Chapter one introduction 1 Background to the Study



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(vii) Ludwig M. Lachmann (1976): "Lachmannian entrepreneurship". The emphasis of this theory is the co-ordination (bringing into greater and greater agreement with each other, and closer and closer matching to correct accuracy of future actual events and conditions) by entrepreneurs of the expectations of market participants in the "kaleidic" market economy in both the flow market for goods and in the stock market for capital assets (Lachmann, 1976; Wood, 2005). Lachmann in his theory was to differentiate between two types of market. These are the stock market for capital assets which co-ordinates patterns of expectations about the future and causes the patterns of expectations to become more homogeneous and more accurate regarding the future which does come into being and the goods market which affects the flow of goods from the point of production to the consumption point, taking cognizance of the role of market forces.
Lachmannian entrepreneurship therefore brings the capital markets closer toward equilibrium (until the next unexpected "kaleidic" upset occurs), and this assists the general economy including the flow market for goods to move toward equilibrium. Along with Shackle, Lachmann has been concerned with the state of expectations in markets for the longest period of time. Lachmann (1976) in his assertion affirmed that “the general economy consists of both goods markets, in which are traded (in a flow through time) consumption goods which provide current utilities easily appraised by consumers (such as the benefits of a can of green peas); and asset markets, or capital markets, in which are traded assets (such as a share of common stock) which produce difficultly-forecasted future benefits across spans of time far into the future. An entrepreneur (men and women) must understand the dynamic nature of the market forces (demand and supply) while taking the decision of venturing into entrepreneurial activities. The importance of these two markets must be evaluated by an entrepreneur and their implications to his or her entrepreneurial venture before venturing into business. The benefits to be provided in the future by a present asset are not easily appraised, and are imagined or expected by market participants (forces), differently by different participants; hence there is much more disagreement among market participants regarding the precise future benefits to be provided by an asset, and the present value of these forecasted benefits, which is the current price of the asset or the goods in the market (Wood, 2005).

(viii) Casson (1945) : Casson saw an entrepreneur as someone who has different skills for coordination of the available scarce resources. To utilize these resources, the entrepreneur needs to make judgmental decision. Casson developed a theory of entrepreneurship from an economic perspective (Philipsen, 1999). He argued that economic theory is the only one of the social sciences which does not have an established theory of the entrepreneur. Nevertheless, Casson argued, that entrepreneurs have an important function in the economy. He criticizes the neoclassical and orthodox economic theory for being static and being unable to make a satisfactory account of the economic function of the entrepreneur because “all the functions that need to be performed are already performed by someone else”. He also rejected the position of the Austrian school of economics, because the extreme subjectivism makes a predictive theory of the entrepreneur impossible (Casson, 1982). In support of his assertion, Philipsen (1999) evaluated Casson’s argument and summarized it into five points:

(i) entrepreneurship appears as a personal quality which enables certain individuals to make decisions with far reaching consequences (i) the entrepreneur has better- or at least relevant –information than other people (iii) it is assumed … that entrepreneurs are motivated by self-interest, they operate their business purely with a view to maximize the profit they obtain from a given amount of effort. (iv) An entrepreneur believes that he is right, while everyone else is wrong. Thus the essence is entrepreneurship is being different, that is being different because one has a different perception of the situation (v) An entrepreneur often has to create an institution to make market between himself and other market operators.


An entrepreneur therefore requires having control over resources to support his judgment and he is therefore expected to have personal wealth because lack of capital will be a barrier to successful entrepreneurial activity. Casson defined an entrepreneur as “someone who specializes in making judgmental decisions about the coordination of scarce resources.

In furtherance of his argument, Casson opined that

while the perspective of the theory is radically different, the technique of the analysis is not. The reason is, quite simply, that the theory, like the neoclassical and Austrian theories, is based upon a rationality postulate. As long as this postulate is maintained, and the information available to the individual is properly specified, the theory rules out inconsistent behaviour and therefore acquires predictive power. Thus while individuals may, for example, follow decision rules to economize on information, their choice of a decision rule is always a rationale one. It is the rationality postulate that explains why marginal analysis and its associated techniques hold the key to future developments in the theory of the entrepreneur” (Casson, 1982)
2.2.2 Theories of Motivation

The study of motivation is based on different theories. These theories form the bases for theoretical framework for the study of motivation. This section deals with the ideas of several early contributors to motivation theory, notable among them are; Maslow (1948); McGregor (1960); Herzberg, (1960); McClelland, (1961); Vroom (1964); Skinner (1974); Alderfer (1972) and Stacey (1963).



(a) Maslow’s Hierarchy of Needs

This theory is based on two assumptions; first that different needs are active at different times and only needs not yet satisfied can influence behaviour. In his theory, Maslow (1948) identified six different types of needs that can motivate people at every point in time. These according to Maslow (1971) and Huitt (2001) include;



  1. Physiological needs (Food, Water etc)

  2. Safety needs (freedom from fear or harm)

  3. Social Needs (Friendship, teamwork)

  4. Self-esteem needs (Acceptance of self as having value, to achieve, be competent, gain approval and recognition )

  5. Self-actualization needs (The fulfillment of potential and personal growth)

  6. Self-transcendence to connect to something beyond the ego or to help others find self-fulfillment and realize their potential

The above needs can be represented in a diagram as below;


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