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Transcript of The Entrepreneur in Economic Theory - some issues Ronald W. McQuaid Employment Research Institute...
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
Employment Research InstituteNapier University
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
Employment Research InstituteNapier University
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.
Employment Research InstituteNapier University
PERSPECTIVES ON ENTREPRENEURSHIP
• Entrepreneurship as starting a new business
• Entrepreneurship as a small business (SME)
owner-manager
Employment Research InstituteNapier University
Changes in Total and Self-Employment (UK 1980 = 100)
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100
110
120
130
140
150
160
170
1980 1985 1990 1995 1999
Total Employment Self Employment
Registrations and De-Registrations as % of Stock, 1999
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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%
Total
GR 28.3%
IT21.4%
UK 10.7%
DK 7.9%
Employment Research InstituteNapier University
Entrepreneurship as a function in the economy
Risk
Co-ordination, allocation and use of resources
‘Middleman’
Etc.
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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
Employment Research InstituteNapier University
Schumpeter – entrepreneurship is disequlibriating
(‘creative destruction’)
Kirzner – entrepreneurship moves market towards
equilibrium
Are they consistent?
Employment Research InstituteNapier University
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.
Employment Research InstituteNapier University
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.
Employment Research InstituteNapier University
Entrepreneurship as a set of personal characteristics
More modern:
Particular qualities or attitude
motivations
their being a ‘great leader’
or social forces
‘Everyman’
Employment Research InstituteNapier University
Entrepreneurship as a set of personal characteristics
- Creative individuals approach (R. Florida?) – are
these just a special case of wider
entrepreneurship?
- Differences according to developing countries,
gender etc.
Employment Research InstituteNapier University
Entrepreneurship as a form of behaviour
Entrepreneurship is what entrepreneurs do, rather
than who they are
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Entrepreneurship as a form of behaviour
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”
Employment Research InstituteNapier University
Entrepreneurship as a form of behaviour
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.”
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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!
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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’?
Employment Research InstituteNapier University
Richard Branson (Virgin)
I never once started a business with the sole
motivation of making money
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The End
http://www.napier.ac.uk/depts/eri/home.htm
Employment Research InstituteNapier University