The Entrepreneur in Economic Theory - some issues Ronald W. McQuaid Employment Research Institute Napier University, Edinburgh Tinbergen Institute, Amsterdam August 2005 Employment Research Institute Napier 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 Institute Napier 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 Institute Napier 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 Institute Napier University

PERSPECTIVES ON ENTREPRENEURSHIP Entrepreneurship as starting a new business Entrepreneurship as a small business (SME) owner-manager Employment Research Institute Napier University

Changes in Total and Self-Employment (UK 1980 = 100) Employment Research Institute Napier University

Registrations and De-Registrations as % of Stock, 1999 Employment Research Institute Napier University

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 Institute Napier University

Entrepreneurship as a function in the economy  Risk  Co-ordination, allocation and use of resources  ‘Middleman’ Etc. Employment Research Institute Napier University

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 Institute Napier University

Schumpeter – entrepreneurship is disequlibriating (‘creative destruction’) Kirzner – entrepreneurship moves market towards equilibrium Are they consistent? Employment Research Institute Napier 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 Institute Napier 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 Institute Napier 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 Institute Napier 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 Institute Napier University

Entrepreneurship as a form of behaviour Entrepreneurship is what entrepreneurs do, rather than who they are Employment Research Institute Napier University

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 Institute Napier 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.” Employment Research Institute Napier University

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! Employment Research Institute Napier University

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 Institute Napier University

Richard Branson (Virgin) I never once started a business with the sole motivation of making money Employment Research Institute Napier University

The End Employment Research Institute Napier University