Dynamic entrepreneurship Theory

Dynamic Theory of entrepreneurship was advocated by Schumpeter, it considers entrepreneurship as a catalyst that disrupts the stationary flow of the economy and sustains process of development i.e. new combination.

The Theory of Economic Development, originally published in German in 1911, in which he endorsed entrepreneurship, was hardly ever mentioned. The theory was not widely accepted in 1930,s as dominance of sellers’ market. Theory was only mere fancy till 1990 when mega corporates failed due to over emphasis on operation which worked well in past.

Embarking upon new combinations of the factors of production – which he succinctly terms innovation – the entrepreneur activates the economy to a new level of development. The concept of innovation and its corollary development embraces five functions:

  1. Introducing new goods or a new quality of good
  2. Introducing new ways of producing goods
  3. Opening up new markets (usually overseas)
  4. Discovering new sources of supply of raw materials or partly-manufactured goods
  5. Re-organizing the structure of an industry (for example, by creating a monopoly or breaking up a monopoly situation)

Schumpeter represents a synthesis of different notions of entrepreneurship. His concept of innovation included elements of risk taking, superintendence and co-ordination. However, Schumpeter stressed the fact that these attributes unaccompanied by the ability to innovate would not be sufficient to account for entrepreneurship.

Schumpeter points out, “to produce means to combine materials and forces within our reach” and that the same materials may well be used in different ways. He describes these potential alternatives as new combinations and identifies the entrepreneur’s role as the discovery and commercialization of new combinations

Theory advocates the age of discontinuity and more on formulating the right questions and then the right answers for survival.


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