Historical Development and Theories of Entrepreneurship – PST06209 Entrepreneurship
NTA Level 6 • Semester 2 • PST06209 Historical Development and Theories of Entrepreneurship Entrepreneurship • Source Session/Topic 2 Full source-text version: all educational wording from the extracted learning source is retained; only presenter/tutor metadata and web-layout noise are removed, while formatting is improved for readability. Session 2: Historical Development and Theories of Entrepreneurship Total Session Time: 120 minutes +1hours of Tutorial Prerequisites • None Learning Tasks By the end of this session students are expected to be able to: • Define of entrepreneurship theories • Explain the historical development of entrepreneurship • Explain the theories of entrepreneurship Resources Needed: • Flip charts, marker pens, and masking tape • Black/white board and chalk/whiteboard markers • LCD Projector and Computer SESSION OVERVIEW Activity/ Step Time Content Method 1 05 minutes Presentation Introduction, Learning Tasks 10 minutes Presentation Definition of Entrepreneurship Theories 2 Buzzing 35 minutes Presentation Historical Development of Entrepreneurship 3 Small Group Discussion 60 minutes Presentation 4 Theories of Entrepreneurship 5 05 minutes Presentation Key Points 6 05 minutes Presentation Evaluation __________________________________________________________________________________________ PST 06209 Enterpreneurship NTA Level 6 Semester 2 Facilitator Guide 7 SESSION CONTENTS STEP 1: Presentation of Session Title and Learning Tasks (5 minutes) READ or ASK students to read the learning Tasks and clarify ASK students if they have any questions before continuing. STEP 2: Definition of Entrepreneurship Theories (10 minutes) Activity: Buzzing (5 minutes) ASK students to pair up and buzz on the following question for 2 minutes • What is entrepreneurship theory? ALLOW few pairs to respond and let other pairs to add on points not mentioned WRITE their response on the flip chart/board CLARIFY and SUMMARIZE by using the content below • Entrepreneurship theory is: o A model that tries to provide a general explanation for how entrepreneurship works. o A statement of the underlying rationale for why something works in the way it does in entrepreneurship. o An observations made over time to explain, interpret, and predict behaviour of an event in entrepreneurship STEP 3: Historical Development of Entrepreneurship (35 minutes) __________________________________________________________________________________________ PST 06209 Enterpreneurship NTA Level 6 Semester 2 Facilitator Guide 8 Activity: Small Group Discussion (15 minutes) DIVIDE students into small manageable groups ASK students to discuss on the following question • What is the historical development of entrepreneurship? ALLOW students to discuss for 10 minutes ALLOW few groups to present and the rest to add points not mentioned CLARIFY and SUMMARIZE by using the contents below o Human activity and acting agents can be divided into two broad classes; those who lead and those who follow o Entrepreneurial talent, however ill-defined, has always been closely aligned with the quality of leadership The general who designed and executed a successful strategy took considerable risks and stood to gain substantial economic benefits. o The Greek idea of stasis led to the idea of economic activity as a zero sum game o Despite centuries of market experience, this idea persisted through the age of mercantilism and even today o In medieval Italy, the capitalist loaned money to the merchant-adventurer o The capitalist was a passive risk-bearer whereas the merchant-adventurer took an active role in trade or commerce But the majority of the profits went to the investing partner o It was generally agreed that merchants were entitled to compensation for risk and recompense for their labor o Merchants needed to have ―good judgment with respect to risks, be well-informed with respect to goods qualities, prices and cost, be attentive to detail, and prepared to suffer hardships and manner of risks o Tax farming is an early example of entrepreneurship involving risk bearing and individual initiative o A tax farmer is an individual who successfully bids for the exclusive right to collect taxes in the name of the Crown o The amount of the bid is related in a predictable way to the bidder‘s evaluation of the amount of taxes he can collect o The incentive that spurs each entrepreneur to action is the opportunity to obtain profit o But the entrepreneur must also be reasonably assured that he may keep entrepreneurial profits that he acquires legitimately o Which in turn requires stability of institutional practices o Historically, the risk-bearing function of entrepreneurship became less important after the establishment of limited liability and the new forms of business organization it generated __________________________________________________________________________________________ PST 06209 Enterpreneurship NTA Level 6 Semester 2 Facilitator Guide 9 o Subsequently, innovation came to be stressed over other aspects of entrepreneurship in theories of economic development STEP 4: Theories of Entrepreneurship (60 minutes) o Richard Cantillon (1680 – 1734) o Richard Cantillon‘s Essaisur la nature du commerce en general was published posthumously in 1755, but written two decades earlier o He recognized three classes of economic agents: Landowners who are financially independent Entrepreneurs who engage in market exchanges at their own risk in order to make a profit Hirelings who avoid active decision making in order to secure contractual guaranties of stable income o The entrepreneur is someone who exercises business judgment in the face of uncertainty o The city creates opportunities for entrepreneurs willing to take risks in order to make goods available at the appropriate time and place o Cantillon emphasized the economic function of the entrepreneur over his/her social status o Cantillon argued that the origin of entrepreneurship lies in the lack of perfect foresight we have with regard to the future This lack of perfect foresight is not a defect of the market system, but a part of the human condition o Uncertainty is a pervasive fact of everyday life, and those who must deal with it continually in their economic decisions are entrepreneurs o Consequently, it is the function of the entrepreneur, not his/her personality, that counts for economic analysis o Jean Baptiste Say (1762 – 1832) o Say‘s theory of the entrepreneur is part of a threefold division of human industry into distinct operations: o The first step is the scientific one. Before any product can