ENTR 207 Week 1

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ENTR 207 Week 1 Theoretical Roots and
Definitions of Entrepreneurship
Dr Luke Pittaway
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• The term entrepreneur originates from the French
  word
• entreprendre to undertake or go between

• Marco Polo cited as early entrepreneur or
  go-between, in
• his attempt to establish trade routes to Far
  East

• Entrepreneurship about more than the
  loadsamoney
• culture of the 1980s and Richard Branson types

• Became an academic area of study as early as
  1755,
• when economist Richard Cantillon introduced the
  term
• itself and idea that entrepreneur plays highly
  specialised role

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• Study of entrepreneur has its foundations,
  rather curiously,
• in the field of economics

• Incompatibility between entrepreneur and
  neo-classical
• model of the firm
• The model is essentially an instrument of
  optimality analysis
• of well-defined problems and it is precisely
  such (very real
• and important) problems that need no
  entrepreneur for their
• solution (Baumol, 1968 p67).

• The entrepreneur has no discretion over which
  actions to
• take the choice is made for him by the rules
  and conditions
• of the neo-classical game (Barreto, 1989
  p143).

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Definitions of the entrepreneurial function
The person who assumes risk associated with
uncertainty The person who supplies financial
capital An innovator A manager or
superintendent An organiser and coordinator
of economic resources An industrial leader
An owner of an enterprise An employer of
factors of production A contractor An
allocator of resources among alternative uses
From Hébert and Link, 1988
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The role of the environment

• Within Austrian and Chicago economic traditions,
  environment
• dictates entrepreneurial behaviour

• Entrepreneur defined by superior perception of
  market opportunities
• defined as entrepreneurial alertness
  (Kirzner, 1973)

• Skill of the entrepreneur lies in the ability to
  constantly scan
• environment for new opportunities, utilising
  information in new
• ways to fill gaps in the market

• Entrepreneur as agent of adjustment responds
  to new
• information and adapts to circumstances
  dictated by external world

• More recently, Casson (1982) argues that
  entrepreneurs can create
• gaps through their personal characteristics,
  beliefs and perceptions
• The essence of entrepreneurship is being
  different being different
• because one has a different perception of the
  situation (p14)

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• Schumpeter defined entrepreneur as agent of
  change
• spontaneous, discontinuous change

• Schumpeterian entrepreneur seeks to innovate and
  cause
• disruption in the market, essence of
  entrepreneurship being
• creative destruction
• entrepreneurship, as defined, consists in
  doing things that
• are not generally done in the ordinary course
  of business routine
• (Schumpeter, 1934 p254).

• Schumpeter introduced five forms of
  entrepreneurial
• innovation

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• The 1960s witnessed a new stream of research,
  which focused on
• trying to define those unique personality
  traits that characterise
• the entrepreneur

• McClellands (1961) early work on achievement
  motivation
• pioneered the way for over 30 years of
  academic inquiry into
• the elusive personality of the entrepreneur

• The search for the entrepreneurial profile
  reflected a growing interest
• in entrepreneurial activity as an important
  contribution to economic
• success
• Statements by government officials,
  business leaders, and
• professors of entrepreneurship reflect the
  opinion that
• entrepreneurial activity will help the
  nation to re-energise its
• economic development and regain its
  competitive edge in world
• markets (Sexton, 1988 p5)

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• Growing interest in entrepreneurship in 1970s
  and 1980s, both as an
• academic area of study and as an economic
  activity described by
• Stevenson and Sahlman (1989) as the
  entrepreneurial revolution

• Reflection of the strong economic, social and
  political turbulence
• of the 1970s large organisations felt the
  full force of the economic
• downturn during this time

• The 1980s also saw entrepreneurial activity
  become part of political
• agendas, particularly the Conservative Govt in
  the UK
• The arrival of Mrs Thatcher to power added a
  high ideological
• dimension to the popularity of
  entrepreneurship. Entrepreneurship,
• represented by small firms, became the central
  element of the
• enterprise culture, the ideological mantle
  of the Conservatives
• economic plans (Alvarez, 1993 p30)

• Growing media love affair was primarily with
  the owner managers of
• small businesses

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Contemporary definition of entrepreneurship
Entrepreneurship is a human, creative act that
builds something of value from practically
nothing. It is the pursuit of opportunity
regardless of the resources, or lack of
resources, at hand. It requires a vision and the
passion and commitment to lead others in the
pursuit of that vision. It also requires a
willingness to take calculated risks (Timmons,
1989 p48)
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Dominant theoretical perspectives
of entrepreneurship
Concerned with defining entrepreneurs economic
function an entrepreneur is what an
entrepreneur does
Functional
Concerned with defining unique entrepreneurial
personality traits who is an entrepreneur?
Personality
Concerned with defining the functions, activities
and actions associated with perceiving of
opportunities and the entrepreneurial process of
new venture creation
Behavioural
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Some areas covered in the study of
entrepreneurship

• Small business growth Ethic minority
  entrepreneurship
• Entrepreneurial networks Family business
• Venture capital Social entrepreneurship
• Corporate entrepreneurship Franchising
• New venture start-up Entrepreneurial
  failure
• Entrepreneurial learning Motivations and
  intentions
• Entrepreneurial mentoring and support
• High tech ventures Graduate enterprise

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Summary
The study of entrepreneurs and entrepreneurship

• Is a broad, complex subject involving many
  different
• elements ENTR 207 provides an introduction
• Involves many different processes and forms of
  activity
• Involves many different contexts it is not
  just about
• starting and managing a business
• Is not merely concerned with the process of
  making money!

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References

• Alvarez, J. L. (1993), The popularisation of
  business ideas The case of entrepreneurship in
  the 1980s, Management Education and Development,
  24(1), 26-32.
• Barreto, H. (1989), The Entrepreneur in
  Microeconomic Theory Disappearance and
  Explanation, London Routledge.
• Baumol, W. J. (1968), Entrepreneurship in
  economic theory, American Economic Review, 58(2),
  64-71.
• Casson, M. (1982), The Entrepreneur An Economic
  Theory, Oxford Martin Robertson Co. Ltd.
• Hébert, R. F., and Link, A. N. (1988), The
  Entrepreneur Mainstream Views and Radical
  Critiques, New York Praeger.
• Kirzner, I. (1973), Competition and
  Entrepreneurship, Chicago University of Chicago
  Press.
• McClelland, D. C. (1961), The Achieving Society,
  New York Van Nostrand.
• Schumpeter, J. A. (1934), The Theory of Economic
  Development, Cambridge, Mass. Harvard University
  Press.
• Sexton, D. L. (1988), The field of
  entrepreneurship Is it growing or just getting
  bigger?, Journal of Small Business Management,
  5-8.
• Stevenson, H. H., and Sahlman, W. A. (1989), The
  entrepreneurial process, in Small Business and
  Entrepreneurship, P. Burns and J. Dewhurst, eds.,
  Basingstoke Macmillan.