ENTREPRENEURSHIP

LESSON 3 – THEORIES ON
ENTREPRENEURSHIP
8 THEORIES ON ENTREPRENEURSHIP

1. Innovation theory – it was contributed by Joseph

Schumpeter, an Austrian economist and political scientist.

- It regards economic development as the product of

structural change or innovation.

- It is considered as the primary factor affecting

development.
2. Keynesian Theory – it was developed by John Maynard
Keynes, a British economist.

- This put so much emphasis on the role of the government

in entrepreneurial and economic development, most
especially when the economy was experiencing depression.

- It attributes economic growth especially during depression

to the government.
3. Alfred Marshal Theory – he was an English economist
who introduced the book Principles of Economics.

- He regarded the entrepreneurs as the prime movers in the

organization.

- He generalizes that the organization plays the most

significant role among the different factors of production.
4. Risk and uncertainty-bearing theory – Frank Hyneman
Knight, and Amercian economist, conceptualized the risk
and uncertainty bearing theory of entrepeneuship

- He believed that the entrepreneur must anticipate possible

random events to happen while shouldering the risk at the
same time.

- It states that an entrepreneur faces the risk of uncertainty

in the process of connecting the supplier and the buyer.
5. Weber’s sociological theory – Max Weber stressed that social cultures
are the primary driving elements of entrepreneurship.
- The entrepreneur is expected to perform the role of a good
constituent by executing his entrepreneurial activities in line with good
customs and tradition, religious beliefs and morals.
6. Kaldor’s technological theory – it was developed by Nicholas Kaldor
who considered modern technology as an essential factor in
production.
- Proper application of modern technology will promote efficiency in
the production of goods and services.
3. Leibenstein’s gap-filling theory – Henry Leibenstein proposed that
the primary role of entreprenuership in any economic activity is
to fill the existing gap.

- He must extend assistance to entrepreneurial venture experiencing

failures and deficiencies.

4. Kirzner’s learning-alertness theory – Israel Kirzner was the main

proponent of this theory.

- He pointed out spontaneous learning and alertness as the two major

attributes of entrepreneurship in any given economy.