There are various theories that have been put forward by various scholars regarding entrepreneurship development. Discussing these theories will help us understand better the nature of entrepreneurship.
The emergence of entrepreneurship has brought with it immense insights that we need to appreciate. This has led to a diversity of theories that we need to examine, by looking at the schools of thought that divide entrepreneurship into specific activities These activities may be looked at from a ‘macro’ or a ‘micro’ view.
The Macro view Entrepreneurial Thought:
This point of view presents a number of schools of thought which suggest that a range of external factors are the forces behind the entrepreneurial process. Often these factors are beyond the control of the individual entrepreneur;
- Environmental School of thought
- Financial/Capital School of Thought
- Displacement School of thought
1. Environmental School of thought-Support
The proponents of this school of thought argue that entrepreneurial desires are molded by external factors (which may be positive or negative) that affect a potential entrepreneur’s lifestyle. They further argue that institutions and societal values grouped together form an environmental framework that strongly influences the development of entrepreneurs. Freedom and support in the work environment can also foster a manager’s desire to pursue an entrepreneurial career. In addition, the social group a person belongs to often may affect the potential development of an entrepreneur
2. Financial/Capital School of Thought- Capital
This school presents the view that the desire to become an entrepreneur is based on the capital seeking process; that the entrepreneurial process is about making decisions involving finances at every major point in the venture process i.e.
a) S tartup or acquisition venture stage:
In the beginning, the entrepreneur’s main concern is deciding on the major sources of funds to give him a head start on the venture. He may either take up a loan or decide to
save up his. The success or failure of this decision making process will lead him further to make a decision as to whether to proceed or abandon the project.
b) Ongoing venture stage:
The financial consideration here is how to manage cash, make investments, undertake financial analysis, and evaluate the financial position of the venture. The decision to be
made here is whether to increase, maintain or reduce size of the business.
c) Decline or succession stage:
The entrepreneur will be forced at some point to investigate the future profitability of the venture. Following this analysis, he may then consider options such as corporate buyout, dissolution or succession. This decision of course, has a financial consideration.
3. Displacement School of thought
This view suggests that individuals will not pursue a venture unless they are prevented or displaced from doing other activities. Factors that may force one from pursuing other ends in life include:
- Political factors; these may include riots, wars e.t.c and may force one to move from station to another.
- Cultural factors e.g. family backgrounds
- Economic factors; This could be, for instance, as a result of loss of current employment
The Micro view Entrepreneurial Thought
This view presents factors that are specific to an entrepreneur who has the ability or control to direct or adjust the outcome of each major influence. The following schools of thought comprise this view point.
1. The Entrepreneurial Trait School of thought
2. The Venture Opportunity School of thought
3. The Strategic Formulation School of thought
1. The Entrepreneurial Trait School of thought- Traits
Following a study of successful people, it was found that they exhibited similar characteristics.
Those behind this school of thought, therefore. suggest that if certain traits associated with successful entrepreneurs are established and supported early in life, this will lead eventually to entrepreneurial success. The four traits usually exhibited by successful entrepreneurs include:
i) Creativity,
ii) Determination,
iii) Achievement,
iv) Technical knowledge.
Family development and education are also important traits which contribute to the success of an entrepreneur
2. The Venture Opportunity School of thought
This school of thought suggests that the ability to become an entrepreneur lies in being able to search for idea sources, develop concepts, and implement venture opportunities. The proponents further argue that creativity, market awareness, developing the right idea, at the right time, for the right market niche are the essential ingredients to entrepreneurial success. Opportunity identification is thus the key force behind becoming an entrepreneur
3. The Strategic Formulation School of thought- Strategy
This approach to entrepreneurial theory emphasizes that the planning process is vital for successful venture development. The argument is that through strategic planning and formulation an individual is able to develop an effective venture. This because he will be able to identify and make use of unique markets, unique people, unique products, and unique resources
