1. Both Knight and Schumpeter laid great stress on the importance of the entrepreneur. What similarities and differences, if any, do you find in these authors’ conception of the nature and role of the entrepreneur?
To Schumpeter, the main function of an entrepreneur is an innovator who induces forward shifts in the market through the improvements which he introduces. Schumpeter classifies innovation under five different types, namely: (1) the creation of a new good or an improvement in the quality of an existing good; (2) the creation of a new method of production; (3) the opening of a new market; (4) the capture of a new source of supply; or (5) the creation of a new organization or industry. Schumpeter’s entrepreneur exists in tandem with the banker or the capitalist. It is the capitalist that finances the business venture and assumes the uncertainty brought about by the entrepreneur.
Knight, on the other hand, contended that the main role of the entrepreneur is to assume uncertainty himself and to function as some sort of an “insurance agent” to stakeholders. To Knight, an entrepreneur is an individual who carries out the following tasks: (1) initiate useful changes or innovations; (2) adapt to changes in the economic environment; and (3) assume the consequences of uncertainty related to the company.
Schumpeter and Knight had some similar points in their conceptualization of an entrepreneur. Both believed that innovation and initiation of change is a vital task of an entrepreneur. Since entrepreneurs generate capitalistic development, Schumpeter and Knight also considered them the driving force behind economic growth. The main difference between the two authors is their approach to uncertainty. Schumpeter firmly believed t...
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The late Peter F. Drucker wrote extensively on management, innovation, and entrepreneurship. In his writings, Drucker credited the “discipline of innovation,” or systematic management practices, as being the engine behind entrepreneurial success (1984, 1987, 1998). Furthermore, Drucker (1998) defined innovation as “the effort to create purposeful, focused change in an enterprise’s economic or social potential.”
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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
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
I would like to write an article for my final project of Introduction to Economics on semester 2. In this article, I want to explain to you about Entrepreneur.
"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.
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Entrepreneurship Extract is an opportunity to understand and exploit. Of course, Schumpeter gradually entered politics, and afterward, his later definitions took a little more sophisticated aspect. For example, he emphasized that entrepreneurs are the ones who revive economics and organizations. He sees the dimensions of entrepreneurship beyond the concept of opportunity and opportunity. Schumpeter focused on “the relationship between
Decision making under uncertainty is the basis of entrepreneurship (Schumpeter, 1934) (Kirzner I. , 1979). It was Knight (1921) landmark thesis that put the issue at the very heart of entrepreneurship research. “The beauty of Knight’s argument was to show that the presence of true ‘uncertainty’ about the future might allow entrepreneurs to earn positive profits despite perfect competition, long-run equilibrium and product exhaustion” (Blaug, 1996).
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.
Dollonger, M. J. (2002). A framework for Entreprenership. In M. J. Dollonger, Entrepreneurship strategies and Resources (pp. 5-6). New Jersey.