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CHAPTER 1
Definitions and Types of Entrepreneurship
Definitions of Entrepreneurship
Few topics in the business area have attracted more attention among academics and journalists than “entrepreneurship.” From an economic perspective, entrepreneurship is generally conceptualized as the creation of a new business and the bearing of the risk associated with that business in exchange for profits to be derived from the exploitation of opportunities in the marketplace (e.g., demands of consumers that are not currently being satisfied). Defined in this manner, entrepreneurship can take a variety of forms. One of the most famous types of entrepreneurship, one that has also become closely aligned with conceptualizations of various forms of entrepreneurship, is Schumpeter’s “creative destruction.” In Schumpeter’s view, the entrepreneur is driven by innovation, which can take the form of a totally new product or process or an innovative change to existing products or processes, which ultimately “destroy,” or render obsolete, products and processes that have been used in the past. While entrepreneurship is often discussed in the context of policies for encouraging and supporting small businesses, Graham observed that entrepreneurship differs from small business in four critical ways: amount of wealth creation, speed of wealth accumulation, risk, and innovation.
Entrepreneurship is widely celebrated as an engine for progress that brings growth to the economy, makes the marketplace more competitive, makes individual firms more productive through technological change and creates jobs, and added value and welfare for members of society. However, while entrepreneurship is generally lauded for the positive impacts and benefits it has provided to society, it is also true that entrepreneurial activities can have negative consequences such as environmental degradation or unequal distribution of wealth. Recognizing this situation, researchers have made a call for entrepreneurial skills and processes to be applied to mitigate and resolve some of the problems that entrepreneurs may have created, an idea which provides the foundation for ecopreneurship, social entrepreneurship, and sustainable entrepreneurship. For example, Hall et al. argued that “entrepreneurship may be a panacea for many social and environmental concerns” and Pacheco et al. asserted that entrepreneurs can be an important force for social and ecological sustainability.
Research regarding “entrepreneurship” has been made challenging by the absence of a consistent definition of the term across the universe of studies on the topic. According to Stokes et al., the concept of entrepreneurship has existed for centuries and has been important to the development of modern economic and social life. The term itself has been linked to the French word “entreprendre,” which means “to undertake” or “to do something,” and early definitions and descriptions of the concept can be found in works of economists going back as far as the eighteenth century (e.g., Cantillon, Adam Smith, Say, John Stuart Mill, and Hermann). For example, one of the first uses of the term “entrepreneur” has been attributed to Cantillon, who wrote in the eighteenth century about individuals who bought materials and means of production at prices that enabled them to combine them into a new product.
Many researchers have focused on the economic function served by the entrepreneur. For example, one of the earliest definitions of entrepreneurship focused on merchants who were willing to take the risks of purchasing items at certain prices while there was uncertainty about the prices at which those items could eventually be resold. Later definitions of entrepreneurship began to focus on the risks and challenges associated with combining various factors of production to generate outputs that would be made available for sale in constantly changing markets. Schumpeter was one of the first to include innovation in the definition of entrepreneurship and believed strongly that the essential role of the entrepreneur was creating and responding to economic discontinuities. Others involved in the study of entrepreneurship focus on the personality traits and life experiences of the entrepreneur in an attempt to generate lists of common entrepreneurial characteristics—propensity for “risk taking,” need for achievement, and childhood deprivation. While these studies are interesting they have generally been far from conclusive and often have generated conflicting results.
Gartner surveyed the landscape of the attempts to define entrepreneurship and concluded that finding a common definition of the entrepreneur remains “elusive.” Gartner quoted an observation made by Cole in 1969:
My own personal experience was that for 10 years we ran a research center in entrepreneurial history, for 10 years we tried to define the entrepreneur. We never succeeded. Each of us had some notion of it—what he thought was, for his purposes, a useful definition. And I don’t think you’re going to get farther than that.
Gartner also pointed out that Borkchuas and Horwitz, who reviewed the literature on the psychology of the entrepreneur in the mid-1980s, struck a similar note when they reported:
The literature appears to support the argument that there is no generic definition of the entrepreneur, or if there is we do not have the psychological instruments to discover it at this time. Most of the attempts to distinguish between entrepreneurs and small business owners or managers have discovered no significant differentiating features.
Gartner also counseled against the so-called trait approach that focuses on identifying “entrepreneurs” and argued that the study of new venture creation must take into account the interaction among several variables or dimensions including not only the personal characteristics of the individual entrepreneur but also competitive entry strategies, “push” and “pull” factors and the actions taken by the entrepreneur during the new venture creation process. Other researchers, including Schumpeter, have added the availability of prospective entrepreneurs with the requisite entrepreneurial orientation (e.g., self-reliance, self-confidence, and perseverance) as a prerequisite to effective new venture creation.
Acknowledging the lack of a universally accepted definition of entrepreneurship, Hessels did comment that “[t]here seems to be agreement . . . that entrepreneurship involves the creation of something new.” For Gartner, that “something new” was a “new organization” and he suggested that the most fruitful path for studying entrepreneurship was to view it as a process that includes a series of behaviors and activities intended ...
