By: Jackson Allison
The concept of the entrepreneur is tossed around a lot today, and has drastically changed over the past 200 years. humanity awakens to an unprecedented collective awareness of the challenges and opportunities facing our species and our planet, the term ‘entrepreneur’ might need to be redefined, yet again!
Nowadays, entrepreneurship is typically associated with starting and running a business. Most definitions on the web refer to innovation, risk and business. Generally, an entrepreneur is recognized as meaning someone who organizes and assumes the risk of a business in return for the profits.
The term appears to have been introduced by Richard Cantillon (1697-1734), an Irish economist of French descent. Later, in 1803,Jean Baptiste Say, a self-proclaimed entrepreneur, defined an entrepreneur as an economic agent who organizes the means of production – land, labor, and capital – to produce a given product. He then sells this product to generate revenue to cover his costs of production – rent to the landowner, wages to labor, and interest to capital – and the leftover residual is profit. However, Say’s entrepreneur does not simply produce and profit, but constantly seeks to increase profits by lowering costs of production or increasing the efficiency of resources by moving them from areas of low productivity to areas of high productivity.
If this definition sounds familiar, it is because it is the one found in most standard textbooks in economics. It might also sound familiar because cost-cutting strategies and the relocation of economic resources are common practices today. But, is this the image that comes to mind when we think of an entrepreneur?
Economist and political scientist, Joseph Schumpeter, believed Say’s definition was too narrow. Writing over 100 years later, Schumpeter articulated that entrepreneurs are not those who simply follow along the road of the lowest cost of production; they are actually the ones paving the road. For Schumpeter, entrepreneurs are the innovators, and innovation goes hand-in-hand with technological change. Thus, it is not enough to reduce costs and increase profits by whatever means possible, but to reduce costs by increasing productivity through innovation, i.e. through the introduction of new technology or through new ways of doing things. For Schumpeter, entrepreneurs shatter institutions and old ways of producing; the innovator-entrepreneur drives “creative destruction.”
The famous economist, Thorstein Veblen, disagreed with the earlier theory because he believed that the creative, industrious, entrepreneur disappeared from the modern business enterprise. This came about during the early 20th century, as there was a separation of business owner from the day-to-day operations of the business; and it was left to managers. Former entrepreneurs then became absentee-owners, generating incomes from ownership (rent) rather than from creativity and industriousness (their entrepreneurial ability).
If we move rapidly along to modern times, Peter Drucker, corporate management guru and educator, agrees that innovation is essential, but does not believe that it completely defines the entrepreneur. Innovation is simply one of the many tools that entrepreneurs have at their fingertips. For Drucker, “the entrepreneur upsets and disorganizes” the production process as it is currently defined, which may or may not involve technological innovation.
Contemporary economist, Richard Florida, would agree that creativity is an essential attribute of the entrepreneur. However, he believes that the environment plays a critical role in nourishing the entrepreneurial spirit. In short, entrepreneurs thrive in environments that score high on the talent, technology, and tolerance scale.
Perhaps, Harvard business professor Howard Stevenson has it right. “Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.” This means that an entrepreneur sees the opportunity, even if they don’t currently have the resources to achieve it. It’s not about deciding what to produce based on an efficient allocation of available resources, but having a vision of what to produce and then figuring out how to acquire the necessary resources. Interestingly enough, research shows that entrepreneurs that exhibit this spirit are more likely to have been raised poor than rich.
Many view entrepreneurs as emerging captains of industry and whether hailed as heroes or threats to social order, entrepreneurs--and their innovations--have had, and always will have, an enormous influence on the growth and prosperity of nations. The market system has been one of the most significant innovations in the history of humankind and it’s definitely time to buckle up for an exciting new wave of Digital Age entrepreneurs.