Entrepreneur
When we talk about entrepreneurship, we need to start with the entrepreneur who runs the entrepreneurship. So, who is an entrepreneur?
The word 'entrepreneur' is derived from the French word "entreprendre" coined by Richard Cantillon in his 'Essai Sur La Nature Du Commerce En General' (Essay on the Nature of Trade in General) written around 1730, but published 1755. The term 'entreprendre' in turn was derived from two French words: 'entre' which means between and 'prendre' which means take. Hence, 'entreprendre' means to undertake or carry out certain activity.
By the term 'entreprendre', Cantillon defined entrepreneurs as someone who undertake to overcome uncertainty and risks to invest in an activity in order to gain some return from it. To Cantillon, entrepreneurs are economic agents who have the foresight and willingness to take the opportunity of realised and unrealised profits through buying and selling activities.
His essay had influenced the development of political economy and the works of Adam Smith, Jean-Baptist Say and other economists.
Entrepreneurs as per Cantillon
Richard Cantillon did an analysis of labour and wage differentials and highlighted that the true cost of something is its "intrinsic value" which is actually the opportunity costs. He disclosed the mutual interdependence amongst economic classes and that the economy self-regulates with entrepreneurs detecting the price signals.
Entrepreneurs acts on perceived arbitrage opportunities and will buy products of the villages at a low price and then transport them to be sold at a higher price. According to Cantillon's theory of entrepreneurship, entrepreneurs bear risks under uncertainty. They buy goods at presently known prices to be sold at unknown prices in the future.
Cantillon described that under the uncertainties, entrepreneurs use judgments without being able to foresee which products will give the highest price based on the factors of supply and demand. Yet, the changes in demand and the entrepreneurs being working with the incentives provided by the profit and loss framework will eventually restore the model to an equilibrium.
Cantillon created a model of the isolated estate and with his model he was able to show the circular flow of goods, incomes, and expenditures between property owners, farmers, farm labour, and entrepreneurs. He pointed out that all the exchange and circulation of the estate is conducted by the actions of the entrepreneurs.
Entrepreneurs as per Adam Smith
Although Adam Smith did not elaborate much on entrepreneurship directly, he had widened the scope of entrepreneurship to include the task of forming an organisation for commercial purposes. Smith (1776) in his book "The Wealth of the Nations" promoted the division and specialisation of labours to boost productivity and also emphasised that new machines and tools flourishes the society.
Adam Smith referred to the entrepreneurs as the 'industry' and their development ought to be encouraged, rewarded and given freedom; the market economy should be kept open and free.
Entrepreneurs as per Marshall, Say and Mill
Alfred Marshall (1890) introduced organisation as the fourth factor to be combined with land, capital and labour into a classical theory of production. Entrepreneurship is considered as the driving factor that brings all the four factors together towards the organic growth of society.
Jean-Baptiste Say (1803) described entrepreneurs as individuals with certain competencies who are able to influence society by forming enterprises and likewise are being influenced by the society to recognise their need and fulfills them through management of resources.
John Stuart Mill (1848) elaborated that entrepreneurship are the founding and prime mover of private enterprises.
Entrepreneurs as per Menger, Schumpeter and Kirzner
Carl Menger (1871) described entrepreneurs as change agents who owns resources and transforms them into useful goods and services according to the knowledge that they possess.
Joseph Schumpeter (1934) relates entrepreneurship with innovations and entrepreneurs are agents of economic change that carries out new combinations of innovations for economic development.
Israel Kirzner (1978) explained that entrepreneurs could balance supply and demand by detecting market imperfections and exploit them. According to Kirzner, the profits entrepreneurs receive from entrepreneurships are their reward for their tolerance of uncertainty as they eliminate arbitrage opportunities.
Entrepreneurs as per Knight, Von Mises and Brockhaus
Frank Knight (1921) asserted that entrepreneurs are distinguishable from non-entrepreneurs based on their willingness to bear the cost of uncertainty. In return to their willingness, the entrepreneurs will be rewarded with profit.
Ludwig Von Mises (1949) defined entrepreneurship as human action seen from the aspect of the uncertainty inherent in every action. Entrepreneurship mainly consists of decision-making activities particularly pertaining to production. Von Mises made a distinction between entrepreneurship and management. According to Von Mises, entrepreneurship involves greater responsibility, with the entrepreneurs performing a more crucial role than the managers. In performing their roles, the entrepreneur is motivated by their desire to make profits and acquire wealth. The entrepreneurs are active individuals whose actions are always speculative.
Brockhaus (1982) identifies three attributes that are consistently associated with entrepreneurial behaviour. They are their need for achievement, internal locus of control and risk-taking propensity.
We have gone through some definitions and descriptions of entrepreneurs and entrepreneurship. Next we will look at the traits of successful entrepreneurs.
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