THEORIES OF ENTREPRENEURSHIP(1)-2

THEORIES OF ENTREPRENEURSHIP(1)-2 - Theoretical Basis of...

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Theoretical Basis of MSE and Entrepreneurship The social and economic environment under which micro and small enterprises operate is dynamic. It is therefore not surprising that our theoretical understanding of the MSEs sector has changed over time. According to Pedersen (2001:9), traditionally, MSEs were seen through the eyes of either neoclassical theory under which they were treated similarly to large-scale enterprises – as competing in homogeneous and anonymous markets on equal terms with them. The alternative viewpoint was “petty commodity” and “dependency theory” suggesting that these activities were dependent on, and subordinate to, larger enterprises. Since the 1970s, there have been shifts in our understanding of MSEs. The earlier focus on neoclassical viewpoint has given away to new theoretical approaches. With the decline in appeal of the neoclassical theories, there has been relaxation of some of the key assumptions concerning the environment under which MSEs operate.. The section that follows presents a review of the new theories and some of their key assumptions. These include; (a) sociological attributes of an entrepreneur, largely advanced by social scientists, (b) psychological attributes of an entrepreneur, largely advanced by socio-psychologists, and, (c) economic attributes of an entrepreneur, largely advanced by economists. These theories were subsequently elaborated to shed light on what entrepreneurship entails. This gave rise to the following three perspectives: (i) assessment of qualities of an entrepreneur (ii) focus on recognition of opportunities of an entrepreneur; and (iii) assessment of the role of an entrepreneur. Psychological Theory It seems that the psychological theory builds on the assessment of qualities of an entrepreneur, the approach of which states that, entrepreneurs who are motivated and influenced by a high need for achievement, are more likely to succeed in entrepreneurship. McClelland (1961) advanced the theory of need-Achievement (N-Ach), where people are seen as having an inner trait of the need to achieve and which trait is acquired during an individual childhood's up bringing. According to McClelland (1961), the driving force is the need to achieve in accomplishing specific tasks and therefore an entrepreneur with a high n-Achievement is more
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likely to be motivated. This was demonstrated in his studies involving motivation and success in entrepreneurship, which showed that there was significant positive relationship between the two. In a later study, McClelland (1971) re-asserted that entrepreneurial behavior is exhibited by people who are highly in need of achievement and their consequent desire to take personal responsibility for decisions involving accompanying risks. He went further to state that such entrepreneurs tend to perform better in situations with moderate risks of failure by reducing such risks with increased effort or skill. McClelland further suggested that it is possible to raise the
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