Issue to be Considered for Entrepreneurship -7

Is Entrepreneurship an Instrument of Free Markets or Is it an Alternative to the Market Versus Government Debate?

Long after Frank Knight emphasized the importance of entrepreneurial "judgment" in creating the very notion of "profit," entrepreneurship scholars from Schumpeter to Baumol have bemoaned the lack of a central role for the entrepreneur in economic theory (Baumol, 1968; Knight, 1921; Schumpeter, 1942). The oft-repeated quote about the Prince of Denmark is a notable symptom of this lament. Yet economists refer to the "entrepreneur" all the time--a word that pinch-hits for the firm, the production function, the manager, and more recently the innovator, besides being a surrogate for a variety of other mechanical devices at the heart of the economic system of supply and demand equilibrated by the invisible hand. In this rhetorical free-for-all, the entrepreneur has simply disappeared into the market versus government debate. Instead of empirically examining where new markets come from we simply assume this elusive and obliging figure called the entrepreneur will miraculously produce it out of thin air. Even Arrow (1962) acknowledged it: "When a market can be created, we assume it will be." Clearly entrepreneurship, embodied in the process we have so far sketched in this essay, is not merely an instrument of free markets. Instead it uses both markets and governments as instruments in formulating and achieving new ends, even inventing other types of institutions along the way. Entrepreneurship thus provides a way to transcend the market versus government debate just as it provides new pivots away from the old dichotomy of for-profit and nonprofit ventures. In our view, entrepreneurship is a method, a meta-logic or procedural rationality if you will, to help us coherently yet pragmatically rethink and reformulate the categories that matter to human and societal progress.

It may be useful at this point to remind ourselves once again of the historical analogy with the development and role of the scientific method. For millennia, until Francis Bacon spelled out the techniques and logic of systematic discovery embodied in scientific experiments, inventions were occasional events, products of serendipity or thanks to so-called gifted men who could "read" the signs of nature (North, 2003). But by the nineteenth century, to paraphrase Whitehead (1997), invention had been routinized and millions of scientists trained in the scientific method have since helped move the world (literally) from a speed record of about 20 mph in chariots to over 18,000 mph in orbit over the course of less than two centuries (Toffler, 2005).

Imagine what the entrepreneurial method could do if we are able to extract, codify, and disseminate the "how" as well as the "what" of the outcomes of entrepreneurship. Already, the artifacts attributed to entrepreneurial action include not only firms and economic value, but also the creation of new markets (Santos & Eisenhardt, 2004; Sarasvathy & Dew, 2005), new opportunities (Alvarez & Barney, 2007; Sarasvathy et al., 2003), new institutions (Battilana et al., 2009; Pacheco, York, Dean, & Sarasvathy, 2010), and social change (Austin, Stevenson, & Wei-Skillern, 2006; Dean & McMullen, 2007; Mair & Marti, 2009; Townsend & Hart, 2008; Zahra, Gedajlovic, Neubaum, & Shulman, 2009). In order to nudge future entrepreneurship research in the direction of this task of spelling out the entrepreneurial method, we offer three immediate possibilities that we hope serve as stepping stones to the real work ahead of us.