Entrepreneurship

Entrepreneurship comes from entrepreneur, anglicized from the original French word. It means someone who undertakes something. Merriam-Webster defines "entrepreneur" as "one who assumes the risk and management of business; enterprise; undertaker." The relevant definition of "enterprise," in turn, is "the character or disposition that leads one to attempt the difficult, the untried, etc." Starting with basic definitions is useful because entrepreneurship is valued in American culture and has therefore come to be applied to all manner of business activities, including the running of very large corporations where the managers are not genuinely at risk, did not start the business, and are simply running things; their "undertakings" might sometimes be risky—but not in relation to total assets.

Academic students of the entrepreneurial phenomenon have emphasized different aspects of behavior in business. Josef Schumpeter (1883–1950), the Austrian economist, associated entrepreneurship with innovation. Arthur Cole (1889–1980), Schumpeter's colleague at Harvard, associated entrepreneurship with purposeful activity and the creation of organizations. The management guru, Peter Drucker (1909–2005) defined entrepreneurship as a discipline. "Most of what you hear about entrepreneurship is all wrong," Drucker wrote in Innovation and Entrepreneurship (1986). "It's not magic; it's not mysterious; and it has nothing to do with genes. It's a discipline and, like any discipline, it can be learned." Drucker argued that entrepreneurship extends to all types of organizations. Two widely cited contributors to the Encyclopedia of Entrepreneurship (1982), A. Shapero and L. Sokol argued, from a sociological position, that all organizations and individuals have the potential to be entrepreneurial. They focused on activities rather than organizational make-up in examining entrepreneurship. In their view entrepreneurship is characterized by an individual or group's initiative-taking, resource gathering, autonomy, and risk taking; thus, like Drucker's their definition encompasses all types and sizes of organizations with a wide variety of functions and goals—very much in line with the observation which shows that entrepreneurship is evident in the foundation and growth of all types of organizations.

The academic approach to this subject has tended to be analytical—attempts at disassembling the entrepreneurial phenomenon in order to generate laws of business. One of Arthur Cole's intentions, for example, was to integrate the entrepreneurial phenomenon into a general theory of economics; thus he spoke of it as one of several production factors: "Entrepreneurship may be defined in simplest terms," he wrote in Journal of Economic History, 1953, "as the utilization of one productive factor of the other productive factors for the creation of economic goods." Much of Peter Drucker's work related to management, particularly the management of large organizations; not surprisingly he saw entrepreneurship in terms of a methodology of management—and methodologies can be learned.

Another way to look at entrepreneurship is by the study of history on the one hand—how enterprises came to be, with special emphasis on their beginnings—and looking at the reports of entrepreneurs themselves to see what they have to say. The historical approach is very instructive but in a surprising way. First, the actual entrepreneurial experience somewhat de-mystifies the concept (as Drucker did, but for other reasons): entrepreneurs very often stumble across opportunities, follow peculiar interests, or make something useful because they cannot find it. Second, history also highlights intangible aspects of the entrepreneurial personality (the very genes that Drucker dismissed): such individuals tend to be open-minded, curious, inquisitive, innovative, persistent, and energetic by temperament, thus showing many of the characteristics highlighted by the academics. But, fourth, the notion that entrepreneurs are risk-takers is not confirmed: rather, entrepreneurs are risk-averse but good at minimizing risk.

Paul Hawken, himself the founder of two successful businesses, provided a good view of entrepreneurship, from the entrepreneur's perspective, in his book Growing A Business. Hawken looked at many instances of start-ups (including his own companies) and highlighted the interesting mix of personal qualities, leanings, opportunities, the incremental means by which businesses get started, and the characteristics good entrepreneurs exhibit. Hawken made useful distinctions that Peter Drucker apparently overlooked. "Entrepreneurial change," Hawken wrote, "depends on static situations, and these are provided in abundance by government, large corporations, and other institutions, including educational ones. We need both entrepreneurial and institutional behavior. Each feeds on the other. The role of the former is to foment change. The role of the latter is to test that change." The distinction will ring true to anyone engaged in small business—especially those who have taken it up after working in a large organization: change is difficult inside large, bureaucratic structures; it is easier to accomplish in a small firm: no committees need to make an input, no chain of command needs climbing one link after the next … Some examples illustrating the historical view of entrepreneurship: