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Importance of entrepreneurial theory in adult care

This page is designed to answer the following questions:

NOTE: Although this page has been marked as complete, it has not yet been peer-reviewed or quality-assured, therefore it should be considered a ‘first draft’ and any information should be fact-checked independently.

For this assessment criterion, you will be required to research several theories of entrepreneurship and decision-making and explain how they could be applied to adult care management. Some theories that you may wish to research are included below.

Economic theories – providing incentives to achieve

Hawley’s Risk Theory of Profit (1893) asserts that an entrepreneur has the right to expect a premium of compensation for taking on risk. Although service users must always be our priority, we should not lose sight of the fact that our organisation needs to remain financially viable to continue to provide services. This theory reminds us that calculated risk-taking is a key skill of entrepreneurship and, consequently, growth.

Schumpeter (1934) wrote many works relating to entrepreneurship and economic theory. Like, Hawley, he asserts that entrepreneurs are incentivised to use creativity and take risks by the opportunity of excess profit.

[Entrepreneurs] can produce a unit of product more cheaply, while at first the existing prices substantially continue to exist. He then makes a profit. Again he has contributed nothing but will and action, has done nothing but recombine existing factors.

Schumpeter, 1934

Clearly, economic theories of entrepreneurship suggest that entrepreneurs are incentivised to take on risks because of the opportunity of excess remuneration in relation to the services they provide. In the health and social care sector, cutting costs and providing better services through the use of creativity and innovation may be the incentives that encourage us to take a more entrepreneurial approach to our work.

We may also use these theories to incentivise an entrepreneurial culture within our own service. Funding is sparse in the health and social care sector, so monetary incentives may not be possible, although they should be considered. We may look at other ways to incentivise our staff such as sincere appreciation (just saying ‘thank you’ can mean a lot), award ceremonies and perks (e.g. discounts at local shops, gym membership, additional annual leave etc.)

Psychological theories – a vision and ability to manage opposition to change

Psychological theories examine the traits and characteristics that drive entrepreneurs to succeed. David McClelland (in his human motivation theory) suggests that the primary motivator of entrepreneurs is the need to achieve a feel a sense of accomplishment. This theory will be discussed in more detail later on this page. As well as a need for achievement, research conducted by McClelland (1988) suggested that entrepreneurs were also proactive and had a commitment to others.

Rotter’s Locus of Control Theory postulates that everyone has a perception of how much control they have over their own lives. People with an external locus of control believe that outside forces have a big influence over what happens to them (e.g. luck, fate, god, the government etc.) whereas those with an internal locus of control believe they are masters of their own fate. Entrepreneurs tend to have an internal locus of control.

It is worth taking some time to consider how strong your own entrepreneurial traits are. Do you believe that you can make a real difference to your service? Do you feel an innate need to accomplish something long-lasting?

As well as reflecting on your own traits and feelings, you may also find it beneficial to reflect on those of your team members. Entrepreneurship means to be constantly moving forward, so you should consider how organisational change will affect your colleagues. Goleman’s Emotional Intelligence (as discussed in the Leadership and Management Unit) provides tools that can help you with this. By understanding how change affects others, you can proactively provide reassurances and overcome barriers and resistance to change. This is discussed more fully in theories of change management.

Sociological theories – how values influence motivations, behaviours and beliefs in decision-making

Values are the personal beliefs standards that we hold dear and believe to be important to life. Personal values vary between individuals to make us each unique, however, there are also many values that are shared amongst groups of people. As part of your professional development, it’s likely that you’ve completed a course on the British Values of democracy, rule of law, individual liberty and mutual respect – these values that are shared between citizens of Great Britain.

Schwartz’s Theory Basic Values identifies ten broad values that transcend geographical location, religion and culture and each is underpinned by the motivation that they express. Weber argued that entrepreneurial development is heavily influenced by religious beliefs – some religions support the values of entrepreneurship, whilst others do not.

It is important to have an awareness of how our values can influence the way work, including our motivations, behaviours, beliefs and decision-making.

Similarly, it is important for team members to share similar values with the organisation that they work for and the sector that they work in. Understanding the values of others can help with the recruitment and retention of staff, using a values-based recruitment process.

Entrepreneurship Innovation Theory – foresight and creativity

As we discussed above, Schumpeter published many works which explored entrepreneurship and innovation, most notably The Theory of Economic Development (1934). Schumpeter argues that innovation results in rewards for the entrepreneur in the form of monetary gains (at least temporarily until competitors mimic the innovation).

By cultivating an entrepreneurial culture within your service, you may develop new and creative ways of doing things that reduce costs, are more time-efficient or provide a better experience for service users. Or, you may take time to seek out and research the most innovative organisations within your market sector and copy what they are doing.

Theory of achievement motivation – doing things in new and different ways, high achievers

McClelland’s Achievement Motivation Theory argues that each person has one of three primary driving motivators; achievement (to accomplish things), power (to be dominant over others) and affiliation (to establish and maintain relationships). Entrepreneurs tend to be primarily motivated by the need for achievement. Do you have a dominant need for accomplishment in your role?

This theory can assist you with identifying the primary motivating factors of your team members so that you can support them to be motivated and reach their full potential. This may involve adjusting your leadership style or the way that you set goals, provide feedback or reward them.

Needs theory of motivation – factors that motivate individual’s behaviours

Continuing with theories that may help to motivate your team members, the Needs Theory of Motivation was developed from Maslow’s Hierarchy of Needs. Maslow provides a tiered structure of human needs – for example, physiological needs such as food and water are at the bottom, with the realisation of one’s potential at the top.

Herzberg’s two-factor theory suggests the needs of employees can be categorised into motivators and hygiene factors. Hygiene factors are their very basic needs that do enhance their performance but would have a negative effect on their performance if they were not present. Workplace safety, policies, salary and job security fall into this category. Motivators enhance performance and could include things like job satisfaction, responsibility and recognition for good work.

Alderfer’s ERG Theory splits Maslow’s needs into three groups; existence, relatedness and growth. Existence refers to basic needs, such as physiological needs and the need for safety. Relatedness is the need for relationships, support and self-esteem. Growth is self-actualisation. High performing team members will be motivated at the growth level, so it is important to try to ensure that their other needs are met so that they can focus on these top-level needs.