Entrepreneurship Theories

Max Weber was a German sociologist writing in the early 1900s who theorized that religious beliefs are a key determinant of entrepreneurial development. He argued that entrepreneurial energies are driven by beliefs about causes and consequences. In particular, he emphasized how religions encourage investment in economic growth and development (and compound interest). A religious belief in saving for the future was key, he believed, to the capitalistic spirit . Weber distinguished between religions that encourage capitalism from those that do not. In particular, Weber noted that Hinduism, Buddhism and Islam may not be conducive to entrepreneurship. Hinduism and Buddhism purportedly have a focus on the present moment and tend to shun materialism, making them problematic to the pursuit of entrepreneurial goals. He suggested that Islam’s focus on the rewards of the afterlife make material accumulation problematic.    By contrast, he argued that the protestant work ethic prevalent in

Frank Hyneman Knight, an American economist at the University of Chicago, developed the uncertainty-bearing theory in the 1920s to explain the phenomenon of entrepreneurship. The Roaring 20s The roaring 20s brought with them renewed attention to the people and processes that served to bring innovations to market with increasing intensity, and the media of the day was in the habit of idealizing business tycoons. Much of the government had adopted a laissez-faire attitude toward business. Knight distinguished between risk that can be modeled probabilistically, from uncertainty, for which the probabilities are unknowable. For instance, uncertainty surrounds the implementation of new strategies, the development of new products or entry into new markets. Similarly, the positive consequences of acquiring a competitor may have unknowable probabilities. According to his theory, bearing business uncertainty creates profit and the more uncertainty taken on, the more profit can be gained. The rel

Joseph Schumpeter, a prominent economist, is widely recognized as a pioneer in the field of entrepreneurship. He placed human actors at the center of economic development processes and argued that entrepreneurs played a critical role in driving innovation and economic growth. Schumpeter's view of entrepreneurship was unique in that he saw it as a disruptive force that challenged the status quo and led to the creation of new markets and industries. He believed that entrepreneurs were not simply passive actors responding to market forces, but were active agents who sought to gain power through their ability to resist social pressure and overcome limitations in existing skill sets. According to Schumpeter, entrepreneurs played a key role in driving the process of "creative destruction." This process involved the destruction of established industries and the creation of new ones through the introduction of innovative products, services, and production methods. Entrepreneurs