A new book on Schumpeter’s conceptions of the entrepreneur

In a previous post, I wrote of the recent workshop on evolutionary thinking that occurred in Hertfordshire in late September. One of the delegates was Markus Becker of the University of Southern Denmark. I was pleased to meet him there and thank him for the timely publication of a new book with his college at USD, Thorbjørn Knudsen, and the sociologist Richard Swedberg, The Entrepreneur: Classic texts by Joseph A. Schumpeter. This is a new publication from Stanford University Press in which the editors have presented eight pieces by Schumpeter on the entrepreneur and entrepreneurship that span Schumpeter’s career. Importantly, they add some new translations of pieces that had not been available except in German, especially two pieces from 1928 that bridge the thinking between The Theory of Economic Development (1911) and Business Cycles (1942). The introduction also delivers value to the reader as the editors place the eight pieces in context. Importantly, one can now see the evolution of Schumpeter’s entrepreneur from the early presentations as heroic economic figure to a more appealing agent of the entrepreneurial function, including teams of individuals within large “trustified” firms that share the function.

This is a must-read for scholars interested in the role of the entrepreneur in theory, particularly given the historical context of moving from late 19th century Continental Europe to the tumultuous American economy of WWII.

GROE Workshop on Evolutionary Thinking and Capitalism

Last week, I attended a workshop organized by the Group for Research into Organizational Evolution (GROE) of the University of Hertfordshire in the UK.  A link to the workshop page is here, with further links to the GROE homepage. I was particularly pleased with two organizational elements of the workshop. First, the invited speakers presented uniformly thoughtful and thought-provoking presentations on exploiting evolutionary thinking in the economics and sociology of firms and markets. Secondly, each presenter was allotted about 3/4 of an hour for the prepared remarks, followed by equal time for discussion with the 30+ delegates in the room. As a consequence of these two elements, the quality of discourse in the formal sessions and during meals/tea was high.

I was joined in this venue by a colleague from the University of Missouri, André Ariew. He is philosopher of science, with particular expertise in evolutionary biology. We are contemplating joint work on entrepreneurship and organizational evolution. can you spot the philosopher in the photo?

GROE presenters and delegates

While none of the papers was specifically aimed at entrepreneurship, there was much subtext about the experimental nature of capitalistic economies that is grounded in Schumpeter, Hayek, and others for whom individual action is a matter of interest. Significant in this was Stan Metcalfe’s excellent presentation that made his excellent book, Evolutionary Economics and Creative Destruction, come alive for me. The book was written for/from a series of papers that Stan delivered as the Graz Schumpeter Lectures. His recent thinking on the inevitability of losers when entrepreneurs “win” extends and refines the lectures. Fun stuff. We will wait to see if the papers get posted to the GROE website or compiled in another form.

You can find an interview of the Director of GROE, Geoffrey Hodgson, by one of the invited speakers, the evolutionary biologist David Sloan Wilson at the This View of Life blogsite. DSW also interviewed another speaker, Eric Beinhocker, about his presentation about modeling complex economic phenomena using agent-based models of awe-inspiring scale and scope.

Bert Hoselitz on Entrepreneurship and Economic Development

A few posts and consequent conversations about Bert Hoselitz have appeared at Organizations and Markets in the last few years.

I discovered him when I found the reprint of his excellent piece on “The Early History of Entrepreneurial Theory”.

Others discovered him as the translators (with James Dingwall) of Menger’s Principles of Economics.

Hoselitz founded the journal Economic Development and Cultural Change and edited it for more than three decades. Indeed, economic development was his professional passion. He worked extensively in India and was part of the very active community of scholars from across the social sciences that were engaged in development projects supported by USAID, the UN, and the NGOs. One of his papers appears in a compendium of 45 articles on theory and practice of economic development that were gleaned from hundreds of papers presented at a conference in Geneva that marked the United Nations’ Decade of Development.

The paper by Hoselitz is similar to another he wrote for The American Journal of Economics and Sociology a decade earlier.

Both papers are built on the argument that economic progress in the post-colonial, post-WWII developing world can benefit from entrepreneurial activity in small- and medium-sized manufacturing companies if  (1) governments make sufficient investments in infrastructure, notably power and transportation; (2) there are stable institutions to support and protect contracts and market entry; and (3) governments do not embrace pan-economic central planning. He believes that mixed economies can work. Read more of this post

Fritz Redlich on Entrepreneurship (2): Entrepreneurial Types

Fritz Redlich wrote economic histories of European phenomena, notably the iron and steel industries, advertising, and the development of entrepreneurial classes. Most of these works are published in German. Upon his arrival in the US, he was counseled by Frank Taussig and the man who took his chair at Harvard, Joseph Schumpeter, to write in English on American phenomena. Redlich did so, writing a massive study of the 19th century American finance industry and a study of the wartime (WWII) housing market in the US. All along, he maintained an active interest in the men who were business leaders in his case studies and in the Robber Barons of American industrialization. This study caused him to write several pieces that are taxonomies of business leaders; he was careful to make distinctions among the roles of leadership (in a social or historical sense), capitalist, manager, executive, and entrepreneur. He even worried over subcategories of entrepreneurs who had control over capital or not, or whether they were CEOs or top management teams with decision authority, and whether they had decision authority that arose because of “rising through the ranks”, marriage into family businesses, access to owned or borrowed capital, and kinship. The most complete of these typologies appears in a self-edited volume of his writings titled, Steeped in Two Cultures, published by Harper and Row in 1971. The paper itself was first published in Germany in 1959 and I cannot find an electronic version of it. The chapter is titled, “Entrepreneurial Typology.”

Redlich had a couple of other major papers in which he examined entrepreneurial types. One is discussed in my previous post. Another was published as Redlich, Fritz. 1949. The Business Leader in Theory and Reality, The American Journal of Economics and Sociology,Vol. 8, No. 3 (Apr., 1949), pp. 223-37. Find it here.

This article is chock-a-block with interesting insights. In this paper, Redlich makes clear distinctions between entrepreneurial function and management function and capital function. He even takes Schumpeter a step further, identifying that economic development (Schumpeterian movement between circular, steady-state economies) may include creative entrepreneurs, creative managers, and creative capitalists “who should be distinguished from their brethren who do not” elevate themselves to the dynamic theory (p. 226). He exercises his historian’s bent and gives examples, particularly of the creative capitalists from his studies of the financial sector.

Read more of this post

Fritz Redlich on Entrepreneurship (1)

Fritz Redlich was a unique scholar of entrepreneurship. He is little known now, but for a few decades after World War II, he was an intellectual force that connected to important thinkers such as Joseph Schumpeter and Alfred Chandler. Moreover, his training in Germany had connected him to Max Weber, Wilhelm Dilthey, and Werner Sombart. This foundation drove the nature of his work, which I will characterize, with my characteristic imprudence, as business history with the characteristic openness to social science and philosophy that Schumpeter appreciated about the Youngest German historical School.

For more of Redlich’s personal history, one should read the eulogies prepared by Kenneth Carpenter and Alfred Chandler [“Fritz Redlich: Scholar and Friend,” Journal of Economic History 39(4) (December 1979): 1003-07] and Charles Gaston Arcand, Jr. [“Fritz Redlich, 1892–1978: The Man and the Scholar,” American Journal of Economics and Sociology 40(2) (April 1981): 217-21]. There are several interesting personal points, including Chandler’s story of how Redlich virtually unearthed all of the sources to complete his dissertation.

In 1952, Redlich was invited by Arthur H. Cole (Harvard Business School and the Baker Librarian) to join the Research Center in Entrepreneurial History, which Cole had founded along with Schumpeter in 1948. Redlich had been working for federal and state housing authorities in Boston and was an habitué of the Kress (economics) and Baker (business) libraries. He was known to the Harvard economists; he was part of the German emigrant group that Frank Taussig had recruited in the 1930s. Alas, while Redlich had completed his PhD in economics on the eve of WWI and wrote his Habilitationsschrift in 1935, current events kept him from obtaining a professorship in Europe. As a consequence, he couldn’t get the faculty appointment in the US that he sought.

The Research Center was an active place. It published a journal, Explorations in Entrepreneurial History, and fomented some of the most interesting studies of entrepreneurship in the developed world and how that history was, and was not, echoed in the postwar era in the developing economies. Fritz Redlich was an intellectual leader in this organization; Chandler calls him “the major intellectual force.” Redlich completed much of his work on characterizing entrepreneurs and entrepreneurial activity between 1952 and 1958, when the Center closed due to lack of funding. A significant preoccupation was improving upon Schumpeter’s creative destruction as a way to define entrepreneurial activity.

In this post, I will consider one of Redlich’s lines of inquiry: the nature of entrepreneurial innovation. I will consider in other posts his work on taxonomies of entrepreneurs, including the distinctions between “ideal” and “real” types in the development of entrepreneurial theory. Read more of this post

New Ventures / New Entrepreneurs

An organic product CSA

A chestnut mill

A rural artist retreat

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Today, a class of new entrepreneurs from The Entrepreneurship Project in Agriculture began making oral presentations — pitches — of new venture plans that they have put together over the course of the 4-month learning program. One of the measures of impact (performance) of the USDA grant that supports the Project is the number of new farm ventures that are in operation within 3 years of the training. I predict that more than half of the class will be engaged in their ventures by the end of the year. I’ll follow up on this prediction. Stay tuned.

Ideas Mean Nothing — 1692 version

The world’s first economics and business journalist, Daniel Dafoe, wrote his first book in 1692 (or so) and published it in 1697. It is titled An Essay Upon Projects. It is an account of the times which he calls The Projecting Age, in which stock companies such as the Hudson’s Bay Company and the Mississippi Company were the largest of the speculative ventures that Dafoe saw around him. He decried many of these as blatant attempts by unscrupulous idea mongers who were seeking fast payoffs from gullible investors.

There are, and that too many, fair pretences of fine discoveries, new inventions, engines, and I know not what, which — being advanced in notion, and talked up to great things to be performed when such and such sums of money shall be advanced, and such and such engines are made — have raised the fancies of credulous people to such a height that, merely on the shadow of expectation, they have formed companies, chose committees, appointed officers, shares, and books, raised great stocks, and cried up an empty notion to that degree that people have been betrayed to part with their money for shares in a new nothing. . . .

For Dafoe, the vast number of projectors who never made the requisite investments to bring a product to market dwarfs the number of honest projectors who finish the job. The former are contemptible, the latter are the engine of the economy.

Why, then, do we fixate on the “opportunity” — the project — in entrepreneurship research, when the entrepreneurial action of creating real value is what matters?

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