Joseph Schumpeter, an American economist, renowned for his term ‘creative destruction,’ defined ‘entrepreneurs as individuals who exploit market opportunity through technical and/ or organisational innovation.’ Entrepreneur is derived from the French verb ‘entreprendre,’ meaning to undertake and consequently entrepreneurship is the ability and will to develop and manage a business scheme; accompanied by any of its risks with the intention of making turnover. Conversely, innovation is the process of transforming a creation into a product or service that generates value; ‘the commercially successful exploitation of ideas.’ It is integral to any developing economy, particularly in those where prevailing business models have become outmoded. Entrepreneurship
Schumpeter’s entrepreneur is the root of disequilibrium and ‘creative destruction,’ and since the new framework makes the long-standing one inappropriate, innovation is not imperative to entrepreneurship. Kirzner, recognised with the Austrian School, argued that anyone is capable of becoming an entrepreneur – all that is essential is wisdom. He branded an entrepreneur as someone who recognises and possesses the alertness to make exploitable gains from trade and benefit from them. Nonetheless, Kirzner understood innovation to be incremental, in which case it was a continuous, recursive process of improving current products. Although, innovation involves modification, innovation is not essential to entrepreneurship as The Austrian School believes attentiveness and knowledge are the real key to economic development. Incremental innovation is a short to medium term process and so does not create lasting value. For instance, Gillette razors began their journey with one blade, now their product has progressed, accumulating unique features and additional blades. The vast difference between Amazon’s Dash Button and Gillette is that greater transformation is present in the Amazon scenario since a novel market forms. Furthermore, once the economy reaches equilibrium there are no exploitable gains to be made since the chance to make substantial profit margins only exists when the economy is ‘out-of equilibrium.’ Innovation is not central to entrepreneurship as reinforced by Kirzner since alert and resourceful entrepreneurs are the real key to innovation and economic development equally, as they exploit on the indecision existing in these fluctuating
Part one of this book deals with the shift from a mercantile economy into a “modern economy”. “A modern economy turns people who are close to the economy, where they are apt to be struck by new commercial ideas, into the investigators and experimenters who manage the innovation process from development, and in many cases, adoption as well.” (Phelps 27) The shift from a mercantile economy to a modern economy stopped people from just buying...
Schumpeter’s view of competition is that companies’ innovation is continuously destructive to processes and assets. In that respect, new technologies displace the older ones making way for greater growth than in the conservative and stable markets. The authors’ review of the failure by IBM and Microsoft provides a good description of that Schumpeterian competition and diseconomy of scope. In that analysis, the author’s address the question on the causes of creative destruction through which they challenge the view that failure in new technological areas by companies that have been successful in theindustry is explained by two scenarios. One being that the companies fear the cannibalization hence ends up under-investing in the new market. The other explanation challenged is that the companies tend to develop cognitive frameworks and organizational capabilities that slow their identification and response to new opportunit...
Koch reveals as much about human nature and the necessity of creation and innovation as he does about business. Since, as George Will claims, “the future has a way of arriving unannounced”, Koch argues, “Businesses must constantly innovate [in order to survive]”. Innovation, which seems a relatively basic and self-explanatory concept, is key to understanding MBM, and as such, Koch goes to great lengths to ensure the proper understanding of the term. Innovation does not simply refer to the creation of the next big product; rather, it refers aspects “throughout all of a company’s business processes.” This definition of innovation includes improvements to all aspects of business, from manufacture, to research, to waste management.
Through my research I was able to relate what Klepper theorized makes an industry, and firms within it, successful to the theories of Schumpeterian entrepreneurs. Schumpeterian entrepreneurs are defined as entrepreneurs that enter new industries and create new markets, something that was seen with Henry Ford and the establishment of The Ford Motor Company. Prior to Ford, the automobile industry was split into two markets: high-end luxury vehicles, and cheap farming vehicles. Ford created a new market within the introduction of the Model T, forging the pathway for affordable, mass-produced automobiles. Within the concept of Schumpeterian entrepreneurship, there is a distinct difference between types of Schumpeterian entrepreneurs; through class discussions and Serguey Braguinsky’s essay Entrepreneurs and Their Economic Functions: Schumpeter and Knight, we defined pioneering Schumpeterian entrepreneurs as those who are the first to introduce new innovations to an industry, while imitating Schumpeterian entrepreneurs are those who enter the industry after the initial innovation in hopes of making a profit while also helping to diffuse the innovation. These distinct types of Schumpeterian entrepreneurs are reflected in Klepper’s idea of a shakeout--where many firms in an innovative industry drop out, despite continued industry growth, leaving a few large firms to dominate the industry. With this, we can conclude that pioneering entrepreneurs are most likely to survive a shakeout and become a dominating firm in the
There has been a large amount of attention paid to the subject of entrepreneurship in the last few years; mainly because most people have chosen to go from working for somebody else, to be their own bosses and work for their dreams. Nevertheless, many still wonder what is entrepreneurship and what is that sets entrepreneurs apart from other regular business owners. At first, it seems both concepts do not differ much from each other since they both start up and run businesses and assume risks to pursue opportunities; however, there are certain traits that difference them.
The economist Joseph Schumpeter argues that, an entrepreneur is a person who demolishes the existing economic order by bringing in novel products and services, by making new forms of organization, or by exploiting new raw materials (D. Bygrave & Zacharakis, 2010). The economist Jean Baptiste say, used the term Entrepreneur to refer to an individual who create value in an economy by moving resources from areas of low productivity into areas with higher yield and (Dees, 1998).
"Entrepreneurs who start and build new businesses are more celebrated than studied. They embody, in the popular imagination and in the eyes of some scholars, the virtues of "boldness, ingenuity, leadership, persistence and determination." Policymakers see them as a crucial source of employment and productivity growth. Yet our systematic knowledge of how entrepreneurs start and grow their businesses is limited. The activity does not occupy a prominent place in the study of business and economics.
Apart from contributing a great deal to creation of jobs, growth to the rate in productivity and value added, Gielnik M.M. and Frese M. (2013), Entrepreneurs create and bring to life new technologies, products and services and create new markets and jobs along the way. Entrepreneurs are smart risk takers, implementers, rule-breakers; or in a word; innovators that can and are contributing to the growth of South African economy. Entrepreneurs produce solutions that fly in the face of established knowledge, and they always challenge the status quo, they are always coming up with better and more effective ideas. They are risk-takers who pursue opportunities that others may fail to recognise or may even view as problems or threats.
This term is defined as generating new products, methods, markets or a fresh organization or conceptualized as the process of turn invention into a marketable product (Gabor, 1970). Kourilsky, (1980) claimed creativity and innovations are the vital factors for inspiration and alternative method to predict the success. In the perspective of entrepreneurship, Schumpeter (1934) defined entrepreneur is an agent of change and involved in recognizing new opportunities and innovation is the maximum elementary role of entrepreneur (Drucker, 1985). The practical proof ensured in the entrepreneurship literature that entrepreneurs are considerably more innovative than non- entrepreneurs (Robinson et al., 1991; Ho, and Koh, 1992). Students who adopt entrepreneurship courses appeared more innovative than the students of business administration and management (Sexton and Upton, 1986; Goldsmith and Kerr 1991). Robinson et al., (1991) confirmed that innovation has significant and positive relationship with attitude towards entrepreneurship. Innovativeness, achievement, self-confidence and control could be good predictors of entrepreneurial attitudes (Bygrave, 1989; Robinson et al., 1991; Armstrong and Hird,
Nowadays, entrepreneurship becomes most popular career, where our government encourages our graduated student to involve in business so that unemployment will not happen in our country. Policymakers, academics, and researcher agree that entrepreneurship is a vital route to economic advancement for both developed and developing economics (Zelealem et al., 2004). Entrepreneurship has many types for example small business and others. Today small business, particularly the new ones, is the main vehicle for entrepreneurship, contributing not just to employment, social and political stability, but also to innovation and competitive power (Thurik & Wennekers, 2004).
Entrepreneurship is an important aspect of social, economic and community life. It can be viewed as a critical factor to economic growth as well as a way of addressing unemployment (Nolan, 2003).Entrepreneurs are people who are persistently focused on identifying opportunities, they seek to create something worthwhile while taking into account foreseeable risk and rewards associated with the efforts (Nolan, 2003). Furthermore, entrepreneurs are frequently understood to be individuals who discover market needs and establish new business to meet those identified opportunities. The following assignment will firstly discuss the types of entrepreneurship, secondly it will discuss the reasons people become entrepreneurs, and thirdly it will discuss the importance of entrepreneurship.
Literature surrounding the topic of entrepreneurship, innovation and cosmopolitanism, indeed has been widely discussed, often have the subtopics been referred as a separate entity to a common subtopic. Whilst this ignores the opportunity for each of the subheadings to be associated, the body of literature clearly supports the existence of entrepreneurship, innovation and cosmopolitanism yet rarely does literature address the association between innovation and entrepreneurship in a cosmopolitan society under a common typology. Rather, entrepreneurship, innovation and cosmopolitanism are treated as separate entities to the same subtopic. This paradigm of correlating the indifferences depends on what or how the terms are associated. In order to narrow the widely apprehendable literature on the common terms, the central theme is one whereby all the headings are grouped and reviewed in terms of the associating factors between innovation and entrepreneurship in a cosmopolitan society. A systematic interpretation of the literature is essential to interpret the board and widely discussed literature at hand.. It is well understood that entrepreneurship and innovation amongst societies is are not new phenomenon’s, however in the contemporary cosmopolitan emergence of the modern world, how all three terms can be perceived requires a closer examination of how the terms can be interpreted and accompanied. Finally, all three terms can be measured in both micro and macro dynamics depending on how the literature is examined, in attempt to keep the topic balanced this paper reviews both the macro (society) and micro (businesses) innovation and entrepreneurship in cosmopolitanism.
In this early 19th century this description was altered by the French economist J. B. Say who instead focused on the business process rather than the practitioner. He said that an entrepreneur shifts economic resources out of an area of lower productivity and into one of higher productivity and greater yield. 200 years later confusion still remains over the definitions of ‘entrepreneur’ and ‘entrepreneurship' with no single definition existing.
Entrepreneurship has been described as a “social process involving the efforts of individuals in activities that ultimately have economic implications at a regional and or national level” (O'Connor, 2013, p.559). Through the new businesses, entrepreneurs provide solutions to the problems that exist in the society. The entrepreneurs identify opportunities, develop new businesses and thereby ‘driving the economies forward through innovation, competence, job creation and by generally improving the wellbeing of the society’ (Cuervo, et al., 2007).
Entrepreneurship has been described as the “capacity and willingness to develop, organize and manage a business venture along with any of its risks to make a profit” (www.businessdictionary.com). Entrepreneurship takes the economy and the society to the state of progress and prosperity. A career in entrepreneurship provides opportunities for individuals to achieve financial stability and independence. It can also contribute greatly to the economy by creating new jobs, innovation, and increasing economic growth (Ramos, 2014).