The Economic Theory of Entrepreneurship - Model - Introduction, Assumptions and Propositions

The Economic Theory of Entrepreneurship - Model - Introduction,  Assumptions and Propositions - Version 1

27 October 2018
Prof. Narayana Rao K.V.S.S.

Introduction

Economic theory is developed on the basis of four factors of production. The four factors are land, labor, capital and entrepreneurship.  The factors are owned by some or other persons in the economy at a given point of time. In every period of production, these four factors participate and the production output of the period is distributed to them according to the contracts that they make at the beginning of the production period.

Land and capital are tangible assets separate from persons and they can be given to others. Labor and entrepreneurship are attached to persons and their use implies participation of persons.

Entrepreneur enters into a contract with the owners or holders of land, capital and labor and acquires the required amount to participate in his plan of production. Entrepreneur distributes the proceeds of rewards after the production period is over and sales takes place and the consumers pay him the exchange value.  The way entrepreneurship is described or modeled in the economic theory, implies that there is an active credit market through which entrepreneurs acquire other factors of production.

All owners of factors of production have to survive till they get returns from production and exchange process. Hence, we need to assume that there is enough consumption goods stock with the owners of production to consume during the production cycle.

Entrepreneur tasks.

1. Should be able to come out with a production and exchange plan that is feasible at expected value level and satisfies the desires of owners of factors of production and consumers.

2. He must create trust in the owners of factors of production so that they provide their goods and services on credit to him.

3. He must have trust in potential customers so that he gives his produce on credit to them.

4. He must have the ability to collect exchange value  from the customers to whom he sold his produce on credit.

What are the questions to be answered by the economic theory of entrepreneurship?

1. Supply of entrepreneurship services.
2. Demand for entrepreneurship services.
3. Reward to entrepreneurship.
4. Growth and decline of entrepreneurship services
5. Role of entrepreneurship in economic growth of society.

Managerial Tasks of an Entrepreneur

Management theory has application in the economic theory of entrepreneurship.  Entrepreneurs have to undertake managerial tasks to successfully complete the cycle of entrepreneurship. The cycle of entrepreneurship is  -----------  Production and Exchange Plan - Communication of the Plan to  Owners of Factors of Production - Acquisition of Factors of Production - Execution of Production Process - Communication of Product/Service Information in the Market - Selling - Collection of the Exchange Value - Payment to Owners of Factors of Production. 

The Cycle of Entrepreneurship

Production and Exchange Plan - Communication of the Plan to  Owners of Factors of Production - Acquisition of Factors of Production - Execution of Production Process - Communication of Product/Service Information in the Market - Selling - Collection of the Exchange Value - Payment to Owners of Factors of Production.

Bibliography - The Economic Theory of Entrepreneurship

Nash, S. J.,
Thesis title : On entrepreneurship : a critique of the economic theories of entrepreneurship
School of Economics, University of Queensland, 1987-01-01
https://espace.library.uq.edu.au/view/UQ:222083


Formaini, Robert L.
The Engine of Capitalist Process: Entrepreneurs in Economic Theory
Economic and Financial Review, Fourth Quarter 2001, Federal Reserve Bank of Dallas


Khalil, Elias
Entrepreneurship and Economic Theory
Munich Personal Repec Archive
October 2016
https://www.researchgate.net/publication/24114234_Entrepreneurship_and_Economic_Theory/download


Rocha Very Caterina
The Entrepreneur in Economic Theory: From an Invisible Man Toward a New Research Field.
FEP Working Papers, No. 459, May 2012
School of Economics and Management, University of Porto.


Gunter, Frank R.
A Simple Model of Entrepreneurship for Principles of Economics Courses
Expanded version of the article published in the Journal of Economic Education, Vol. 43, No. 4, 2012, pp. 1-11.




Tiryaki, Ahmet
Theories of Entrepreneurship: A Critical Overview
Paper avaiable on Web/Internet


Campagnollo, Gilles, & Vivel, Christel
The Foundations of the Theory of Entrepreneurship in Austrian Economics - Menger, Bohm-Bawerk on entrepreneur

Self Motivation - Intrinsic Motivation

Self motivation is included by Daniel Goleman as a component of Emotional Intelligence.

Fred Luthans, the noted author of Organization Behavior, writes that intrinsic motives are internally generated. The motivators are presented in the task or job itself and other extrinsic rewards promised by others are not required for the motivation to do the task. The feeling associated with the completion of the task or doing the task itself such as feeling of responsibility, achievement, accomplishment, learnt something,  and feeling challenged etc.



Bibliography

https://positivepsychologyprogram.com/self-motivation/


https://books.google.co.in/books?id=rnfFFRH6oOsC&pg=PA137#v=onepage&q&f=false


https://books.google.co.in/books?id=ocEm10E0VoQC&pg=PA14#v=onepage&q&f=false


https://www.cambridge.org/core/journals/journal-of-management-and-organization/article/testing-the-links-between-emotional-intelligence-and-motivation/B0BF1FF537ABA86DC6913D1884EAAB2D

https://en.wikiversity.org/wiki/Motivation_and_emotion/Book/2011/Emotional_intelligence

https://www.linkedin.com/pulse/developing-your-eq-part-2-self-motivation-anke-exner

Intrinsic Motivation

A person is intrinsically motivated to engage in behavior if he does it for no apparent reason except the activity itself (Koch 1956, Hunt 1965, Berlyne 1966). Engaging in these behaviors allows him to feel a sense of competence and self-determination (White 1959, de Charms, 1968, Deci 1972a).



Berlyne D.E., Exploration and Curiosity, Science, 1966, 153, 25-33.

Koch, S, "Behavior as "Intrinsically" Regulated: Work Notes toward a Pre-theory of Phenomena called "Motivational."  In M.R. Jones, Nebraska Symposium on Motivation, 1956, 4, 42-86



Books

Edward Deci (1975), Intrinsic Motivation, Plenum Press, New York.
https://books.google.co.in/books?id=_Ut-BgAAQBAJ

Contemporary Theories of Motivation

Basic introduction in one or two lines to each theory is given at the present.

1. Self-Determination Theory

It is based on cognitive evaluation theory.

Employees who feel what they do is within their control and a result of free choice are likely to be more motivated by their work.

2. Goal-Setting Theory

In the late 1960s, Edwin Locke proposed that intentions to work toward a goal are a major source of work motivation.

3. Self-Efficacy Theory

Self-efficacy refers to an individual's belief that he or she is capable of performing a task. The higher your self-efficacy, the more confidence you have in your ability to succeed.

4. Reinforcement Theory

5. Equity Theory/Organizational Justice

6. Expectancy Theory

SAP ERP Controlling CO

Detailed information will be posted in due course of time.


https://www.slideshare.net/rshanbhag/product-costing-in-sap-a-primer


First Steps in SAP Controlling (CO)
Ashish Sampat
Espresso Tutorials GmbH, 05-Sep-2015 - 205 pages


 This book offers a comprehensive introduction to SAP ERP Controlling (CO). You will learn the basic fundamentals of the organizational structure, master data, and functions of SAP Controlling, including overhead controlling, product costing, month-end closing, and reporting. If you would like to understand the basic fundamentals of SAP Controlling, with examples based on a case study approach, this book is for you! Using a fictional chocolate manufacturing company case study, you will learn fundamentals based on several day-in-the-life scenarios of various key functions such as cost planning, production controlling, actual costing, and information systems. Get detailed information on how SAP CO integrates with other SAP modules and obtain insight into the different functional areas typically used in manufacturing organizations. Dive into SAP ERP master data elements and get tips on how to maintain consistent and accurate data. Review the various planning methods available and get an overview of cost center planning, including overhead planning and labor cost planning. Understand how SAP Material Ledger can be used to accurately determine costs. Identify how actual costs are booked and absorbed. By using a detailed case study, practical examples, tips, and screenshots the author brings readers new to SAP CO quickly up to speed on the fundamentals.


- Cost center and product cost planning, actual cost flow
- Best practices for cost absorption using Product Cost Controlling
- Month-end closing activities in SAP Controlling
- Examples and screenshots based on a case study approach
https://books.google.co.in/books?id=ZQIvDwAAQBAJ




Practical Guide to SAP CO-PC (Product Cost Controlling)
Tanya Duncan
Espresso Tutorials GmbH, 29-Jul-2014 - Business & Economics - 236 pages


 Because of its complex integration, Product Cost Controlling (CO-PC) is often regarded as the most challenging module in SAP ERP. In this book, you will learn the most important concepts, business processes, and configuration settings. By concentrating only on the essentials, this book will quickly enable you to use it as a supplementary reference guide for implementing or supporting SAP CO-PC. Screenshots of transactions and configuration are included to illustrate written content. This book also dives into CO-PC integration details with other modules and tips on how to properly configure and implement a highly integrated sub-module. This complete and simplified guide to configuration and business processes for SAP Product Costing covers:


* Introduction to Value Flows in SAP Controlling
* Step-by-Step Examples
* Configuration for Product Costing
* Detailed Month End Closing Processes 
https://books.google.co.in/books?id=cwIvDwAAQBAJ

Practical Guide to SAP Cost Center Accounting
John Pringle
Espresso Tutorials GmbH, 13-Sep-2017 - 250 pages


 Are you taking full advantage of cost center accounting functionality in SAP (CO-CCA)? This book explains the core (and often underused) functionality in cost center accounting including basic planning, allocation, and reporting functions and delves into more advanced functions such as automatic planning functions, template allocations, accrual calculations, target costing, variance analysis, and marginal costs. Compare and contrast cost center planning in SAP ECC 6.0 and SAP S/4HANA and get up to speed on recent changes.

Explore the period end allocation processes that should be performed in cost center accounting and identify the differences between the different types of cost allocations and the benefits of each. Walk through methods for analyzing cost center costs and identify your options for variance analysis and posting cost center variances.
Dive into a typical manufacturing scenario including master data requirements, integrated planning, month-end processes, and reporting. By using practical examples, tips, and screenshots, the author brings readers quickly up to speed on the fundamentals of SAP Cost Center Accounting.

- Overview of cost center accounting in SAP
- Flow of actual values into cost center accounting
- Cost center planning in SAP ECC 6.0 and SAP S/4HANA
- Most important standard reporting options in SAP CCA
https://books.google.co.in/books?id=vGI3DwAAQBAJ


https://www.leveragetech.com.au/blog/sap-business-one-and-enprise-a-perfect-match-for-your-job-costing-requirements/


https://sapficoconsultant.com/sap-training/video-training.html

Creative Problem Solving - Process of Creative Thinking in Practice

Chapter 10 Mastering Creative Problem Solving
from the book -   Lifelong Creativity: An Unending Quest by Pradip N. Khandwalla

Models of Creative Problem Solving

Stages Models

Graham Walls
William Kirkwood

Simulation Models

Heuristic is mentioned in this model.

Some heuristics that mind uses are: try something counter-intuitive, make the familiar strange, generate hypothesis from an episode or a case, use analogies, account for exceptions, investigate paradoxical incidents, play with ideas, etc. 

'Primary Process' Thinking Models

Ernst Kris

In the primary process thinking many fluid contributions or syntheses take place as during reveries.  Analytical or evaluative activity takes during 'secondary process thinking.

Personality Trait and Emotion-Based Models

 Albert Rothenberg

Kirton Adaptation-Innovation Inventory

Martinsen

Todd Lubart and Isaac Geetz - Emotions play central role

David Carson and Mark Runco - Certain emotions negatively impact creativity

Cognitive Capabilities Models

Michael Mumford  - Creating super categories given some categories

Example: Given chair, couch, lamp and pictures coming out with a super category of furnishings.

Structured Problem-Solving Models

Kepner and Tregoe's Model

Sidney Parnes and Associates

Problem Solving Programme - Five Stages

1. Awareness of the 'mess' or problem situation
2. Fact finding, involving listing down or otherwise discovering all the facts pertinent to the problem situation.
3. Problem finding or fairly precise statement of what the problem is.
4. Idea finding, in which such techniques of divergent thinking as brainstorming are used to come up with a wide range of possible solutions.
5. Solution finding, in which the alternative proposed solution ideas are assessed against criteria of evaluation to generate a small number of feasible solutions.
6. Acceptance finding, or getting system to accept one of the feasible solutions.
7. Implementation of the selected solution, involving thinking through and planning the steps needed to implement the chosen solution

Dennis Brophy

Runco

Useful Mechanisms of Convergent Thinking

Clarificatory Mechanisms

Analytical Mechanisms

Synthesis Aiding Mechanism

Optimizing Mechanisms

Mechanisms of Divergent Thinking

The Institute of Administrative Management (IAM) - UK - Since 1915

The Institute of Administrative Management (IAM) is one of the oldest management institutes in the UK, having inspired professional business managers and administrators since 1915.

Our focus is on developing professional administrators, administrative managers and managers.

What is Administrative Management?
Administrative management is at the heart of every successful organisation playing an essential role to ensure that businesses run smoothly.

It involves all types of business management and administration. Any middle or senior manager who is involved in the planning, co-ordinating, directing, or controlling aspects of a business can be considered an administrative manager. Administrative managers ensure there is effective information flow and that resources are employed efficiently across an organisation.








http://www.instam.org/Learning-Overview

The Practice of Social Science in Organizations - A Review

Working Across the Gap: The Practice of Social Science in Organizations

Lisl Klein
Routledge, 30-May-2018 - Psychology - 289 pages


The author's experience of applying the social sciences in organizations must be unique. Her work is grounded in research but much of her professional activity has been in application, combining the methods and findings of research with an understanding of dynamics in working with organizations. Moving between research and practice she has, for nearly forty years, pursued the aim of rendering the social sciences useful and practical in organizational life.

This collection of papers brings together wide-ranging material that is highly relevant to today's world, whilst also providing a useful historical overview of the field.

https://books.google.co.in/books?id=EdtdDwAAQBAJ

New Forms of Work Organisation

Lisl Klein, Dave Klein
CUP Archive, 15-Apr-1976 - Business & Economics - 106 pages
https://books.google.co.in/books?id=Jjg9AAAAIAAJ