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Innovation Through Cooperation pp 35–58Cite as

The Entrepreneurial Society

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Part of the book series: Management for Professionals ((MANAGPROF))

Abstract

How has innovation happened so far? After the Second World War, innovation was mainly a corporate process. In-house researchers were tasked to innovate for firms. Towards the end of the 20th century, entrepreneurship became more and more important where anyone with a bright idea and the skills and means to set up a firm could innovate. An Entrepreneurial Society arose, ‘an economy full of innovators and entrepreneurs, with entrepreneurial vision and entrepreneurial values, with access to venture capital, and filled with entrepreneurial vigor’. Now innovation is essentially equated with entrepreneurship. Innovation is entrepreneurship. Entrepreneurs are hailed the modern economic heroes, the bringers of growth and prosperity.

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Notes

  1. 1.

    Despite its critical importance and historic prominence, little consensus exists on defining ‘entrepreneurship’ (see the Delphi exercise conducted by Gartner 1990). “The entrepreneur is at the same time one of the most intriguing and one of the most elusive characters in the cast that constitutes the subject of economic analysis” (Baumol 1968, p. 64. Also see Baumol 2002, p. 58). The entrepreneur is still left without a workable, commonly acceptable concept (see Shane and Venkataraman 2000, p. 217). Also Davidsson 2004, Chap. 1; Bull and Willard 1993; Hebert and Link 1988. Also see discussion in Baumol 1993; Iversen et al. 2008, Chap. 2; Carland et al. 1984 (For an early attempt and review also see Cole 1946). Many definitions exist, and different concepts of entrepreneurship are in use, often based on long traditions, including Richard Cantillon, Jean Baptiste Say, John Stuart Mill, Joseph Schumpeter, Frank Knight, Israel Kirzner, Peter Drucker and many more. This has left a diverse field of inquiry. Several broad conceptual approaches run in parallel. These include: (i) Bearing Risk (see especially Knight 1921); (ii) Starting a new firm (for a nuanced argument for and against see Reynolds et al. 2005; also Gartner 1985, 1988; Gartner et al. 2004); (iii) Realising ideas (see, for example, Schumpeter 1947, p. 153. Also see Schumpeter 1942, p. 132, or Baumol 1968, p. 65). Neither one approach seems distinct and specific enough to capture what one typically considers entrepreneurship. “There is no generally accepted definition of entrepreneurship”(Grilo and Thurik 2006, p. 4. Also Audretsch 2005, p. 22; Carland et al. 1984; Peneder 2009; Hebert and Link 1989; Gartner 1988; Shane and Venkataraman 2000). Many official definitions mostly add to the confusion, rather than making it easier. (OECD 1998, p. 11. Also see Ahmad and Hoffman 2008; OECD 2010a, pp. 32–33; Wennekers and Thurik 1999, pp. 46–47; Peneder 2009; Gartner 1990; Davidsson 2004; Gartner et al. 2004). The best approach, therefore, it seems is to keep whatever conception you may have, vague and undogmatic.

  2. 2.

    For a fascinating overview into the richness of entrepreneurial activity over the ages, see Landes et al. (2010). Also see Carlsson et al. (2009), Wingham (2004). Also Chandler (1977) and Blackford (1991).

  3. 3.

    For a vivid account, see Audretsch (2003). For a different perspective. also see Chesbrough’s description of the ‘closed’ economy (Chesbrough 2003a). For more structured description, see Audretsch and Thurik (2000, 2001a, 2004), Thurik (2008); also see Schramm (2006). Note, however: “Contrasting the managed economy with the entrepreneurial economy is not, however, symmetric.” Audretsch and Thurik 2001a, p. 270; also Thurik 2008; Harrison 1997.

  4. 4.

    This was in line with a general perception of innovation as a specialized process. Other sources of innovation were ignored. For an early critique, see Schmookler (1957).

  5. 5.

    Schumpeter (1942, p. 132).

  6. 6.

    The Economist 2001 (as pointed out in Thurik 2008).

  7. 7.

    In the US, for example, big businesses like steel, automobile, chemicals, food industry and heavy manufacturing, dominated the view of the economy. This included names like GM, Ford, IBM, US Steel, AT&T, RCA. Also see especially Chandler (1977).

  8. 8.

    Schumpeter (1942 (2006), p. 106).

  9. 9.

    This expression (though the actual quote may differ) typically referenced to Charlie Wilson, Chairman and CEO of General Motors in 1955 is often used to exemplify this era. Several important books reflect this spirit, stressing a variety of aspects: Chandler 1962, 1977, 1990, 1994; Galbraith 1952, 1967; Servan-Schreiber 1968; Schumpeter 1942; Also: Whyte 1956; Riesman et al. 1953; Mills 1951; Even Wilson 1955; Kerr et al. 1960; For a more critical account, also see Langlois (2004), as well as and Mowery (1983).

    As Thurik noted: “The alleged success of the communist, centrally-led economies plays a huge role in the prevailing way of thinking of that era. These economies thrived on uniform, stable mass production. It is straightforward that entrepreneurship is viewed as behaviour hostile to the communist system and declared criminal” (Thurik 2008, p. 4).

  10. 10.

    Audretsch and Thurik (2001b, p. 18).

  11. 11.

    See Audretsch (2003) and Chesbrough (2003a) especially p. 70. Also see especially Hamel (1999) and Henderson and Clark (1990). Related also Prahalad and Bettis (1986, 1995), Daft and Lewin (1990). Connected to this, also see the discussion on the ‘not sold here virus’ in Chesbrough (2006a).

  12. 12.

    See, for example, Christensen (1997).

  13. 13.

    See, for example, Chesbrough (2003a, 2006a).

  14. 14.

    See Smith and Alexander (1999). For a different version of Apple stealing the GUI, see The New Yorker 2011. Such filters can also appear not only in large companies, but even in start-ups. A telling example is that of Dr. Gelernter. He developed a proposal for what now is used as the Facebook timeline “from the moment of your birth to the day of your death, containing every document, photo, message or web page you have ever interacted with all in a single, searchable stream, and held safely online.” (The Economist 2011c). His plan, similar to Facebook, was to grow gradually by first attracting college students as early adopters starting at Yale, only to grow. Investors decided to focus on corporate clients instead. It never took off. The Economist 2011c.

  15. 15.

    This is not quite true. In fact, Kenneth Galbraith (1967), the most vocal proponent of the managed economy, describes the replacement of the previous seemingly prevalent entrepreneurial society with the managed approach. Also, Schumpeter (1942) stresses such development (Also see Schramm 2006 for a more succinct version of a re-emergence, rather than the rise, of entrepreneurial activity in the US.). It could be argued that the entrepreneurial society did indeed exist. Thus, the analysis here could be limited to the post-war area.

  16. 16.

    Drucker (1984, p. 63), also (1986, p. 14). Similarly also Audretsch and Thurik (2001b, p. 5): “The consequences of economic restructuring away from the managed economy to the entrepreneurial economy are enormous and encompass virtually every dimension of economic life. No field of economics alone is capable of capturing shifting economic systems.”

  17. 17.

    For more elaborate discussions and to get a better sense of the complexity of this evolution, see especially Audretsch (2003, 2009), Audretsch and Thurik (2000, 2001a, 2004), Carree and Thurik (2003); Also Brock and Evans (1989) and Drucker (1986).

  18. 18.

    Audretsch (2009, p. 249). Note that small business does not need to coincide with entrepreneurship. The ambition can and often is to become a large firm. Even a large scale entrepreneurial entry is possible. Typically, however, the two overlap to a considerable extent. The quote reflects a general perception of small business as opposed to large incumbents.

  19. 19.

    For an overview of the evolution of research in entrepreneurship, see Murphy et al. (2006). On the other hand, much research is still needed. Entrepreneurship research still has a long way to go (Brazeal and Herbert 1999; similarly Low 2001).

  20. 20.

    Drucker (1986, p. 30). To be precise this argument does not hold in reverse, which might be the more telling logical proposition. It does not read: ‘Entrepreneurship is the specific instrument (read path) of innovation.’ Others have indeed gone further: “One view of entrepreneurship and innovation is that they are virtually synonymous […] innovation and entrepreneurship are almost a tautology” (Acs and Audretsch 2005, p. 1; similarly Wennekers and Thurik 1999. Also see McDaniel 2000. A similar criticism is also in Bruyat and Julien 2001).

  21. 21.

    Note the somewhat narrow version of entrepreneurship as enterprise creation adopted here. It corresponds best to innovative entrepreneurship. It stresses the process of non-corporate, external innovation processes.

  22. 22.

    Gartner and Shane (1995), based on Dun & Bradstreet data, as well as US census data. For a critical discussion, see Harrison 1994; Shane 2008; Davis et al. 1996; see Stangler and Kedrosky 2010. Using different definitions may yield considerably different results (using different times frames, stock v flow, relative v absolute numbers, etc. (e.g. New Business Incorporations (see database and Statistical Abstracts (census.gov/history/www/reference/publications/statistical_abstracts.html 02.03.2013); New Establishments (see US Census data: Business Dynamics Statistics (census.gov/ces/dataproducts/bds/ 02.03.2013) also see Haltiwanger et al. 2009). If an unambiguous surge in entrepreneurship cannot be found in this data, it questions the validity of the current policy regime including legislation and public expenditure on entrepreneurship. Two hypotheses may further support such claim: (i) the nature of entrepreneurship has changed (due to changes within the data (e.g. some sectors are declining, some are growing – see for example (see Mansel and Blackford 1991))) and (ii) entrepreneurship has become more innovative. The ‘entrepreneurial’ endeavours of past generations are not the same as today. Starting a business today in many industries requires more innovation than in the past. Innovation based competition is greater (See especially Baumol 2002). Research and development is increasingly conducted also in smaller firms. In this sense, entrepreneurship has become more innovative, and closer to a common notion of innovative entrepreneurship (see Data on R&D Expenditure (nsf.gov/statistics/iris/ and nsf.gov/statistics/industry/ 02.03.2013)). Small enterprises share of R&D spending has increased from 4 % in 1973 to 24 % in 2007. Venture Capital investments rose from a mere $100 million in 1970 to some $28.1 by 2008 (see National Venture Capital Association 2009, p. 10. Also see Kaplan and Lerner 2010). Angel investments rose even more steeply to around $20 billion in 2010 (see Sohl 2011. In general see Center for Venture Research at the University of New Hampshire (wsbe.unh.edu/cvr 02.03.2013)).

    Academic interest in entrepreneurship has surged drastically in recent decades (see Katz 2003. Also see Katz 1991, 2004; Vesper and Gartner 1997; Solomon and Fernald 1991; Solomon et al. 1994; Cooper 2003. Also see Zahra 2006, or Kuratko 2005). The number of publications dealing with entrepreneurship has increased significantly. For example, JSTOR publications on ‘Entrepreneurship’ have surged from 845 in the 1950s to 6,061 in the 1990s. Google Scholar shows a similar increase from 659 to 142,000 (Google and JSTOR accessed 05.04.2010).

    There is no unambiguous data showing a definite and significant rise entrepreneurship. The data may still be indicative. Proxies may help. Qualitative changes may support the argument. But perhaps “any one measure of entrepreneurship is insufficient to account for its various and diverse characteristics.” “The message from this discussion of levels of analysis, rates and stocks, and time frames, is not that any one measure of entrepreneurship is superior to another, but that all measures have limitations and require trade-offs.” (Gartner and Shane 1995, p. 296 and p. 192)

  23. 23.

    This does not mean it has completely replaced the managed economy (see, for example, Thurik 2008). But entrepreneurship has become more prominent and ubiquitous. Much empirical work has been conducted trying to capture and quantify the rise of entrepreneurship, trying to support this claim of the arrival of the entrepreneurial society. Unfortunately, the data situation is poor, and the different definitions of what constitutes entrepreneurship, and what can reasonably be measured, complicate this (see Godin et al. 2008, p. 43. Similarly, Iversen et al. 2008. Also see Ahmad and Hoffman 2008). New indicators are emerging and much effort is invested in collecting better data (e.g. Global University Entrepreneurial Spirit Students Survey (GUESSS), Global Entrepreneurship Monitor (GEM), Kauffman Index of Entrepreneurial Activity, OECD Entrepreneurship Indicators Programme (EIP), World Bank Group Entrepreneurship Snapshots (WBGES)). Also see discussions, for example, in Ahmad and Seymour 2008; OECD 2009a; Parker 2008; Godin et al. 2008; Desai 2009; Acs et al. 2008; Katz 1992; Aldrich 1990; Dennis 1996; Armington 2004; Headd and Saade 2008; and especially Gartner, and Shane 1995. Also see discussion in Acs and Audretsch 1990. Most research has been conducted using data from the US, where the data situation is still the best. For an attempt to harmonize international data, see van Stel 2005; Also Freytag and Thurik 2007; Wennekers 2006; Caree et al. 2002; Audretsch and Thurik 2001b; somewhat also Blanchflower 2004.

  24. 24.

    Drucker (1986, p. 254 and p. 257).

  25. 25.

    As so eloquently put by Robert Kuttner in the Foreword to Harrison (1997). “Small was bountiful. Small was beautiful. Small was in.” (Harrison 1994, p. 4).

  26. 26.

    See Audretsch (2003, p. 5). This claim rests on much research and debate aiming to show positive impact (i.e. job creation, economic growth, poverty reduction, formalizing the informal sector. See Ahmad and Hoffman 2008). This is tricky. One is the transmission mechanism. The most obvious would be its mere existence. More enterprises, ceteris paribus, would mean more employment. Fast growing gazelles, innovation driven enterprises, etc. drive growth. But why should this be superior to any existing possibly large enterprises? Here a variety of arguments have been put forward ranging from the benefits of increased competition, larger knowledge spillovers, greater economic diversity, and most of all, more innovation through better realization possibilities, incentive structures and potential appropriability for the inventor (see, for example, Thurik 2009; and Audretsch and Thurik 2001a; Biggs 2002; More applied: Carlsson et al. 2009.)

    Much empirical work has been conducted, by supporters and critics, to support their respective positions. The results are mixed. Many studies support a close link to growth, employment and innovation. Others have questioned this; have found ambiguous results or even negative effects. (For an overview, see, for example, van Praag and Versloot 2008; Wong et al. 2005; van Stel 2006; related also Sutton 1997; Also see Henrekson and Johansson 2009 and Haltiwanger et al. 2010.)

    Almost more important is to note the prominence entrepreneurship has gained in the debate. This itself has an impact: The ‘recognition’ that entrepreneurship helps fostering growth led to the political mandate to promote entrepreneurship (Thurik 2009).

  27. 27.

    Iversen et al. (2008, p. 43) (emphasis in original).

  28. 28.

    Carl Schramm President of the Kauffmann Foundation (Schramm 2010). As the President of the influential Kaufmann Foundation it is his job almost to make such claims.

  29. 29.

    Klaus Schwab, Founder and Executive Chairman of World Economic Forum in World Economic Forum 2009.

  30. 30.

    OECD (2010b, p. 5).

  31. 31.

    This equation often goes unnoticed. As the introduction to the immensely popular entrepreneurship week phrases it (gewusa.org/about 02.03.2013): “For one week, millions of young people around the world join a growing movement of entrepreneurial people, to generate new ideas and to seek better ways of doing things. Countries across six continents come together to celebrate Global Entrepreneurship Week, an initiative to inspire young people to embrace innovation, imagination and creativity. To think big. To turn their ideas into reality. To make their mark.” Note how Innovation is equated to Entrepreneurship!

  32. 32.

    For an overview of the different actors and initiatives, see, for example, OECD (2004). Also see OECD (2010a, b). Also see the overview of policy approaches in Audretsch (2005, p. 36).

  33. 33.

    The Economist (2011d).

  34. 34.

    Barroso (2008). In the same spirit, see new Europe 2020 strategy (ec.europa.eu/europe2020/ 02.03.2013).

  35. 35.

    European Commission (2004, p. 4); See also the European Commission (2003, 2009).

  36. 36.

    Director of the National Economic Council to President Obama, Larry Summers (Summers 2010). Also see Schramm (2006). Similarly the UK: “need entrepreneurial individuals with the vision to turn new ideas into winning products and processes. Entrepreneurship is the lifeblood of the new British economy.” UK Department of Trade and Industry (1998, p. 7).

  37. 37.

    OECD (2009a, p. 5).

  38. 38.

    Acs et al. (2009, p. 2).

  39. 39.

    For example: now worldwide, there are Entrepreneurship Weeks (unleashingideas.org; gew.org.uk; unleashingideas.webjam.com/usa; gruenderwoche.de); The EU hopes to stimulate entrepreneurial initiative through, among others, a 3.6 billion Euro Competitiveness and Innovation Framework Programme (CIP) (see European Commission 2006); Germany is now “Gründerland Deutschland” with an ineptly named “Founder Generation 2.0” (bmwi.de/BMWi/Navigation/Presse/pressemitteilungen,did=327390.html 02.03.2013); (test.magazin-deutschland.de/en/business/creative-economy/article/article/die-gruendergeneration-20.html 02.03.2013).

  40. 40.

    Mariotti et al. (2000), Allen (2001), Berry and Parsons (2008), Kawasaki (2004), Dennis (2008).

  41. 41.

    Reich (1987, p. 78). Though dated, it perhaps still best captures this perspective of the entrepreneurial hero.

  42. 42.

    Audia and Rider (2005, p. 7). See Audia and Rider (2005) for an overview and discussion of such belief. Also Purrington and Bettcher (2001).

  43. 43.

    Audia and Rider (2005, p. 6). ‘367 Addison Ave’ was the home of Dave Packerad where he and Bill Hewlett founded Hewlett-Packard (HP) in 1939.

  44. 44.

    The Economist (2009a, p. 6). Such attitudes can also be supported by research findings: “The main results reveal most of university students consider desirable to create a new firm, although the perception of feasibility is not positive” (Guerrero et al. 2008, p. 35). “A recent Gallup poll reported that more than 90 % of Americans would approve if either a daughter or son attempted to start a small business.” (Cooper 2003, p. 28). Also see the highly publicised ‘Pop-events’ celebrating Entrepreneurship. For example, the Global Entrepreneurship Week with more than 33,000 events in 123 countries, some 24,000 partners, engaging over seven million people (see unleashingideas.org/press-releases/global-entrepreneurship-week-coming-belgium 02.03.2013).

  45. 45.

    For example, ‘hackfwd’, an innovative early-stage investment/pre-seed fund (hackfwd.com 02.03.2013). Also see emerging outfits, such as SecondMarket.com or SharesPost.com, facilitating secondary start-up trading.

  46. 46.

    For Venture Capital, see National Venture Capital Association 2010, Kaplan and Lerner 2010. For Angel investments, see Sohl (2011).

  47. 47.

    See, for example, EU policies for Entrepreneurship education (ec.europa.eu/enterprise/policies/sme/promoting-entrepreneurship/education-training-entrepreneurship/index_en.htm 02.03.2013). Also Kauffman Foundation (2007), World Economic Forum (2009). However, there is also an on-going debate whether it can be taught at all or at least to what extent it might be based on ‘natural’ ability.

  48. 48.

    See Global University Entrepreneurial Spirit Students Survey (GUESSS) 2004, 2006, 2008 (guesssurvey.org), as well as Global Entrepreneurship Monitor 1999–2010 (gemconsortium.org) and Kauffman Index of Entrepreneurial Activity 1996–2010 and the YouthPuls 2010 (kauffman.org, Fairlie 2011). Also see discussion on Entrepreneurial self-efficacy (Bird 1988; Boyd and Vozikis 1994; Krueger and Brazeal 1994 and Koellinger et al. 2007; McGee et al. 2009). Also see Arenius and Minniti (2005).

  49. 49.

    Much effort is put into exporting this idea and its associated impact to the developing world. (See Schramm (2004). Especially see remarks by Secretary Clinton (2010)).

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    Georg Weiers

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Weiers, G. (2014). The Entrepreneurial Society. In: Innovation Through Cooperation. Management for Professionals. Springer, Cham. https://doi.org/10.1007/978-3-319-00095-4_3

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