Schumpeter Theory Theory Schumpeter Discuss the roles of entrepreneurship in economic development process.

. He explains the differences between economic growth and development (Business Cycles (1939). He argues development as consisting of a process which involved reformation on various equipments of productions, outputs, marketing and industrial organizations. Capitalist system is a rapid economic development system process. This system may affect negatively on social life. In the long-run, economy will face stagnation period and it is not a process that always operate accordingly and smoothly. In development process, economy may sometime run prosperously (full employment condition) and sometime is in crisis (unemployment) and this may take place happen alternately. A key factor of development is dependent on entrepreneur group which are very innovative in combining the factors of production which is targeted to produce goods and services. The reformation process included the following measures:

introduce a new product using new method in producing goods to find new market to develop new raw material as alternative to have rearrangement of industries sources

Analysis begun with the assumption that countrys economic performance is in rigid condition, i.e., there are no population growth and net investment, and high level of unemployment. Some entrepreneurs committed to reformation and followed by other entrepreneurs until there is an increase in investment.

The impacts are increasing in societys income and consumption. This phenomena will lead the entrepreneurs to increase the new capital. induced investment increasing of investment because of increasing in

income , production and profit. autonomous investment investments which determined by long-term

development, such as new resources found and technology which can create reformation The economic development (booming period) will be followed by economic recession

some entrepreneurs who cannot compete with those entrepreneurs whose

have done reformation will subsequently failed in their business and lost their market and have to close their business. creation of new products will lead to uncertainty among the entrepreneurs

in terms investment and capital that are needed for business development Those entrepreneur who are able to create the new products and market will

lead to economic booming However, the equilibrium point is higher than the economic recession period. With the new equilibrium, the level of per capita income is higher

Conclusion of Schumpeter Theory Explanation of factors that cause uncertainty in capitalist economy. Identification of factors that encourage economic development process. For efficiency - optimal mobilization and combination of factors of production with the new method of production. Enlargement of credit facilities to mobilize factors of production The significant role of entrepreneurs in economic development process

A significant characteristic in economic development process is mobilization of production factors and not to increase new accumulated capital.

CLASSICAL THEORY
The entire classical theory depends upon the Says law of market. According to Sir J.B.Say, Supply creates its own demand. Economy always work on full employment level. This is so because economy keeps on employing the unutilized resources. There is no scope for voluntary unemployment. The wage flexibility helps in maintaining the full employment level in an economy. The mechanism of interest rate flexibility brings about the equilibrium between the savings and investment. Equilibrium is established through market mechanism. Therefore, there is no need for state intervention.

Pillars of classical theory Equilibrium in labour market-wage flexibility Money market Goods and services market

Essence of classical economics: The aggregate production function:

Y=F(K,N)

Y=National Income K=Fixed Capital N=Labour In the classical model, employment and output are determined by the factors operating on the supply side of labour market. Production is the only source of demand Production does not depend on AD only but also on prices. Deficiency in AD will be made up by changes in prices. With a fall in wages of labour all workers will get employment. Voluntary unemployment vs involuntary unemployment vs policy implication. Govts. & trade unions are responsible for unemployment. _ Agg. Supply curve depends on Physical and Technical conditions of production. More labourers will be employed only if the entrepreneurs expect to receive greater revenue so as to cover rise in costs. In times of recession agg. demand should be raised so that equilibrium be achieved at higher levels.

Increase in agg. demand will lead to inflation after full employment has already been achieved.

Entrepreneur, Entrepreneurship & Intrapreneur Theories of entrepreneurship 1.Economic Theory 2.Sociological Theory 3.Psychological Theory

The Economic Theory- B.C.Tandon He describes the Functions of an entrepreneur in a developing economy in the context of the environmental forces.i.e economic, rural ,political and culture. Accordingly the entrepreneur must posses: a) Ability of organization & administration. b) Technological knowledge , alertness to know opportunities ,willingness to accept change & ability to initiate and c) Capacity to assume risk and self confidence d) Tact ,patience and power of observation & ability of discrimination. e) Perseverance to overcome obstruction and fear. f) Capacity to pick and choose associates and subordinates and delegate authority to inspire loyalty.

g) Role like that of a strike who keeps the fire burning.. Leibensteins X efficiency theory X-efficiency is the degree of ineffiency in the use of resources in the wrong way, within the firm for productive potential. The entrepreneur has to complete the production efficiently with proper inputs and improve flow of information in market by gap filling in the economy

Sociological Theory- Peter Marris To assemble or reassemble from what is available ,very concrete kind of imagination ,to see what other have missed ,sensitivity to business and social environment ,zest in industrial development and entrepreneurial courage are the factors that make an entrepreneur. Psychological Theory Schumpeter He believes that entrepreneurs are motivated by will to power, will to find a private kingdom or will to conquer. The main characteristics are:

a) An institutional capacity to see things in a way which afterward proves correct, b) Energy of will and mind to overcome fixed habits of thought and

c) The capacity to withstand social opposition. Harvard school theory Cole Entrepreneurship comprises any purposeful activity that initiate , maintain or develop a profit oriented business ,in interaction with internal ,economic ,political and social circumstances of business. Entrepreneurs operate under fairly uncertain circumstances.

Theory of High Achievement Mc Clelland Mc Clelland identified two characteristics of entrepreneurship for decision making under uncertainty . He stressed the need of achievement and the tendency to strive for success. People with high (N-Ach) are not influenced by profits as it is just a measure of success and competency.

Theory of Profit- Knight Knight identifies the entrepreneur as a recipient of pure profit. Uncertainty can be identified by priority reasoning or statistical inference.

Peter Druckers theory

Entrepreneurs need to search purposefully for the sources of innovation ,the changes and their symptoms that indicate opportunities for successful innovation and they need to know and apply the principles of successful innovations.

Hagen views on entrepreneurship creative innovation is the fundamental feature of economic growth. An entrepreneur is described as a creative problem solver interested in things that are

practical. While facing a problem he feels a sense of increased pleasure and tolerates disorder without disorders. Innovation requires creativity and individuals who are creativity can only bring about economic growth. the withdrawal of status respect Four different types of personalities would emerge .t they are:

CONTINGENCY THEORY
(Fiedler, 1964). there is no one best way of organizing / leading and that an organizational / leadership style that is effective in some situations may not be successful in others. The optimal organization / leadership style is contingent upon various internal and external constraints. William Richard Scott "The best way to organize depends on the nature of the environment to which the organization must relate".

Important ideas of Contingency Theory : There is no universal or one best way to manage Wide range of external and internal factors must be considered and the focus should be on the action that best fits the given situation Effective organizations not only have a proper 'fit' with the environment but also between its subsystems

 The needs of an organization are better satisfied when it is properly designed and the management style is appropriate both to the tasks undertaken and the nature of the work group. Each managers situation must be viewed separately Managers need to be developed in skills that are most useful in identifying the important situational factors.

PROPERTIES Theory is practical and it is equally important for every organization Theory doesn't believe in 'one best way' so many methods and principles may be used in Every situation is unique so manager HAS TO be able to analyze each and every situation INDIVIDUALLY. an authoritarian leadership style may be more appropriate than a leadership style that tries to get workers internally motivated. Applied in activities of motivating, leading and structuring the organisation. The other potentials of application are;

A. employee development and training B. Decision of decentralization C. Establishment of communication and control systems D. Planning info decision systems E. Application of a contingency perspective Will enable the manager to examine the situation and to determine the cause of decreased profits before a new procedure or program is implemented. Contingency theory is designed to provide the manager with the capabilities to examine numerous possible solutions to a problem

CONCEPTUAL THEORY
Conceptual Framework of entrepreneurial education at an entrepreneurially oriented university Institutional culture

University culture affects the entrepreneurship education activity within the university The culture of the university has a significant influence on learning experiences of the student entrepreneur.

 It has been suggested that student entrepreneurs benefit more from university environment and the cultural orientation than from course content( Raffo et al.,2000) University culture consists of static and dynamic components According to Klofsten ; universities need to have both types of competencies( static and dynamic) in order to achieve effective education of entrepreneurs. Barriers to innovation at the university are insular culture, bureaucracy and specialization. Accordingly, the rate of change at universities where these barriers are strong is very low. These are good examples of the static component of the university culture.

Entrepreneurship theory in essence teaches students what they ought to do. It is not surprising that many former students of entrepreneurship have communicated the need to be taught how to do things , instead of knowing what to do. Theory is often static(that is, not changing at the rate of the outside world),the students seem to be lacking the dynamic component of that change(that is , the current , applied, constantly developing insights)

Teaching entrepreneurship most effectively:

Challenges: The dynamic nature of entrepreneurship In order to keep in touch with new insights and developments, the university must adapt and progress at the rate of change comparable to the outside entrepreneurial environment. This means

Having the culture and the structure that will support frequent changes. The more entrepreneurially oriented the university is, the greater its ability to effectively teach entrepreneurship. Klofsten found that in order for a university to train entrepreneurs, the university must ensure there is the creation and maintenance of an enterprising culture on the whole at the university Propositions: The static component of the institutional culture has a direct effect on the static component of the entrepreneurship education activity

 The dynamic component of the institutional culture has a direct effect on the dynamic component of the entrepreneurship education activity. Final Propositions: An increase in the universitys entrepreneurial orientation(by increasing organizational innovativeness, proactiveness and risk-taking tolerance) will lead to an increase in the dynamic component of institutional culture. An increase in innovation , proactiveness and risk-taking tolerance within the institutional culture will lead to an increase in the dynamic component of the entrepreneurship education activity of the university.

SHORT RUN THEORY

KEYNESIAN ECONOMICS 1. Full employment is not normal feature 2. Unemployment equilibrium is normal. 3. Short Run Theory : Amount of Technology, do not change. In the short run, higher level of income and employment can be attained by injection of macro economic measures which will lead to increase in aggregate demand for goods and services. In a developed economy, employment depends on level of effective demand. Agg. Supply Price : Total amount of money which all entrepreneurs taken together must expect to receive from the sale of output produced by given number of Labourers. Aggregate Supply Price : The minimum expected sale proceeds required to induce firms to produce and output and to provide employment on a given scale is called the aggregate supply price of that output. aggregate supply price increases with increase in the level of employment and vise versa. Capital, Population, labour Force,

At full employment , no increase in cost or sales proceeds can generate employment further. Aggregate Demand Price : Total money receipts expected by all the firms in the economy taken together from the sale of their products produced by a given number of workers. When the firms expect to earn through increased expenditure of the community on goods and services, they will employ more workers and vise versa. Equilibrium Determination The equilibrium between ADP and ASP is established at the point where two curves intersect each other. Here proceeds expected is just equal to the level which induce firms to offer that employment.

Keynesian Theory of Employment Concept of Effective Demand. Aggregate Demand Function

(AD=total exp=C+I) aggregate supply function. As=F(N) AS is the aggregate supply price N=number of workers employed. KEYNES ON CLASSICALS

Income saved does not necessarily Create Demand=AD<AS Investment demand < Desired savings causes unemployment Factors determining Savings and investment are different. Savings depends on income, old age, social security network, education, marriage of children, housing need etc.

Investment depends upon (a) Expected rate of profit. (b) Rate of interest. (c) Technological progress (d) Population growth _Wage reduction of general nature may not bring full employment _Wages determine both the cost of production and also level of income of people. _One mans exp is another mans income. Reduction in wages leads to fall in aggregate demand. Even when wage rates are perfectly flexible, unemployment will prevail in the economy if aggregate demand is deficient.

Classical economics is relevant for individual industry and firm analysis, valid for partial equilibrium and not general equilibrium.

Capitalist economy can not automatically attain a state of full employment. Govt. has to play a pro-active role through monetary policy, fiscal policy, and other economic policies.

Classicals stood for Laissez faire policy; Keynes for active govt. intervention and Important role for money supply in carrying out corrections in aggregate demand.

Comparison Between Classicals and Keynesians

Classicals

Keynasians

Economy is always in full Full employment equilibrium is an employment. Wage flexibilities and exception. interest General reduction in wages throughout full the economy can lead to fall in demand.

restores

employment equilibrium, if disturbed.

Monetary expansion may Inflation will arise only after full create inflation. employment has been achieved.

Interest rate brings about Savings & investment is influenced equality between by level of income and expected return on investment.

Savings and investment

Investment elastic.

is

interest Interest sensitivity of investment may not be adequate.

Policy Implications of Keynesian Economics 1. Manage effective demand through active intervention 2. Monetary policy intervention

(a) Higher rate of growth in money supply (b) Manipulating interest rate to encourage private investment 3. Fiscal policy Reduce taxation - direct taxes and indirect taxes to give a boost to demand Increase in government expenditure to push up the demand. Choose projects having greater intensity of labour per unit of output. Focus on supply of wage goods. Aggregate supply refers to the total quantity of goods and services that the nations business willingly produce and sell in a given period aggregate supply would depend on available of

(a) Capital, Labour and Technology (b) Price level and costs (c) Potential output In general, business would like to sell more if prices keep on rising and give them higher profits Aggregate Demand: -

Aggregate demand refers to total amount of money that different sector of the economy willingly spend in a given period

It is the sum of spending by consumers, business and governments and it depends on the level of prices as well as on Monetary, Fiscal policy and other factors

Macro Economic Equilibrium Macro economic equilibrium is a combination of overall price and quantity at which all buyers are satisfied with their purchases, sales and prices. It occurs at the interaction of aggregate demand and supply curves. It represents overall price level where firms willingly produce and sell what consumers and other demands willingly buy.

LOCALIZED COMPETITION IN THE KNOWLEDGE SPILLOVER THEORY OF ENTREPRENEURSHIP

1950s: Neoclassical Theory

Buddy Holly

Solow & Swan National economic growth? Simple! Product of growth in supply of labor, capital, and technology improvement (the rate at which raw materials -> finished goods).

Mixed support for the model. Gap between developed and developing countries is increasing (counter to the predictions of the model). US growth rate lower in 19th century than 20th.

Does not take institutions into account (updates to model added investments in education, but could not explain heterogeneity in returns on that investment).

The model does not explain how or why technological progress occurs and treats growth as exogenous (it happens, but no explanation for why it happens).

1980s: New Growth Theory

Duran Duran

Paul Romer developed a new model in which investment in human capital did not depreciate. Instead, investment in knowledge production costlessly spilled over to non-investors.

Implication is that investment in research and development allows output of all firms to grow. Explains why knowledge-intensive countries benefit disproportionally compared to others.

The model underscores that investment in innovation is linked to economic growth, and supports the international diffusion of knowledge (globalization is good).

But some countries with high levels of research and development investment had low rates of growth and little entrepreneurship. What gives?

Despite being more complex, new growth theory has been no more successful at explaining income divergence between the developing and developed world than old-school neoclassical models.

1990s: Institutional and Evolutionary Models

Jay-Z North examined the role of institutions (for example law and property rights) in society. He argues that strong institutions make it possible for the inventor to benefit from the application of their creative energy to a problem. Institutions solve the incentive problem that stalls development. De Soto examined economic development around the world and concluded that property rights and levels of corruption explain the difference between the haves and the have-nots.

Neo-classical growth models suggest that where you invest - big firm, small firm - does not matter.

Most models of entrepreneurship say that you should fund the small firm. Alternative models suggest that the odds of picking successful small firms are small, thus it is better to fund the general environment.

Are you serious? Is this the best that economists can do?

Jedi Warrior Killer App

Jedi Warrior Killer App

KNOWLEDGE SPILLOVER THEORY OF ENTREPRENEURSHIP Arrow economic and useful knowledge Grilliches knowledge production function Jaffe real effects of academic knowledge AA small and large firm innovation Audretsch reverse production function AVA spillovers are local AABC KSTE

Competition Barteck biosciences/Martin Marietta/MAR/monopoly Apple computers/Zerox/Porter and Jacobs/competition

OBJECTIVES

what social entrepreneurship is and what social entrepreneurs do key drivers of social entrepreneurship the complex challenges that social entrepreneurs face and one social innovation model as a potential solution, illustrated through the use of a case example (REAL project, Inverness) some critiques of social entrepreneurship some research implications social entrepreneurship as a career option

THEORIES OF WORK MOTIVATION

Herzberg's two-factor theory: Frederick Herzberg, in the late 1950s conducted a study on motivation. He and his associates used semi-structured interviews to elicit from 200 engineers & accountants in Pittsburgh area, the factors which satisfy or dissatisfy the workers. Theories of Work Motivation His study revealed that factors responsible for job satisfaction are quite different from those responsible for job dissatisfaction. Certain factors give job satisfaction, but absence of these does not mean job dissatisfaction. It only means no job satisfaction. Similarly, certain factors cause job dissatisfaction, but absence of these does not mean job satisfaction. It only means no job dissatisfaction. According to Herzberg, motivational factors are responsible for job satisfaction; and Hygiene or Maintenance factors are responsible for job dissatisfaction. Motivational factors: The presence of these factors motivates workers & at the same time, absence of these does not cause dissatisfaction. Hygiene or Maintenance factors:

The presence of these factors maintains motivation at zero level, but absence of these factors causes serious dissatisfaction. In other words, presence of these factors prevents dissatisfaction. Maintaining motivation at zero level thus prevents negative motivation, hence they are called maintenance factors. Motivators Achievement Work itself Recognition Responsibility Advancement Possibility of growth Hygiene factors Co. policy & admn. Interpersonal relations Supervision Money Job security Status Working conditions Herzbergs framework is compatible with Maslows need hierarchy. Maslows lower order needs are analogous to Herzbergs hygiene factors & his upper level needs correspond to Herzbergs motivators. Herzbergs theory was also challenged by the thought that there exists a tendency of people to attribute good results to their own effort & blame others for poor results.

Douglas Mc Gregors X & Y theory: Theory X : This theory assumes that most people prefer to be directed, are not interested in assuming responsibility & want safety above all. Accompanying this philosophy is the belief that work is inherently distasteful to most people & people are motivated by money & the threat of punishment. Managers who accept Theory X assumptions, attempt to structure, control & closely supervise their subordinates. Theory Y: This theory assumes that people are not by nature lazy & unreliable. Man can be selfdirected & creative at work, if properly motivated. Managers who accept this theory, attempt to help their employees mature, by exposing them to progressively less control, allowing them to assume more self-control. Employees are able to achieve the satisfaction of social esteem & self-actualization needs with this kind of environment.

Theory X

Theory Y

1. Workers dislike to work by themselves.

1. Workers feel that work is as natural as play.

2. Workers are not ready to accept responsibility.

2. Workers are ready to accept responsibility if proper motivation is available to them.

3. Workers prefer to be directed by others.

3. Workers are directed by themselves.

Vrooms Expectancy theory: The model is built around the concepts of valence, instrumentality & expectancy & is commonly called VIE theory. By valence, Vroom means the strength of an individuals preference for a particular outcome. Valence is positive when a person prefers attaining the outcome to not attaining it. Valence is zero when the individual is indifferent towards the outcome. Valence is negative when a person prefers not attaining the outcome to attaining it. Another major input into the valence is the instrumentality of the first level outcome in obtaining a desired second level outcome. Eg. person would be motivated towards superior performance because of the desire to be promoted. The superior performance (first level outcome) is seen as being instrumental in obtaining a promotion (second level outcome). Another important variable is Expectancy. It relates efforts to first level outcomes; while instrumentality relates first level & second level outcomes. So, expectancy is the probability (ranging from 0 to 1) that a particular action or effort will lead to a particular first level outcome.

Instrumentality refers to the degree to which a first level outcome will lead to a desired second level outcome. Strength of motivation to perform a certain act will depend on the algebraic sum of the products of the valences of outcome (which include instrumentality) times the expectancies. Motivational force F: F = Valence x Expectancy Theories of Work Motivation

This model can clarify the relationship between individual & organisational goals. Eg. suppose workers are given a certain standard of production. By measuring the workers output, mgt can determine how imp. their personal goals are, the instrumentality of the organisational goal in attaining their personal goals & the workers expectancies that their effort & ability will accomplish the organisational goals.

If the output is below standard, it may be that workers do not give high importance to the second level outcome; or they may not see the first level outcome being instrumental in achieving the second level outcome;

or they may think that their efforts will not accomplish the first level outcome. Anyone or a combination of these possibilities will result in low motivation, according to Vroom.

ALDERFERS ERG THEORY

Vrooms Expectancy Theory Concepts Expectancy: Belief that effort leads to a specific level of performance Instrumentality: A performance outcome perception. Valence: The Value of a reward or outcome

Managerial Implications of Expectancy Theory

Determine the outcomes employees value. Identify good performance so appropriate behaviors can be rewarded. Make sure employees can achieve targeted performance levels. Link desired outcomes to targeted levels of performance. Make sure changes in outcomes are large enough to motivate high effort. Monitor the reward system for inequities.

Organizational Implications of Expectancy Theory Reward people for desired performance, and do not keep pay decisions secret. Design challenging jobs. Tie some rewards to group accomplishments to build teamwork and encourage cooperation.

Reward managers for creating, monitoring, and maintaining expectancies, instrumentalities, and outcomes that lead to high effort and goal attainment.

Monitor employee motivation through interviews or anonymous questionnaires. Accommodate individual differences by building flexibility into the motivation program. Goal-Setting Theory

Specificity Challenge Feedback Participation Commitment Self-efficacy Characteristics Culture

Insights from Goal-Setting Research Difficult Goals Lead to Higher Performance. - Easy goals produce low effort because the goal is too easy to achieve.

- Impossible goals ultimately lead to lower performance because people begin to experience failure. Specific Difficult Goals Lead to Higher Performance for Simple Rather Than Complex Tasks. - Goal specificity pertains to the quantifiability of a goal. - Specific difficult goals impair performance on novel, complex tasks when employees do not have clear strategies for solving these types of problems. Feedback Enhances The Effect of Specific, Difficult Goals. - Goals and feedback should be used together. Insights from Goal-Setting Research (continued) Participative Goals, Assigned Goals, and Self-Set Goals Are Equally Effective. - Managers should set goals by using a contingency approach. Different methods work in different situations. Goal Commitment and Monetary Incentives Affect Goal-Setting Outcomes. - Difficult goals lead to higher performance when employees are committed to their goals. - Difficult goals lead to lower performance when employees are not committed to their goals. - Goal based incentives can lead to negative outcomes for employees in complex,

interdependent jobs requiring cooperation.

Guidelines for Writing SMART Goals Specific Measurable Attainable Results oriented Time bound An Integrative Model of Motivation

Maslows hierarchy of needs Theory. Herzbergs two-factor theory. Victor Vrooms theory. Porter and Lawlers theory.

Abraham Maslows hierarchy of needs theory It is based on the following propositions; Man is a wanting being

Satisfied need is not a motivator The needs of a man has hierarchy or importance.

Abraham Maslows hierarchy of needs theory

Few weaknesses It states that lower level people are able to satisfy lower order needs and higher level people are able to satisfy higher order needs

It ignores the fact that an act may be motivated by several needs and not any single need.

Fredrick Herzbergs Two-factor Theory He conducted a motivational study on 200 accountants and engineers He made use of critical incident method for analyzing data Questions : When did you feel particularly good about your job? When did you feel exceptionally bad about your job ? The good feelings = Job experience / job content The bad feelings = Job surroundings / job context Job content factors = Motivators Job context factors = Hygiene Hygiene Factors Company policy and administration Supervision Salary Interpersonal relationships Working conditions.

Motivators Achievement Recognition Work itself Responsibility Advancement.

FEW WEAKNESS There is always a question regarding the samples used by Herzberg Low-complexity job workers Age The varied situations may affect preferences for motivators.

VICTOR VROOMS EXPECTANCY THEORY OF MOTIVATION Expectancy theory argues that the strength of the tendency to act in a certain way depends on the strength of an expectation that the act will be followed by a given outcome and on the attractiveness of that outcome to the individual. An employee will be motivated to exert high level of effort when he/she believes that the effort will lead to a good performance appraisal; that a good appraisal will lead to organizational rewards such as a bonus, salary increments or promotion; and that the rewards will satisfy the employees personal goals. This theory focuses on three relationships; Valence : Effort performance

Expectancy : Performance reward Instrumentality Let us see the applicability If I give a max. effort, will it be recognized in my performance appraisal? : Rewards personal goals

If I get a good performance appraisal, will it lead to organizational rewards? if I am rewarded, are the rewards the ones that I find personally attractive? Weakness Like other theories, this too is a model that helps managers understand certain aspects of motivation, but it does not give practical solutions to solve motivational problems. EXTRINSIC

Pay Benefits Promotions Transfers Insurance INTRINSIC

Feeling of responsibility Achievement Constant learning Taking challenges

Exhibit 4-1 Maslows Hierarchy of Needs

Herzbergs Motivation-Hygiene Theory Hygiene factors - necessary, but not sufficient, for healthy adjustment Extrinsic factors; context of work Motivators - the sources of satisfaction Intrinsic factors; content of work Criticisms of Motivation-Hygiene Theory The procedure that Herzberg used is limited by its methodology The reliability of Herzbergs methodology is questioned

Herzberg did not really produce a theory of motivation No overall measure of satisfaction was used The theory is inconsistent with previous research

Alderfers ERG Theory Maslow Herzberg Alderfer McClelland

Exhibit 4-4 Summarizing the Various Needs Theories

Expectancy Theory The theory that individuals act depending on whether their effort will lead to good performance, whether good performance will be followed by a given outcome, and whether that outcome is attractive to them. Expectancy Relationships

The theory focuses on three relationships: Effort-performance relationship Performance-reward relationship Rewards-personal goals relationship

The theory focuses on three relationships: Effort-performance relationship Performance-reward relationship Rewards-personal goals relationship

Goal-Setting Theory The theory that specific and difficult goals lead to higher performance. Goals tell an employee what needs to be done and how much effort will need to be expended. Specific hard goals produce a higher level of output than does the generalized goal of do your best.

Equity Theory Main points Individuals compare their job inputs and outcomes with those of others and then respond so as to eliminate any inequities. Equity theory recognizes that individuals are concerned not only with the absolute amount of rewards for their efforts, but also with the relationship of this amount to what others receive. Exhibit 4-7 Equity Theory

Responses to Inequity

Change Inputs Change Outcomes Adjust Perceptions of Self Adjust Perceptions of Others Choose a Different Referent Leave the Field

Herzbergs Motivation-Hygiene Theory Hygiene factors - necessary, but not sufficient, for healthy adjustment Extrinsic factors; context of work Company policy and administration Unhappy relationship with employee's supervisor Poor interpersonal relations with one's peers Poor working conditions

Motivators - the sources of satisfaction Intrinsic factors; content of work Achievement Recognition Challenging, varied or interesting work Responsibility Advancement

Criticisms of Motivation-Hygiene Theory The procedure that Herzberg used is limited by its methodology

The reliability of Herzbergs methodology is questioned Herzberg did not really produce a theory of motivation No overall measure of satisfaction was used The theory is inconsistent with previous research