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Psychological Theories of Entrepreneurial Behaviour

Psycho-Theories of Entrepreneurial Behaviour

Entrepreneurship is an innovative process rather a psycho process. According to psycho theories of entrepreneurial behaviour, prime motivator of entrepreneurship are psycho factors. According to Schumpeter, rate of economic progress of a nation depends upon the distribution of innovation which in turn depends upon psycho factors i.e., people having psycho characteristics. Entrepreneur’s behaviour is activated by psycho factors such as emotion, pre-dispositions, tendencies, mental attitude etc. Entrepreneurial activities are guided by the background of a person. An entrepreneur is motivated by psychological rewards such as ego or status.

Generally speaking, the concept of innovation is by and large psychological which relates to those forms operating within the individual employee or subordinate which compel him to act or not to act in certain ways.

Among psychologists, French Young describes an entrepreneur as a change agent. K.L. Sharma maintains that entrepreneurs are men with qualities of leadership in solving persistent professional problems.

T.V. Rao and Udai Pareek describe entrepreneurship as a creative and innovative response to environment.

Personality of an entrepreneur affects his behaviour, decisions plans, thoughts and activities. The personality of an entrepreneur plays an important role in shaping and developing entrepreneurial activities.

Psychological theories or models are based on the concept that the supply and motivation of our entrepreneur is affected by non physical, internal and psychological factors. The most important subscribers to this views are Schumpeter, Hagen, McClelland and John Kumbel.

Schumpeter’s Theory of Entrepreneurship

According to Joseph A. Schumpeter, all entrepreneurs are primarily motivated by the strong power of will to find a private kingdom or will to conquer. According to him the following characteristics are revealed :

  1. an institutional capacity to see things in a way which afterward proves correct,
  2. energy of will and mind to overcome fixed habits of thoughts; and
  3. the capacity to withstand social opposition.

McClelland’s Theory

According to McClelland, high need for achievement drives people towards entrepreneurial activities. According to him, this achievement motive is inculcated through child rearing practices, which stress standards of excellence, material warmth, self reliance training and low father dominance. High achiever tends to take keen interest in situations of high risk, desire for responsibility and a desire for a concrete measure of task performance.

Hagen’s Theory of Entrepreneurship

Hagen’s theory is based on withdrawal of status respect which triggers mechanism for changes in personality formation. Members of some special groups perceive that their purposes and values in life are not respected by groups to the society whom they respect and whose esteem they value. According to him the following indicate withdrawal of status:

  1. displacement by force;
  2. disintegration of valued symbols;
  3. inconsistency of status symbols with a changing distribution of economic power, and
  4. non acceptance of expected status on migration to a new society.

Kumbel’s Theory

Kumbel’s theory is concerned with the overtly expressed activities of individuals and their relations to the previous and presently existing surrounding social structures and physical conditions.

According to this theory entrepreneurial behaviour is a function of the surrounding social structure both past and present which can be easily influenced by the manipulative economic and social incentives.

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