heroism. The entrepreneur, withdrawing the resources from old combinations, has to offer more for them than it was accepted earlier; therefore, his expenses will increase even more. Schumpeter considers a temporary position of monopoly to be a source of this income.

Schumpeter rejects the equilibrium analysis as he believes that human economic development is the history of continuous creative destructions caused by entrepreneurs. The entrepreneur is an innovator, not an imitator in the production, and as an innovator he is, naturally, a monopolist. Since economic progress comes from innovations, innovator-monopolist should be protected and entrepreneurship should be encouraged (Tiryaki 2003).

There are a lot of common features of the economic and psychological approaches to the entrepreneurship. The roots of the psychological type of an entrepreneur are not understandable if not to consider them from the point of view of a cosmic energy. The concept of a biological predisposition of certain individuals and groups becomes helpful; the problems of influence of the social environment are removed, and social problems are reduced to the distinction of the psychological qualities through the links to a genetic code.

The Psychological Approach

Among all existing psychological approaches, the greatest popularity was gained by the Kirzner’s entrepreneur theory connecting the phenomenon of the entrepreneur with the concept of the increased need for achievement. It is stronger than natural laziness, as well as more important than a simple thirst for a profit and public recognition. Among the other psychological qualities disposing to entrepreneurship, the increased tendency to risk and an internal locus of control by the Rotter’s scale (own forces in a counterbalance necessary for the influence of external circumstances) are most often fixed.

Kirzner’s entrepreneur is an alert arbitrager, and competition between alert entrepreneurs contributes to the market clearing process. Economic agents have different information and knowledge, and this difference creates opportunities for entrepreneurs to exploit them and helps the market to reach equilibrium. He believes that the tendency towards a single price is continually interrupted but constantly resumed in the markets (Kuratko 2009).

In fact, the socio-cultural parameters are often found in the psychological explanations; thus, there is a lot of in common with a socio-cultural approach to the entrepreneurship. It is noticed that entrepreneurs are the natives of big families. The character of a family also plays an important role. For example, a quite original portrait of the entrepreneur as an outcast and non-conformist is drawn in a “jet model” of the psychodynamic forces creating the identity of the entrepreneur. Many of these forces emerge as a result of suppression of a teenager’s personal strivings by an authoritative father. Rigid external control gradually develops rejection of any power and organization, which complicates social adaptation. The motivational theories of entrepreneurship, also remaining within the psychodynamic approach, consider the motive of “achievement” as personal line of the universal enterprise, which is unambiguously predetermining all other characteristics of business activity. The motive is considered to be the central dynamic formation, in which personal properties are concentrated. 

The Socio-Cultural Approach

The sociological approach to the entrepreneurship can be presented differently. Entrepreneur is not only a person possessing a certain social status and executing a particular function in society, but also a type of a social behavior, as well as a type of a personality that possesses definite skills. Moreover, entrepreneurship is a certain cultural form.

The supporters of socio-cultural approach consider that the paramount role during the formation of a potential entrepreneur is played not by the psychological features, but by a social environment of the personality. The elements of the organization of the personality are the features of interaction of an individual and society, namely social beliefs, roles, strategy, and behavior patterns.

The Managerial Approach.

The managerial approach studies entrepreneurship as one of the organizational functions. It develops the purposes, opportunities and methods of an operating impact on the counteraction organization of shadow economy according to the objective regularities of management.

The analysis of all these and other approaches concerning the problems of entrepreneurship testifies that the variety of aspects and the sides of this diverse phenomenon in a communicative space “entrepreneurship - power” is poorly traced. It is quite natural as the practice of market reforming in the modern world most often ignores a leading place of entrepreneurship in this process.

Summing up everything above-said, it is possible to draw some conclusions. First of all, it is early to speak of the existence of the entrepreneurship with complete scientific discipline. Despite the abundance of the scientific works devoted to the phenomenon of entrepreneurship, there is no consensus in its definition and approaches to its research. Since the 18th century, the experts of the most discrepant scientific directions have been interested in this subject: sociologists and historians, psychologists and economists. All of them viewed this object and research methodology from the positions of their disciplines.

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