LESSON 1.
ENTREPRENEURSHIP
DEFINED, ECONOMIC
DEVELOPMENT
AND GROWTH EXPLAINED
AND DEVELOPMENT AND
GROWTH THEORIES
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Development and Growth Theories
1. Laissez Faire Theories
• these are French words introduced by the Physiocrats
to mean economic freedom.
• This theory explains that the government should not
interfere in economic activities.
• It is absolute free-enterprise economy.
• The role of the government is only confined in
education, justice and public works.
• It is argued that with economic freedoms, business
can be more efficient through free competition. And
this benefits the economy.
Keynesian Theory
• the government should play the key role in economic
development, particularly in less developed
countries, or those with depressed economic
conditions.
• This theory contends that during economic
depression the government should put up massive
public works, like construction of roads and bridges,
and other labor intensive projects.
• These generate large – scale employment resulting to
more incomes for more people. Such situation
increases the demand for goods and services. This
means more production, and this enhances
Ricardian Theory
• This is the theory of David Ricardo, an
English classical economist. He believes
that the key factor in economic growth is
land.
• This means that agriculture plays a major
role in economic development.
• They claim that all wealth comes from the
land. People cannot live without food and
natural resources.
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Harrod – Domar Theory
• This was conceptualized by Sir Harrod of England and
Professor Domar of England and Professor Domar of
the United States.
• economic growth is physical capital like machines.
The theory claims that more products can be
produced through the use of machines.
• production is far more efficient with the use of
machines.
Kaldor Theory
• Nicholas Kaldor maintains that the key factor is
technology.
• the application of modern technology in the
production of goods and services has been responsible
for the economic success of the highly developed
countries like United States. Japan, Great Britain,
France, Italy and Germany.
• In the case of Japan, it can raise vegetables without
the use of soil. Only fertilized water is used. Such
technology has been exported to the Middle East
where agriculture lands are scarce.
Innovation Theory
• This was developed by Joseph Schumpeter. He
stresses the role of innovators or entrepreneurs
in economic development.
• the innovator who has the courage and
imagination to handle old systems, and be able
to transform theory into reality.
• It is the innovator who introduces change for the
better.
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Non- Economic Theories
• Their key factors are political stability, efficient
public administration, open society, and positive
cultural values.
• Max Weber, author of Protestant Ethics and the
Spirit of Capitalism, claims that Protestant
countries are more prosperous that catholic
countries and others.
• He says that thrift, industry and an entrepreneurial
spirit have contributed much to the economic
growth of Protestant countries.
IMPORTANCE OF
ENTREPRENEURSHIP AND
CONTRIBUTIONS OF
ENTREPRENEURS
Importance of Entrepreneurship
1. Growth of Entrepreneurship
Entrepreneurship the advent of new venture
particularly small ventures to materialize the
innovative ideas of the entrepreneurs.
2. Creation of job opportunities
Entrepreneurship firms contributed a large share of
new jobs. It provides entry-level jobs so necessary fur
training or gaining experience for unskilled workers.
3. Innovation
• Entrepreneurship is the incubator of innovation.
Innovation creates disequilibria in the present state of order.
4. Impact on community development
• A community is better off if its employment base is diversified
among many small entrepreneurial firms.
• it promotes abundant retail facilities, a higher level of
homeownership, fewer slums, better, sanitation standards and
higher expenditure on education, recreation, and religious
activities.
5. The consequence of business failure
• The collapse of the large industry almost has irresistible
damage to the development of the state and the state of the
economy and the financial condition of the relevant persons.
6. Political and economic integration of outsiders
• Entrepreneurship is the most effective way of integrating
those who feel disposed of and alienated into the economy.
Minorities, migrants, and women are safely integrated into
entrepreneurship that will help to develop a well-composed
plural society.
7. Spawns entrepreneurship
• Entrepreneurship is the nursing ground for new inexperienced
adventurists. It is the field where a person can start his/her
idea of the venture, which may be ended up in a giant
enterprise. All the large industrial ventures started as a small
entrepreneurial enterprise.
8. Enhances the standard of living
• The standard of living is a concept built on an
increase in the amount of consumption of a variety
of goods and services over a particular period by a
household.
9. Promotes research and development
• Entrepreneurship is innovation and hence the
innovated ideas of goods and services have to be
tested by experimentation.
Contributions of Entrepreneurs
1. Develop new markets
• Under the modern concept of marketing, markets are
people who are willing and able to satisfy their needs.
• In economics, this is called effective demand,
Entrepreneurs are resourceful and creative.
• They can create customers or buyers, this makes
entrepreneurs different from ordinary businessmen
who only perform traditional function of management
like planning organization and coordination.
2. Discover new sources of materials
• Entrepreneurship are never satisfied with traditional or
existing sources of materials. Due to their innovative nature,
they persists on discovering new sources of materials to
improved their enterprises.
• In business, those who can develop new sources of materials
enjoy a comparative advantage in terms of supply, cost and
quality. In Japan, due to the extreme scarcity of local raw
materials, entrepreneurs give top priority to research and
development in order to discover alternative materials.
3. Mobilize capital resources - Entrepreneurs are the
organizers and coordinators of the major factors of production,
such as land, labor and capital.
4. Introduce new technologies – New industries and new
products. Aside from being innovators and reasonable risk -
takers, entrepreneurs take advantage of business
opportunities, and transform these into profits.
5. Create employment – the biggest employer is the private
business sector. Millions of jobs are provided by factories,
service businesses.
Enrichment Activity
Directions: Explain two (2) tips how to become a successful
entrepreneur base on the picture below.
THANK YOU!