Role of Entrepreneur

Wenxian Fang ECO 506 Murray Hall rd 23 April 2012

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Table of Contents

HISTORY OF ENTREPRENEURS .............................................................. 2 CLASSICAL ENTERPRENEURSHIP THEORIES ..................................... 3 CHARACTERISTICS OF ENTREPRENEURSHIP ..................................... 6 ROLE OF ENTREPRENEURS ..................................................................... 8
TYPE CHAPTER LEVEL (LEVEL 2) ...................................................................................................

REFERENCES .................................................................................................

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History of entrepreneurs
From the historical perspective, one of the initial entrepreneurs was Macro Polo, one of the first Europeans who sailed to the Far East in the 13th century, with the idea to trade materials he owned with Asian. His treks and expeditions was sponsored by venture capitalists in Venice under the circumstance that they would share profits after his return. Then during the Middle Ages, entrepreneurs were referred to organizers of musical performances and managers of building projects, who simply dealt with existing resources or materials provided. A typical example of this was the cleric, who chiefly in charge of architectural schemes, such as castles and fortifications public buildings and cathedrals. In the last part of the 18th century, an economic transformation took place, which was known as the Industrial Revolution. The term entrepreneur finally was bounded up with risk. Entrepreneurs first took off to bring forth new ideas into produce when current market was approximately saturated and people live with surplus. Thomas Edison was one of them, who made effort to developing something new. They raised capital from venture capitalists so that they could devote to costly experiments. As a result, those substantial inventions opened up a completely new era by changing the mainly agricultural society to one that industry and manufacturing was in control. In comparison, those capitalists merely financed inventors or innovators to create more modern outputs instead of practicing by themselves.
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In the late 19th and early 20th century, entrepreneurs were seen as businessbuilders and more discussed in economic activities. Entrepreneurs consumed resources, paid for the workforce, and took the chance of future uncertain profits/losses. Andrew Carnegie was an example in that period. He transferred his ideas in to production and paved the way for the American steel industry. It was until the middle of 20th century that the definition of entrepreneur as an innovation was formally established. Those who emphasized on creation or reproduction in a different way; such as Edward Harriman, who reconstructed the railroad in U.S., and John Morgan, who developed banking house business by reorganizing and financing the nations industries; were worth mentioning.

The ability of innovation has not only continuously changed the way that human society lives form Stone Age to Bronze Age, then to Iron Age; but also sets the tone of our culture in each specific time period.

Classical Entrepreneurship Theories

During the first two hundred and fifty years, though countless entrepreneurs emerged on the stage of history, only economists paid attention to entrepreneurship, among them there were four scholars fundamentally contributed to the development of the studies. As a factor in microeconomics, the earliest study of entrepreneur can be traced back to the work of Richard Cantillon (1680-1734), an Irish banker, in late 17th century, who pointed out in his work, Essai sur la nature du commerce en

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general (1775), that an entrepreneur is a person who buys services at certain prices with a view to sell out at uncertain prices. In terms of his view, an entrepreneur is a risk taker. It was the very first time that entrepreneur was used in economic activities. Most economists after Cantillon showed interests in entrepreneurial function instead of entrepreneur. Jean Baptiste Say (1767-1832) categorized economic activities into three parts: research on generating knowledge, entrepreneurship applying knowledge to functional products by the way of combining the outputs in new ways and workers doing the manufacturing. To Say entrepreneurs build the connection between factors and production, and coordinate the business at the same time. In early 20th century, the concept of entrepreneur was enriched by Joseph A. Schumpeter during his twenty years in his life at Harvard University (18831950), who was considered as the most important classical scholar in this field. Schumpeter saw entrepreneur as a innovator who carries out new combinations to initiate the process of economic development through introduction of new outputs, new markets, conquests of new source od a raw materials and establishment of a new organization of industry. Furthermore, he brought two new ideas into this region: main mechanism for economic development is creative destruction and people cease to be entrepreneur once they have introduced an innovation. Israel Kirzner (born 1930) labeled entrepreneurs as positive opportunists. Whats more, he argues that as the entrepreneurial element in individual decision 4

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making leads to a more efficient personal allocation of resources, or coordination of the individual's plans, so when it comes to economic coordination, entrepreneurship also leads to more efficient allocations of resource. Though the works of entrepreneurs are to some extent limited, scholars study entrepreneur as an element in economic have never stop. (Table 1)

Table 1. Some theories among economists as to the meaning of entrepreneurs and entrepreneurship 1. Economists have referred to entrepreneurial activity as a specic task, like that of a manager or a foreman. Consequently some authors (such as Say and Mill) see entrepreneurial prot as a kind of salary. 2. To many other economists the most important characteristic of the entrepreneur is that of taking on the risk associated with business venturing. These economists include Cantillon. 3. To some economists (such as Smith and Ricardo) the entrepreneur provides nancial capital. 4. To others, above all Schumpeter, the most important aspect of entrepreneurship is innovation. 5. Entrepreneurs are sometimes seen as the employer of the production factors. 6. Kirzner, and others, sees the entrepreneur as the person who exploits opportunities. 7. Entrepreneurs have also been seen as: Industrial leaders, Pure speculators, Negotiators, A source of information. Sources: Behavioral research (David McClelland, 191798) Sociology (William Gartner, b. 1953) Small business research (David Birch, b. 1937; David Storey, b. 1947).

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Characteristics of Entrepreneurship
It is truly difficult to reach an agreement on who is an entrepreneur or what is entrepreneurship among those arguments, but there are some essential values, on which a successful entrepreneur depends will never change: Communication: Human resources- clients, employees, or strategic partners are what makes or breaks a business, and skillful communication is the key to build successful relationships. Confidence: Not everyone is born with confidence, but the thing is everyone can make effort to be capable of it. Once people have believes, the motivations are becoming stronger as well. A good beginning is half done. Innovation: Resources that production requires will be depleted someday, that's why it is one of the vital traits to have the ability of reorganizing manufacture or creating new outputs in order to realize the sustainable development eventually. Management: To seize the opportunities in time or make right decisions form multiple alternatives has great impact on the development of an enterprise. Besides, an efficient entrepreneur might not do everything in person, but he/she clearly knows the best way to delegate and allocate tasks. Risk Tolerance: When facing risks, entrepreneurs calmly accept the challenge, analyze all aspects fairly, and reduce the uncertain venture to minimum.

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Vision: Cultivate a vision of long-term growth and expansion also benefits a lasting development. The ability of forecast the market trend accurately will boost the growth and evolution of enterprises. As stated above, entrepreneurs take heavy responsibility in the process of running enterprise; even play the roles of managers and capitalists quite often. (Table. 21) Table 2. Entrepreneurs, managers and capitalists
ENTREPRENEUR Discovers and exploits opportunities A creator who initiates and motivates the process of change Accepts risks Uses intuition, is alert, explores new business Leadership, initiates new ways of acting Identifies business opportunities Creation of new Enterprise Choice of venture assets CAPITALIST Capital owner: Shareholders Controlling shareholder Passive shareholder Aversion to risk-taking Aversion to risk-taking Rational decisionmaker. Explores business Creates and maintains competitive advantage Creates trust to enhance cooperation Supervision of the administrative process MANAGER

CHARACTERIZ ED BY

Administrates and manages resources An administrator

BEHAVIOUR

Assesses alternatives

1 Alvaro Cuervo Garcia & Domingo Ribeiro & Salvador Roig. (2007). Entrepreneurship: Concepts, Theory and
Perspective. Springer.

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REFERENCES Albert N. Link & Donald Siegel. (2007). Innovation, Entrepreneurship, and Technological Change. Oxford University Press. Alvaro Cuervo Garcia & Domingo Ribeiro & Salvador Roig. (2007). Entrepreneurship: Concepts, Theory and Perspective. Springer. Bjorn Bjerke. (2007). Understanding Entrepreneurship. Edward Elgar Publishing. James Patrick Gunning. (2000). Israel Kirzner's Entrepreneurship. Feng Chia University. Taiwan, R.O.C. Sangram Keshari Mohanty. (2005). Fundamentals of Entrepreneurship, Prentice-Hall of India Pvt.Ltd.

Joseph A. Schumpeter. (1942). Capitalism, socialism and democracy. Harper. Zoltan Acs & David B. Audretsch. (1990). Innovation and Small Firms. MIT Press.