ENTREPRENEURSHIP THEORIES

Björn Bjerke

Professor of Entrepreneurship

HISTORY OF THE SUBJECT OF ENTREPRENEURSHIP DURING ITS FIRST 250 YEARS OR SO:

FOUR CLASSICAL SCHOLARS:

RICHARD CANTILLON (1680-1734) JEAN BAPTISTE SAY (1767-1832) JOSEPH SCHUMPETER (1883-1950) ISRAEL KIRZNER (b. 1930)

RICHARD CANTILLON

THE ENTREPRENEUR IS A RISK TAKER

FOCUSED ON THE ENTREPRENEURIAL FUNCTION, NOT THE ENTREPRENEURIAL PERSON

JEAN BAPTISTE SAY

THREE ACTIVITIES IN THE ECONOMY: RESEARCH GENERATING KNOWLEDGE ENTREPRENEURSHIP APPLYING THIS KNOWLEDGE TO USEFUL

PRODUCTS WORKERS DOING THE MANUFACTURING

THE ENTREPRENEUR IS A BUSINESS-BUILDER

JOSEPH SCHUMPETER

THE ENTREPRENEUR IS AN INNOVATOR (COMBINING PRODUCTION FACTORS IN NEW COMBINATIONS)

ENTREPRENEUR ALTERNATIV: TO INTRODUCE NEW PRODUCTS AND/OR PROCESSES, TO FIND NEW SOURCES OF RAW MATERIAL, TO ESTABLISH NEW ORGANIZATIONAL UNITS OR TO OPEN UP NEW MARKETS

THE MAIN MECHANISM FOR ECONOMIC DEVELOPMENT IS CREATIVE DESTRUCTION

PEOPLE CEASE TO BE ENTREPRENEURS AFTER AN INNOVATION HAS BEEN INTRODUCED; THEN PEOPLE MAY BECOME BUSINESS MANAGERS.

ISRAEL KIRZNER

THE ENTREPRENUR IS AN OPPORTUNIST

THE ENTREPRENEUR IS ALERT AND CREATIVE, IDENTIFIES NEW OPPORTUNITIES AND REALIZES THEM

SOME THEORIES AMONG ECONOMISTS AS TO THE MEANING OF ENTREPRENEURS:

THE ENTREPRENEUR HAS A SPECIFIC TASK AND ENTREPRENEURIAL PROFIT IS A KIND OF SALARY (Say and Mill)

THE ENTREPRENEUR IS A RISK TAKER (Cantillon) THE ENTREPRENEUR IS A CAPITALIST (Smith and Ricardo) THE ENTREPRENEUR IS AN INNOVATOR (Schumpeter) THE ENTREPRENEUR IS AN EMPLOYER AND A DECISION

MAKER (Marshall and Keynes) THE ENTREPRENEUR IS AN INDUSTRIAL LEADER THE ENTREPRENEUR IS A PURE SPECULATOR THE ENTREPRENEUR IS A NEGOTIATOR THE ENTREPRENEUR IS A SOURCE OF INFORMATION

SINCE THE 1960S ENTREPRENEURSHIP HAS BECOME A SUBJECT FOR OTHER SCHOLARS, INTERESTED IN BUSINESS ONLY AT FIRST. SOME CONTRIBUTIONS ARE:

THEORIES FOR TECHNOLOGY DEVELOPMENT (Donald Schon; 1930-1997)

BEHAVIOURAL RESEARCH (David McClelland; 1917-1998)

SOCIOLOGY (William Gartner; b. 1953)

SMALL BUSINESS RESEARCH (David Birch; b. 1937; David Storey; b. 1947)

DONALD SCHON

THE IMPORTANCE OF ”CHAMPIONS” IN ALL TECHNICAL DEVELOPMENT:

AT THE OUTSET NEW IDEAS FACE STRONG RESISTANCE; THIS COULD BE CALLED DYNAMIC CONSERVATISM

TO OVERCOME THIS RESISTANCE SELLING BECOMES VITAL

THE PEOPLE WHO REPRESENT THE NEW IDEA WORK MAINLY THROUGH THE INFORMAL RATHER THAN THE FORMAL ORGANIZATION

TYPICALLY, ONE PERSON ACTS AS A CHAMPION FOR THE IDEA

DAVID MCCLELLAND

BASIC QUESTION: WHY DO SOME SOCIETIES DEVELOP MORE DYNAMICALLY THAN OTHER SOCIETIES?

THE ACHIEVING SOCIETY (1961)

A SOCIETY THAT HAS A NEED FOR ACHIEVEMENT AS A NORM DEVELOPS MORE DYNAMICALLY

ENTREPRENEURS TYPICALLY HAVE A NEED FOR ACHIEVEMENT

WILLIAM GARTNER

TO ASK: WHO IS THE ENTREPRENEUR? IS A FRUITLESS QUESTION

THE IMPORTANT THING IS TO ASK: HOW ARE NEW ORGANIZATIONS CREATED?

ENTREPRENEURSHIP MEANS ”THE CREATION AND ESTABLISHMENT OF NEW ORGANIZATIONS”

DAVID BIRCH

THE JOB GENERATION PROCESS (1979) – A PIONEERING WORK

SMALL BUSINESSES ARE VITAL TO THE AMERICAN ECONOMY

DAVID STOREY

WHETHER A SMALL FIRM IS GROWING OR NOT IS VERY MUCH UP TO THE ENTREPRENEUR/FOUNDER

THE GOVERNMENT IS IMPORTANT FOR THE DEVELOPMENT OF THE SMALL BUSINESS SECTOR IN AN ECONOMY (GREAT BRITAIN IN HIS CASE)

THERE ARE MAJOR DIFFERENCES BETWEEN THE FREQUENCIES OF ESTABLISHMENT OF NEW FIRMS IN DIFFERENT REGIONS OF A COUNTRY

AS A RESULT OF HISTORY:

AN ENTREPRENEUR IS A:

RISK TAKER

BUSINESS BUILDER

INNOVATOR

OPPORTUNIST

BUT HOW ADEQUATE IS THIS TODAY:

1. ENTREPRENEURSHIP IS TODAY AN INTERDISCIPLINARY SUBJECT:

EVEN IF IT HAS OBVIOUS ECONOMIC CONSEQUENCES, ENTREPRENEURSHIP SHOULD NOT ONLY (MAYBE NOT EVEN PRIMARILY) BE UNDERSTOOD ECONOMICALLY!

2. WE HAVE A NEW SOCIETY TODAY (THERE ARE MANY NAMES GIVEN TO IT):

A NEW KIND OF CHANGE INFORMATION TECHNOLOGY AND OTHER TECHNOLOGIES

PLAY A DECISIVE ROLE KNOWLEDGE IS CENTRAL OUR ACTIVITIES HAVE A NEW CONTENT NEW KINDS OF ORGANIZATION AND WORK RELATIONSHIPS AND NETWORKS ARE MORE IMPORTANT TO

US GLOBALIZATION A NEW VIEW OF DISTANCE AND TIME NEW TYPES OF CAPITAL BORDERS BETWEEN DIFFERENT INDUSTRIES AND SECTORS

OF THE SOCIETY ARE VERY BLURRED MEMBERS OF THE SOCIETY ARE, ON AVERAGE, OLDER WORDS ARE MORE IMPORTANT

3. ENTREPRENEURSHIP IS NO LONGER AN EXTRA-ORDINARY ACTIVITY:

WE CANNOT TRUST THAT THE FUTURE WILL BE A CONTINUATION OF TODAY, THAT IT IS SOMEWHERE WAITING FOR US. THE FUTURE IS HERE, TODAY, TO BE CREATED.

NOT TAKING RISKS IS A SURE RECIPE FOR GOING BACKWARDS.

WE MUST CONTINOUSLY INNOVATE, WHICH MEANS, AMONG OTHER THINGS, TO TAKE RISKS.

4. ENTREPRENEURSHIP IS SEEN IN ALL KINDS OF VARIETIES AND SITUATIONS TODAY:

BUSINESS SITUATIONS

COMMON SITUATIONS

SOCIAL SITUATIONS

AS A RESULT:

RISK TAKER

BUSINESS BUILDER

INNOVATOR

OPPORTUNIST

WHAT IS CHARACTERIZING AN ENTREPRENEUR?

MY INTEREST IN ENTREPRENEURSHIP STARTED SOME TWENTYFIVE YEARS AGO, WHEN, AS A CONSULTANT, I WAS WORKING WITH ESTABLISHING NEW BUSINESSES ON THE RUINS OF A LARGE CLOSEDOWN, WHERE 4,000 PEOPLE LOST THEIR JOB. ONE IMPORTANT OUTCOME OF THAT JOB WAS TO LEARN WHO IS NOT SUITABLE TO BECOME ENTREPRENEURS: THE PLANNING FANATICS THE PATENT GENIOUS THE GAMBLER THE EXTREME SPECIALIST THE SAFETY SEEKER

INSTEAD, I LEARNED THAT THE MOST IMPORTANT CHARACTERISTICS OF ENTREPRENURS ARE: THEIR ABILITY TO SELL THEMSELVES THEIR WILLINGNESS TO SACRIFICE THEMSELVES IN WHAT THEY WERE

DOING

BUT HOW TO GENERALIZE THIS KNOWLEDGE?

THERE IS NO GENERAL ENTREPRENEURIAL PERSONALITY

THERE IS NO GENERALLY BEST WAY TO SUCCEED AS AN ENTREPRENEUR

ENTREPRENEURSHIP CAN ONLY BE DEFINED (OR RATHER CONCEPTUALIZED) BY ITS RESULT:

ENTREPRENEURSHIP = TO COME UP WITH (AT LEAST PARTLY)

NEW SOLUTIONS

CREATIVITY -> INNOVATIVENESS -> ENTREPRENEURSHIP

HOW TO BEHAVE ENTREPRENEURIALLY?

ENTREPRENEURSHIP IS NOTHING EXCEPTIONAL – EVERYBODY CAN, IN PRINCIPLE, BEHAVE ENTRENEURIALLY

MOST ENTREPRENEURIAL EFFORTS BUILD ON IDEAS AND GIVE RESULTS WHICH ARE NOT VERY RADICAL

WE ARE ENTREPRENEURS ONLY PERIODICALLY AND WE ALL BEHAVE ENTREPRENEURIALLY FROM TIME TO TIME

AN ENTREPRENEUR:

ONLY JUST IS NOT

BEHAVES AS IF

AN ENTREPRENEUR MUST BE THERE WITH FOUR PARTS OF THE BODY – AND ALL MUST BE THERE!

THE BRAIN (TO KNOW)

THE HEART (TO BE WILLING)

THE STOMACH (TO DARE)

THE FEET (TO DO SOMETHING)