Table I-1: A Chronological History of Entrepreneurial Theorists
CLASSICAL (to about 1850)
Richard Cantillon (Irish)
Developed a vision of a market as a self-regulating network of reciprocal exchange arrangements that produce prices. The entrepreneur has a central role in price determination. The entrepreneur has foresight, assumes risk and takes action to make a profit. "Cantillon argued that the origin of entrepreneurship lies in the lack of foresight individuals have with regards to the future" (H&L, p. 21).
Francois Quesnay (French)
Founder of the Physiocratic School, which viewed nature as static and ruled by laws. Focused on agrarian/physical capitalism. Referred to the entrepreneur as a large farmer who "guides and turns to his account his enterprise by his intelligence and his wealth" (H&L, p. 25).
Anne-Robert, Jacques Turgot (French)
Mapped out a theory of an entrepreneurial economy beyond agriculture. His entrepreneur is a rich merchant or industrialist who advances capital and plans or supervises productive activity in an effort to accumulate more wealth. (P.11). "Turgot’s entrepreneur is a rich merchant or industrialist who advances capital and plans...in an effort to accumulate more wealth" (H&L, p. 29).
Nicolas Baudeau (French)
Developed an early theory of entrepreneurship behavior in the agriculture sector. The entrepreneur is motivated by profits in the face of some risks and has special abilities. "Bandeau understood the importance of intelligence." (H&L, p. 27).
Jeremy Bentham (English)
Supported usury to get investment in risky projects and developed the idea of contract management, and administrative arrangements. Like his proclaimed mentor, Smith, he had confidence in individual self-interest as the spur to human action (p. 43).
J. B. Say (French)
Opposed to Physiocrats, believed in a division of human industry in three steps: The first one is scientific, the second entrepreneurial, the third is manufacturing of the item at the hands of manual labor. Entrepreneurship is synonymous with all management. The entrepreneur estimates needs and above all the means to satisfy them, using judgment, perseverance and knowledge of the world as well as business (H&L, p. 32).
David Ricardo (English)
Founder of many tenets of classical economics; but neglected the origin and nature of investment opportunities; and thus failed to recognize the entrepreneur as a separate agent of production. In correspondence with Say never mentioned the entrepreneur in dialogue on the topic of value created (H&L, p. 40).
Adam Smith (English)
His "invisible hand" declarations made everyone an entrepreneur and distracted classical economics from according a separate share of output to the entrepreneur, which was different from the capitalist and which was unique or legitimate in a capitalist society. He further denied the importance of "management as a determinant of profit" (H&L, p. 38).
J.H. von Thünen (German)
Set forth an explanation of profit that clearly distinguished the return of the entrepreneur from that of the capitalist. Entrepreneurial gain (return to entrepreneurial risk) is profit minus: 1) interest on invested capital; 2) insurance against business losses; 3) wages of management (H&L, p. 45).
John Stuart Mill (English)
Business income and profit were central to enterprise growth and economics (he set the standard among economists for more than half a century). Mill coined the term, "wages of superintendence" to distinguish exceptional wages to exceptional management (H&L, p. 44).
Bruno Hilderbrand (German)
Belonged to the German historical movement. The historical movement contended that a thorough analysis and complete understanding of historical data were a prerequisite for proper development of economic theory. The study of entrepreneurs was particularly revealing (H&L, p. 74).
Gustav (Hans) Schmöller (German)
Schmöller found from historically studying actual entrepreneurs that the key factor in economic activity was the "enterprising spirit," arising from creative organization and initiation (H&L, p. 74). He was a second generation of historicists, who studied actual (historic) behavior. The entrepreneur (unternehmer) was seen as a creative organizer and manager whose role was innovation and initiation. His entrepreneur must be imaginative and bold, quite like Weiser’s entrepreneur (H&L, p. 75).
H.K. Von Mangoldt (German)
Von Mangoldt’s theory was more narrowly focused on the relationship between production and risk. He did not focus on an ideal entrepreneur but rather on the production decisions one must make in an uncertain, competitive environment. He distinguished between "production to order" and "production for the market" the latter being speculative and entrepreneurial (H&L, p. 48).
NEOCLASSICAL (to about 1950)
Karl Marx (German)
Marx was antagonistic. He posited that social forces pit social ranks against one another. Labor was the most deserving of the rewards from production, because labor is the key factor of production contributing most purely to value. Capitalists/entrepreneurs move to a status that inherently makes them corrupt and exploitative. By excessively taking profits for themselves, capitalists are unnatural, naturally pitted against the natural will and logic of mankind, and doomed there in.
Alfred Marshall (English)
His businessman must be a natural leader of men that preserves order and unity in the main plan of business. A famous quotation, "The central idea of economics, even when its foundations alone are under discussion, must be that of living force and movement." The entrepreneur was developed as a multi-faceted capitalist, who manages the life force; he is essentially an exceptional leader of men who rents their ability (H&L, p. 53).
Leon Walras (French)
Walras developed a theory of general static equilibrium, which many consider a negative view because in it the entrepreneur neither gains nor loses (negative contribution). Yet, he defined the entrepreneur as the key to all economics in the face of this ultimate futility. He distinguished the capitalist from the entrepreneur primarily on the differing bases of their incomes (Walker, p. 1).
Carl Menger (Austrian)
He was the founder of the Austrian School of Economics. He established the subjectivist perspective of human valuation as the starting point of economic theory, where a good gains its value because it satisfies human need. Developed a conception of the entrepreneur as one whom must deal with the inter-temporal coordination of the factors of production to provide this value (timing is the essence).
Francis Walker (American)
Walker served as first President of the American Economics Association. He described the entrepreneur as a decision maker and leader, and separated the ownership of capital from the responsibilities of the entrepreneur. Entrepreneurs choose and divest production to organize and control the industrial machine (p. 64). The entrepreneur was higher type of labor that was a leader and master who was able to extract extra rent (treated profit as rent) from workers and other factors of production.
Friedich Von Wieser (Austrian)
He was a follower of Menger who defined the entrepreneur in a legalistic, but catholic fashion. He spoke of entrepreneurs as the great personalities of capitalism. The entrepreneur is any legal owner of an enterprise. He is also a leader, thinker of ideas, planner, manager and "great personality" (H&L, p. 51).
Eugen Von Böhm-Bawerk (Austrian)
He was the last of the Austrian triumvirate. He was much more concerned with the theory of capital and interest and how the entrepreneur exploited them than the entrepreneur, per se.
Francis Y Edgeworth (1926, English)
He was a disciple of Marshall, who defined the sphere of influence of the entrepreneur entirely within the firm. The central figure in the productive system is the entrepreneur, who creatively manipulates and works the factors of production (H&L, p. 51).
F.W. Taussig (American)
He considered entrepreneurial activity as a special form of half conscious labor. Innovation is one key activity of the entrepreneur. He said that it doesn’t make sense to try to separate "wages" from "profits" for the entrepreneur. Ironically, he considered and reflected on the "Schumpeterian thesis," even before Schumpeter made his views on the dynamics of entrepreneurship explicit and popular (H&L, p. 68).
Warner Sombart (German)
He was from the third generation of historicists who focused on the entrepreneurial abilities such as creative innovation, leadership, and personality, which temper the individual to maximum productivity. He proposed that different situations and talents might develop different types of entrepreneurs (H&L, p. 75).
Max Weber (German)
He was from the third generation of historicists who focused on motivation and changing society. For Weber, the critical characteristics of the successful entrepreneur are his ethical and religious imperatives, which empower him to do great things. These imperatives constitute what is called the Protestant ethic, which has metaphysical individual and social powers (H&L, p. 76). His entrepreneurs build bureaucratic organizations.
Israel Mayer Kirzner (Austrian)
He was a student of Mises’ in New York. The role of the entrepreneur is to achieve the kind of adjustment necessary to move economic markets toward the equilibrium state. "Equilibrium simply means a state in which each decision correctly anticipates all other decisions" but this perfect state never really exists. He conceived of equilibrium, where there is a pure and penniless entrepreneur (pp. 95-96).
John Bates Clark (American)
He focused more on what entrepreneurship was not. For instance, he refused to concede that risk bearing was an entrepreneurial activity. Instead, all risk is borne by the capitalist.
Harvey Leibenstein (Austrian)
He developed the theory of x-inefficiency. He refuted the vision of a perfectly competitive world, and makes inefficiency the norm. The x-inefficient world is one of persistent slack, which implies the constant existence of entrepreneurial opportunities (H&L, p. 100).
Edwin F.Gay (American)
He was the founder and first president of the Economic History Association. He was an early American scholar who emphasized the role of the entrepreneur in economic development and social progress.
A.C. Pigou (English)
One of Marshall’s students, he shunted the theory of entrepreneurship onto an even more narrow track, returning to the traditional Smithian view of the entrepreneur as the same as a capitalist who forecasts uncertainties. Quantified expectations about future prospects impact on employment, profits and economic activity in general (H&L, p. 56).
Ludwig von Mises (Austrian)
His concept of human action, for the entrepreneur suggests that entrepreneurs are basically thoughtful, make decisions and take appropriate action. Economics is human action, and the outcome of action is always uncertain, especially with the entrepreneur (praxeology is the study of human action).
Schumpeter (German)
Schumpeter represents an integrating figure in the history of entrepreneurial thought, especially relating to his ideas of the role of the entrepreneur in change, technology and economic development. Not a bearer of risk like a capitalist, the entrepreneur carries out new combinations we call "enterprise." His starting point is the concept of flow, "an unchanging economic process which flows on at constant rates in time and merely reproduces itself" (entrepreneurs change this with innovation and will) (H&L p. 73, p. 75).
John Keynes (English)
He was one of Marshall’s most famous students. He defined entrepreneurship mostly in a micro social context as depending largely on metaphysical aspects (e.g., coined the term “animal spirits” to describe aggressive entrepreneurial behavior of investors in bull markets). He generally placed the entrepreneur as the key decision-maker within the individual firm. His function is to foresee the future and "fix the amount of employment and that level which is expected to maximize the excess of proceeds over the factor costs" (H&L, p. 68).
MODERN (to about 1980)
Frank H. Knight (American)
He provided a very useful emphasis on the distinction between insurable risks and non-insurable uncertainty. Second, he advanced a theory of profit that related this non-insurable uncertainty to growth and entrepreneurial ability. Knight dubbed the term "true" uncertainty (e.g., the inability to predict consumer demand). Its magnitude is what relates to profit (H&L, p. 69).
Arthur Cole (American)
For him, the entrepreneur is the central figure in modern economics. Cole’s entrepreneur is a productive agent and makes decisions under uncertainty. Advocated the use of case studies and he was most interested in environmental influences. "He said to study the entrepreneur is to study...the central figure of Economics" (H&L, p. 7).
Arthur Koestler (English)
He posited that the creative process of entrepreneurship is a wrenching away of a concept or technique from its traditional context or meaning (H&L, p. 3).
Bert Hoselitz (American)
He did research on the history of entrepreneurship. The entrepreneur historically was in charge of great architectural works for instance and has a key role in economic history.
Jacob Bronowski (English)
He found an answer to man’s uniqueness is in his forward-looking imagination. "Human uniqueness...ties in the ability to draw conclusions from what we see and what we do not see" (H&L, p. 2).
G.L.S. Shackle (English)
The psychic act of decision in the enterprise is the focus of entrepreneurship. Decision acts initiate human change and progress (imagination). He used the term "enterpriser" because in choosing a present act we are, in the nature of things, in some respects blind. The entrepreneur is a man whose characteristic act is a gamble on his imagination (H&L, p. 3-4).
S. M. Kanbur (American)
He was a Schumpeter antagonist who introduced opportunity costs and said that the entrepreneur takes risks, other than financial, from which he can get gains or losses. Risk of reputation and uncertainty of ability are examples of non-financial risks entrepreneurs face, (H&L, p. 83).
F. B. Hawley (American)
As an independent thinker, he asserted that it is impossible to understand why capital has a price unless we study it from the undertaker point of view. For all element of risk, the final consumer has to pay. Buying at a certain price and selling at an uncertain price is essentially entrepreneurship (H&L, p. 65).
T. W. Schultz (American)
He was a Noble Laureate that developed a human capital approach. He sees entrepreneurship as an ability or skill to deal with disequilibrium. Rewards go to those who bring equilibrium, especially extending to non-market attributes (e.g., households and time management). "Fundamentally, Schultz takes the Mangoldt-Marshall position that the value of entrepreneurial action is a differential return to ability" (H&L, p. 104).
David McClelland (American)
He developed the idea that the need to achieve is a basis for entrepreneurship and entrepreneurship helps stimulate growth and economic development. Status and socialization affect the levels of this need to achieve, which means it can be lenient to some extent.
MODERN SITUATIONALISTS
Jeffrey A. Timmons, Leonard Smollen and Alexander Dingee
They found that entrepreneurship is the ability to create and build a vision from practically nothing in almost any situation; it is a creative act that can occur in many venues. The creation of the enterprise is the key unit of analysis to study. (New Venture Creation: Entrepreneurship in the 1990s, Homewood, IL: Irwin, 1990)
Robert C. Ronstadt
He developed the entrepreneurial assessment approach to measure entrepreneurship in different contexts. He posited that entrepreneurship is the dynamic process of creating incremental wealth. (Entrepreneurship, Dover, MA: Lord Publishing.1984)
Lanny Herron and Harry Sapienza
They developed a venture initiation approach that focused on entrepreneurs' aspirations, skills and satisfaction levels in various situations. (The entrepreneur and the initiation of new venture launch activities. (Entrepreneurship Theory and Practice, 49-55, 1992)
Gifford Pinchot
He developed Entrepreneurship as a concept occurring in the existing enterprise/organization. (Entrapreneuring: Why You Don't Have to Leave the Corporation to Become an Entrepreneur, 1985)
Hans Schollhammer
He identified five types of internal entrepreneurship, which he called "Internal Corporate Entrepreneurship." (The Encyclopedia of Entrepreneurship, Prentice Hall: Englewood Cliffs, NJ, 1982)
Karl Vesper
He developed three types of corporate venturing. To an economist, an entrepreneur is one who brings resources, labor, and materials. To a psychologist, an entrepreneur is one who is driven by certain forces (need to obtain…). To a businessman, an entrepreneur is one who appears as a threat, an aggressive competitor.
William D. Guth and Ari Ginsberg
They found that the domain of corporate entrepreneurship encompasses 2 types of processes, internal innovation and strategic renewal (Corporate Entrepreneurship, Strategic Management Journal, 11 (1990), 5-15).
Jeffrey G. Covin and Dennis P. Slevin
They developed a conceptual model of firm behavior, which was entrepreneurial. ("A conceptual model of entrepreneurship as firm behavior" Entrepreneurship Theory and Practice, Fall 1991 Vol. 16, No.1 pp. 7-26)
Deborah V. Brazeal
She posited that corporate venturing is as an internal process that embraces the ultimate goal of growth through the development of innovative products, processes, technologies that should be institutionalized as a process geared toward long-term prosperity. (Organizing for internally developed corporate venture, Journal of Business Venturing, 8: 75-100, 1993)
L. Hrebiniak
He proposed that the global entrepreneur is a key area for study in modern times. (Organizational adaptation: strategic choice and environmental determinism, Administrative Science Quarterly, Vol. 30, pp.: 336-349, 1985)
OPEN SYSTEM THEORISTS
H. Stevenson, H. Irving Grousbeck, M. J. Roberts and A. Bhide
The entrepreneur pursues opportunity without regard to resources currently controlled. They are able to change economic systems in that pursuit. (New Business Ventures and the Entrepreneur. 5th ed., Richard D. Irwin, 1999)
J.S. Hornsby, D.W. Naffziger, D.F. Kuratko and R.V. Montagno
They developed an interactive model of entrepreneurial process, which was based on systems theory that described the process in larger organizations (An Interactive Model of Corporate Entrepreneurship Process, Entrepreneurship Theory and Practice, 17(2), 29-37, 1993).
M. B. Low and I. C. MacMillan
They developed a model for understanding entrepreneurship based on three indispensable elements: Process, outcomes and context. Their work provided a major shift from studying entrepreneurship as an individual phenomenon to the study of deeper issues related to knowledge, networks, resources and outcomes. They suggest that multidisciplinary research is needed to understand the boundaries of the field (Entrepreneurship: Past Research and Future challenges, Journal of Management, 14, 1988, 339-369).
H. E. Aldrich and M. A. Martinez
They studied the interaction between entrepreneurial process and context (based on above work of Low and MacMillan) and developed an evolutionary approach that links strategy to environment (Many Are Called, but Few Are Chosen: An Evolutionary Perspective for the Study of Entrepreneurship, Entrepreneurship Theory and Practice, summer 2001, 41- 56).
B. Bird and M. Jelinek
They found that entrepreneurs are characterized by focusing their attention on interrelationships and form visions that can be communicated and provide meaning to others. They key to entrepreneurship is to see interrelationships and opportunities better than others (The Operation of Entrepreneurial Intentions, Entrepreneurship Theory and Practice, 13 (2): 21- 29, 1988).
Chester Barnard
He is credited with being one of the first writers in the management field to use the term open systems and the first to articulate holistic theories of organization (For instance see, S. Robbins and M. Coulter, Management, Prentice Hall, 2002, p.19).
Peter F. Drucker
In many of his works he spends considerable time discussing the outcomes of entrepreneurship and the virtues of the creative style it implies, particularly in the large organizations. He identifies entrepreneurship as essentially developing new systems for managing, and provides many examples worthy of studying (For instance see, Innovation and Entrepreneurship, Harper Business, 1993).
Peter Senge
He posited that learning organizations are the wave of the future because they adapt to changing conditions to maximize the possibilities for creating a desirable future. He frames systems thinkers much like entrepreneurs and learning organizations much like entrepreneurial organizations (The Fifth Discipline, Doubleday, 1990).
Russell Ackoff
He outspokenly claims we are in a "systems age" regarding management thought. He wrote numerous books on systems thinking, developed a center for systems thinking and various workshops, seminars and websites on the subject. He was a close colleague of Edwards Deming, who shared many of the same views on the need to understand systems (For instance, see Ackoff Center Weblog).
Daniel Katz and Robert Kahn
Wrote about and researched about how organizations are living systems, and how biological organisms and social organizations are acutely dependant upon their external environment and so must be conceived of as open systems (The social Psychology of Organizations, Wiley, 1996, p.17).
Tom Peters and Robert Waterman
They found that culture, vision and commitment interact to produce excellent organizations. Many factors must work together to produce the great organizational successes (In search of Excellence, Warner Books, 1988).
Joseph Vogel
Because environments change and resources are limited, humans will adopt culturgens which best exploit their environment. Those individuals who display the culturegens which best exploit the environment will pass on a greater share of their genes to the next generation than will other members of the same group (Entrepreneurship, Evolution, and the Entropy Law, Journal of Behavioral Economics, Vol. 18, #3, p. 186).
Mike Moms, Pam Lewis and Don Sexton
They found that entrepreneurship is a process that can be conceptualized as a system surrounded by inputs and outputs (Re-conceptualizing a Entrepreneurship: An Input-Output Perspective, SAM Advanced Management Journal, Winter 1994, V59, #1, p. 219).
Amir Bhide
He extensively studied and interviewed successful entrepreneurs (Inc 500 firms) to identify the factors that contributed most decisively to their success. Success was found to be associated with a myriad of factors in unique contexts, which pertained to individual factors (like timing, guts, determination) and situational factors (size, investment, stage, competition). He found that many systematic interrelationships are responsible for success (The origin and Evolution of New Business, Oxford, 2000, p. xiii).
Melissa A. Shilling
She studied the degree that systems are modular (can be separated and recombined and the degree which the “rules of the system architecture enable or prohibit the mixing or matching of components). She proposed that systems migrate toward more or less modularity, and proposed that healthy ones migrate toward more; whereby systems that are tightly integrated may become disintegrated into loosely coupled components that may be mixed or matched, allowing greater flexibility in end configurations (e.g., personal computers have evolved to more modularity). Her model is helpful in understanding the integration and disintegration of evolving systems (Toward a General Modular Systems Theory and Its Application to Interfirm Product Modularity, AMR, 2002, v27, #4, 553-74).
Deniz Ucbasaran, Paul Westhead and Mike Wright
They found that context and process issues must be studied to explain rather than just describe entrepreneurial phenomena. They developed a systematic model with categories of different types of entrepreneurs (nascent, novice, serials and portfolio) and different organizational forms (corporate venturing, management buy-outs and buy-ins, franchising and family inheritance) and five themes (theory, type of entrepreneur, process, type of firm, external environment and outcomes) (The Focus of Entrepreneurship Research: Context and Process Issues. Entrepreneurship Theory and Practice, Summer 2001, p. 57-80).
Hans Landström
He contents that entrepreneurship boils down to understanding the systematic relationships that exist in markets and environments. Thus, the entrepreneur looks for imbalances in the system and then exploits them (The Roots of Entrepreneurship Research, New England Journal of Entrepreneurship, 1999, p.10-20).
Per Davidson and Johan Wiklund
They developed suggestions for macro and micro levels of analysis that are needed in the study of entrepreneurship. The multiple levels include the individual, the organization, the industry and the community, but they also suggest that many other meaningful levels exist hat are worth studying (Levels of Analysis in Entrepreneurship Research: Current Research Practice and Suggestions for the Future, presented at annual SBIDA Conference, 2002, San Diego).
Claudia Bird Schoonhoven and Elaine Romanelli
Entrepreneurship is a contextual process that can promote industrial and regional growth. Entrepreneurship can create growth where now seems possible or viable. They emphasize the concepts of social embeddedness of social action and cooperation, not competition. They emphasize the centrality of legitimacy as a driver of entrepreneurial success and the use of collectives of organizations and networks rather than individuals (The Entrepreneurial Dynamic: Origins of Entrepreneurship and the Evolution of Industries, Stanford, CA: Stanford University Press, 2001).
Edwards Deming
He developed the field of “total quality management” (TQM) around the study and understanding of the realities associated with the systems and processes we build. He particularly focused on understanding systematic variation, which we build into our processes and is manageable as the key to managing organizations
Tom Falcone
Entrepreneurship is largely imagining fresh interrelationships that are opportunistic and exploiting them for benefit and ultimately profit. Seeing and managing systematic change and progress in organizations, markets and other social networks is a special type of management perspective and style that is vital to socio-economic sustainability, which requires unique kinds of personal energy and organizational support.
Disclaimer for Table I-1
In true entrepreneurial style, I make no warranty for TableI-1, not for its comprehensiveness nor for its exhaustiveness, nor for its logical progression, nor for its temporal progression, nor for its generality. Get the point? My personal experiences, preferences and mental models certainly biased the selections. Nevertheless, I’ve tried to pull together diverse authors and ideas that I feel are important, and to arrange them in a meaningful chronology; but, as with all mosaic art, the proof is in the interpretation. This table is thus meant to give a flavor for the progression of key personalities and their ideas through history, which have helped shape the field of entrepreneurship; and can have a significant impact on the journey to systems thinking and associated orientations that enable profound imaginations.
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