Entrepreneurs contribute to economy and society
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Published: Mon, 5 Dec 2016
During the time there were a different theories and approaches of what entrepreneurship & entrepreneur is. A good illustration of this will be that ” Moris (1998) found 77 different definitions in a review of journal articles and textbooks over a five years period” (Hans Landstrom, 2009, p. 10) Each of us understand entrepreneurship by themselves moreover add something new in this term due to time, environment, education and many others factors. As Arthur Colen said “my own personal experience was that for ten years we ran a research center in entrepreneurial history; for ten years we tried to define the entrepreneur we never succeeded. Each of us had some notion of it what he thought was, for his purpose a useful definition. And I don`t think you`re going to get farther than that” (Cole, 1969, p 17)
Entrepreneur originally comes from French what means to “to undertake”. This term firstly was used by Irishman economist Richard Cantillon in 1755. By this he implies somebody who is self-employed and takes some business decisions in uncertainties in future. He formulated the entrepreneur as playing role in economic development (“Frontiers in Entrepreneurship: Boris Urban, p.8) and introduced the concept of opportunity seeking, accompanied by shrewd economic management in order to obtain optimal yields on invested capital (Filion 1997). Cantillon’s “Essay on the Nature of Commerce in General” was the very first clear study of self-acting market mechanism operation, and was quoted by many followers of his ideas, including Anne Robert Jacques Turgot and Adam Smith.
Richard Cantillon analyzed entrepreneur as an individual who purchases for a certain price in order to sell for uncertain price – which is today regarded as arbitrage. He claimed that an entrepreneur can be either a tradesman or a landowner, and can equally be a capitalist, using vicarious labour. In all those cases the entrepreneur’s role is to exercise business judgment in the face of uncertainty. (Blaug M. Great Economists since Keynes. An introduction to the lives and works of 100 economists of the Past. 2nd Ed. Edward Elgar, 1998).
Despite that these days definition are more widely the idea of risk tacking is still there. The main problem of his theory from my point of view was that he defined as entrepreneurs almost all who are faced an uncertainness risks in business processes, even beggars. (check this one http://books.google.com/books?id=PHndVSEbtw8C&pg=PA26&dq=Richard+Cantillon+entrepreneurship&hl=en&ei=fT0ITenkNNCHhQfT3I3DDw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CEgQ6AEwBw#v=onepage&q=Richard%20Cantillon%20entrepreneurship&f=false)
Another figure of that time was Jean-Baptiste Say who popularize Cantillion`s theory in spite of he gave his own definition of entrepreneur. He looked on entrepreneur more as managers who have coordination, organisation, and supervision function and who was required to estimate or forecast demand. Moreover he supposed that temporary position during the business is developed but as soon as it built up you are not anymore entrepreneur. It can be said that during 17-18 century term entrepreneur by many economist was equal as manager or businessman. (http://books.google.com/books?id=PHndVSEbtw8C&pg=PA26&dq=Richard+Cantillon+entrepreneurship&hl=en&ei=fT0ITenkNNCHhQfT3I3DDw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CEgQ6AEwBw#v=onepage&q=Richard%20Cantillon%20entrepreneurship&f=false )
Recognized founders of classical economics Adam Smith and David Ricardo did not develop Cantillon’s ideas regarding entrepreneurship itself, but pulled together factors of production. Thus, Adam Smith presented a detailed analysis of primary income of society – gains, salaries and ground rent, – and determined value of social product as a sum of income of society. The core idea of the classical economy was that the value of a product depends on the costs involved in producing that product and that a significant input/output ration entails observable and consistent outputs that is based on Cantillon’s premises.
During this period, various scholars such as Quesnay, Baudeu and Turgot introduced developing theories on the importance of uncertain outcomes and risk (i.e. when the probability distribution of outcomes is known) within the classic economic movement (Murphy et al. 2006).
The classical economic movement introduce some entrepreneurship-related postulates and can be summarized as follows (Murphy et al. 2006):
Equilibrium presumptions are incongruous with short-term prices and production costs
Innovative entrepreneurial processes were not describable
Exchange value differed from use-value of goods/services
Subjective or projective value of goods/services is significant
Relations between market value and demand were not traceable.
Thereby, classical theory praised the merits of competition, free trade and specialization, (D. Ricardo, 1817; A. Smith 1776), elevating economics to a new level.
However no one marked out particular independent role of entrepreneur as a motive power of economy development. Later, in the end of the 1800s, economic thought expanded in sophistication during the neo-classical movement. Economic behavior was described as momentary. Demand for products and services was drawn by a downward sloping curve across time, with supply slopping upward. The intersection point of curves indicated an equilibrium level of price or value (“Frontiers in Entrepreneurship: Boris Urban, p.10). Within this model framework, the entrepreneur matches resource allocation decisions in relation to system component. And the first consistent theory of entrepreneurship was proposed by Joseph Alois Schumpeter. Schumpeter made an attempt to reveal factors of economics dynamic, developing ideas on business cycles. He suggested a hypothesis, where the motivator of economic development was innovational actions of entrepreneur.
Thus, entrepreneur premise vacillate towards the focus on new combinations of existing resources (Schumpter 1934).
Arthure Cole, Schumteper contemporary defined entrepreneurship as the utilization by one reductive factor of the other reductive factors for the creation of the “economic good”. Cole created something new – entrepreneurial history – in his paper “An Approach to Entrepreneurship”. By 1948 Harvard University and Cole had their research centre in Entrepreneurial History, and the firs avatar as Explorations in Entrepreneurial History. Cole (1946) made it clear that entrepreneurship had to be built into economic theory, for “without an entrepreneur nothing happens in economic life”.
Entrepreneurship involved consciously implementing innovation, achieving new combinations and introductions of new goods, markets, modes of production, organizational form or sources of raw materials.
The neo-classical economic movement introduced some entrepreneurship-related postulates that can be summarized as follows (Murphy et al. 2006):
Locations of resources and other decisions are subjective decisions
Entrepreneurial decision making can be guided by diminishing marginal utility
Arbitrage opportunities are highlighted by price differentials in the market.
Entrepreneurship includes novel markets, production methods, raw materials sources, or organizations.
Entrepreneurs create and respond to changes in the environment.
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