Notes- Types of Entrepreneurs

Types of Entrepreneurs

Schumpeter made the entrepreneur the adventurous innovator who acting on his own account, introduces changes that others do not dare to experiment with. Other writers have, however, identified some other categories of entrepreneurs.

Arthur H. Cole distinguishes between empirical, rational and cognitive entrepreneurs. The empirical entrepreneur hardly introduces anything revolutionary and follows the principle of rule of thumb. The rational entrepreneur is well informed about the general economic conditions and introduces changes that look more revolutionary. The cognitive entrepreneur is well informed, draws upon the advice and services of experts and introduces changes that reflect complete break from the existing scheme of things.

In a study of American Agriculture, Clarence Danhof classifies entrepreneurs into four types-innovative, imitative, Fabian and drone. The innovating entrepreneur is one who assembles and synthesizes information and introduces novel combinations of factors. He is an aggressive figure and an industrial leader. The imitative entrepreneur is also known as the adoptive entrepreneur. He simply adopts successful innovations introduced by other innovators. The Fabians entrepreneurs are timid and cautious. He will imitate other innovations only if he is certain that failure to do so may damage his business. Finally there is the drone entrepreneur. His entrepreneurial activity may be restricted to just one or two innovations. He refuses to adopt changes in production even at the risk of reduced returns.

This classification of Danhof brings into focus two important aspects:

(a)        It shows that an economy which is making a lot of technical advancement has in its ranks a large number of innovating and adoptive entrepreneurs and less number of Fabians and drones.

(b)        Technological advancement may not take place even if innovators are present, if the actual control and ownership of production is in the hands of Fabians or drones.

Another classification of entrepreneurs is between private and public entrepreneurs. Private entrepreneur is motivated by profit and as such would not enter those sectors of the economy in which prospects of monetary rewards are not bright. In general, infrastructure industries fall under this category. For example electricity generation and distribution is Government owned. This forces the Government to take the initiative to start enterprises in these sectors. Thus, we have the category of public entrepreneurs. In the less developed countries the entrepreneurial functions of the Government has greatly widened due to the lack of sufficient private entrepreneurs.

Another classification based on the scale of enterprise is between small scale and large scale enterprises. This classification is especially relevant in the less developed countries. Private enterprise is usually found in households, small scale and medium scale industries. The small entrepreneur does not possess the necessary talents and resources to initiate large scale production and introduce revolutionary technological changes. In the developed countries most entrepreneurs deal with large scale enterprises. They possess the financial wherewithal and the necessary expertise to initiate large scale enterprises and introduce novel technical changes. The result is the developed countries are able to sustain and develop a high level of technical progress. It is this classification which has led to the wide technological gap between the developed and the less developed countries.

In the initial stages of economic development, entrepreneurs tend to have less initiative and drive. As development proceeds, they become more innovating and enthusiastic. Similarly, when entrepreneurs are shy and humble the environment is underdeveloped. Business environment becomes healthy and developed when entrepreneurs are innovating.

1. Innovating entrepreneurs: Innovative entrepreneurship is characterized by aggressive assemblage of information and the analysis of results derived from sound combination of factors. Persons of this type are generally aggressive in experimentation and cleverly put attractive possibilities into practice. An innovating entrepreneur sees the opportunity for introducing a new technique or a new product or a new market. He or she may raise money to launch an enterprise, assemble the various factors, choose top executives and set the organization going. Schumpeter’s entrepreneur was of this type. Such an entrepreneur introduces new products and new methods of production, opens new markets and re-organizes the enterprise.

Among the different types of entrepreneurs, the innovating entrepreneur is the most vigorous type of entrepreneur. Innovating entrepreneurs are very commonly found in developed countries. There is dearth of such entrepreneurs in underdeveloped countries. A country with little or no industrial tradition can hardly produce innovating entrepreneurs. Such entrepreneurs can emerge and work only when a certain level of development is already achieved and people look forward to change and progress. Innovating entrepreneurs played the key role in the rise of modern capitalism through their enterprising spirit, hope of money making, ability to recognize and exploit opportunities, etc.

2. Adoptive or imitative entrepreneurs: These kinds of entrepreneurs are characterized by readiness to adopt successful innovations created by innovative entrepreneurs. These type of entrepreneur are revolutionary entrepreneurs with the different that instead of innovating the changes themselves, they just imitate the technology and techniques innovated by others. These entrepreneurs are most suitable for developing countries because such countries prefer to imitate the technology, knowledge and skill already available in more advanced countries. The Cochin Shipyard is a good example of the result of imitative entrepreneurship. The Shipyard has been constructed using the innovative technology provided by the Mitsubishi Heavy Industries Ltd. of Japan. Imitative entrepreneurs are most suitable for the underdeveloped nations because in these nations people prefer to imitate the technology, knowledge and skill already available in more advanced countries. In highly backward countries there is shortage of imitative entrepreneurs also. People who can imitate the technologies and products to the particular conditions prevailing in these countries are needed.

Sometimes, there, is a need to adjust and adopt the new technologies to their special conditions. Imitative entrepreneurs help to transform the system with the limited resources available. However, these entrepreneurs face lesser risks and uncertainty than innovative entrepreneurs. While innovative entrepreneurs are creative, imitative entrepreneurs are adoptive.

Imitative entrepreneurs are also revolutionary and important. The importance of these humbler entrepreneurs who exploit possibilities as they present themselves and mostly on a small scale must not be under-estimated. In, the first place, such adaptation requires no mean ability. It often involves what has aptly been called subjective innovation that is the ability to do things which have not been done before by the particular industrialist, even though, unknown to him, the problem may have been solved in the same way by others. By western standards, an imitative entrepreneur may be a pedestrian figure, an adopter and imitator rather then a true innovator. He is more an organizer of factors of production than a creator. But in a poor country attempting to industrialized, he is nevertheless a potent change producing figure. He can set in motion the chain reaction’ which leads to cumulative progress. This humbler type of entrepreneur is important in under developed countries for another reason. These countries are placing great emphasis in their economic planning on small scale industries and decentralized industrial structure.

3.         Fabian entrepreneurs: Entrepreneurs of this type are very cautious and skeptical while practicing any change. They have neither the will to introduce new changes nor the desire to adopt new methods innovated by the most enterprising entrepreneurs. Such entrepreneurs are shy and lazy. Their dealings are determined by custom, religion, tradition and past practices. They are not much interested in taking risk and they try to follow the footsteps of their predecessors.

4.         Drone entrepreneurs: Drone entrepreneurship is characterized by a refusal to adopt and use opportunities to make changes in production methods. Such entrepreneurs may even suffer losses but they do not make changes in production methods. They are laggards as they continue to operate in their traditional way and resist changes. When their product loses marketability and their operations become uneconomical they are pushed out of the market. They are conventional in the sense that they stick to conventional products and ideas. The traditional industries of Kerala are characterized by drone entrepreneurs. The coir and bamboo industries are still in the hands of laggards who refuse to innovate.