The Economics of Entrepreneurship: Theories of entrepreneurship
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Abstract
Numerous thinkers have speculated on the origin and function of the entrepreneur, and on the nature of entrepreneurship. A large body of economic research now exists on these topics. Section 2.1 briefly surveys ‘early’ (chiefly pre-1975) views about entrepreneurship. These are mainly concerned with defining and identifying salient aspects of entrepreneurship in a fairly general way. Section 2.2 treats ‘modern’ (post-1975) contributions to the economic literature on entrepreneurship. These are typically framed in terms of optimising choices between entrepreneurship and paid-employment, and essentially belong to the tradition of neoclassical microeconomics. They tend to be less concerned with definitional issues, usually implicitly taking entrepreneurship to be any activity where individuals work for themselves and trade off risk and returns. Section 2.3 draws some conclusions. ‘Early’ views about entrepreneurship Our treatment of early views about entrepreneurship will be brief, since much of this literature has been summarised before. We will group these views by theme rather than chronologically: Arbitrage and the bearing of uncertainty Richard Cantillon (1755) stressed the importance of the entrepreneur as an arbitrageur or speculator, who conducts all exchanges and bears risk as a result of buying at certain prices and selling at uncertain ones. Cantillon's is a risk theory of profit: anyone who receives an uncertain income can essentially be regarded as an entrepreneur. According to Cantillon, successful entrepreneurs perform a key role in the economy by relieving the paralysis engendered by uncertainty, allowing production and exchange to occur and market equilibrium to be attained.