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Entrepreneurial Economics is concerned with the role of entrepreneurs, and the nature and scope of entrepreneurship in the economy. It broadly covers a range of economic and non-economic theories of the characteristics and behaviour of entrepreneurs. Also considered are government policies to increase the number of entrepreneurs in the economy and social entrepreneurship linked to economic development. It includes illustrations of successful entrepreneurs and more detailed case-studies.



What is Entrepreneurship?


1. Introduction to Entrepreneurship

Entrepreneurial Economics considers the role of entrepreneurship and entrepreneurs in economic theory. Economic theory helps to provide insights into the wide variety of behaviour of different producers, consumers and markets, and how each of these changes over time. A key component of these is the role of entrepreneurship. As the economist William Baumol has argued, much of traditional neoclassical economics considered the three key factors of production in economic theory to be land, labour and capital, but this neglected the role of the individual and of entrepreneurship in the economy and in the competitiveness of organizations. Earlier classical economists, such as Adam Smith, had also recognized the importance of entrepreneurship and many economists now add a fourth factor of production, entrepreneurship — the focus of this book.
Keith S. Glancey, Ronald W. McQuaid

2. Entrepreneurship in the Economy

In recent decades entrepreneurs have been particularly important for the economy because of their contribution to new jobs, innovation and flexibility. Each of the concepts of entrepreneurship considered in the previous chapter provides differing perspectives of the importance of entrepreneurs in the economy. Now the significance of small firms is considered, reflecting on the entrepreneur as an owner-manager of a business. Also the importance of new, and small, firms in a dynamic economy is discussed, reflecting entrepreneurship as the event of creating an organization, as a source of innovation and as a form of behaviour.
Keith S. Glancey, Ronald W. McQuaid

Theories of Entrepreneurship


3. Entrepreneurship in Neoclassical Economics

In Part II of this book the concern is with theoretical treatment of entrepreneurs and the activities that constitute ‘entrepreneurship’. In Chapter 1 it is demonstrated that while there is by no means a consensus in academic thought regarding the definitions of ‘entrepreneur’ and ‘entrepreneurship’, there are common themes, of which the acts of creating and developing innovative new business ventures are the foremost. Another issue to emerge from the discussion of small businesses in Chapter 2 is the fact that few small businesses ever grow to a significant extent, although in aggregate the sheer number and diversity of small business activity makes this an important sector in both advanced and developing contemporary market economies. The concept of entrepreneurship in practical terms is commonly linked to small business activity, with the ‘ideal’ model of business success being the growth of a small business into a corporate giant.
Keith S. Glancey, Ronald W. McQuaid

4. Entrepreneurship and Market Dynamics

The concern of this chapter is with the economic theories of entrepreneurship developed by Kirzner and Schumpeter. Both of these theorists identify an explicit function for entrepreneurship within an equilibrium approach to analysing the operations of a market economy, but do so from entirely different perspectives from each other and from that of neoclassical economics. Both Kirzner and Schumpeter relate entrepreneurial activity to the process through which the market economy adjusts in response to factors which create disequilibrium. In Chapter 3 it was shown that changing consumer preferences and production technologies are the major causes of disequilibrium but that neoclassical economics is not concerned with explaining why these factors should change in the first place.
Keith S. Glancey, Ronald W. McQuaid

5. Socio-Economic Influences on Entrepreneurship

In this chapter we analyse theorists: Casson and Etzioni. They both identify the importance of entrepreneurship as a key function within market economies but do so by relating the concept to a wider societal framework. In this respect they incorporate a socio-economic aspect to their analyses rather than adopting a purely economic perspective. The respective approaches they adopt are somewhat different although it is possible to regard their theories as representing complementary perspectives. Both theorists essentially focus on the socio-economic factors which determine the demand for and supply of entrepreneurs.
Keith S. Glancey, Ronald W. McQuaid

6. Entrepreneurship, Contracts and Networks

The aim of this chapter is to build upon the major issues raised in Chapters 3 to 5, those of entrepreneurship in an individual and collective form and within a socio-economic and institutional environment. In developing these issues this chapter brings together key elements of the neoclassical, Austrian, socio-economic and evolutionary schools of economic thought. More specifically, the points which are addressed relate to the role of entrepreneurship in determining: (1) the nature of relationships between firms; (2) the evolution of production modes; (3) the economic and social mechanisms which govern relationships between firms, within production modes, and which lead to efficient resource usage.
Keith S. Glancey, Ronald W. McQuaid

7. Non-Economic Perspectives on Entrepreneurship

This chapter concludes the examination of theoretical perspectives on entrepreneurship undertaken in Part II. Chapters 3 to 6 demonstrated that economic approaches have generally focused on the function of entrepreneurship in the economic system, rather than on the personal characteristics of those individuals who are entrepreneurial. However, economic theorists have recognized the importance of sociological factors such as social background and cultural attitudes, and psychological attributes such as creativity and imagination. In economic approaches the prime motivation to undertake entrepreneurial activities is utility maximization generally based upon profit and the intrinsic gains to the individual of undertaking entrepreneurial activity are relegated to relatively minor importance. Some would argue that without profit there is no entrepreneurship (although this view ignores the view of entrepreneurship as a form of behaviour).
Keith S. Glancey, Ronald W. McQuaid

Policy and Entrepreneurship in the Wider Society


8. Social Entrepreneurship

As with profit orientated entrepreneurs, social entrepreneurs apply new perspectives and innovations and significantly change what things or services are produced, how they are produced and/or how their organizations operate. There have been many such social entrepreneurs and innovators down the ages. We start by looking at some examples of these before considering social entrepreneurship in business related organizations and civic entrepreneurship in government.
Keith S. Glancey, Ronald W. McQuaid

9. Public Policies to Promote Entrepreneurship

The aim of this chapter is to consider government policies to encourage entrepreneurial activity. Generally such policies have focused upon aiding new and small businesses, although as discussed in Chapter 8 various policies have tried to increase entrepreneurial behaviour in the government and ‘not-for-profit’ sectors. The first question is why should governments intervene in the market to support new or small firms? The importance of entrepreneurship generally, and of new and small firms in terms of employment in particular, was discussed in Chapter 2. As was seen in earlier chapters some theories suggest that a rise in entrepreneurship will help the economy move towards equilibrium. Alternatively other writers argue that entrepreneurship may result in greater disequilibrium forces (Chapters 3–4).
Keith S. Glancey, Ronald W. McQuaid



10. Conclusions and Summary

The previous chapters have shown the wide variety of ways in which economists and economic theory have considered entrepreneurs and entrepreneurship. By explicitly taking account of entrepreneurship these theories have helped improve our understanding of change in the economy. The field of entrepreneurship is rich in its variety of perspectives, often using different assumptions and providing different insights. The current chapter briefly pulls together a summary of the various ideas and concepts covered in earlier chapters.
Keith S. Glancey, Ronald W. McQuaid


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