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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 is about
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 essential function

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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 for equilibrium

Entrepreneur manages/co-ordinates factors 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 new methods anxiety and risk

Knight a manager becomes an entrepreneur 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, main contributions 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 challenging basic community values

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Economic History
Based largely on the work of the Center for Entrepreneurial History at Harvard Focuses on
the enterprise relationships within the enterprise

Corporations seen as the drivers of economic 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 to entrepreneurial 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 somewhat discredited

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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 to the emergence of the modern capitalist economy

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Non-Business Entrepreneurship
Entrepreneurship
increasingly seen as important in noneconomic/business contexts
Social entrepreneurship does not have profit as main aim concentrates on social outputs long-term objectives

Civic entrepreneurship - deals with the way public services are resourced, organised and managed

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A Taxonomy of Entrepreneurial Theory (1)


Herbert & Link suggest that
there are 12 main entrepreneurship themes these can be grouped into 3 major intellectual 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

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