Paper 09: Entrepreneurship Development & Project Management

Module 10: Entrepreneurial Traits and Types. The Motivating Factors & Theories

Prof. S P Bansal
Principal Investigator Vice Chancellor
Maharaja Agrasen University, Baddi

Co-Principal Investigator Prof YoginderVerma

Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.

Paper Coordinator Dr. Vishal Kumar

School of Management,
Maharaja Agrasen University, Baddi

Content Writer Ms.Shivani Mahajan

School of Management,
Maharaja Agrasen University, Baddi

Entrepreneurship Development & Project Management

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Entrepreneurial Traits and Types. The Motivating Factors & Theories
 Items Description of Module
Subject Name Management
Paper Name Entrepreneurship & Project Management
Module Title Entrepreneurial Traits and Types. The Motivating Factors & Theories
Module Id Module no 10
Pre- Requisites Basic knowledge of what Entrepreneurship is.
Objectives To study the entrepreneurial traits and the motivating factors
Keywords Entrepreneur, Traits, Factors, Motivation, Theories

QUADRANT-I
Module 1: Entrepreneurial Traits and Types. The Motivating Factors & Theories
1. Learning Outcome
2. Introduction
3. Concept of an Entrepreneur
4. Traits of an Entrepreneur
5. Types of Entrepreneur
6. Entrepreneurial Motivation
7. Motivation theories of Entrepreneurship
8. Summary

1. Learning Outcome
After completing this module students will be able to:
i. Understand the concept of an Entrepreneur.
ii. Understand the Entrepreneurial Traits.
iii. Know the Factors of Motivation.
iv. Understands the theories of motivation of entrepreneurship.

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 Entrepreneurial Traits and Types, the Motivating Factors & Theories
2. Introduction
India is full of entrepreneurs. We have large number of successful entrepreneurs in the country like
Ratan Tata, Aditya Birla, Azim premji, N.R Narayan Murthy, Rahul Bajaj and many more. They have
taken the opportunities and generated employment opportunities in the country. Therefore,
entrepreneurs are important for the economic growth of the country.
3. Concept of an Entrepreneur
The term entrepreneur is derived from the French word “„enterprendre” i.e. to undertake. This word
has been used since ages but its meaning is changing over time. In Early 16th century entrepreneurs was
the term used for the persons engaged in the military journey. Later on in 17th century, it was expanded
for the persons engaged in engineering activities such as construction etc. In the beginning of the 18th
century, Entrepreneur refers to the persons engaged in the economic activities. Therefore,
„entrepreneur‟ has changed over the time from the person engaged in military expeditions to the
economic activities.
Entrepreneur literally means the person who innovate the new things to earn profits as a reward by
organizing the factors of productions and bearing the risk.
Richard Cantillon was the first who proposed the term „entrepreneur‟. According to him, “An
entrepreneur is an agent who buys factors of production at certain prices in order to combine them into
a product with a view to selling it at uncertain prices in future.” According to Joseph Schumpeter,
“Entrepreneur is an individual who carries out new combines of means of production by which there
occurs disequilibrium.”
As there are many views regarding entrepreneur, therefore entrepreneur is classified as risk bearer,
innovator and organizer.

 Entrepreneur as Risk Bearer:

Richard Cantillon proposed about the unique feature of risk bearing as an entrepreneur. He states
that entrepreneur bears the risk by buying the factor of production at a certain prices and produces
the product to sell them at the uncertain prices in future. Knight also proposed that entrepreneur is a
person who bears the non-insurable risk. Non-insurable risk is uncertain and cannot be calculated.
He further stated that entrepreneur takes the responsibility of the uncertainty which is not insured.

 Entrepreneur as an Innovator:
Joseph A. Schumpeter in 1934 defined the entrepreneur as an Innovator. He believed that
entrepreneur brings the economic development in the country with the help of the innovation.
According to him, entrepreneur is an innovator as he introduces a new product, introduces a new

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 method of production, and carries a new form of organisation. However, he felt that these attribute
would not be sufficient to explain the entrepreneurship.

 Entrepreneur as an Organiser:
Jean Baptiste Say developed the concept of entrepreneur as an organizer. He defined the role of
entrepreneur as a coordinator, organiser and supervisor. According to him, Entrepreneur organizes
the factors of production by taking the land form one, labour from other and capital from yet
another.
4. Characteristics/ Traits of an Entrepreneur:
If we go through history, we come across different successful entrepreneurs in India like Ratan Tata,
Aditya Birla, Azim premji, N.R Narayan Murthy, Rahul Bajaj and many more. We will find certain
similarities between them these similarities can be called as traits of an entrepreneur. Following are the
characteristics of an entrepreneur:
 Hard work: Entrepreneurs works very hard to succeed. Most of entrepreneurs work hard in the
beginning and thus same becomes their habit for the lifetime because they believe that hard
work is the key to success.
 Visionary: Entrepreneur is visionary and have foresight to know the future. He have the ability
to visualize the likely change in taste and preferences of the customer, technology
advancements etc in the future.
 Decision making ability: Entrepreneurs have good decision making skills and is able to take
the decisions promptly and accurately.
 Innovative: Entrepreneur is the source of the economic development in the country so he
should be innovative to bring the change in the country. He produces the goods and services
according to the changing needs of the customers.
 Desire for high-achievement: Entrepreneur have desire for high goals therefore, takes the
business to the new heights.
 Optimistic: Entrepreneurs are optimistic and have positive approach towards the things. They
do not get troubled by the present problems and believe that things will become better in the
future.
 Good Organiser; Entrepreneur organizes the various factors of production on their own and
thus brings together all the required resources for starting an enterprise.
 Patient: Entrepreneurs are highly patient and do not get affected by the temporary failure and
continue to work hard. Entrepreneurs try again and again to achieve the success.
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  Communication Skills: entrepreneurs are good communicator and with their good
communication skills they are able to convince others with their ideas.
 Team spirit: An entrepreneur has the ability to build successful teams and thus working in
teams. He/she is good at building and managing successful teams
 Emotional balance: There are many ups and downs in the business but entrepreneur has to be
emotionally stable. They do not get carried away by the huge profits and disappointed by the
huge losses. They remain quiet and calm at every situation.
5. Types of Entrepreneur
Entrepreneurs can be classified into different types as follows:
a. Based on the use of Technology:
1. Technical entrepreneurs
2. Non-Technical entrepreneurs
1. Technical Entrepreneurs: The entrepreneurs‟ who establish technology based industries are called
as Technical entrepreneurs. For e.g. IT industries
2. Non-Technical Entrepreneurs: The entrepreneurs who do not use science and technology into their
businesses are called as non-technical entrepreneurs.
b. Based on the type of Business
1. Trading Entrepreneur
2. Manufacturing Entrepreneur
3. Agriculture Entrepreneur
1. Trading Entrepreneur: The entrepreneurs who carry out the trading activities are called as trading
entrepreneurs. They arrange the finished goods from the manufacturers and sell them to the customers
or the retailers. E.g.: wholesaler, middleman etc.
2. Manufacturing Entrepreneurs: The entrepreneurs who identify the needs of the customers and
accordingly manufacture the products are called as manufacturing entrepreneurs. They are the one who
converts the raw material into the finished goods.
3. Agricultural Entrepreneurs: The entrepreneurs who take up the activities related to the agriculture
are called agricultural entrepreneurs. E.g.: cultivation, marketing of agricultural products etc.
c. Based on Ownership

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 1. Private entrepreneur
2. State entrepreneur
3. Joint entrepreneur
1. Private Entrepreneur: When an enterprise is owned by an individual, he/she is called as private
entrepreneur. He bears the whole risk and is the sole owner of the business.
2. State entrepreneur: When an enterprise is owned by the State or the Government, it is called as the
state entrepreneur.
3. Joint entrepreneur: When an enterprise is jointly run by the Government and the private
individual, it is called as Joint entrepreneur.
d. Based on Size of the enterprise.
1. Small-Scale Entrepreneur
2. Medium-Scale Entrepreneur
3. Large-Scale Entrepreneur
1. Small-Scale Entrepreneur: An Entrepreneur who has invested up to one crore rupees for the plant
and machinery is called as Small-Scale Entrepreneurs.
2. Medium-Scale Entrepreneur: An Entrepreneur who has invested above one crore rupees and
below five crore rupees for the plant and machinery of the business is called as Medium-Scale
Entrepreneurs.
3. Large-Scale Entrepreneur: An Entrepreneur who has invested above five crore rupees for the plant
and machinery of the business is called as Large-Scale entrepreneurs.
e. Based on the Gender
1. Male Entrepreneurs
2. Female Entrepreneurs
1. Male Entrepreneurs: When enterprise are established and controlled by male, these are called as
Male entrepreneurs.
2. Female Entrepreneurs: When enterprise are established and controlled by female, these are called
as Female Entrepreneurs.
f. Based on the Clarence Danhof Classification

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 According to Danhof, entrepreneurs are less innovative and initiating in the beginning but become
highly innovative and responsible over time. Based on this, Danhof has classified the entrepreneurs
into four types:
1. Innovating Entrepreneurs
2. Imitative Entrepreneurs
3. Fabian Entrepreneur
4. Drone Entrepreneurs
1. Innovating Entrepreneur: The entrepreneurs who innovates new product, new market, new
process etc are called as Innovating Entrepreneurs. These entrepreneurs exist only when the country is
developed and people are looking forward to the innovations.
2. Imitative Entrepreneurs: These are the entrepreneurs who accept the innovations and imitate them.
They do not innovate themselves but reproduce the innovations already done. Such entrepreneurs can
work only in the under developed economy by bringing the innovations from the developed
economies.
3. Fabian Entrepreneurs: Such Entrepreneurs are very cautious and handle things with care. They
imitate the changes when only they get sure that implementing changes would give them profits for
sure and not to adapt changes will lead to loss.
4. Drone Entrepreneurs: Such entrepreneurs are not ready to accept changes. They generally refuse to
accept the innovations and want to continue with their existing business processes because of which
they generally incur losses.
g. Based on different Behaviourial Scientists:
1. Solo Operators
2. Active Partners
3. Inventors
4. Challengers
5. Buyers
6. Life-Timers
1. Solo Operators: These are the entrepreneurs who work alone and if needed, hire few employees.
Mostly every entrepreneur starts their enterprise as solo entrepreneur.

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 2. Active Partners: These are the entrepreneurs who jointly start an enterprise and work actively for
the business. Entrepreneurs who only provide funds for the business and do not actively participate in
the operations are just called as „partners‟.
3. Inventors: These are the entrepreneurs whose basic interest is in the research and development.
They are the one who are creative and bring new innovations.
4. Challengers: These are the entrepreneurs who are ready to accept the challenges and get into the
business because of the challenges it presents.
5. Buyers: They are the entrepreneurs who are afraid of risks and do not want to bear much risk.
Therefore, they prefer to buy an ongoing firm rather than starting a new one.
6. Life-Timers: These entrepreneurs want to continue their enterprise for the life time. Generally
people who have hereditary enterprises are called as life- timers.
6. Entrepreneurial Motivation
The word motivation has come from the Latin word „mover‟ which means „to motive‟ and is derived
from the English word „motive‟. It means the inner state of our mind that direct or stimulate us to
achieve our goals. Motives are not necessarily in born but are the result of our interactions with the
society. So, they give directions to our behavior to achieve the desired goals.
Therefore, Entrepreneurial motivation can be defined as the process that directs or stimulates our
behavior to achieve the entrepreneurial goals. In other words, entrepreneurial motivation activates the
inner state of an entrepreneur to put higher level of efforts for the achievement of the desired
entrepreneurial objectives.
6.1 Motivating Factors for Entrepreneurs
Entrepreneurial motivation is important because as long as the entrepreneur is not motivated he/she
cannot achieve their goals. There are certain factors which motivate the entrepreneurs while some do
not. It is a matter of concern to find out which factors motivate the employees. Different researchers
have conducted several studies to identify such factors. Following are the summed up factors of
motivation for the entrepreneurs:
1. Education background: The knowledge acquired through the various courses provided by the
institutions has motivated entrepreneurs to step into the business. Entrepreneurs feel confident while
entering into the business of their education fields.
2. Family Background: The family businesses motivate the entrepreneurs to join businesses. In India,
different entrepreneurs have continued their fore father‟s business. For e.g.: Mukesh Ambani, Ratan
Tata, Aditya Birla etc.

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 3. Desire to do something new: People have urge to do something new and creative. The strong desire
to be innovative and creative promotes entrepreneurship among the population.
4. Business experience: Large experience in a particular field makes the people aware of that field.
Therefore, Entrepreneur feel motivated to enter into the fields in which they have the rich experience.
5. Government assistance and support: Government provide support to the entrepreneurs in different
ways such as providing loans at low interest rates, tax concessions, leasing scheme, Export assistance
etc. Assistance from the end of the Government motivates people to become entrepreneurs.
6. Encouragement from big business houses: The success stories of the large businesses motivate the
people to become entrepreneur. Moreover, the large businessman encourages the people to become
entrepreneurs.
7. Easy availability of raw material and labour: Easy availability of the raw material and labour at
cheap rates motivates the people to become entrepreneurs as it makes the business little easy.
8. Profit margins: Many people become entrepreneurs for earning more money. So, earning money is
one of the most motivating factors.
9. Promising demand of the product or service: There is an increasing demand for some goods and
services. Therefore, entrepreneurs find their paths in establishing business for such products and
services.
10. Job Security: Over-population and Unemployment is the one of most challenging problem in
India. As the population is growing there is more and more risk of unemployment. Moreover, people
don‟t feel secure with their jobs because of the availability of large number of skilled population.
Therefore, People prefer to become entrepreneurs.
11. Social prestige: In India, entrepreneurs are seen with respect. So, people get motivated to become
entrepreneurs to gain social respect.
7. Motivation theories for Entrepreneurship
Entrepreneurship has large risk associated with it but still prefer to become entrepreneur because of the
several motivating factors. There are thinkers who have explained what motivates an individual to go
for entrepreneurship through different theories. Maslow‟s need hierarchy and McClelland achievement
motivation theory are most relevant to understand the entrepreneurial behavior of an individual.
a. Maslow Need Hierarchy theory:
Maslow has given the need hierarchy theory of motivation. According to him, humans have five types
of needs from lower to higher order. Following are the needs:
1. Physiological needs:
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 These are the most basic needs and the lowest in the hierarchy. These needs are of basic shelter, food
and cloths. Human beings work hard to fulfill their basic needs. Entrepreneurs also have this basic need
which motivates them to set up their own enterprise.
2. Safety and Security needs:
The second in the hierarchy is the safety and security needs and will emerge once the physiological
needs are met and once these needs are met they become inactive. These needs include the free from
the threats, secure atmosphere, financial security etc. to fulfill these needs, one need to have enough
money. Entrepreneur works hard to meet his/her security needs.
3. Social needs:
After security needs are met, social needs are arises. Human being likes to be recognized and accepted
by others. People like to interact with others so to get affiliated to others. Therefore, entrepreneurs
interact with the other entrepreneurs, employees and others.

(source:http://s3.media.squarespace.com/production/1892222/19210459/wpcontent/uploads/2010/01/c
hild-hierarchy-of-needs.jpg)

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 4. Self esteem needs: These needs include self-confidence, accomplishment, skills, knowledge, and

freedom. In case of entrepreneurs, the ownership and self- control over business satisfies their esteem
needs by giving them respect, reputation, freedom and status.

5. Self-actualization

This is the highest level of the Maslow hierarchy. Self actualization needs are self aware, self

conscious and more concerned with the personal growth. This need is concerned with identifying what

actually the potential is and actualizing the realization of the potential.

According to Maslow, if the lowest need in the hierarchy is satisfied then only next need will arise.

Humans never get satisfied so as long as one need is satisfies, immediately second need arises. Social

needs, Self esteem and self-actualization needs motivate the entrepreneur more to work hard.

b. McClelland Need for Achievement theory:

The most important motivation theory for entrepreneurs is McClelland need for achievement theory.
McClelland focused on three needs: Need for power (npow), need for affiliation (naff), need for
achievement (nach).
 Need for Power (n Pow)
The need for power is related to influence others, have control over others, and push to change
people. The people with high need for power want to direct others. They want people to be
dependent on them which results in supreme satisfaction to the individuals.
 Need for Affiliation (n Aff)
The need for affiliation is concerned with desire to build healthy and friendly relations with the
other people. They have the strong desire to get accepted and affiliated by others. When people
recognize the individuals they get motivated.

 Need for Achievement (n Ach)

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 The need for achievement is the desire to excel, to achieve the set goals with excellence. These
needs direct the behavior of the individuals to perform better. People with high achievement
needs show better performance than the individuals with the low achievement needs. They
personally take the responsibility of achieving the set goals. They accept challenges and
generally set difficult goals than low achievers.

(Source: https://wikispaces.psu.edu/display/PSYCH484/2.+Need+Theories)
According to the McClelland, all the three needs can exist simultaneously but people with the high
achievement needs are more likely to be entrepreneurs.
8. Summary
Entrepreneurs are important for the economic development of the country. There are certain
characteristics which are common to the entrepreneurs. Moreover, entrepreneurs cannot always remain
motivated. There are several factors which motivates the entrepreneurs. Different Psychologists have
worked to find the factors which can motivate the entrepreneurs. On the basis of that, they have
propounded different theories of motivation for the entrepreneurs.
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