Page 30 - Bisiness Studies

Business Studies for Secondary Schools

entrepreneur as the engine of growth that risk-bearing as the most important
sees the opportunity for introducing new function of entrepreneurs. According to
markets, new products, new sources of this theory, an entrepreneur earns profi ts
supply, carrying out new organisation of because of undertaking risks. Risk entails
an industry, and discovering new sources potential for loss or failure associated
of supply of raw materials. with starting and running a business.
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The more risk the nature of business is,
Need achievement theory the greater must be the profi t earned by
According to Professor David McClelland it. For that reason, profi t is regarded as a
in 1961, there are two characteristics of an reward of an entrepreneur for assuming
entrepreneur which are doing things in a risks. Hence, it is also treated as a part
new and better way, and making decisions of the normal cost of production. This
under uncertainty. McClelland highlighted theory summarises that profi t is the
achievement as the most important factor reward to the entrepreneur after bearing
risks which were not insured. Thus, the
for entrepreneurs. Individuals with amount of profi t earned depends upon the
high achievement orientation are not magnitude of uncertainty borne. Risks
infl uenced by considerations of money or incurred by the entrepreneurs are related
any other external incentives. However, to human resources, fi nancial resources,
profi t and incentives determine success and physical resources like machines,
of entrepreneurs with high achievement equipment, land, and buildings.
orientation.

According to McClelland a person Theory of status withdrawal
acquires three types of needs as a result of This is an important theory of entrepreneurial
one’s life experience. These three needs behaviour that was postulated by Everett
are: E. Hagen in 1962. The founder regards the
(a) Need for achievement: A drive to withdrawal of status of respect, as the cause
excel, advance, and grow; for changes in personality formation. He
(b) Need for power: A drive to dominate developed this theory from the case of the
or infl uence others and situations, and Samurai community of Japan which had
(c) Need for affi liation: A drive for enjoyed a high status of which it was later
deprived. To regain this lost prestige, it
friendly and close interpersonal became more active and vigorous and gave
relationships.
rise to many entrepreneurs. Thus, creativity
of a disadvantaged minority group is the
Risk bearing theory main source of entrepreneurship.
This theory postulates risk bearing as the
key element of entrepreneurship. John Hagen further states that withdrawal of
Stuart Mill and Professor Knight viewed status respect would give to four possible

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