IV D 2. Human Resource Development:A Note on Entrepreneurship

March 5, 2013ECON 3508 Carleton University

Main Source: Liebenstein, Harvey, (the seminal article) “Entrepreneurship and Development”, American Economic Review, 1968, (to be distributed in class.)

Complete original essay here: http://www.jstor.org/stable/pdfplus/1831799.pdf?acceptTC=true

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Agenda:

1. History and History of Thought2. Does Entrepreneurship Promote for

“Development”3. Where does Entrepreneurial Savoir-Faire Come

From?4. Can Public Policy Promote Entrepreneurship?

Should It? 5. Two Cases: Otavalo and Osoyos

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I. Introduction:

Long recognized as performing a central role in the process of development

But, • Largely ignored in the main body of

economic theory• Little attention in the general literature on

development. • In and out of fashion;

• Entrepreneurship and Poverty

– Note: Informal sector, rural and urban, exist and survives in large part in the informal economy.

– Income generation and poverty, the lot of many entrepreneurs in the informal economies.• The greater the poverty, the more informality and

informal entrepreneurs

A Paradox? Capitalism for the poor and socialism for the rich?

Entrepreneurship

Entrepreneurship: - performs a central role in an economy and society- largely ignored in economic theory

An entrepreneur: - perceives and seizes an opportunity for the

achievement of an objective, - visualizes and plans how the objective can be

achieved, - undertakes to do everything necessary to

implement the vision,” - brings together all of the other factors of

production;

II. The Otavalo Case:

Otavalo Market Scenes

1. General Situation of the Otavalenses, 20072. History

• Pre-Inca and Inca;• Colonial and Independence to +/- 1914• 1914-1960• Post WWII

3. Textile Activity4. Transnational Marketing5. Music6. Explaining Otavalo’s Success7. Lessons?8. Generalizability or Unique to Otavalo?

Osoyoos, British Columbia

1. Background on the Osoyoos Indian Band (OIB)2. OIB Goals3. Leadership: Chief Clarence Louie4. Major Projects of the OIB Development

Corporation• Businesses• The Nk’Mip Winery• Eco-Tourism

5. Unique Features of the Osoyoos Experience6. Duplicatability?

Entrepreneurship in the economy: the “Key Factor of Production”

Could operate in politics, academia, religion, music, sports, or any area of human endeavor.

It can be exercised in different varieties of economic system and in the private, public and voluntary sectors

• The roles of entrepreneurs:

– a “market connecting role,” (linking up the potential market for the outputs with the markets for all the relevant inputs);

– a “gap-filling role,” (doing what is not normally or easily done through markets);

– an “input-completing role,” (improvising the provision of all the inputs necessary for the enterprise); and

– an “enterprise creating role,” (bringing together the inputs for the production of an output over a period of time and in some sort of organization).

2. The specific activities of entrepreneurs,

A wide variety of things, some clear-cut and others more abstract.

• Exploring, discovering and evaluating new opportunities;• “Seizing the initiative”; doing everything necessary for its

realization;• Determining, locating, purchasing and integrating all inputs;• Establishing an enterprise, managing it, and providing

leadership• Structuring and implementing incentive structure;• Bearing uncertainty and facing risk;• Bearing ultimate responsibility and managing crisis;• Continuously learning, evaluating and implementing new

techniques and new management approaches.

In pathological circumstances - entrepreneurship may become deformed. When law and order break down or when

entrepreneurial activities are illegal, entrepreneurship may become criminalized, perhaps within Mafia-like organizations.

Entrepreneurship alone is insufficient to generate growth and development.

Instead, it requires a supportive, legal, and orderly institutional environment.

III. Entrepreneurship and Development

1. History of Thought• Werner Sombart & R. H. Tawney:

“Protestantism…”• David McClelland, 1962 “The Achieving Society”

• Michael Porter, 1992 “Cluster Analysis”• UN, Unleashing Entrepreneurship” 2004

2. Some History

3. Some Conlusions

IV. Does Entrepreneurship Promote for Development”

• Ex Post: “Yes”– Societal & economic improvement requires innovation

and someone to bring it about.• But:– Significant entrepreneurship can co-exist with stagnation

and regression. – The problem of the Informal Sector”?– Suppression of entrepreneurship• Intentional suppression• Policy mess-ups?• Macroeconomic instability• Civil instability

• Conclude: entrepreneurship on its own may lead nowhere, not a magic bullet

V. Where does “Entrepreneurship” come from?

Why do some individuals, ethnic groups, regions nations(?) have it (for a while) while others do not?

VI . Can Public Policy Promote Entrepreneurship?

How?

1. Direct support for existing entrepreneurs?2. Support for Informal Enterprises?3. Support for “Clusters”

3. Support for Entrepreneurship

Are there specific policies that could be used to support or promote “entrepreneurship” per se? Should there be?