Essay Sample on Development of the Term Entrepreneurship

Different scholars have tried to come up with varying definitions of the term entrepreneurship. There exists no specific description of entrepreneurship. It all matters with the researcher's point of view, and the question at hand. This paper aims at defining the term entrepreneurship about different scholars, the different approaches to entrepreneurship, and the various theories applied to explain entrepreneurship. This paper is an extension of the scholarly work done on the above topic.

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Entrepreneurship Definitions

As stated in the thesis, there is not a single definition of the term entrepreneurship. The meaning depends on the writer's perspective and focus. Depending on the researcher's field of specialization, such as economics, psychology, or sociology, entrepreneurship can get varying definitions.

The first entrepreneur to recognize entrepreneurship as a critical economic factor was Richard Cantillon (Van Praag, 1999). From his perspective, Cantillon identified the entrepreneur as the crucial determinant for all circulation and exchange in the economy. The entrepreneur makes an infinite amount of return, unlike landowners or wage workers who earn a fixed rent/income (Hebert & Link, 1988). Cantillon defines an entrepreneur as a person who equilibrates demand and supply in the economy and, by this, bears uncertainty and risks.

Another scholar who tried to define an entrepreneur was Say. He referred to an entrepreneur as a firm manager or an involvement in the process of production (Say, 2001). According to Say, the entrepreneur is the primary production mediator in an economy.

Alfred Marshall, an early neo-classical economist, was also determined to study entrepreneurship. Marshall extended Cantillon's aspect of management and risk-bearing by introducing an innovative function, "the entrepreneur." Marshall emphasized that to minimize costs, the entrepreneur has to look for new opportunities frequently. The general definition of an entrepreneur is a person who engages in decision-making and takes responsibility for the resources, location, and use of goods and services (Hebert and Link, 1989).

By the introduction of new market ideas and new opportunities in the market, Schumpeter, from his Economic perspective, was able to define entrepreneurship. According to him, the role of entrepreneurs is to market gap identification, assembling of resources, practically implement a plan, and then reap the harvest in a flexible, timely manner (Sahlman and Stevenson, 1991). Entrepreneurship is, therefore, a form of management involving opportunity utilization without looking at current resources managed.

Theories of Entrepreneurship

Cantillon's theory (1755)

In this theory, the entrepreneur is viewed not as a factor of production, but as a risk-taker who works to equilibrate the economy's supply and demand.

Marshall's Theory

Marshall's aim as an entrepreneur was to create economic equilibrium. An entrepreneur plays an important role such that not even managers of modern corporations can fill the gap. Marshall's study and the neo-classical concept assume perfect competition, faultless evidence and knowledge, homogeneity of goods, and free entry and exit in trying to explain equilibrium market conditions. To create a state of market equilibrium, Marshall ensured that there are many market players which led to perfect completion.

Schultz Approach (1975)

He argued that there is a close connection between disequilibria situations and entrepreneurship. To him, entrepreneurship is the capability to cope with these disequilibria circumstances. At imbalance, agents can target higher satisfaction levels by resource reallocation. Schultz argues that at an imbalance, opportunities to raise satisfaction are well known to individuals, but there is a need for time for the reallocation process. Resource allocation is either done through experimentation, that is, trial and error, or through human capital investment. In all aspects of life, entrepreneurship exists.

Kirzner's Approach

In the Neo-classical analysis, Marshall focused on the necessary conditions to sustain market balance while Schumpeter focused on the capitalistic structure progress expanding the innovator, "entrepreneur's destructive creation." On the other hand, Kirzner, who represented the Neo- Austrian method to free enterprise, targeted on seeking an answer to the following questions: does a market economy work? If it does, what causes economic stability? According to Kirzner, at first, the economy is in a disequilibrium state. After competing with "vigilant" entrepreneurs, the economy stabilizes. His entrepreneurship analysis establishes a state of market disequilibria, and to correct this state of imbalance, there need for vigilant entrepreneurs who exchange and produce marketable products.

The Equilibrium Destruction Theory (Schumpeter, 1999)

Schumpeter's view of entrepreneurship is mostly inclined to innovation rather than imitation. Schumpeter's joy is not profit-making, but the aspect of being a servant and an innovator in society. The Schumpeterian theory states that, out of equilibrium, the entrepreneur runs the economy. It seems familiar that the accumulation process leads to social prestige and power. Schumpeter had full support to this statement, but he further thought entrepreneurship had a higher potential to spur economic growth. The primary goal of entrepreneurship is to carry out innovations, backed up by power acquisition. The entrepreneur may not necessarily invent new combinations but comes up with ideas for applying those combinations in production. By creating new products, the entrepreneur renders old ones obsolete. This process is innovative destruction (or building uncertainty). Schumpeter viewed this process as a dynamic force toward economic progress.

Conclusion

This paper gives a brief analysis. Future researchers should focus on strengthening the study by looking into more in-depth details.

References

Cantillon, R., 1755. Essay on the nature of general commerce. Henry Higgs, trans. London: Macmillan.

Hebert, R.F. and Link, A.N., 1988. The entrepreneur: mainstream views & radical critiques. Praeger Publishers.

Say, J., Tomasco, M.F., Heller, A., Gal, Y., Aria, B., Heller, E., Plante, P.J., Vreeke, M.S., Friedman, K.A. and Colman, F.C., Abbott Diabetes Care Inc, 2001. Analyte monitoring devices and methods of use. U.S. Patent 6,175,752.

Stevenson, H.H. and Sahlman, W.A., 1991. Introduction to the entrepreneurial venture.

Van Praag, C.M., 1999. An estimated equilibrium model of business formation and labor demand of entrepreneurs.