June 16, 2011 Leave a comment
These days entrepreneurship can be pretty much anything. In empirical research, start-ups are often used as proxies for entrepreneurship where starting a firm is assumed to be entrepreneurial. But even though this is often the definition used in daily conversation, this definition may not be very valuable from a research perspective. For instance, are the creation of a new organization dedicated to the production of a previously unseen innovation and opening another McDonald’s franchise equally entrepreneurial?
The entrepreneur can also be seen as an innovator (Schumpeter in a simplified version), as a charismatic leader (Witt), as exercising alertness to opportunity (Kirzner), as having and acting on superior judgment (Knight), and so on.
In contrast, Ludwig von Mises saw entrepreneurship as speculative uncertainty-bearing. Mises stated that all action by definition is entrepreneurial in the sense that it aims to achieve ends in an uncertain future. Actions are future-oriented and uncertain, are subject to profits/losses, and the risk of losing capital. They therefore include an entrepreneurial element. But certainly everyday mundane actions such as taking a shower or walking the dog are not all that entrepreneurial? Granted, such actions may not be of economic significance in scope or degree, but they are by definition speculative.
A better definition of entrepreneurship that has economic significance as well as relevance in both research and the market economy may be Misesian speculative action undertaken specifically in a catallactic setting, i.e. involving interpersonal exchange. Such action necessarily includes a time element (what Mises called the “period of provision,” i.e. the time of production and serviceableness), investment of assets (by which the action becomes of economic significance), understanding of technology and the causal chain of events to achieve ends, subjectivity in the sense of idiosyncratic judgment or foresight, and willingness to assume risk (bear uncertainty).
Adopting the Misesian perspective could bring clarity to the sometimes ambiguously structured entrepreneurship literature.