Essay: Concept of entrepreneurship, relevant theories & who can be an entrepreneur

This essay aims to discuss the concept of entrepreneurship, to explore relevant theories, and to expand on the fundamental question of who can be an entrepreneur. Based on constructive arguments the essay will critically evaluate the different theories and discuss if the contemporary hype around entrepreneurship is justified or not in turbulent markets, and in modern economies. There are a significant number of attempts in the academic literature which have aimed to define entrepreneurship (Cunningham and Lischeron, 1991). However, there is a lack of common understanding of what exactly entrepreneurship is (Hill and Levenhagen, 1995). In order to try and comprehend the concept of entrepreneurship, this report will explore the three main approaches, which are namely the economic, socioeconomic, and social (Peverelli and Song, 2012).
The economic theories of Adam Smith, Jen-Baptiste Say, and Richard Cantillon, which were developed in the early 1700s, were the first ones which introduced the concept of entrepreneurship (Aspromourgos, 2012; Murphy et al., 2006). Based on Cantillon’s theories, entrepreneurs constitute a distinct economic class, and they are individuals who are subjected to economic returns analogous to the risk that they are undertaking (Aspromourgos, 2012). Adam Smith suggested that the division of labour has its origins to the creation of profit, and he defined entrepreneurship as a series of actions which could lead to changes in the division of labour (Michael, 2007). Postmodern theories explored entrepreneurship from a socioeconomic perspective. Based on Schumpeter’s theory, entrepreneurship is a concept, which develops through learning experiences of the individual, and it depends on specific characteristics, such as the power, and determination to accomplish tasks and ideas (Śledzik, 2013). Schumpeter expanded beyond the definition, and he made connections between entrepreneurship and innovation stating that “innovation is a process of industrial mutation that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one” (Schumpeter, 1987:84). Since then entrepreneurship has been used to describe the notion of “creative destruction”, according to which individuals create innovation that disrupts the status quo (Schumpeter, 1987). While some theories shared and acknowledged Schumpeter’s views, concurrently they developed associations between entrepreneurship and opportunity, and the capability to identify and exploit opportunities for the creation of wealth. As opposed to the Schumpeterian theory, Kirzner (1978) focused on the process of discovery, and suggested that entrepreneurship is based on unnoticed opportunities which can be identified and exploited, aiming to generate profit (Lewin, 2002). Based on Penrose’s theory, entrepreneurship can be developed on a subjective manner through the introduction of innovative activities in organisations, and not necessarily by creatively disrupting the market (Kor et al., 2007). In accordance with Penrose’s and Kirzner’s theories, it became widely acceptable that the concept of entrepreneurship sought to understand how opportunities were identified and exploited, considering at the same time the risk, or the uncertainty based on complex societal patterns (De Jong and Marsili, 2010). Blundel and Lockett (2011) summarised the above theories and defined entrepreneurship as a phenomenon which involves patterns of interactions that extend beyond entrepreneurial activity of the individual; these activities could extend on teams, organisations, networks, and institutions. Based on the above theories and observations entrepreneurship evolved through the decades, starting as an economic concept and ending up as a complex term, which is used not only to describe individuals who are willing to acknowledge the risk and to exploit opportunities and resources, but also it has been used to characterise multifaceted, and often successful patterns and interactions within teams and organisations.
Adam Smith suggested that an entrepreneur is an “agent” who has the capability to transform demand into supply (Bjerke and Hultman, 2004; Smith, 2005). Jean Baptiste Say linked entrepreneurship and the role of the entrepreneur with personal attributes, such as leadership skills, communication and organisational capabilities; this theory was based on a resource based model (Koolman, 1971). Say elaborated further on this model and defined the entrepreneur as a person capable of transferring resources out of less productive sectors to more dynamic ones, always aiming to generate value (Steiner, 2002). In contrast to Smith’s theories, which perceived entrepreneurship from an economic perspective, Say managed to project the sociological dimension of entrepreneurship. Say suggested that an entrepreneur takes into consideration the risk and uncertainty and acts analogically to generate value, having as an ultimate purpose to create profit (Bruyat and Julien, 2001). Postmodern theories argued with the proposed relationship between risk and entrepreneurship and suggested that entrepreneurs are individuals who have the ability to take “calculated risk” (Timmons, 1989). A modern popular assumption about entrepreneurs described them as risk takers, doers not thinkers, highly inventive, and born not made (Kuratko and Hodgetts, 2004).
Nowadays, two basic trends exist, and are widely identified in the scientific community. The first supports the theories of Say and considers the entrepreneur to be a person able to create and develop a business of any kind (Bruyat and Julien, 2001). The second trend supports the Schumpeterian theory and perceives the entrepreneur as an innovator who is able to change the market by generating turbulence in relatively stable environments (Bruyat and Julien, 2001). Christensen classified innovation into two major groups, namely, “sustaining to firms” which allowed the production of better and more profitable products, and “disruptive innovation”, which referred to the process through which a product starts in a simple form, typically at the bottom of the market, and evolves to eventually dislodge established competitors (Christensen et al., 2013). Seemingly, Christensen’s (2013) disruptive innovation refers back to the Schumpeterian theory, which is described above, and makes connections with how Kuratko and Hodgetts (2004) described the modern entrepreneur. Innovation has the power to disrupt and destroy through the concept of creative destruction. It transforms processes, or products in a way which imposes the need for new requirements that current resources, skills and qualities cannot fulfil (Spencer et al., 2008). This kind of change has a definitive effect on competition, and on the requirements to achieve competitive advantage. Its deepest form has the power to generate new industries, and it can be used to constrain or eliminate competition (Gans and Stern, 2000).
Becoming an entrepreneur is all about opportunities and resources; however, to answer the fundamental question of who can become an entrepreneur; it is also worth considering the structural barriers in relation to gender, class, disability and ethnicity. Entry to certain feminised professions maybe restricted (Saridakis et al., 2014); in contrast gender expectations may impact female entrepreneurs negatively (Brush et al., 2006). Although disable people are most likely to be self-employed, disability is often disregarded in entrepreneurship studies (Boylan and Burchardt, 2002). Ethnic minorities and immigrants face barriers to entrepreneurship due to difficulties accessing resources and using them to tap into large markets (Smallbone et al., 2003). The theory of intersectionality can provide a relevant framework to better understand the social context of entrepreneurship, the interactions between and within social categories, and the barriers to privilege, disadvantage, and access to resources (Romero and Valdez, 2016). An intersectional approach can explain the multi-dimensional representation of financial success through enterprise, providing also a meaningful understanding of the possibilities for economic decline, or progress (Romero and Valdez 2016). Studies which focused on intersectionality and entrepreneurship recognised that race, class, and gender amalgamate to affect group members’ opportunities, access to economic resources, social support, relationships, and interactions (Romero and Valdez, 2016). In these complex structural contexts individuals are positioned differently, mainly, within hierarchically organised classes, gender and racial group classifications, and interconnect to create diversity leading to social positioning. Subsequently, social positioning generates differences and unequal resource allocations, creating dynamic yet durable social positions (Romero and Valdez, 2016). Based on the above observations to become an entrepreneur does not only require the possession of certain attributes and the exploitation of opportunities, but it involves complex societal layers in relation to social positioning and access to resources.
The concept of entrepreneurship kept evolving over the decades, and many competing theories have contributed to define the term. Nowadays, entrepreneurship is a subject not only extensively studied in business schools, but also in economic development, social psychology, and policy (Rosa, 2013). Typically, entrepreneurs are considered to be pioneers in their field and create business ventures that encompass a degree of innovation, uncertainty, or risk. Such individuals own their own business, or end up working within large organisations taking up the role of “intrapreneur” (Mazzarol, 2013). Modern society perceives entrepreneurs as mavericks, with entrepreneurial charisma. However, based on the above theories and observations entrepreneurship and the fundamental question of who can become an entrepreneur are complex concepts, and examining them carefully does not justify the modern cultural hype about entrepreneurship. Ries (2011) suggested that there is too much mythmaking around entrepreneurship, stating that the majority of all the new ventures launched by aspiring entrepreneurs end up failing. Ries after rationalising ended up proposing that entrepreneurship is a new form of management, which can be defined, measured and learnt by organisations and by individuals, prompting the idea of treating entrepreneurship as a foundation for economic growth rather than as a cultural hype (Ries, 2011). The perspective of many organisations and governments, especially after the recession in 2008, was that entrepreneurship and entrepreneurs could be the solution to unemployment and to the economic stagnation. Although this type of thinking was understandable for those who sought to promote entrepreneurship and use it as a force to transform the economy, it was fueling the cultural hype around entrepreneurship and discouraged attention to efficient and effective management after a new business was launched (Mazzarol, 2013). Ries (2011) highlighted that the most important things in a new business is not pitching for new venture capital, but learning how to sell and promote new products, manage cash flow, negotiate favourable deals, control complex operations, and strategise to achieve sustainability in highly uncertain markets.
Entrepreneurship evolved through the decades, starting as an economic concept and ending up as a complex term which found applications in various other fields such as sociology and economic development. The fundamental question of who can become an entrepreneur has a rather philosophical value which depends on a multifaceted approach that involves the interaction and intersection of personal attributes, resources and opportunities, and of other economic and societal factors. The modern cultural hype which was created around entrepreneurship is justified up to a certain extent; beyond this point other essential aspects need to be considered in order to establish the success and sustainability of new businesses.