BUS 401: APPROACHES TO ENTREPRENEURSHIP

4 Approaches to Study Entrepreneurship

Some of the major approaches to study entrepreneurship are as follows: 1.

Sociological Approach 2. Psychological Approach 3. Political Approach 4.

Composite Approach.

The concept of entrepreneurship as we have studied so far is not a very old

one. It became a popular subject of study only after the Second World War,

the time when the students of economic development concentrated on

economic problems of the less developed countries and realized that the

real problem of development in the less developed countries today is not as

much economic as it is non-economic.

The element of entrepreneurship in the process of industrialization and

economic development could be realized as early as by the beginning of the

19th century. Weber and Schumpeter may be considered the first scholars

to have systematically explained the role of entrepreneurs in productive

enterprises.

Since then, scholars of different disciplines have been concentrating on the

issues like social, economic and political bases of entrepreneurial supply,

psychological characteristics of entrepreneurs and entrepreneurial

functions in the business enterprise.

There are broadly four approaches to the study of entrepreneurship:

1. Sociological Approach

2. Psychological Approach
3. Political Approach

4. Composite Approach

1. Sociological Approach:

The sociological approach to the study of entrepreneurship deals with social

and cultural factors responsible for the nature and growth of

entrepreneurship development in a society. It attempts to understand as to

why a social structure and culture facilitates or inhibits entrepreneurial

development. It believes that laws of development lie in the social structure

and culture of a region.

It tries to seek answer to the question, why one segment of social structure

produces larger number of entrepreneurs than the other. For example, it is

mainly the Samurai community that could rise to entrepreneurship during

the Meiji regime in Japan. Indian entrepreneurship, from the very

beginning, has been dominated by three communities: the Parsis, the

Gujratis and the Marwaris. They, however, continue to dominate the

business sector even today.

Max Weber, Cocharan, Young, Hoselitz and Hagen are prominent among

the scholars known for sociological interpretation of entrepreneurial

development. Max Weber’s thesis is that Protestantism, and not

Catholicism, could help generate entrepreneurship and modern capitalism.

Weber believed that the Hindu religion of India did not have the potential to

promote entrepreneurship.

The traditional social structures; the caste and the joint family which were

essential attributes of the Hindu society, according to Weber, have been

detrimental to the process of entrepreneurial growth. Kapp (1963) also

holds the Hindu culture and Hindu social organization responsible for slow

pace of development and suggests that “a lasting solution of the problem

can be found only by a gradual but systematic transformation of India’s

social system, world view and the level of personal aspirations”.

The Parsonian model of development, best known as ideal-typical approach

to entrepreneurship and development, relates to his popular schema of

pattern variables. B.F. Hoselitz used the Parsonian model of pattern

variables to explain how entrepreneurship development is a function of

socio-cultural changes known as modernization.

Hoselitz uses three of the five pattern alternatives given by Parsons which

according to him are applicable to the problem of development: the choice

between modalities of the social object (achievement vs ascription), the

choice between types of value orientation standards (universalism vs.

particularism) and the definition of scope of interest in the object

(specificity vs. diffuseness).

The backward economies, according to Hoselitz, exhibit usually a lack of

reliance on achievement as a norm for acquiring economic goods.

Achievement-oriented behaviour is however not fully absent but exists only

in limited cases.

Distribution of economic goods in primitive societies and also in medieval

societies has been typical example of ascriptive way of distribution pattern.

The advanced societies, on the other hand, exhibit the norms of

achievement-oriented behaviour. In such societies, there is system of formal

education and vocational and professional training.

The second characteristic of underdeveloped economies is the prevalence of

particularism in the distribution of economically relevant tasks among

performers. Particularistic pattern of distribution has been prevalent, for

example, in the traditional Indian caste system. The advanced societies have

universalistic i.e., rational approach to the allocation of resources.

Again, it is to be emphasized that both these variables do not exist in the

respective societies in their pure forms. The movement of society is seen

from particularistic to universalistic system as it moves from backward to

advanced economy. Sir Henry Maine has also postulated this movement

with different terminology and that is from ‘status to contract’.

Thirdly, in the backward societies, economic activities are quite diffuse. It is

so because of the fact that there is a low level of development of division of

labour. Partly it is the result and, at the same time, cause of the low level of

productivity. Thus, the specialization of tasks and the finer division of

labour require the development of principle of specificity and rational

allocation of roles.

Specificity is the outcome of rational planning, the result of the combined

application of the principles of universalism and achievement as the norm to

economically relevant social situations. Hoselitz concludes that the analysis

of social structural aspects of the differentiation between “advanced” and

“underdeveloped” economies leads us to conclude that we expect the

former to exhibit predominantly universalistic norms in determining the

selection process for the attainment of economically relevant roles; that the

roles themselves are functionally highly specific; that the predominant

norms by which the selection process for those roles is regulated are based

on the principle of achievement, or “performance”.

In an underdeveloped society, on the contrary, particularism, functional

diffusion and the principle of ascription predominate as regulators of social

structural relations especially in its economic aspects and the orientation of

actors in economically or politically influential roles is determined

predominantly by considerations of their ego.

Cocharan is of the view that entrepreneurial development depends to a

substantial degree on cultural factors. According to him, patterns of child

rearing and family life determine the personality patterns. Frank W. Young,

in his ‘Mediation Model’ of entrepreneurial activity, points out that the

entrepreneurial attributes show up in individuals as a result of particular

family background and as a reflection of general cultural values.

Entrepreneurial characteristics, such as the ability to make new

combinations of factors of production, managerial skill perception of

opportunity, risk-taking, inventiveness and achievement motivation are not

merely a pale reflection of these antecedent conditions; they constitute an

independent causal factor mediating between structural factors and

consequent economic development.

E.E. Hagen opined that the traditional authoritarian social structure inhibits

the growth of personality with entrepreneurial talent. His thesis is that an

entrepreneur is a creative problem-solver with innovative temperament

interested in things in the practical and technological realm and driven by a

sense of duty to achieve.

Modern democratic system is more conducive to the development of

innovative behaviour. According to him, they are more prone to taking up

entrepreneurship as a career whose existing social status has been

denigrated in the course of historical change.

2. Psychological Approach:
We have understood by now that the entrepreneur is not a common person.

He has a typical personality with creative, managerial and imaginative skill

who can innovate and contribute positively to an industrial project. This

kind of personality develops in a person who has strong motivation for

achievement.

David McClelland, the greatest exponent of the psychological approach to

entrepreneurship, is of the view that the genesis and performance of

entrepreneurs requires strong motivation for achievement. The

achievement motivation, according to McClelland, is a function of child

rearing practices in a society.

Unlike the sociological approach which asserts that the existing social

structure determines entrepreneurship and economic development, the

psychological approach seeks to find out how the social structure affects the

attitude of the people of a society. Areas like entrepreneurial commitments,

tendency of saving and investment and business management have been

usually covered by the studies carried out by psychologists.

Collins, Moore and others have examined a sub-category of business

leaders. Their study of innovating entrepreneurs revealed that many of their

subjects had experienced childhood poverty and disrupted family lives

which stimulated strong motivations for personal achievements.

John H. Kunkel questioned the validity of many psycho-dynamic concepts

and principles and the unresolved controversy surrounding the role of social

structure and personality in the process of economic development. He

propounds the behavioural approach as an alternative.

Joseph Schumpeter, the first to offer a systematic interpretation of

entrepreneurship, had psychological perspective in his mind when he said

that the entrepreneur possesses energy of will and mind to overcome fixed

habits of thought and the capacity to withstand social opposition.

3. Political Approach:

The political approach to entrepreneurship deals with the issues involved in

relationships between entrepreneurship development and the state

particularly in the context of the role of the latter in the development of

entrepreneurs. The role of the government is crucial in deciding the nature

and rate of development.

Rapid growth of industries and good pace of economic development largely

depend on the merit of economic policies of the government. Democratic

and relatively stable governments are supposed to be conducive to

economic development.

Entrepreneurial supply would be greater in a state which believes in the

ideology of capitalistic liberalism and provides requisite credit facility,

appropriate training opportunity, technological and scientific knowledge

and adequate incentive.

The Government of India pursued the policy of mixed economy till the end

of 80s of the 20th century which could not contribute to growth rate of 3 to

4 per cent for over 40 years of the economic regime of the country.

Corruption, laziness, traditional power structure and weak governance,

responsible for sluggish development, could not be removed by the state.

Economic reforms initiated by India from 1991 with an objective to

liberalize economic policies, promote individual investors and bring about

structural adjustment have undoubtedly yielded significant results.

Entrepreneurial growth in India had been very slow till 1990. A long span of

colonial rule and the following strict and partially controlled economy and

red-tapism did not allow fast entrepreneurial growth. By 1990, the number

of small-scale units in the country was about 10 lakh which, due to

economic reform movement, swelled up to about 35 lakh by 2005.

Political studies on entrepreneurship have revealed that the late growth of

entrepreneurship in Russia and France had been due to the existing

political conditions in the countries. Japan’s fast entrepreneurial growth can

be attributed to the country’s political system which peculiarly integrated

the industrial and agricultural economy.

4. Composite Approach:

The entrepreneurship is a complex phenomenon. None of the approaches

discussed above has been able to explain the entrepreneurial dynamics

fully. Due to their non-holistic nature, they have failed to offer the precise

laws of supply and success of entrepreneurship.

It has been observed that entrepreneurial behaviour is an outcome of the

interplay of multiple social, cultural, economic, political and psychological

factors. No single factor is entirely responsible for the supply of successful

entrepreneurs. We, in our study of carpet manufacturers in the Bhadohi-

Mirjapur belt in India, found no manufacturer entering into business on

account of any single factor.

Dwijendra Tripathi also, in his comparative study of historical roots of

industrial entrepreneurship in India and Japan, has observed that the

emergence, performance and perception of entrepreneurs can be

understood by an integrated approach which would take into account all the

possible sociological, psychological, economic and political factors

contributing to the increase in entrepreneurial behaviour.

The variables like business acumen, motivation for achievement, modern

and progressive value orientation, minimum necessary capital, technical

knowledge, adequate market and favourable political conditions need to

exist together for the development of a milieu conducive to entrepreneurial

supply and industrial development.