Why should you learn about and from entrepreneurs? Because entreprenuers are the engine that power our economy and create jobs. Josef Schumpeter and Fredrick Hayek are possibly the most famous economists to focus their research on the value of entrepreneurism. Schumpeter’s ideas on the indispensable nature of entrepreneurs are part of his “theory of creative destruction” (Schumpeter, 1939). Disputably both of these economists contributed two of the greatest economic theories related to entrepreneurism prior to World War II.
Schumpeter’s theory is summarized by the following statement:
Without entrepreneurs we would have no risk taking and little innovation. Without innovation and risk taking there would be no market winners or losers. There would be little to no competition, leading to less and less innovation. Risk taking activities allow the market to creatively destruct the less desirable products and services in favor of those that satisfy or delight their customers. Products that fall out of favor can then adapt to the challenges posed by more successful competitors or die off (Schumpeter, 1939).
Hayek contributed the theory that specialized and specific information on markets and buying behavior collected by entrepreneurs provide valuable intellectual capital that can be monetized. In the past, economists taught price theory based on the concept that markets can assume all actors/participants have perfect information (Hayek, 1944). However, specialized information in the hands of an entrepreneur has value and can be monetized.
Modern practitioners take a more holistic view of entreprenuerism. Anthony Soohoo, Vice President of Marketing at Columbia Broadcasting System (CBS), founder of Dotspotter, and a self-proclaimed “serial entrepreneur” claims that entrepreneurism is identifying a market niche or unmet demand and having the courage to risk your personal resources and/or career to create a new product or service to fill that void.
Some of the most important entreprenuerial activities today include:
- risk taking to gain a competitive edge or profit
- marshalling resources including financial, human, and technology
- innovation (building a better mouse trap)
- new product, process or market development
- adapting to a significant change or disruptions in the market
- exploiting opportunities for growth
- establishing control systems
Any would be entreprenuer starts by staring at a blank page and dreaming big.
