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The Study of Entrepreneurship

Aim - introduce

Concept complexity

Different Schools of Economic thought

Social Science approaches

Subject breadth - not confined to

business smes

Basic definitions

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Entrepreneurship Definitions

No agreed definition

Often equated with

new venture creation

small business management

Much broader

pattern of behaviour

set of behavioural characteristics

Various definitions attempted

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Economic Definitions

Classical Economics

American School

Austrian School

British School

French School

German School

Neo-Classical

sees the economy as a system

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American School Based on the work of Walker (father &

son)

4 types of Entrepreneur

rare, gifted person person with high-ordered talent

reasonably good business people

the neer do wells

profit the return for skill, ability, talent

Conflicted with Hawley

profit reward for risk

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Austrian School

Menger suggested that entrepreneurship isabout

bringing about economic change by obtaining information

making decisions

facing uncertainty with respect to

quantity of production quality standards

Risk bearing not seen as an essentialfunction

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British School

According to the work of Smith,Ricardo& Bentham

Entrepreneur is a capitalist invests in own business

Profit is reward for risking capital

Entrepreneurs create wealth through their inclination

technical knowledge

capital power

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French School

Cantillon saw entrepreneur as

risk-taker - estimates demand

Baudeau - entrepreneur as

innovator - reduces costs

Say popularised Cantillons theory

entrepreneur is a manager

estimates/forecasts demand

entrepreneur not a force for change

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German School

Von Thunen distinguished between

manager & entrepreneur

insurable & uninsurable (entrepreneurial)risk

He saw

entrepreneur as

risk-taker and

innovator

profit as reward for uninsurable risk &

ingenuity

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Neo-classical Economics (1) Economy is a system

free-market economies strive forequilibrium

Entrepreneur manages/co-ordinatesfactors of production

land

labour

capital

Entepreneur is a superintendent

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Neo-classical Economics (2)

According to

Marshall entrepreneurship is more than

superintendence mental strain of organising and devising newmethods

anxiety and risk

Knight a manager becomes anentrepreneur when

his/her judgement is liable to error

he/she takes responsibility for it

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Neo-classical Economics (3)

Von Mises - entrepreneurs are

decision-takers whose decisions

affect the future are determined by their vision of it

Schumpeter - entrepreneurs

implement new combinations of means of

production disturb the status quo - equilibrium state

make profits through innovation

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Other Social Science

Contributions Other disciplines have made a major

contribution to entrepreneurship theory

Of the single disciplines, maincontributions are from

Anthropology

Economic History

Psychology

Sociology

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Anthropology

Barth

sees entrepreneurship as

connecting 2 spheres in society

transferring value between them

emphasises opportunity recognition

stresses that it may involve challengingbasic community values

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Economic History

Based largely on the work of the Centerfor Entrepreneurial History at Harvard

Focuses on the enterprise

relationships within the enterprise

Corporations seen as the drivers ofeconomic growth

Entrepreneurs seen as change agents

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Psychology

2 Major contributions

Traits approach - emphasis on

entrepreneurial personality

entrepreneurial behaviour

Cognitive approach

studies the situations that lead toentrepreneurial behaviour

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Psychology - Traits approach

Entrepreneur seen as

Risk-taker

Social deviant Having a high need for

achievement,

internal locus of control

autonomy

Such approaches now somewhatdiscredited

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Psychology - Cognitive

approach Suggests that

individuals will become entrepreneurs if

they have ability

there are environmental possibilities

there is support

entrepreneurship can be developed in individuals

societies

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Sociology

Based on Webers work on

charisma

Protestant work ethic Saw

Charismatic leaders as innovators whom

others follow The Protestant work ethic having led tothe emergence of the modern capitalisteconomy

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Non-Business

Entrepreneurship Entrepreneurship

increasingly seen as important in non-

economic/business contexts Social entrepreneurship -

does not have profit as main aim

concentrates on social outputs

long-term objectives

Civic entrepreneurship - deals with the waypublic services are resourced, organised andmanaged

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A Taxonomy ofEntrepreneurial Theory (1)

Herbert & Link suggest that

there are 12 main entrepreneurship themes

these can be grouped into 3 majorintellectual traditions

each share 3 themes

perception

uncertainty innovation

uncertainty is a consequence of change

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A Taxonomy of

Entrepreneurial Theory (2) Innovation is a precept of change

Entrepreneurship

requires

perception

courage

action is a dynamic force for the restoration of

equilibrium in a market economy