The Entrepreneur in Economic Theory - some issues Ronald W. McQuaid Employment Research Institute...

transcript

The Entrepreneur in Economic Theory - some

issues

Ronald W. McQuaidEmployment Research InstituteNapier University, Edinburgh

Tinbergen Institute, Amsterdam

22-23 August 2005

Employment Research InstituteNapier University

OUTLINE

• Introduction

• Perspectives on entrepreneurship (What is an

entrepreneur?) Entrepreneurship as: • starting a new business

• a small business (SME) owner-manager

• a function in the economy

• a set of personal characteristics

• a form of behaviour

Entrepreneurship in theory and practice

• Baumol etc.

• GE model Quebec

• European Employment Strategy (Entrepreneurship

was a pillar in 1999)

• Gothenburg Strategy (2001) – socio-economic-

environmental pillars

Approaches to Entrepreneurship in theory

Role of entrepreneurship in influencing economic equilibrium

Kirzner and Schumpeter - the process of market dynamics which determines economic equilibrium

Kirzner - the Austrian school of economics

Casson, Shane - synthesises approaches and Include societal influences on entrepreneurship. Role played by entrepreneurs in the evolution of economies Etzioni - socio-economic analysis Nelson and Winter - evolutionary approaches

Social networks, management approaches etc.

PERSPECTIVES ON ENTREPRENEURSHIP

• Entrepreneurship as starting a new business

• Entrepreneurship as a small business (SME)

owner-manager

Changes in Total and Self-Employment (UK 1980 = 100)

1980 1985 1990 1995 1999

Total Employment Self Employment

Registrations and De-Registrations as % of Stock, 1999

0 5 10 15 20 25 30 35

All industries

Other Services

Agriculture, fishing

Mining, energy

Manufacturing

Construction

Wholesale, retail, repairs

Hotels, restaurants

Transport

Finance

Business services

Education, health

Registrations De-Registrations

EU 27 Self employment as % economically active (2001)

Predominantly urban 12.5%

Substantially urban 13.9%

Predominantly rural 14.8%

GR 28.3%

IT21.4%

UK 10.7%

DK 7.9%

Entrepreneurship as a function in the economy

Co-ordination, allocation and use of resources

‘Middleman’

Entrepreneurship as a function in the economy

Innovator –

• Products

• methods of production, new markets

• new sources inputs

• or by changing the structure of an organisation

or an industry

Schumpeter – entrepreneurship is disequlibriating

(‘creative destruction’)

Kirzner – entrepreneurship moves market towards

equilibrium

Are they consistent?

Possible Process?

Schumpeter – new information, technology etc. –

disequilibrium (innovation, new, high tech firms)

Kirzner – information etc. ‘freely’ available - towards

equilibrium (‘middleman’, resource allocation)

Standard/ routine entrepreneurship (Leibenstein)

(focus on SMEs)

I.e. different ‘stages’ of entrepreneurship and

‘external environment’ interaction.

Entrepreneurship as a set of personal characteristics

• Samuel Smiles (1859): the key psychological traits

of an entrepreneur were integrity, self-learning,

courage, conscientiousness, patience,

perseverance, self-discipline and self-respect.

More modern:

Particular qualities or attitude

motivations

their being a ‘great leader’

or social forces

‘Everyman’

- Creative individuals approach (R. Florida?) – are

these just a special case of wider

entrepreneurship?

- Differences according to developing countries,

gender etc.

Entrepreneurship as a form of behaviour

Entrepreneurship is what entrepreneurs do, rather

than who they are

PETER DRUCKER, 1985, said:

an entrepreneur is a person who “always searches

for change, responds to it, and exploits it as an

opportunity.”

entrepreneurship “consists in the purposeful and

organised search for changes, and in the

systematic analysis of the opportunities such

changes might offer for economic or social

innovation”

STEVENSON and SAHLMAN, 1989,

“entrepreneurship is most fruitfully defined as the

relentless pursuit of opportunity without regard to

resources currently controlled”.

So we can have “Enterprising Employees.”

SUMMARY AND CONCLUSIONS

• Need to consider:

People

External environment /context

Project (e.g. type of business)

• What we mean by the terms ‘entrepreneur(ship)’ will determine what data we need or use, what policies we develop and theory we develop.

So let us be clear!

Entrepreneurship in Neo-classical Economics

• Output = f(K, L, N)

• Capital

• Labour

• Land

• ADD?: Entrepreneurship, knowledge, innovation, technology (?) Are these all part of the same ‘issue’?

Richard Branson (Virgin)

I never once started a business with the sole

motivation of making money

The End

http://www.napier.ac.uk/depts/eri/home.htm

The Entrepreneur in Economic Theory - some issues Ronald W. McQuaid Employment Research Institute...

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