Unit II Types, Entrepreneurship Motivational Theories, and Entrepreneurship Development Programmes

BY: Deepali Mandalia

Classification of entrepreneurs
Classification of entrepreneurs on the basis of common characteristics:
Clarence Danhof Classification Arthur H. Cole Classification Classification on the Basis of Ownership Classification Based on the Scale of the Enterprise Other Categories of Entrepreneurs

Clarence Danhof Classification

The American anthropologist Clarence Danhof classifies entrepreneurs into four types. 1. Innovative Entrepreneurs:
are the ones who gather and process information and introduce new factors of production. They sense the opportunities for introducing new ideas, new technologies, new markets and creating new organizations. Innovative entrepreneurs are helpful to the economy of a nation as they bring about a transformation in life style.

Contd
2. Imitative/Adoptive Entrepreneurs:
adapt successful innovation ideas that have been already introduced by innovative entrepreneurs. These entrepreneurs tend to imitate the existing entrepreneurs and setup their business in the same manner. Such entrepreneurs are helpful in under or less developed countries, as they contribute significantly to the growth of enterprise and entrepreneurial culture in such countries. Further, by adapting technology that has been already tested, they generate ample employment opportunities. Therefore they are treated as the agents of economic development.

Contd
3. Fabian Entrepreneurs:
They are timid and cautious. Such entrepreneurs imitate other innovations only if they are certain that failure to do so may damage their own business. They are generally skeptical in adapting new technologies. They prefer to remain in the business using proven, old techniques.

Contd
4. Drone Entrepreneurs:
They are highly conservative in their outlook. They dont like to get rid of their traditional business and traditional systems. They feel comfortable with their old technology, even though the environment as well as the society have undergone considerable changes. These are laggards and continue to operate in their traditional ways, resisting changes. Drone entrepreneurs refuse to accept changes even at the risk of reduced returns.

Arthur H. Cole Classification

Arthur H. Cole, a Harvard scholar, classifies entrepreneurs as:
1. Empirical Entrepreneurs: Empirical entrepreneurs hardly introduce anything revolutionary and they follow the principle of rule of thumb. 2. Rational Entrepreneurs: The rational entrepreneurs are well informed about the general economic conditions. They introduce changes that might be revolutionary. 3. Cognitive Entrepreneurs: Cognitive entrepreneurs are well informed, draw upon the advice and services of experts and introduce changes that are totally new from the existing scheme.

Classification on the Basis of Ownership

Private Entrepreneurs: Private entrepreneurs are motivated by profit. They will not enter those sectors of the economy in which prospects of monetary rewards are not bright.
Public Entrepreneurs: This set up could be seen especially in the developing counties, wherein the countries government will take the initiative to share enterprises.

Classification Based on the Scale of the Enterprise

Small-scale Entrepreneurs: These are the ones who do not possess the necessary talents and resources to initiate large scale production and introduce revolutionary technological changes.
Large-scale Entrepreneurs: The population of the large-scale entrepreneurs is more in developed countries. The large-scale entrepreneurs posses the financial and other necessary resources to initiate and introduce new changes. The result is that the developed countries get the ability to sustain and develop a high level of technical progress.

Other Categories of Entrepreneurs

Solo Operators:
They set up their business individually. They invest their own capital, intellect, and business acumen to run the enterprise. Generally, they adapt the proprietorship mode of running a business.

Active Partners:
They share the effort and resources to build their enterprise. They actively participate in managing the daily routine of the business.

Contd
Inventors:
They focus primarily on Research & Development (R&D) activities. They are creative and tend to invent new products, technologies and methods of production, rather than following the existing practices.

Challengers:
These entrepreneurs accept challenges to establish business venture as mark of achievement. They focus on improvising and face the odds and adversities of running a business. Challengers tend to use their business acumen and talent to convert the odds into opportunities, and making profits. Challenges do not hesitate to plunge into uncertainties for earning profit.

Contd
Buyers (Entrepreneurs):
The buyer type of entrepreneurs explore opportunities to purchase the existing units (which may or may not be in the running condition). This enables them get rid of the hassles of building the infrastructure and investing other resources. If the business units they buy happen to be sick, they try to turn them around using their experience, expertise and business acumen.

Life Timers:
The life timer entrepreneurs believe that business is a part of their life. They have a strong desire for taking personal responsibility in running the business. Family enterprises which thrive due to high personal skill come under this category.

Entrepreneurial Motivation
The word motivation has its origin in the Latin word movere, meaning to move. Psychologically, it is the inner or environmental stimulus to action, forces, or the factors that are responsible for initiation, sustaining (and restraining/abstaining from) behaviour. Different people engage in the same behaviour for different reasons. There may be more than a reason, a constellation of various influences, and the reasons for continuing the same behaviour may be different from the ones that started it off. In other words, motivation may be diverse, multiple, and dynamic for different people.

Example:
Three people ran a marathon along with many other participants. None of them won. Does that mean that these three people were losers?
Not at all, as each of them went into the race with different objectives in mind.
The first person participated in the race to test his endurance, and performed better than his expectation. The second wanted to improve his previous performances. The third person had never run a marathon and his objective was to complete the race. The point to be noted here is that each of the three entered the race with different objectives, and they all met them. They were all winners in their own regard, regardless of who won the medal. Thus, motives may be different and so the perception of success.

Entrepreneurial Motivation The Needs Framework

There are various theories of the needs framework, such as:
the Need Hierarchy Theory of Maslow, Two-Factor Theory of Herzberg and Three-Factor/ERG Theory formulated by Alderfer.

However, we shall focus on the much celebrated framework of Manifest needs given by the American psychological theorist David McClelland, who may be called as the father of the study of entrepreneurial motivation. One can easily observe these needs from the behaviour of the individual. The Manifest needs framework relates directly to what the entrepreneurs do and how they do it. For e.g. the risk-taking and innovative behaviour of entrepreneurs that imply an individuals desire to undertake challenging tasks, pursuit of excellence, and competitiveness.

Manifest Needs Theory

McClelland identified 3 types of manifest needs:
Need for Achievement (N-Ach) Need for Power (N-Pow) Need for Affiliation (N-Aff) Need for Autonomy (N-Aut)

Entrepreneurship Development Programmes (EDPs)