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The entrepreneur is the head of the ﬁrm and coordinates the factors of production; introduces new methods, processes, and products and creates opportunities for economic growth; bears the risks connected with his or her activities; and, enjoys power and high status in capitalist market societies. Entrepreneurs predate capitalism and do exist in socialist and other alternative economic systems, but are especially associated with that economic system more than any other.
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The term entrepreneur is only one of the concepts used to designate leadership in business and overlaps with others, such as capitalist, employer, investor, owner, manager, producer, chief executive, bourgeois, investor, work-giver, proﬁt-maker, boss, businessman, and businesswoman. Each of these labels stresses one aspect of leadership in business institutions and of the relations with a variety of stakeholders, but the concept ‘entrepreneur’ seems the most encompassing and rigorously deﬁned.
The very origin of the word ‘entrepreneur’ must be traced to the realm of war rather than of economic competition, although in a war for gain rather than for power or honor. The ﬁrst references to the word appeared in sixteenth-century France, where it deﬁned the fortune captain who hired mercenary soldiers to serve princes, leagues, or towns for pay. It was only later, in the eighteenth century that the concept applied to ‘peaceful’ economic actors who either undertook contracts for public works, or introduced new agricultural techniques in their land, or risked their own capital in industry.
The ﬁrst theoretical accounts of the entrepreneurial function appeared in the second half of the eighteenth century with Cantillon and Turgot, who stressed the willingness to accept the risk and uncertainty inherent in economic activity as the key distinctive feature, a concept which was later developed by Knight in the twentieth century. Adam Smith and mainstream economics did not emphasize the speciﬁc role of the entrepreneur—with the notable exceptions of Jean Baptiste Say—who deﬁned the entrepreneur as the person who combines the factors of production for proﬁt, putting himself at the center of several relations among capitalists, workers, technicians, merchants, and consumers—and John Stuart Mill—who separated the entrepreneurial function (the payment for which is proﬁt) from that of providing capital (the payment for which is interest). It was, however, Joseph Schumpeter, who above all, conceptualized entrepreneurship as innovativeness, thus giving it a dynamic quality lacking in earlier formulations.
Contemporary economics assumes that entrepreneurial services are highly elastic and that failures in entrepreneurship are due to maladjustments to external market conditions and to lack of economic incentives. Only a few economists analyze more deeply the concept of the entrepreneur, conceiving him or her as a middleperson between markets, or a gap-ﬁller alert to new opportunities. The study of entrepreneurship is thus more developed within other disciplines: sociology, business history, psychology, and anthropology.
1. The Classical Theories
The classical interpretations of entrepreneurship by Marx, Weber, and Schumpeter are framed into broad, ambitious studies of economic dynamics and cultural change which, although sometimes not convincing and in need of empirical veriﬁcation and substantial revision, generally avoid the pitfalls of comparative static models and often ask the right kind of questions.
Marx’s contribution to the study of entrepreneurship does not lie so much in Das Kapital’s (1867) abstract model of the capitalist mode of production, as in the analysis of the capitalist labor market and factory system, and in the historical sketch on ‘primitive accumulation,’ where he traces the processes of disenfranchising of labor from feudal and corporate ties and the transformation of land, merchant, and money capital into industrial capital; as well as in the accounts of the events of 1848 and 1870 in France, where the diﬀerent strategies of the various components of the bourgeoisie, such as industrial and ﬁnancial capital, are analyzed. On the whole, in spite of its methodological errors—ﬁrst of all the reifying of its economic model into more or less universal laws— Marx’s analysis of the rise and the internal dynamics of capitalism played an important role in future works by Weber, Sombart, Schumpeter, and many others (both Marxists like Dobb, Sweezy, the ‘dependencia’ theorists, and non-Marxists like Polanyi and Barrington Moore), by identifying a set of basic structural conditions of a capitalist economy, where entrepreneurship can develop.
Weber’s study of entrepreneurship is couched in his analysis of the interplay between religious ethos and modern rationalization in the rise of capitalism. The entrepreneur is clearly distinguished from his historical predecessors in traditional economies by virtue of his rational and systematic pursuit of economic gain, reliance on calculation measured in relation to this economic criterion, the extension of trust through credit, and the subordination of consumption in the interest of accumulation. These are the elements of the rational economic actor’s ‘instrumental rationality’ (Zweckrationalitat), by which he or she establishes a systematic relationship between preferred goals and the most suitable means to achieve them. In his ponderous essays on the economic ethics of great world religions published in the Archi fur Sozialwissenschaft und Sozialpolitik and in his major work Wirtschaft und Gesellschaft on the relations between economy and society, Weber argued that the advent of ascetic Protestantism provided an especially fruitful breeding ground for the mentality of economic rationality, since through a complex process material success is a sign of ascetic realization.
Weber’s analysis has been variously and sometimes convincingly criticized; but his most signiﬁcant and lasting contribution lies, as Brigitte Berger (1991) puts it, in ‘his ability to show how the expansion of ‘‘instrumental rationality’’ characteristic of the modern entrepreneurial phenomenon also impelled—slowly and incrementally, through the eﬀorts of individuals and groups in their everyday activities and practices— the formation of distinctly modern institutions in all spheres of life, the public as well as the private.’ The degree to which the forces of rationalization responsible for dislodging individuals from their embeddedness in nature, religion, and tradition continue to shape contemporary and future developments is the study of some current researchers, particularly those inﬂuenced by Kellner.
The classical interpretations of Marx and Weber are relevant, but Schumpeter is the theorist of entrepreneurship ‘par excellence,’ who provides the most thorough analysis of the entrepreneurial function. The analysis of entrepreneurship is at the center of Schumpeter’s theoretical system. The entrepreneurial function is the key variable in his theory of development. He deﬁned it as innovation, the introduction of a new combination of the factors of production (land and labor) that, when combined with credit, breaks into the static equilibrium of the circular ﬂow of economic life and raises it to a new level. The entrepreneur changes the conditions of supply, combines existing resources in new ways, and thereby sets up a new production function. Entrepreneurship does not imply the requisite of property, is not based on the assumption of risk, and does not require belonging to a business organization. Schumpeter stressed the revolutionary character of the entrepreneur (and sometimes portrayed him with the same unilateral admiration as Marx showed for the revolutionary proletariat). But the conception of entrepreneurship as ‘the function of innovation’ opens the door to the critique that he exaggerates the importance of a function that seems potentially open to every person in business. To counteract this critique, Schumpeter drew on a range of sociological and psychological insights to demonstrate the entrepreneur’s exceptional role and qualities.
Entrepreneurship, he argues, calls for a speciﬁc type of personality and conduct, which diﬀers from the economic man. The entrepreneur takes advantage of rationally based components of his or her environment, such as money, science, and individual freedom, and he or she orients his or her conduct to rational values, but he or she is not the average product of bourgeois culture, which deﬁnes rationality from the narrower viewpoint of calculating one’s short-term advantage. The entrepreneur acts on the basis of an autonomous drive to conquest and struggle, to achieve and create for its own sake, and also to establish a family dynasty. He or she is a bold leader, capable of thinking the new and grasping the essential, willing to act quickly, to understand by intuition, and to forgo the psychological resistances and social criticisms that always arise when new and innovative behavior is regarded as deviant and dangerous. This sets him oﬀ from the routine manager. While having some elements in common with religious and military leaders of the past, the entrepreneur is, however, the leader of a rational and antiheroic culture, and as a result does not excite the charismatic feelings and collective enthusiasm of those who make or defend whole civilizations.
Entrepreneurship is a speciﬁc historical phenomenon, which rests on the premise of a separate economic sphere diﬀerentiated from others. In previous epochs, the entrepreneurial function was fused with others in the actions of religious, political, and social leaders. In any historical society there is leadership, deﬁned as the capacity to conceive and lead the making of innovations. What changes in the diﬀerent historical contexts is the privileged sphere where leadership is applied, the one that is related to the core function for the survival and development of that given society. Entrepreneurship is the speciﬁc historical form that leadership assumes in capitalism, its distinctive (and even essential) feature, closely linked to the bourgeois class. The bourgeoisie is the leading class, because bourgeois families have performed the innovating and leadership role in the economy and because they acquire, consolidate, and transfer prestige, power, and wealth to future generations.
The fate of entrepreneurship is closely linked to those of the bourgeoisie and capitalism. The conception of entrepreneurial innovation as the key element of capitalism implies that the weakening of the role of the innovative entrepreneur is seen as a basic factor—along with the fading away of bourgeois institutions—of the crisis of capitalism. Schumpeter predicted the progressive decay of the entrepreneurial function by virtue of the routinization of innovation in large oligopolies, which would render the entrepreneurial function superﬂuous and undermine the basis for continued bourgeois dominance. It is the very success of the capitalist ﬁrm that undermines the system.
Schumpeter’s identiﬁcation of the fate of the nineteenth-century entrepreneur with that of capitalism is largely responsible for his faulty prediction of the collapse of this system. In reality, capitalism has proved capable of fundamental transformations through that process of ‘creative destruction’ that Schumpeter had clearly perceived, but underestimated. Several diﬀerent brands of capitalism exist, which proved compatible with the existence of very large ﬁrms and with state intervention and control of the economy.
In spite of his limitations, Schumpeter is the most inﬂuential scholar of entrepreneurship. Although often in a rather sketchy way, he asked the most relevant questions and provided important theoretical insights.
2. The Multidisciplinary Approach To The Study Of Entrepreneurship
In recent decades entrepreneurship has been studied by various disciplines and through diﬀerent approaches that were inﬂuenced by the classical studies, and particularly by Schumpeter’s theory. For most economists—with notable exceptions from Schumpeter to Kirzner—the question of entrepreneurship is not problematic; entrepreneurial activities will emerge more or less spontaneously, as an instance of rational proﬁt maximization, whenever economic conditions are favorable, such as availability of capital, labor, and technology, factor mobility, and access to markets. Other social scientists, mostly sociologists, social-psychologists, business historians, and anthropologists, tend to see entrepreneurship as a more problematic phenomenon, deeply embedded in societies and cultures; they focus on the inﬂuence of, and the mutual interplay among noneconomic factors, such as cultural norms and beliefs, class relations and collective action, state intervention and control, organizational structures, bounded solidarity and trust, deviant behavior and marginality status, and motivations for achievement. They also study how diﬀerent historical and geographical settings may call for markedly dissimilar forms of entrepreneurship. Economic historians have pointed out that the personality type and behavior characteristics of last-century business leaders bears little resemblance to their counterparts of today. Comparative sociologists have shown strong diﬀerences in entrepreneurial roles and styles across countries and with regard to the ﬁrm’s size and to the stages in the ﬁrm’s life cycle.
Diﬀerent disciplinary paradigms provide a ﬁrst basis for classifying major approaches to the studies of entrepreneurship and management. Underlying these diﬀerent approaches are the two fundamental dimensions of: (a) system variables versus actor variables (or, in diﬀerent terms, macro analytical models versus micro analytical models), and (b) structural versus cultural variables.
Metaphorically we can say that for entrepreneurship to emerge it is necessary that the ‘seed’ should ﬁnd the appropriate ‘ground.’ Certain scholars focus on the seed, i.e., either on speciﬁc psychological traits of entrepreneurial personalities or on their social characteristics. Other scholars focus on the breeding ground, which is analyzed either in its structural factors (types of markets, factors of production, class and ethnic relations, state planning, etc.) or cultural factors (business ethics, social approval of economic activity, etc.). Others, still, emphasize the speciﬁc relation between the actor and the situation.
3. The Entrepreneurial Personality
Schumpeter argued that entrepreneurship calls for a speciﬁc type of personality and conduct, which diﬀers from the simple rational conduct of the economic person. Psychological and sociopsychological studies focus on the distinctive traits of entrepreneurial behavior and personality. McClelland’s comparative study tries to answer the question of why some societies are more likely to produce entrepreneurs than others. His major conclusion is that childhood experiences create in certain individuals a particular psychological factor, what he calls ‘the need for achievement,’ which is responsible for economic growth and decline. The inculcation of the achievement motive is due to child-rearing practices that stress standard for excellence, self-reliance training, maternal warmth, and low father dominance. In Western industrialized nations children internalize in family socialization attitudes and symbols which favor a higher need for achievement than do children raised elsewhere, and many of the high achievers have become entrepreneurs. In underdeveloped countries McClelland ﬁnds fewer people with a high need for achievement; besides, of this smaller number, most go into ﬁelds other than business and industry. This interpretation of the motivational structure of entrepreneurship has rather overt normative implications; governments interested in economic growth should produce more high achievers by breaking traditional patterns and emphasizing other-directedness and should motivate the high achievers to enter business and industry. McClelland’s need for achievement theory raises serious methodological problems and risks to be tautological; yet, because it is easily testable, it has fostered a large number of empirical researches.
In general, psychological approaches are questionable since they either tend to make economic activity too much a function of personality, underplaying the role of contextual inﬂuences, or to establish too simple a correlation between micro (personality) variables and macro (economic and sociological) variables. Gerschenkron (1962) criticizes this type of theory, arguing that the normal variation in child-rearing practices and in IQ will produce enough potential entrepreneurs in every society; the critical questions are the institutional factors that are available for entrepreneurial action.
A more sophisticated theory of the relation between socialization and entrepreneurial personality is that of Hagen (1962), who tries to answer both the questions of who the entrepreneurs are and why they come more often from certain social groups. Hagen’s model combines a psychoanalytical interpretation of the entrepreneurial personality with an analysis of his or her condition as a member of a group that is deviant from the cultural norms of the larger society. According to Hagen, entrepreneurs tend to come from groups that suﬀered from withdrawal of status respect (i.e., groups who perceive that their purposes and values in life are not respected by other groups in society whom they respect and whose esteem they value). The loss of status by the social group leads to the breakdown of the family authority and is the trigger mechanism for changes in personality formation. However, the outcomes can be very diﬀerent. Status withdrawal may only lead to sentiments of anger and anxiety and to retreatism. Or, in situations where the mother rejects the husband-father and shows an attitude of protective nurturance to her child, she may foster individualism and the development of a creative and self-reliant personality. Several generations are required to overcome social blockage, but then entrepreneurs can emerge.
The weakest point of Hagen’s theory is that his attempts at veriﬁcation are limited to a few historical cases. Yet, at least for the part based on status withdrawal, his model can rely on empirical evidence of disadvantaged minorities in complex national societies that contributed disproportionately to entrepreneurial activity and economic development (like the Jews and the Protestants in Europe, the Samurais in Japan, the Parsees in India). Hagen’s model is in some way the trait-d’union between the psychological and the sociological approach; he considers macrosociological variables, such as status withdrawal and social marginality, but only insofar as they inﬂuence personality development.
4. The Social Context Of Entrepreneurship: Marginal Or Privileged Status?
The context where entrepreneurship emerges has been studied with regard to: either the social position of the entrepreneurs (marginal deviant or privileged), or the cultural values and attitudes that can favor it, or the structure of risks and opportunities. Sociological conceptions of entrepreneurship in terms of deviance and marginality status have a longstanding tradition. In Der Moderne Kapitalismus (1916–27, 1987), Sombart remarks that the creativity and the ability to break traditional values and patterns which characterize the capitalist entrepreneur can be found in all peoples, social groups, and religions, but that they are more frequent among the members of certain minorities, such as the heretics, the strangers, and the Jews. These groups are not completely accepted in the societies in which they live; they can therefore avoid more easily than others the traditional values and norms that regulated economic behavior in premodern Europe. Because of their minority status— both tolerated and oppressed—they tend to develop speciﬁc skills in the commercial and ﬁnancial activities they are allowed to practice; and because of their acute sense of diversity, they maintain a strong group solidarity, which favors trust and therefore credit among the members of the group.
Building on both Sombart and Schumpeter, Hoselitz (1963) argues that entrepreneurs are deviant because of their ambiguous social position. Marginal groups such as the Jews and Greeks in medieval Europe, the Chinese in Southeast Asia, and Indians in East Africa, are peculiarly suited to make creative adjustments in situations of change and to develop genuine innovations in social behavior, because they act in a hostile social milieu, where prevailing attitudes are against innovation; they are excluded from political power so they concentrate on business; and being left outside the dominant value system, they are subjected to lesser sanctions for their deviant behavior.
More recent works on ethnic communities (Ward and Jenkins 1984, Waldinger et al. 1985) and women (Goﬀee and Scase 1985) follow a similar ‘positional’ approach. Structural factors within the larger society, such as racism, sexism, and credentialism, through processes of exclusionary closure create ‘outsiders’; but some of these people form ‘feeder groups’ from which new entrepreneurs emerge, as in the case of South African Indians who, embedded in organic networks and communities, were remarkably successful in circumventing the massive legal and political constraints of apartheid.
In their study (1992) of how Dominican and other immigrants ‘made it’ in the American economy Portes and Min Zho emphasize bounded solidarity and enforceable trust as sources of social capital, which do not stem from shared value orientations, but from the position of the ethnic minorities in the wider social structure. Citizens of China, Korea, or Cuba do not display any exceptional solidarity or bienfeasance in economic transactions when they are in their native countries. Such beneﬁts stem from their being the members of an identiﬁable social minority in the host country. Bounded solidarity is created among immigrant customers, workers, and investors because they are treated as foreigners, and have a heightened awareness of the symbols of common nationhood. Enforceable trust is based on the ostracism of violators, cutting them oﬀ from sources of credit and opportunity in the ethnic economy.
The social marginality approach can be challenged on two grounds: on structural grounds, by those who argue that dominant classes in society can produce entrepreneurs more than marginal groups can, because of their access to economic, political, and social resources; and on cultural grounds, by those who stress core values and social approval as requisites of entrepreneurship. Social marginality and ethnic solidarity certainly play a role in the formation of entrepreneurship. But historical and comparative research on developed countries—both early industrializing countries (like Great Britain and France) and ‘latecomers’ (like Germany, Italy, and Japan)—show that most new entrepreneurs come from the already ‘privileged’ status groups of preindustrial societies, such as merchants, landowners, and wealthy artisans, who possess both the material and intellectual resources for economic achievement. Dobb’s thesis of the revolutionary role played by yeomen and independent artisans (1946), Pirenne’s analysis of the role of merchants in the formation of the urban bourgeoisie (1914), and Brentano’s view of the acquisitive aristocracy as a protocapitalist class (1916), are all instances of the importance of social groups that occupied well-established positions in the ‘traditional’ societies and which paid a key modernizing role. Although in diﬀerent ways, studies of modernization and of the world economy by Barrington Moore (1966), Bendix (1978), Wallerstein (1979), and others, show the importance of socially established classes in entrepreneurial formation and consolidation.
Even in a more open society as the United States, the contribution of immigrants and lower classes to the formation of entrepreneurship has been exaggerated. Scholars as diﬀerent as Mills (1945) and the business historians of the Harvard Center for Entrepreneurial History (Miller 1952) found a rather stable recruitment pattern: most of the business elite in the period of the great American industrialization (1870– 1910) came from landowning or entrepreneurial families, whereas lower classes contributed between 10 and 20 percent of the membership. A similar critique of the popular origins of entrepreneurs in industrialized countries comes also from major studies in social mobility (Lipset and Bendix 1959).
More recent studies of the relationship between entrepreneurship and social stratiﬁcation focus on the social and cultural speciﬁcities of women entrepreneurs (Goﬀee and Scase 1985); and stress the importance of the middle classes as a breeding ground for small entrepreneurs. Martin and Norman (1970) argue that small entrepreneurs are particularly suited to contemporary society, because of facilitating conditions both on the supply side of entrepreneurial talents, and on the demand side of services requiring new market niches. And Bechhofer and Elliot (1981), see them as the true custodians of the traditional values upon which the capitalist social order was built (passionate individualism and independence, the moral evaluation of work, laissez faire competition, and the belief that inequality is the result of diﬀerential distribution of talent and eﬀort).
5. Entrepreneurship And Culture
Studies stressing cultural context variables are indebted both to Weber and Schumpeter. The classical expose is Weber’s comparative analysis of religious ethics and economic action in the rise of capitalism. Schumpeter inspired the historical research of the Harvard Center for Entrepreneurial History. Neo-Weberian research focuses on the degree to which the forces of rationalization responsible for dislodging individuals from their embeddedness in nature, religion, and tradition continue to shape economic growth and social modernization. Following Weber and Parsons (and in a similar vein to Marshall Berman’s perceptive study of modernity, 1982), scholars like Peter Berger, Brigitte Berger, and Kellner (Berger et al. 1973), stress the typical cognitive style that distinguishes modern consciousness, such as instrumental rationality and the propensity to combine and recombine activities for the achievement of calculated ends. Brigitte Berger’s cultural approach to entrepreneurship argues that economic growth develops from the ‘bottom up,’ not from ‘top down’: ordinary individuals, competing with one another for achieving a variety of goals (including economic proﬁt and self-advancement), create in their everyday activities, practices, habits, and ideas the basis for other distinctly modern institutions to emerge that may mediate between them and distant, large-scale structures of society.
Evidence for this cultural approach is found in various empirical researches, including: Martin’s (1990) analysis of the role of Protestant sects in generating a dynamic process among segments of the urban poor in contemporary Latin American cities that fosters entrepreneurial activities; Redding’s study of the relation between basic aspects of Chinese culture—such as Confucian ethic and family attitudes—and the entrepreneurial behavior among overseas Chinese (1990); Landa’s thesis of the entrepreneurial success of ethnically homogeneous middlemen groups in Africa and in Southeast Asia (1991).
These types of study can be challenged on various grounds. First, these studies often make some confusion between the hegemonic culture and marginal groups’ subcultures: sometimes it is the contrast with the core cultural values which is presented as a cause of entrepreneurial success; some other times it is the convergence with the core value of instrumental rationality. Second, the concept of culture is often stretched so far as to include social interaction in general and all sorts of social networks, without paying attention to structural variables like patterns of solidarity, class, status and power relations, legal norms, and state arrangements and policies, which fundamentally aﬀect social interaction. Third, cultural explanations can be accused of having little predictive power since they are invoked only after a particular group has demonstrated its economic prowess; and of being ultimately tautological, since if a certain minority is successful, it must be because it originally had, or later acquired, the right values.
Another approach that is framed in the cultural paradigm is the social attitudes (or cultural legitimation) model, developed by the members of the Harvard Center for Entrepreneurial History, such as Landes (1951), Sawyer (1952), and Cochran (1949) and by sociologists such as Lipset (1967).Comparing the United States and Latin America, both Cochran and Lipset explain diﬀerences in economic development in terms of the degree of legitimation of entrepreneurship. Cultural norms, role expectations, and social sanctions can either favor or hinder innovation. Comparing France and the United States, both Landes and Sawyer maintain that the diﬀerent pace and degree of economic development in the two countries were due to their diﬀerent historical heritage; while in France the feudal heritage had left a consistent residual of social attitudes hostile to entrepreneurship that limited the recruitment of entrepreneurs, in the United States the absence of a feudal past had allowed the growth of a sociocultural context which was especially receptive for innovation and entrepreneurship.
In a well-known debate, Gerschenkron (1962) refutes Landes and Sawyer’s thesis by arguing that the error of giving too much importance to social attitudes lies in assuming the existence of a homogeneous and generalized value system in society. As counterevidence Gerschenkron brings the cases of eighteenth-century France’s fermiers generaux and of nineteenth-century Russia’s emancipated serfs, who became entrepreneurs in spite of an unfavorable cultural environment. Gerschenkron’s critique is framed in his theory of the diﬀerent paths to economic development; according to him, diﬀerent countries develop through a diﬀerent mix of what he calls the ‘institutional agents’ of development, such as private entrepreneurs, merchant banks, and governments.
6. The Entrepreneur In The Structure Of Risks And Opportunities
Both nonmainstream economics and the situational approach to the study of entrepreneurship focus on markets as structures of risks and opportunities. Mainstream accounts of economics—like those by Knights and by post World War II development economists—assume economic actors to have knowledge of all the opportunities open to them and to behave in a ﬁxed, rational, maximizing way, once appropriate incentives are introduced. But, when these assumptions are relaxed, and market segmentation, ignorance, impeded factor mobility, and pervasive administrative controls are taken into account, the ‘extraordinary’ role of the entrepreneur becomes apparent, as does the need to analyze more carefully the factors that can favor his or her formation. The most interesting contemporary interpretation of this kind is Kirzner’s approach.
Under the inﬂuence of Schumpeter, Mises, and Hayek, Kirzner (1973) points out that human action is meaningful only in relation to the purposes, plans, and expectations of the actor; it is partly guided by maximizing criteria, but alertness, creativity, and judgment—the typical features of the entrepreneur— also inﬂuence what we do. For the market process to emerge, an additional element is required that is not comprehensible within the narrow conceptual limits of economizing behavior, that is entrepreneurial action. This action is favored by an appropriate system of economic and social incentives, such as proﬁt, fame, prestige, power. Entrepreneurial competition is a discovery procedure of proﬁt opportunities, and the competitive system is a fundamentally social process, dependent on the free interplay of individuals.
Pushing Kirzner’s conception further, Lavoie (1991) argues that the theory of entrepreneurship could more fully account for economic change if it were built on the hermeneutical theory of language and culture. According to him, any individual interpretive process is embedded in culture and meaningful only in relation to culture. Lavoie adheres partially to methodological individualism, only insofar as it assumes that the social whole has no purpose, but is a complex resulting from the choices of the participating individuals. But he rejects its other assumption, shared by most economists, that the rational action of the isolated individual serves as the foundation of the analysis of markets. Individual minds are interdependent parts of an integral process of cultural dynamics; they could not exist in isolated, cultureless, brains devoid of language. With Lavoie, we come full circle, back to culture.
By the mid-1960s, scholars from diverse disciplines contributed to what is known as the situational (or social development) approach. Instead of looking at the institutional conditions of entrepreneurship, they asked themselves what actually an individual does when being an entrepreneur. Some, like Glade, and Greenﬁeld and Strickon, give primacy to social action over structural context; others, like Gibb and Ritchie, stress structural context over social action.
Glade (1967) starts criticizing McClelland and Hagen’s models as instances of comparative statics, describing social behavior in two contrasting types of system, one underdeveloped and the other developed, which are both in a steady state; what they lack is a theory of change which explains the transition from one state to the other. Glade maintains that actors make choices and decisions within social settings that are opportunity structures changing over time. The integral features of any given situation are both an ‘objective’ structure of economic opportunity and a subjective capacity of participants to perceive and act upon such opportunities. Entrepreneurs are individuals who can recognize the new opportunities and take advantage of them, without losing them to others. Glade’s situational analysis to the study of entrepreneurship has been criticized and elaborated upon by Greenﬁeld and Strickon (1986). They propose using Darwinian biology as a metaphor for the study of change; as Darwin rejected typological, essentialist biology, they reject ﬁxed types of entrepreneurship— the analogue of the immutable species—and recognize existing diversity of behavior within speciﬁc human populations (or communities), which at its extremes encompasses innovation and novelty. These diverse behaviors interact with their environments, to produce outcomes that are evaluated both by the actor and others. Those innovations judged more advantageous in terms of the standard prevailing within the group may be selected, learned, and imitated, with the result being the establishment of a statistical pattern. Society, culture, religion, politics, and economics are not seen as entities with a reality of their own, but as statistical patterns abstracted from the variable behaviors of the members of speciﬁc communities.
An attempt to combine the situational approach with that of reference groups is the social development model exempliﬁed by Gibb and Ritchie (1982). Entrepreneurs change continuously in terms of the situations they encounter and the social groups to which they relate. It is their interactions with speciﬁc social contexts and reference groups which produce distinctive ambitions and behavior. The wide range of inﬂuences and interactions makes it impossible to deﬁne a single entrepreneurial model, but it does not prevent the development of typologies of entrepreneurs, like the one they develop, where four types (‘improvisers,’ ‘revisionists,’ ‘superceders,’ and ‘reverters’) are identiﬁed as being at the center of diﬀerent sets of inﬂuences.
7. An Integrated Approach To The Study Of Entrepreneurship
The conclusion we can draw from the state of the art of the research on entrepreneurship is that the most interesting studies are often located at the borders between disciplines, such as those by economists who reject simple rational models and recognize the inﬂuence of social interaction and culture, or by sociologists and anthropologists who reject over socialized conceptions of man and take into account the strategies of individual actors. The most convincing interpretations are those away from the extremes of the actor-system continuum, which dismiss oversimpliﬁed views of the interaction between the actor and the systemic context.
A recent example of this integrated approach, close to my own view, is that expressed by Aldrich and Waldinger in their essay on ethnic entrepreneurship (1990). It focuses on such diverse variables as structure of markets, access to ownership, state policies, group characteristics, predisposing factors, and resource mobilization. As for types of economic environments that might support new immigrant entrepreneurs, they identify core urban markets increasingly abandoned by large food retailers, markets where economies of scale are low, markets aﬀected by instability or uncertainty, markets for exotic goods; as for access to ownership, the relevant conditions are the level of interethnic competition for jobs and businesses, patterns of residential segregation and succession, and state immigration and labor market policies; as for group characteristics, predisposing factors, and resource mobilization, they focus on selective migration trends, settlement patterns, culture and aspiration levels, ethnic social networks, and/or ganizing capacities. Although Aldrich and Waldinger’s preference is for structural and institutional variables (like market niches and group resource mobilization) over cultural variables (like group cultural heritage), they are willing to take into account all covariables which can reasonably aﬀect entrepreneurial formation in ethnic communities.
What is needed in future research on entrepreneurship is a multidisciplinary comparative approach, capable of integrating the analysis of the context (market, social structure, culture) with a theory of the actor (both individual or collective) with his or her motives, values, attitudes, cognitive processes, and perceived interests.
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