CHAPTER 1: THEORIES & CONCEPT
OF ENTREPRENEURSHIP
FUNDAMENTALS OF ENTREPRENEURSHIP
(ENT300)
Chapter Objectives
The objectives of this chapter are:
• To introduce students to the theory of entrepreneurship.
• To have a deeper understanding of the the role of entrepreneurship
towards economic development.
Contents
1.0 Theories & Concepts of
Entrepreneurship
• 1.1 Evolution of Entrepreneurship Theory
• 1.2 Islamic view on Entrepreneurship
• 1.3 Definition of Entrepreneur and Entrepreneurship
• 1.4 Entrepreneurship and SMIs in Malaysia
• 1.5 The role of Entrepreneurship in Malaysian
Economic Development
1.1 Evolution of Entrepreneurship Theory
• The concept of entrepreneurship has evolved throughout the decades
& encompasses trends in thoughts as well as development of
entrepreneurship as a discipline of studies.
• Theories of entrepreneurship can be viewed in 4 different
perspectives:
I. Economic
II. Psychological
III. Sociological
IV. Management perspective
Different Perspectives of Entrepreneurship
Theories
Economic Scholars that define an entrepreneur via the
perspective contributions & roles played in economic
development such as allocating resources
efficiently, creating job opportunity & pioneering
innovations.
E.g. Richard Cantillon (1755), Adam Smith (1776),
Alfred Marshall (1776), Jean Baptiste Say (1803),
John Stuart Mill (1848), Carl Menger (1871), Joseph
Schumpeter (1934) & Israel Kirzner (1978)
Different Perspectives of Entrepreneurship
Theories
Psychological Scholars that define entrepreneurs through the
perspectives
behavior & personality traits possessed by successful
individuals. Such personalities are risk taker, having
high internal locus of control & desire for
accomplishment.
E.g. McClelland (1951), & Julian Rotter (1954)
Different Perspectives of Entrepreneurship
Theories
Sociological Scholars that define entrepreneurs as a generation
perspective or a group which adopts entrepreneurship as a
career to improve the status of the group in the
eyes of the society through their social roles.
E.g. Ibn Khaldun (Abdul Rahman Mohamed
Khaldun) (1406), Max Weber (1917) & Everett
Hagen (1957)
Different Perspectives of Entrepreneurship
Theories
Management Scholars that define an entrepreneur as a
perspective strategic manager who strives to ensure the
business gains profit & expands.
E.g. Peter F. Drucker (1985), Donald L. Sexteon
and Nancy Bowman-Upton (1991), Dylan
Jones-Evans (1995), Donald F. Kuratko and
Richard M. Hodgetts (2004) & Robert D.
Hisrich, Michael P. Peters and Dean A.
Shepherd (2005)
1.2 Islamic View on Entrepreneurship
• Entrepreneurship is an integral part of the religion.
• Islam is a complete way of life. It has its own entrepreneurship culture
& guiding principles based on the Quran & Hadith to guide business
operation.
1.2 Islamic View on Entrepreneurship
Human Nature (The Fitrah Of Human Being)
•By virtue of the human nature, the person must firstly be a Muslim,
then an entrepreneur. He has the responsibility to perform ‘ibadah’ and
be a ‘khalifah’. Muslim entrepreneur should search for God’s blessings
above all other factors. A Muslim entrepreneur perform business not
solely for profit, but above all, to fulfill the ‘fardhu kifayah’.
The Ethical Behavior of Muslim Entrepreneurship
To avoid
To avoid malicious To avoid
squandering
(hateful) behavior stinginess
(wasteful)
To pay alms To pray
Trustworthy
(zakat) consistently
Qana’ah (Be
Tawakkal Patience pleased &
thankful)
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Exemplary Conducts of Good Muslim Entrepreneurs
During The Prophet Muhammad S.A.W Reign
① Business is secondary when being called for other form of
crusade (cause/battle/war).
② Avoid using influence for self interest.
③ Afraid of accumulated wealth.
④ Leadership qualities in all aspects.
⑤ Practice moderate way of life.
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1.3 Definition of entrepreneurship &
entrepreneur
Entrepreneurship Entrepreneur
• Entrepreneurship is a • Entrepreneurs is an
process of identifying individual who carried out
business opportunity, seize the process of identifying
that opportunity, with the business opportunity, seize
use of creativity & that opportunity, with the
innovation to produce use of creativity &
product or service that innovation to produce
have value for customers. product or service that
have value for customers.
1.4 Entrepreneurship & SMIs in Malaysia
• Entrepreneurship has taken on great global significance for
governments looking to boost growth and employment since the
global financial crisis. It is also seen as a remedy for socio-economic
challenges.
• It leaves no question as to why the government has placed so much
emphasis on the small and medium enterprise (SMEs), as well as
entrepreneurs to start formulating their companies especially now.
1.4 Entrepreneurship & SMIs in Malaysia
• Governments such as Malaysia’s, who is looking at entrepreneurship
to boost economic growth continue to focus on promoting
opportunity entrepreneurship in particular, even though these
entrepreneurs might form only a very small part of the total
entrepreneurship pool.
1.5 The role of entrepreneurship in Malaysia
economic development
Create large Catalyst to
Offering goods
scales job national
& services
opportunity development
Generate Backbone of Spotting &
income for the heavy seizing
economy industries opportunities
Forming Managing
ventures resources
END OF CHAPTER 1
CHAPTER 2: ENTREPRENURIAL
BEHAVIOR & COMPETENCIES
FUNDAMENTALS OF ENTREPRENEURSHIP
(ENT300)
RBP/UiTMKS/FPP/ENT300
By the end of this chapter, students should be able to:
1. Explain and demonstrate the key entrepreneurial motivation and
2. Explain and demonstrate competencies of successful
entrepreneurs
RBP/UiTMKS/FPP/ENT300
2.1 Entrepreneurial Motivation
2.2 Entrepreneurial Competencies
RBP/UiTMKS/FPP/ENT300
RBP/UiTMKS/FPP/ENT300
2.1 Entrepreneurial Motivation
What make people responsive to opportunity?
What drive them to entrepreneurship?
Answering these question entail the examination of
entrepreneurial motivation
Motivation is defined as a drive that cause a person
to take some goal oriented action.
RBP/UiTMKS/FPP/ENT300
Entrepreneurial Motivation
Motivation theorists have pointed out that at least
three (3) general categories of social motives as
important determinant of human behavior:
i. The need for achievement (n Ach)
ii. The need for Power (n Pow)
iii. The need for affiliation (n Aff)
Entrepreneurial Motivation-Social Motives
① The need for achievement (n Ach)
Achievement motive - drive to do well, strive for excellence and overcome challenges and
obstacles in the pursuit of goal.
② The need for Power (n Pow)
Power motive - drive to control, influence and to have impact on others and change the
situations.
③ The need for affiliation (n Aff)
Affiliation motive - drive to establish, maintain or renew affective relationship with others.
Note: All three motives may exist together in a person . But one usually more
dominant than the other motives for most of the individual’s actions.
RBP/UiTMKS/FPP/ENT300
2.2 Entrepreneurial Competencies
• In 1985, McClelland with McBer & Co. NY developed a set of
instruments to measure entrepreneurial inclination. A set of 13
competencies was identified & it is critical to the business formation
function.
RBP/UiTMKS/FPP/ENT300
Entrepreneurial Competencies
Concern for
Sees & Acts on Information
Initiative Persistence High Quality of
Opportunities Seeking
Work
Commitment
Efficiency Systematic Problem Self-
to Work
Orientation Planning Solving Confidence
Contract
Use of
Assertiveness Persuasion Influence
Strategies
RBP/UiTMKS/FPP/ENT300
Entrepreneurial Competencies
McClelland and McBer (1985)
1. Initiative
The entrepreneur should be able to take actions that go beyond
his job requirements and to act faster. He is always ahead of
others and able to become a leader in the field of business.
Examples
Does things before being asked or compelled by the situation.
Acts to extend the business into new areas, products or services
Entrepreneurial Competencies
McClelland and McBer (1985)
2. Sees and acts on opportunities
An entrepreneur always looks for and takes action on
opportunities.
Examples
Sees and acts on new business opportunities
Seizes unusual opportunities to obtain financing,
equipment, land, work space or assistance
RBP/UiTMKS/FPP/ENT300
Entrepreneurial Competencies
McClelland and McBer (1985)
3. Persistence
An entrepreneur is able to make repeated efforts or to take different actions
to overcome an obstacle that get in the way of reaching goals.
Examples
Takes repeated or different actions to overcome an obstacle
Takes action in the face of a significant obstacle
Entrepreneurial Competencies
McClelland and McBer (1985)
4. Information Seeking
An entrepreneur is able to take action on how to seek information to help
achieve business objectives or clarify business problems.
Examples
Does personal research on how to provide a product or service
Consults experts or experienced persons to get relevant information
Seeks information or asks questions to clarify a client's or a supplier's need
Personally undertakes market research, analysis or investigation
Uses contacts or information networks to obtain useful information
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Entrepreneurial Competencies
McClelland and McBer (1985)
5. Concern for High Quality of Work
An entrepreneur acts to do things that meet certain standards of excellence
which gives him greater satisfaction.
Examples
States a desire to produce or sell a top or better quality product or service
Compares own work or own company's work favorably to that of others
Entrepreneurial Competencies
McClelland and McBer (1985)
6. Commitment to Work Contract
An entrepreneur places the highest priority on getting a job completed.
Examples
Makes personal sacrifice or expends extraordinary effort to complete a job
Accepts full responsibility for problems in completing a job for customers
Pitches in with workers or works in their place to get the job done
Expresses a concern for satisfying the customer
Entrepreneurial Competencies
McClelland and McBer (1985)
7. Efficiency Orientation
A successful entrepreneur always finds ways to do things faster or with
fewer resources or at a lower cost.
Examples
Looks for or finds ways to do things faster or at less cost
Uses information or business tools to improve efficiency
Expresses concern about costs vs. benefits of some improvement, change,
or course of action
Entrepreneurial
Competencies
McClelland and McBer (1985)
8. Systematic Planning
An entrepreneur develops and uses logical, step-by-step plans to reach
goals.
Examples
Plans by breaking a large task down into sub-tasks
Develops plans that anticipate obstacles
Evaluate alternatives
Takes a logical and systematic approach to activities
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Entrepreneurial Competencies
McClelland and McBer (1985)
9. Problem Solving
Successful entrepreneur identifies new and potentially unique ideas to
achieve his goals.
Example
Switches to an alternative strategy to reach a goal
Generates new ideas or innovative solutions
Entrepreneurial Competencies
McClelland and McBer (1985)
[Link]-Confidence
A successful entrepreneur has a strong belief in self and own
abilities.
Examples
Expresses confidence in own ability to complete a task or meet a
challenge
Sticks with own judgment in the face of opposition or early lack of
success
Entrepreneurial Competencies
McClelland and McBer (1985)
[Link] (Confidence/daring/courage)
An entrepreneur confronts problems and issues with others directly.
Examples
Confronts problems with others directly
Tells others what they have to do
Reprimands/warn or disciplines those failing to perform as expected
Entrepreneurial
Competencies
McClelland and McBer (1985)
[Link]
An entrepreneur can successfully persuade or influence others for
mobilizing resources, obtaining inputs, organizing productions and selling
his products or services.
Examples
Convinces someone to buy a product or service
Convinces someone to provide financing
Convinces someone to do something else that he would like that person to do
Asserts own competence, reliability, or other personal or company qualities
Asserts strong confidence in own company's products or services
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Entrepreneurial Competencies
McClelland and McBer (1985)
[Link] of Influence Strategies
An entrepreneur is able to make use of influential people to reach his
business goals.
Examples
Acts to develop business contracts
Uses influential people as agents to accomplish own objectives
Selectively limits the information given to others
Uses a strategy to influence or persuade others
END OF CHAPTER 2
RBP/UiTMKS/FPP/ENT300