Description
Elucidation in relation to contracting and organizations research institute and mcquinn center for entrepreneurial.
February 16, 2006
Can Entrepreneurship Be Taught?
Peter G. Klein
Contracting and Organizations Research Institute and
McQuinn Center for Entrepreneurial Leadership
University of Missouri-Columbia
135D Mumford Hall
Columbia, MO 65211
[email protected]
J . Bruce Bullock
Department of Agricultural Economics and
McQuinn Center for Entrepreneurial Leadership
University of Missouri-Columbia
203 Mumford Hall
Columbia, MO 65211
[email protected]
Forthcoming, Journal of Agricultural and Applied Economics
Abstract: Is entrepreneurship an innate ability or an acquired skill? Can entrepreneurial acumen
be achieved and enhanced through education and training, or are certain people “born” to be en-
trepreneurs or to act entrepreneurially? Economists and management theorists give widely diver-
gent answers to these questions. This paper reviews the major approaches to teaching entrepre-
neurship, primarily at the undergraduate level, and relates them to economic theories of entre-
preneurship. Surprisingly, we find little connection between the leading approaches to entrepre-
neurship education and economists’ understanding of the entrepreneurial function. We assess
likely explanations for the lack of contact between these two groups of scholars and suggest pos-
sible improvements.
Key words: alertness, entrepreneurship, innovation, opportunity identification, resource acquisi-
tion, uncertainty bearing
JEL Classifications: M13, A22, O31
We thank, without implicating, Vincent Amanor-Boadu, Michael Cook, Nicolai Foss, J oseph
Parcell, and Michael Sykuta for helpful conversations and comments.
2
1. Introduction
Entrepreneurship is one of the fastest-growing subjects at U.S. colleges and universities
(Gartner and Vesper, 2001; Solomon, Duffy, and Tarabishy, 2002). Entrepreneurship courses,
programs, and activities are emerging not only in schools of business, but throughout the curricu-
lum. In 2003 U.S. colleges and universities offered over 2,200 entrepreneurship courses at over
1,600 schools, supported by 277 endowed faculty positions, several dozen refereed academic
journals, and more than 100 funded centers (Kuratko, 2003). Entrepreneurship became a Divi-
sion (specialized interest group) within the Academy of Management in 1987. While the field
remains a minority specialization among business school faculty (Katz, 2003), during the 1990s
the number of entrepreneurship positions increased by over 250% and the number of candidates
nearly doubled (Finkle and Deeds, 2001). Besides the usual business school offerings courses in
Social Entrepreneurship, Family Business Management, Technical Entrepreneurship, Performing
Arts Entrepreneurship, and the like are popping up in colleges of arts and sciences, engineering,
education, social work, and even fine arts.
Colleges of agriculture and life sciences are also expressing interest. Several agricultural
economics and agribusiness programs, including those at Texas A&M, Purdue, Vermont, and
Cornell offer entrepreneurship majors, minors, or concentrations, and many more departments
offer individual courses in entrepreneurship. Since 1998 the national FFA has offered a program
in Agri-Entrepreneurship. The University of Missouri-Columbia’s College of Agriculture, Food,
and Natural Resources established an endowed chair in Entrepreneurial Leadership in 2004 and
is working to develop a college minor in entrepreneurship.
While this explosion of interest in entrepreneurship education is a relatively recent phenome-
non, economists have been thinking systematically about entrepreneurship since at least the
eighteenth century. The concept of entrepreneurship is central to Schumpeter’s (1911, 1939) the-
ory of economic development, Knight’s (1921) explanation of profit and the firm, Kirzner’s
(1973, 1979, 1992) account of the market process, and Schultz’s (1975, 1979, 1982) theory of
technological adoption and diffusion. Yet, most of the literature and teaching materials on entre-
preneurship education are only tangentially linked to underlying economic theories of entrepre-
3
neurship. The entrepreneurship curriculum at many colleges and universities tends to focus pri-
marily on new venture formation and the mechanics of small-business management—routine
management tasks, relationships with venture capitalists and other sources of external finance,
product development, marketing, and so on. Other courses focus on the personal psychological
characteristics of those who found their own companies. While these are undoubtedly important
issues, they have little to do with the concerns of Schumpeter, Knight, Kirzner, or Schultz. Few
of the major economic theories of entrepreneurship emphasize new ventures over existing ones,
small businesses over large ones, or particular personality types, for example.
Can entrepreneurship be taught? Specialists in entrepreneurship education appear convinced
that it can, that entrepreneurs are made, not born. According to Kuratko (2003, p. 12), “the ques-
tion of whether entrepreneurship can be taught is obsolete.” What, though, is being taught? The
content of most entrepreneurship curricula seems far removed from the concerns of Schumpeter,
Knight, Kirzner, or Schultz. In this paper we ask not whether small-business management can be
taught, but whether Schumpeterian innovation, Knightian uncertainty-bearing, Kirznerian alert-
ness, or other manifestations of the entrepreneurial function can be taught. Our tentative answer
is that some aspects of the entrepreneurial function and the entrepreneurial process can be taught,
but many more cannot be.
In what follows we review some important economic theories of entrepreneurship and relate
them to the major approaches to teaching entrepreneurship, primarily at the undergraduate level.
Our goal is to assess the degree to which the teaching of entrepreneurship is influenced by
economists’ theoretical understanding of what entrepreneurship is and what role it performs in
the market economy. Surprisingly, we find that the leading approaches to entrepreneurship edu-
cation are sharply divorced from economic theories of the entrepreneurial function. In part, this
is because economists and specialists in entrepreneurship education ask different questions, focus
on different phenomena, and use different analytical methods. To answer the question posed in
the title of this paper: something is indeed being taught, perhaps very well. Whether that some-
thing is “entrepreneurship” is less clear.
4
2. Economic concepts of entrepreneurship
In the academic management literature, entrepreneurship is often associated with boldness,
daring, imagination, or creativity (Begley and Boyd, 1987; Chandler and J ansen, 1992; Lumpkin
and Dess, 1996). These accounts emphasize the personal, psychological characteristics of the
entrepreneur. Entrepreneurship, in this conception, is not a necessary component of all human
decision-making, but a specialized activity that some individuals are particularly well equipped
to perform, and one that can presumably be hired on the market like any other consulting service.
Another strand of literature, incorporating insights from economics, psychology, and sociology
and leaning heavily on Max Weber, associates entrepreneurship with leadership (Witt, 1998).
Entrepreneurs, in this view, specialize in communication—the ability to articulate a plan, a set of
rules, or a broader vision, and impose it on others. The successful entrepreneur excels at commu-
nicating these models to others, who come to share the entrepreneur’s vision (and become his
followers). Among labor economists, entrepreneurship is frequently identified simply as self-
employment. Entrepreneurship research is thus subsumed under the general topic of occupational
choice.
The classic contributions to the economic theory of entrepreneurship, however, tend to take a
more “macro” view, focusing not on the individual entrepreneur or his specific venture, but on
the role entrepreneurship plays in the economy. While mainstream economists have not com-
pletely ignored the entrepreneur, there is little consensus about how the entrepreneurial role
should be modeled and incorporated into economic theory. Indeed, the most important works in
the economic literature on entrepreneurship have generally been viewed as interesting, but idio-
syncratic insights that do not easily generalize to other contexts and economic problems.
Schumpeter
Schumpeter’s (1911, 1939) well-known concept of the entrepreneur as innovator is a prime
example of an idea that is much cited, but perhaps little used. Schumpeter’s entrepreneur intro-
duces “new combinations”— new products, production methods, markets, sources of supply, or
industrial combinations—shaking the economy out of its previous equilibrium through a process
5
Schumpeter termed “creative destruction.” Realizing that the entrepreneur has no place in the
general-equilibrium system of Walras, Schumpeter gave the entrepreneur a role as the source of
economic change. “n capitalist reality as distinguished from its textbook picture, it is not
[price] competition which counts but the competition from the new commodity, the new technol-
ogy, the new source of supply, the new type of organization . . . competition which commands a
decisive cost or quality advantage and which strikes not at the margins of profits and the outputs
of existing firms but at their foundations and their very lives” (Schumpeter, 1942, p. 84).
Schumpeter carefully distinguished the entrepreneur from the capitalist; while the entrepre-
neur could be a manager or owner of a firm, he is more likely to be an independent contractor or
craftsman. In Schumpeter’s conception, “people act as entrepreneurs only when they actually
carry out new combinations, and lose the character of entrepreneurs as soon as they have built up
their business, after which they settle down to running it as other people run their businesses”
(Ekelund and Hébert, 1990, p. 569). Moreover, because Schumpeterian entrepreneurship is sui
generis, independent of its environment, the nature and structure of the firm does not affect the
level of entrepreneurship. Corporate R&D budgets, along with organizational structures that en-
courage managerial commitment to innovation (Hoskisson and Hitt, 1994), have little to do with
Schumpeterian entrepreneurship per se.
While there is a substantial body of “Schumpeterian” literature, especially in technology
management and evolutionary economics, the extent to which this work builds directly on
Schumpeter’s ideas is subject to debate (Hodgson, 1993; Mirowski, 1994). Most of the modern
literature attempts to model small, continuous changes, while Schumpeter sought to explain radi-
cal, discontinuous shifts in technologies and markets. Schumpeter also paid little attention to
natural selection, taking the successful innovation as the unit of analysis. As Rosenberg (1986, p.
197) remarks, “many of Schumpeter’s contributions to economic and social thought remain ne-
glected—even by people who would not shrink from the label ‘Neo-Schumpeterians.’”
6
Kirzner
Another well-known approach in economics is Kirzner’s (1973, 1979, 1992) concept of en-
trepreneurship as “alertness” to profit opportunities. The simplest case is that of the arbitrageur,
who discovers a discrepancy in present prices that can be exploited for financial gain. In a more
typical case, the entrepreneur is alert to a new product or a superior production process and steps
in to fill this market gap before others. Success, in this view, comes not from following a well-
specified maximization problem, but from having some insight that no one else has, a process
that cannot be modeled as an optimization problem. As in Schumpeter’s vision, Kirzner’s entre-
preneurs do not own capital; they need only be alert to profit opportunities. Because they own no
assets, they bear no uncertainty, and hence cannot earn losses; the worst that can happen to an
entrepreneur is the failure to discover an existing profit opportunity. For these reasons, the link
between Kirznerian entrepreneurship and other branches of economic analysis, such as industrial
organization, innovation, and the theory of the firm, is weak. Hence Kirzner’s concept has not
generated a large body of applications.
1
Cantillon, Knight, and Mises
An alternative to the foregoing accounts is that entrepreneurship consists of judgmental deci-
sion-making under conditions of uncertainty. J udgment refers primarily to business decision-
making when the range of possible future outcomes, let alone the likelihood of individual out-
comes, is generally unknown (what Knight terms uncertainty, rather than mere probabilistic
risk). This view finds expression in the earliest known discussion of entrepreneurship, that found
in Richard Cantillon’s Essai sur la nature de commerce en géneral (1755). Cantillon argues that
all market participants, with the exception of landowners and the nobility, can be classified as
either entrepreneurs or wage earners:
Entrepreneurs work for uncertain wages, so to speak, and all others for certain
wages until they have them, although their functions and their rank are very dis-
proportionate. The General who has a salary, the Courtier who has a pension, and
the Domestic who has wages, are in the latter class. All the others are Entrepre-
1
Exceptions include Ekelund and Saurman (1988) and Holcombe (1992).
7
neurs, whether they establish themselves with a capital to carry on their enter-
prise, or are Entrepreneurs of their own work without any capital, and they may
be considered as living subject to uncertainty; even Beggars and Robbers are En-
trepreneurs of this class (Cantillon, 1755, p. 54).
J udgment is distinct from boldness, innovation, alertness, and leadership. J udgment must be
exercised in mundane circumstances, for ongoing operations as well as new ventures. Alertness
is the ability to react to existing opportunities while judgment refers to the creation of new oppor-
tunities.
2
Those who specialize in judgmental decision-making may be dynamic, charismatic
leaders, but they need not possess these traits. In short, in this view, decision making under un-
certainty is entrepreneurial, whether it involves imagination, creativity, leadership, and related
factors or not.
Knight (1921) introduces judgment to link profit and the firm to uncertainty. Entrepreneur-
ship represents judgment that cannot be assessed in terms of its marginal product and which can-
not, accordingly, be paid a wage (Knight, 1921, p. 311). In other words, there is no market for
the judgment that entrepreneurs rely on, and therefore exercising judgment requires the person
with judgment to start a firm. J udgment thus implies asset ownership, for judgmental decision-
making is ultimately decision-making about the employment of resources. An entrepreneur with-
out capital goods is, in Knight’s sense, no entrepreneur (Foss and Klein, 2005).
Entrepreneurship as uncertainty bearing is also important for Mises’s (1949) theory of profit
and loss, a cornerstone of his well-known critique of economic planning under socialism. Mises
begins with the marginal productivity theory of distribution developed by his Austrian predeces-
sors. In the marginal productivity theory, laborers earn wages, capitalists earn interest, and own-
ers of specific factors earn rents. Any excess (deficit) of a firm’s realized receipts over these fac-
tor payments constitutes profit (loss). Profit and loss, therefore, are returns to entrepreneurship.
In a hypothetical equilibrium without uncertainty (what Mises calls the “evenly rotating econ-
2
In Kirzner’s treatment, entrepreneurship is characterized as “a responding agency. I view the entrepreneur not as a
source of innovative ideas ex nihilo, but as being alert to the opportunities that exist already and are waiting to be
noticed” (Kirzner, 1973, p. 74).
8
omy”), capitalists would still earn interest, as a reward for lending, but there would be no profit
or loss.
Entrepreneurs, in Mises’s understanding of the market, make their production plans based on
the current prices of factors of production and the anticipated future prices of consumer goods.
What Mises calls “economic calculation” is the comparison of these anticipated future receipts
with present outlays, all expressed in common monetary units. Under socialism, the absence of
factor markets, and the consequent lack of factor prices, renders economic calculation—and
hence rational economic planning—impossible. Mises’s point is that a socialist economy may
employ workers, managers, technicians, inventors, and the like, but it cannot, by definition, em-
ploy entrepreneurs, because there are no money profits and losses. Entrepreneurship, and not la-
bor or management or technological expertise, is the crucial element of the market economy. As
Mises puts it: managers of socialist enterprises may be allowed to “play market,” to act as if they
were managers of private firms with their own interests at stake, but entrepreneurs cannot be
asked to “play speculation and investment” (Mises, 1949, p. 705). Absent entrepreneurship a
complex, dynamic economy cannot allocate resources to their highest valued use.
Schultz
Schultz (1975, 1979, 1982), like Schumpeter, works in the Walrasian tradition. However,
unlike Walras and Schumpeter, Schultz recognizes that markets do not automatically and instan-
taneously regain equilibrium following an exogenous shock. “[R]egaining equilibrium takes
time, and how people proceed over time depends on their efficiency in responding to any given
disequilibrium and on the costs and returns of the sequence of adjustments available to them”
(Schultz 1975, p. 829). Surprisingly, economists have devoted little attention to this problem.
Even Schumpeter, who saw economic progress as the result of disruptions to existing equilib-
rium states, assumed that equilibrium is quickly regained following such a disruption. Schultz,
by contrast, took innovation as given, and focused how economic agents adjust to exogenous
shocks. An example is farmers in a developing economy. Such people must “deal with a se-
quence of changes in economic conditions, which are in general not of their own making because
9
they originate mainly out of the activities of people other than farm people. For this reason
Schumpeter’s theory of economic development is far from sufficient to explain most of these
changes” (Schultz 1975, p. 832). Moreover, the atomistic nature of agriculture and the unique
aspects of farm production generate problems of collective action and by-product behavior (Ol-
son, 1971), making such adjustments lengthier.
In Schultz’s formulation, entrepreneurship is the ability to adjust, or reallocate one’s re-
sources, in response to changing circumstances. As such, entrepreneurship is an aspect of all
human behavior, not a unique function performed by a class of specialists. “No matter what part
of the economy is being investigated, we observe that people are consciously reallocating their
resources in response to changes in economic conditions” (Schultz 1979, p. 2). Businessmen,
farmers, housewives, students, and even university presidents, deans, and research directors
make Schultz’s (1979) list of entrepreneurs.
Somewhat paradoxically, the degree to which entrepreneurship is manifested in a society is
itself determined by supply and demand. The demand for entrepreneurial services is given by the
expected gains from adjusting one’s resources in the face of the disequilibrium, itself a function
of some characteristics of that disequilibrium. The supply of entrepreneurial capacities is given
by agents’ abilities to perceive and exploit opportunities. Like any economic good, entrepreneur-
ship is valuable and scarce (Schultz 1979, p. 6). Knight and Kirzner treat entrepreneurship as
“extra-economic,” meaning that it is the driving force behind the pricing process, but is not itself
traded and priced on the market. Schultz (1979) insists that entrepreneurial ability, like other ser-
vices available for hire, is a resource with a market price and quantity, though he did not develop
this insight into a fully specified theory of the supply of and demand for entrepreneur-ship.
Schultz conceives entrepreneurial ability as a form of human capital. Like other forms of
human capital, this ability can be increased through education, training, experience, health care,
and so on. While education and other human-capital investments also lead to improvements in
technical and allocative efficiency, Schultz argues that efficiency improvements cannot account
for all of the effects of education on economic performance, particularly in agricultural commu-
nities during periods of modernization. At least part of the returns to education are the returns to
10
improved abilities to adjust to change, for instance by adopting new technology and organiza-
tional practices. Moreover, an economy’s aggregate stock of entrepreneurial ability can also be
increased by the immigration of people with particular entrepreneurial experiences and skills
(presumably in response to increased opportunities for entrepreneurial gain).
3. Approaches to teaching entrepreneurship
As the foregoing sketch makes clear, “entrepreneurship” is a highly elastic term, even within
economics. The academic study of entrepreneurship has been described as “a broad label under
which a hodgepodge of research is housed” (Shane and Venkataraman, 2000, p. 217) and a “ca-
cophony of results and ideas” (Gartner, 1999, p. 27). Underscoring this heterogeneity in theoreti-
cal foundations and research methods, Morris, Kuratko, and Schindehutte (2001) identify no less
than twelve distinct conceptual approaches or frameworks within the entrepreneurship literature.
In this context, it is not surprising that entrepreneurship curricula vary widely in content and
approach. Some focus on particular skills or attributes, while others emphasize a broader “entre-
preneurial way of thinking.” Most programs and courses are housed in business schools, rather
than economics or agricultural economics departments, though this appears to be changing. For
these reasons, the question, “Can entrepreneurship be taught?” (or, alternatively, “How can en-
trepreneurship be taught?”) is too broad. The question must be asked separately for different ap-
proaches to entrepreneurship, or for groups of skills or abilities or modes of thinking commonly
described as entrepreneurial.
Consider, for purposes of the following discussion, a broad notion of the entrepreneurial act.
The Ewing Marion Kauffman Foundation, the largest private foundation dedicated to entrepre-
neurship research and teaching, defines the entrepreneur as “one who takes advantage of knowl-
edge and resources to identify and pursue opportunities that initiate change and create value in
one’s life and those of others.” The University of Illinois’s Academy for Entrepreneurial Leader-
ship describes entrepreneurship as “a process that can lead to creative solutions to social prob-
lems or the formation of new and innovative enterprises.” As such, entrepreneurship “spans op-
portunity recognition and resource acquisition and leads to innovation and invention.” Three as-
11
pects of the entrepreneurial process are identified in these definitions: opportunity recognition,
resource acquisition, and innovation. Schumpeter’s interpretation of entrepreneurship includes
all three of these aspects, while Schultz’s idea of adjustment to exogenous economic change is
largely covered by opportunity recognition and resource acquisition. Knight’s, Kirzner’s, and
Schultz’s concepts of entrepreneurship also suggest a fourth aspect: the management of existing
resources in a new or established organization. All these aspects of entrepreneurship involve
bearing uncertainty, the hallmark of Cantillon’s and Knight’s approaches.
How, and how well, are these aspects taught? Consider each in turn, grouped by decreasing
order of popularity and increasing order of subtlety or complexity.
Managing existing resources. Effective management of existing resources, whether in new or
established organizations, requires not only technical business skills (accounting, marketing, fi-
nance, operations, business law), but also leadership and strategic decision making. These sub-
jects, of course, constitute the core of most undergraduate business programs. Curiously, while
none of the established economic theories of entrepreneurship specifically emphasize new ven-
ture formation, courses emphasizing these skills and activities are usually only classified as en-
trepreneurship courses if they specialize on new or small firms.
3
Such courses typically employ a
combination of traditional classroom instruction (lectures and discussion), applied team projects,
and, increasingly, the case method.
Acquiring new resources. Many undergraduate entrepreneurship courses focus on the acqui-
sition of new resources: writing business plans, acquiring venture or angel capital, marketing
new products, acquiring intellectual property, and so on. These skills are usually taught through a
combination of basic analytical principles, historical case studies and examples, classroom simu-
lations, and real-world projects. (Management of ongoing projects is usually left to other busi-
ness courses, as described above.) While “resources” can be defined broadly (as is indeed the
case within the resource-based approach to the firm), these entrepreneurship courses typically
3
Stewart et al. distinguish conceptually between entrepreneurship and the management of existing enterprises,
though they acknowledge considerable overlap between the two.
12
emphasize financial capital over other resources. The venture capitalist or angel investor is the
party of interest.
Identifying existing opportunities and creating new ones. An increasing number of entrepre-
neurship courses focus not on the mechanics of running a business enterprise, but on identifying
opportunities for creating new sources of value.
4
Opportunity identification involves not only
technical skills like financial analysis and market research, but also less tangible forms of crea-
tivity, team building, problem solving, and leadership (Long and McMullan, 1984; Hills, Lump-
kin, and Singh, 1997; Hindle, 2004). It can involve both the recognition of already existing op-
portunities and the creation, ex nihilo, of new opportunities (Alvarez and Barney, 2005). While
value can of course be created not only by starting new activities, but also by improving the op-
eration of existing activities, courses in opportunity identification tend to emphasize the launch-
ing of new ventures (firms, products, or services).
Opportunity identification is typically taught through innovative problem-solving and crea-
tive-thinking exercises and techniques rather than traditional classroom activities (though some
courses also emphasize financial analysis, intellectual property protection, new products market-
ing, and so on). But can the necessary attributes be acquired in the classroom? McGrath and
MacMillan (2000) argue that particular individuals have an “entrepreneurial mindset” that en-
ables and encourages them to find opportunities overlooked or ignored by others, and that this
mindset is developed through experience, rather than formal instruction. Entrepreneurs with ex-
perience owning and operating small businesses tend to be better at identifying new opportuni-
ties than those potential entrepreneurs who lack such experience. This suggests that opportunities
for teaching opportunity identification may be limited.
Bearing uncertainty, exercising alertness, fostering technological or organizational innova-
tion, and adjusting to change. As discussed above, the economics literature tends to emphasize
broad concepts of the entrepreneurial role such as uncertainty bearing (Cantillon, Knight, Mises),
alertness (Kirzner), innovation (Schumpeter), and adjustment to disequilibrium (Schultz). Be-
4
While entrepreneurship educators have traditionally focused on the creation of economic profit, an increasing
number of courses focus on broader notions of value—social, cultural, artistic, religious, etc.
13
cause these are economic functions, rather than attributes of particular individuals, it is less clear
how such activities can be taught through formal instruction. Mises expresses strong skepticism
on this point. Entrepreneurship, Mises writes, is a fundamentally creative activity: “What distin-
guishes the successful entrepreneur and promoter from other people is precisely the fact that he
does not let himself be guided by what was and is, but arranges his affairs on the ground of his
opinion about the future. He sees the past and the present as other people do; but he judges the
future in a different way” (Mises, 1949, p. 585). Because the future is essentially open-ended
(characterized by Knightian uncertainty, rather than mere probabilistic risk), the entrepreneur’s
understanding of the future “defies any rules and systematization. It can be neither taught nor
learned” (Mises, 1949, p. 585).
It is clear, moreover, in Kirzner’s formulation, that “alertness” cannot be learned, that it can-
not be acquired through investments in education and training or from on-the-job experience.
While the entrepreneurship education literature often associates opportunity identification with
Kirznerian entrepreneurship (e.g., Gaglio and Katz, 2001), Kirzner appears to have a different
concept in mind. Kirzner’s entrepreneur identifies opportunities, but “identification” here means
simply “awareness of,” not “systematic pursuit of.” Entrepreneurs are naturally alert to profit
opportunities, but they do not search systematically for opportunities previously known to exist.
“Entrepreneurship does not consist of grasping a free ten-dollar bill which one has already dis-
covered to be resting in one’s hand; it consists in realizing that it is in one’s hand and that it is
available for the grasping” (Kirzner, 1973, p. 47).
5
This realization, as Kirzner sees it, is an in-
nate ability, one that cannot be acquired through formal education. In the broadest sense, more-
over, alertness is a universal characteristic of all human action, though some individuals special-
ize in being particularly “alert.”
Koppl (2003) tries to reconcile Mises’s and Kirzner’s skepticism about entrepreneurship edu-
cation as follows:
5
Ricketts (1987, p. 58) gives the following illustration: “Stigler's searcher decides how much time it is worth spend-
ing rummaging through dusty attics and untidy drawers looking for a sketch which (the family recalls) Aunt Enid
thought might be by Lautrec. Kirzner’s entrepreneur enters a house and glances lazily at the pictures which have
been hanging in the same place for years. ‘Isn't that a Lautrec on the wall?’”
14
It is true, of course, that no one can teach an entrepreneur the specific innovation
that he creates. What, indeed, would that mean? But one can teach business stu-
dents the tools and skills required to transform a new idea into a practical business
plan. We can also teach them to be not afraid. We can teach them, that is, that
new ideas can become business plans and that they are perfectly free to found new
enterprises and think new things.
Or, as Harvard Business School professor Howard Stevenson puts it, “if people have innate mu-
sical talent, you can't necessarily teach them to become Beethoven. But if they have that innate
talent, then they probably would still benefit from piano lessons” (Stevenson et al., 2002).
We agree that certain skills are undoubtedly necessary for translating entrepreneurial visions
into practice. However, it is not clear that alertness itself can be taught, or even operationalized.
6
Indeed, our own experience teaching entrepreneurship to undergraduates convinces us that while
certain aspects of entrepreneurship—primarly, the process of new venture formation and the
manner in which entrepreneurship manifests itself in the economy—can be studied systemati-
cally, it is not generally possible to teach discovery, recognition, decision-making under genuine
uncertainty, and the nature of the “entrepreneurial” personality.
4. Discussion and conclusions
The foregoing remarks indicate a gulf between economists’ conceptions of entrepreneurship,
as the driving force behind the market economy, and those practical manifestations of entrepre-
neurship studied in the classroom. One source of this gulf may be that economists and manage-
ment scholars approach entrepreneurship through different lenses, with fundamentally different
purposes. Schumpeter, Knight, Mises, Kirzner, and other theorists reviewed above sought to de-
fine entrepreneurship as a function, as a necessary ingredient to a comprehensive understanding
of how a market economy works. This resulted in instrumentalist concepts of entrepreneurship in
which entrepreneurship itself is a black box. For Schumpeter, entrepreneurship is that which
causes technological change and economic growth; for Knight and Mises, it is that which gener-
ates economic profit, as opposed to interest; for Kirzner, it is that which sets in motion the ten-
6
For an attempt to operationalize Kirznerian discovery, in the form of a classroom experiment, see Klein and Dem-
mert (2003).
15
dency for market clearing; and so on. In these formulations, questions about who is an entrepre-
neur, how entrepreneurship is manifested in the economy or society at large, what techniques are
useful for training individuals to be entrepreneurs or recognizing which individuals have entre-
preneurial talent, are simply irrelevant. Hence the leading economic theorists of entrepreneurship
have offered little of value, beyond inspiration and a set of citable scientific authorities, to entre-
preneurship educators.
An analogy may be drawn from the economic theory of the firm.
7
Economists have recog-
nized the importance of the business enterprise from the earliest days of the discipline. However,
the development of an explicit economic theory of the firm is a recent phenomenon, dating from
the 1970s. J ust as it is possible to say much about, say, earthquakes without having a theory of
the nature and causes of earthquakes, it is possible to say much about the firm—the size of a
firm, the size distributions of firms, firms’ market behavior, market structure, and the like—
without having a formal theory of why firms exist, what determines their boundaries and internal
organization, how they use incentive compensation, and so on. The relatively detailed account of
firms’ production and selling decisions found in intermediate microeconomics texts (or even in
advanced treatments such as the Arrow-Debreu model) may constitute a theory about the firm,
even though they do not contain a theory of the firm.
One reason economists neglected the theory of the firm is that they thought the internal
workings of the business firm were beyond the scope of economic analysis. In Pigou’s (1921, p.
463) words:
It is not the business of economists to teach woollen manufacturers to make and
sell wool, or brewers how to make and sell beer, or any other business men how
to do their job. If that was what we were out for, we should, I imagine, immedi-
ately quit our desks and get somebody—doubtless at a heavy premium, for we
should be thoroughly inefficient—to take us into his woolen mill or his brewery.
Robbins (1932, p. 33) argued similarly that “[t]he technical arts of production are simply to be
grouped among the given factors influencing the relative scarcity of different economic goods.
7
This example is taken from Foss and Klein (2006).
16
The technique of cotton manufacture . . . is no part of the subject matter of economics.” Like-
wise, the technical arts of managing existing resources, acquiring new resources, identifying and
creating opportunities, bearing uncertainty, and innovating—the subjects of most entrepreneur-
ship courses—are perhaps regarded as outside the economist’s legitimate expertise.
Contact between economics and entrepreneurship research appears to be increasing, how-
ever, as scholars in both fields begin to recognize potential gains from trade (Foss and Klein,
2005). Ultimately, these gains may be small, on the margin, or even nonexistent. The fact that
exchange opportunities are being explored at all is an encouraging sign, however. The increasing
recognition by economists that entrepreneurship, like the firm, is worthy of analysis, and the par-
allel recognition by entrepreneurship specialists that a more thorough grounding in economics
may be necessary, should lead to more rigorous and consistent approaches to the teaching of en-
trepreneurship.
Are economists well positioned to do the teaching? On the one hand, we bring some baggage
to the table. Our focus on measuring parameters in static optimization models is not particularly
useful for understanding a dynamic, inherently unpredictable process. Our limited concept of
uncertainty (mere probabilistic risk) sheds little light on how entrepreneurs make decisions in
situations characterized by ambiguity regarding key decision variables. Moreover, we are rela-
tively unfamiliar with complementary tools and concepts from management, marketing, sociol-
ogy, philosophy, etc.
Economists do, however, have a history of teaching economics as a “way of thinking.” Our
challenge is to conceptualize and articulate entrepreneurship as a way of thinking, as a multidis-
ciplinary approach to the process of creating economic and social value in the face of uncertainty
and limited resources. We look forward to future efforts to meet this challenge.
17
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Mises, L. Human Action: A Treatise on Economics. New Haven: Yale University Press, 1949.
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(1975): 827–46.
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Iowa State University, October 1979.
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437–48.
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est, and the Business Cycle. Cambridge, Mass.: Harvard University Press, [1911] 1934.
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19
Shane, S., and S. Venkataraman. “The Promise of Entrepreneurship as a Field of Research.” Academy of
Management Review 25 (2000): 217-26.
Solomon, G.T., S. Duffy, and A. Tarabishy. “The State of Entrepreneurship Education in the United
States: A Nationwide Survey and Analysis.” International Journal of Entrepreneurship Education 1
(2002): 1–22.
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Taught.” HBS New Business (Winter 2002).
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Journal of Economic Behavior and Organization 35 (1998): 161–77.
doc_542777565.pdf
Elucidation in relation to contracting and organizations research institute and mcquinn center for entrepreneurial.
February 16, 2006
Can Entrepreneurship Be Taught?
Peter G. Klein
Contracting and Organizations Research Institute and
McQuinn Center for Entrepreneurial Leadership
University of Missouri-Columbia
135D Mumford Hall
Columbia, MO 65211
[email protected]
J . Bruce Bullock
Department of Agricultural Economics and
McQuinn Center for Entrepreneurial Leadership
University of Missouri-Columbia
203 Mumford Hall
Columbia, MO 65211
[email protected]
Forthcoming, Journal of Agricultural and Applied Economics
Abstract: Is entrepreneurship an innate ability or an acquired skill? Can entrepreneurial acumen
be achieved and enhanced through education and training, or are certain people “born” to be en-
trepreneurs or to act entrepreneurially? Economists and management theorists give widely diver-
gent answers to these questions. This paper reviews the major approaches to teaching entrepre-
neurship, primarily at the undergraduate level, and relates them to economic theories of entre-
preneurship. Surprisingly, we find little connection between the leading approaches to entrepre-
neurship education and economists’ understanding of the entrepreneurial function. We assess
likely explanations for the lack of contact between these two groups of scholars and suggest pos-
sible improvements.
Key words: alertness, entrepreneurship, innovation, opportunity identification, resource acquisi-
tion, uncertainty bearing
JEL Classifications: M13, A22, O31
We thank, without implicating, Vincent Amanor-Boadu, Michael Cook, Nicolai Foss, J oseph
Parcell, and Michael Sykuta for helpful conversations and comments.
2
1. Introduction
Entrepreneurship is one of the fastest-growing subjects at U.S. colleges and universities
(Gartner and Vesper, 2001; Solomon, Duffy, and Tarabishy, 2002). Entrepreneurship courses,
programs, and activities are emerging not only in schools of business, but throughout the curricu-
lum. In 2003 U.S. colleges and universities offered over 2,200 entrepreneurship courses at over
1,600 schools, supported by 277 endowed faculty positions, several dozen refereed academic
journals, and more than 100 funded centers (Kuratko, 2003). Entrepreneurship became a Divi-
sion (specialized interest group) within the Academy of Management in 1987. While the field
remains a minority specialization among business school faculty (Katz, 2003), during the 1990s
the number of entrepreneurship positions increased by over 250% and the number of candidates
nearly doubled (Finkle and Deeds, 2001). Besides the usual business school offerings courses in
Social Entrepreneurship, Family Business Management, Technical Entrepreneurship, Performing
Arts Entrepreneurship, and the like are popping up in colleges of arts and sciences, engineering,
education, social work, and even fine arts.
Colleges of agriculture and life sciences are also expressing interest. Several agricultural
economics and agribusiness programs, including those at Texas A&M, Purdue, Vermont, and
Cornell offer entrepreneurship majors, minors, or concentrations, and many more departments
offer individual courses in entrepreneurship. Since 1998 the national FFA has offered a program
in Agri-Entrepreneurship. The University of Missouri-Columbia’s College of Agriculture, Food,
and Natural Resources established an endowed chair in Entrepreneurial Leadership in 2004 and
is working to develop a college minor in entrepreneurship.
While this explosion of interest in entrepreneurship education is a relatively recent phenome-
non, economists have been thinking systematically about entrepreneurship since at least the
eighteenth century. The concept of entrepreneurship is central to Schumpeter’s (1911, 1939) the-
ory of economic development, Knight’s (1921) explanation of profit and the firm, Kirzner’s
(1973, 1979, 1992) account of the market process, and Schultz’s (1975, 1979, 1982) theory of
technological adoption and diffusion. Yet, most of the literature and teaching materials on entre-
preneurship education are only tangentially linked to underlying economic theories of entrepre-
3
neurship. The entrepreneurship curriculum at many colleges and universities tends to focus pri-
marily on new venture formation and the mechanics of small-business management—routine
management tasks, relationships with venture capitalists and other sources of external finance,
product development, marketing, and so on. Other courses focus on the personal psychological
characteristics of those who found their own companies. While these are undoubtedly important
issues, they have little to do with the concerns of Schumpeter, Knight, Kirzner, or Schultz. Few
of the major economic theories of entrepreneurship emphasize new ventures over existing ones,
small businesses over large ones, or particular personality types, for example.
Can entrepreneurship be taught? Specialists in entrepreneurship education appear convinced
that it can, that entrepreneurs are made, not born. According to Kuratko (2003, p. 12), “the ques-
tion of whether entrepreneurship can be taught is obsolete.” What, though, is being taught? The
content of most entrepreneurship curricula seems far removed from the concerns of Schumpeter,
Knight, Kirzner, or Schultz. In this paper we ask not whether small-business management can be
taught, but whether Schumpeterian innovation, Knightian uncertainty-bearing, Kirznerian alert-
ness, or other manifestations of the entrepreneurial function can be taught. Our tentative answer
is that some aspects of the entrepreneurial function and the entrepreneurial process can be taught,
but many more cannot be.
In what follows we review some important economic theories of entrepreneurship and relate
them to the major approaches to teaching entrepreneurship, primarily at the undergraduate level.
Our goal is to assess the degree to which the teaching of entrepreneurship is influenced by
economists’ theoretical understanding of what entrepreneurship is and what role it performs in
the market economy. Surprisingly, we find that the leading approaches to entrepreneurship edu-
cation are sharply divorced from economic theories of the entrepreneurial function. In part, this
is because economists and specialists in entrepreneurship education ask different questions, focus
on different phenomena, and use different analytical methods. To answer the question posed in
the title of this paper: something is indeed being taught, perhaps very well. Whether that some-
thing is “entrepreneurship” is less clear.
4
2. Economic concepts of entrepreneurship
In the academic management literature, entrepreneurship is often associated with boldness,
daring, imagination, or creativity (Begley and Boyd, 1987; Chandler and J ansen, 1992; Lumpkin
and Dess, 1996). These accounts emphasize the personal, psychological characteristics of the
entrepreneur. Entrepreneurship, in this conception, is not a necessary component of all human
decision-making, but a specialized activity that some individuals are particularly well equipped
to perform, and one that can presumably be hired on the market like any other consulting service.
Another strand of literature, incorporating insights from economics, psychology, and sociology
and leaning heavily on Max Weber, associates entrepreneurship with leadership (Witt, 1998).
Entrepreneurs, in this view, specialize in communication—the ability to articulate a plan, a set of
rules, or a broader vision, and impose it on others. The successful entrepreneur excels at commu-
nicating these models to others, who come to share the entrepreneur’s vision (and become his
followers). Among labor economists, entrepreneurship is frequently identified simply as self-
employment. Entrepreneurship research is thus subsumed under the general topic of occupational
choice.
The classic contributions to the economic theory of entrepreneurship, however, tend to take a
more “macro” view, focusing not on the individual entrepreneur or his specific venture, but on
the role entrepreneurship plays in the economy. While mainstream economists have not com-
pletely ignored the entrepreneur, there is little consensus about how the entrepreneurial role
should be modeled and incorporated into economic theory. Indeed, the most important works in
the economic literature on entrepreneurship have generally been viewed as interesting, but idio-
syncratic insights that do not easily generalize to other contexts and economic problems.
Schumpeter
Schumpeter’s (1911, 1939) well-known concept of the entrepreneur as innovator is a prime
example of an idea that is much cited, but perhaps little used. Schumpeter’s entrepreneur intro-
duces “new combinations”— new products, production methods, markets, sources of supply, or
industrial combinations—shaking the economy out of its previous equilibrium through a process
5
Schumpeter termed “creative destruction.” Realizing that the entrepreneur has no place in the
general-equilibrium system of Walras, Schumpeter gave the entrepreneur a role as the source of
economic change. “n capitalist reality as distinguished from its textbook picture, it is not
[price] competition which counts but the competition from the new commodity, the new technol-
ogy, the new source of supply, the new type of organization . . . competition which commands a
decisive cost or quality advantage and which strikes not at the margins of profits and the outputs
of existing firms but at their foundations and their very lives” (Schumpeter, 1942, p. 84).
Schumpeter carefully distinguished the entrepreneur from the capitalist; while the entrepre-
neur could be a manager or owner of a firm, he is more likely to be an independent contractor or
craftsman. In Schumpeter’s conception, “people act as entrepreneurs only when they actually
carry out new combinations, and lose the character of entrepreneurs as soon as they have built up
their business, after which they settle down to running it as other people run their businesses”
(Ekelund and Hébert, 1990, p. 569). Moreover, because Schumpeterian entrepreneurship is sui
generis, independent of its environment, the nature and structure of the firm does not affect the
level of entrepreneurship. Corporate R&D budgets, along with organizational structures that en-
courage managerial commitment to innovation (Hoskisson and Hitt, 1994), have little to do with
Schumpeterian entrepreneurship per se.
While there is a substantial body of “Schumpeterian” literature, especially in technology
management and evolutionary economics, the extent to which this work builds directly on
Schumpeter’s ideas is subject to debate (Hodgson, 1993; Mirowski, 1994). Most of the modern
literature attempts to model small, continuous changes, while Schumpeter sought to explain radi-
cal, discontinuous shifts in technologies and markets. Schumpeter also paid little attention to
natural selection, taking the successful innovation as the unit of analysis. As Rosenberg (1986, p.
197) remarks, “many of Schumpeter’s contributions to economic and social thought remain ne-
glected—even by people who would not shrink from the label ‘Neo-Schumpeterians.’”
6
Kirzner
Another well-known approach in economics is Kirzner’s (1973, 1979, 1992) concept of en-
trepreneurship as “alertness” to profit opportunities. The simplest case is that of the arbitrageur,
who discovers a discrepancy in present prices that can be exploited for financial gain. In a more
typical case, the entrepreneur is alert to a new product or a superior production process and steps
in to fill this market gap before others. Success, in this view, comes not from following a well-
specified maximization problem, but from having some insight that no one else has, a process
that cannot be modeled as an optimization problem. As in Schumpeter’s vision, Kirzner’s entre-
preneurs do not own capital; they need only be alert to profit opportunities. Because they own no
assets, they bear no uncertainty, and hence cannot earn losses; the worst that can happen to an
entrepreneur is the failure to discover an existing profit opportunity. For these reasons, the link
between Kirznerian entrepreneurship and other branches of economic analysis, such as industrial
organization, innovation, and the theory of the firm, is weak. Hence Kirzner’s concept has not
generated a large body of applications.
1
Cantillon, Knight, and Mises
An alternative to the foregoing accounts is that entrepreneurship consists of judgmental deci-
sion-making under conditions of uncertainty. J udgment refers primarily to business decision-
making when the range of possible future outcomes, let alone the likelihood of individual out-
comes, is generally unknown (what Knight terms uncertainty, rather than mere probabilistic
risk). This view finds expression in the earliest known discussion of entrepreneurship, that found
in Richard Cantillon’s Essai sur la nature de commerce en géneral (1755). Cantillon argues that
all market participants, with the exception of landowners and the nobility, can be classified as
either entrepreneurs or wage earners:
Entrepreneurs work for uncertain wages, so to speak, and all others for certain
wages until they have them, although their functions and their rank are very dis-
proportionate. The General who has a salary, the Courtier who has a pension, and
the Domestic who has wages, are in the latter class. All the others are Entrepre-
1
Exceptions include Ekelund and Saurman (1988) and Holcombe (1992).
7
neurs, whether they establish themselves with a capital to carry on their enter-
prise, or are Entrepreneurs of their own work without any capital, and they may
be considered as living subject to uncertainty; even Beggars and Robbers are En-
trepreneurs of this class (Cantillon, 1755, p. 54).
J udgment is distinct from boldness, innovation, alertness, and leadership. J udgment must be
exercised in mundane circumstances, for ongoing operations as well as new ventures. Alertness
is the ability to react to existing opportunities while judgment refers to the creation of new oppor-
tunities.
2
Those who specialize in judgmental decision-making may be dynamic, charismatic
leaders, but they need not possess these traits. In short, in this view, decision making under un-
certainty is entrepreneurial, whether it involves imagination, creativity, leadership, and related
factors or not.
Knight (1921) introduces judgment to link profit and the firm to uncertainty. Entrepreneur-
ship represents judgment that cannot be assessed in terms of its marginal product and which can-
not, accordingly, be paid a wage (Knight, 1921, p. 311). In other words, there is no market for
the judgment that entrepreneurs rely on, and therefore exercising judgment requires the person
with judgment to start a firm. J udgment thus implies asset ownership, for judgmental decision-
making is ultimately decision-making about the employment of resources. An entrepreneur with-
out capital goods is, in Knight’s sense, no entrepreneur (Foss and Klein, 2005).
Entrepreneurship as uncertainty bearing is also important for Mises’s (1949) theory of profit
and loss, a cornerstone of his well-known critique of economic planning under socialism. Mises
begins with the marginal productivity theory of distribution developed by his Austrian predeces-
sors. In the marginal productivity theory, laborers earn wages, capitalists earn interest, and own-
ers of specific factors earn rents. Any excess (deficit) of a firm’s realized receipts over these fac-
tor payments constitutes profit (loss). Profit and loss, therefore, are returns to entrepreneurship.
In a hypothetical equilibrium without uncertainty (what Mises calls the “evenly rotating econ-
2
In Kirzner’s treatment, entrepreneurship is characterized as “a responding agency. I view the entrepreneur not as a
source of innovative ideas ex nihilo, but as being alert to the opportunities that exist already and are waiting to be
noticed” (Kirzner, 1973, p. 74).
8
omy”), capitalists would still earn interest, as a reward for lending, but there would be no profit
or loss.
Entrepreneurs, in Mises’s understanding of the market, make their production plans based on
the current prices of factors of production and the anticipated future prices of consumer goods.
What Mises calls “economic calculation” is the comparison of these anticipated future receipts
with present outlays, all expressed in common monetary units. Under socialism, the absence of
factor markets, and the consequent lack of factor prices, renders economic calculation—and
hence rational economic planning—impossible. Mises’s point is that a socialist economy may
employ workers, managers, technicians, inventors, and the like, but it cannot, by definition, em-
ploy entrepreneurs, because there are no money profits and losses. Entrepreneurship, and not la-
bor or management or technological expertise, is the crucial element of the market economy. As
Mises puts it: managers of socialist enterprises may be allowed to “play market,” to act as if they
were managers of private firms with their own interests at stake, but entrepreneurs cannot be
asked to “play speculation and investment” (Mises, 1949, p. 705). Absent entrepreneurship a
complex, dynamic economy cannot allocate resources to their highest valued use.
Schultz
Schultz (1975, 1979, 1982), like Schumpeter, works in the Walrasian tradition. However,
unlike Walras and Schumpeter, Schultz recognizes that markets do not automatically and instan-
taneously regain equilibrium following an exogenous shock. “[R]egaining equilibrium takes
time, and how people proceed over time depends on their efficiency in responding to any given
disequilibrium and on the costs and returns of the sequence of adjustments available to them”
(Schultz 1975, p. 829). Surprisingly, economists have devoted little attention to this problem.
Even Schumpeter, who saw economic progress as the result of disruptions to existing equilib-
rium states, assumed that equilibrium is quickly regained following such a disruption. Schultz,
by contrast, took innovation as given, and focused how economic agents adjust to exogenous
shocks. An example is farmers in a developing economy. Such people must “deal with a se-
quence of changes in economic conditions, which are in general not of their own making because
9
they originate mainly out of the activities of people other than farm people. For this reason
Schumpeter’s theory of economic development is far from sufficient to explain most of these
changes” (Schultz 1975, p. 832). Moreover, the atomistic nature of agriculture and the unique
aspects of farm production generate problems of collective action and by-product behavior (Ol-
son, 1971), making such adjustments lengthier.
In Schultz’s formulation, entrepreneurship is the ability to adjust, or reallocate one’s re-
sources, in response to changing circumstances. As such, entrepreneurship is an aspect of all
human behavior, not a unique function performed by a class of specialists. “No matter what part
of the economy is being investigated, we observe that people are consciously reallocating their
resources in response to changes in economic conditions” (Schultz 1979, p. 2). Businessmen,
farmers, housewives, students, and even university presidents, deans, and research directors
make Schultz’s (1979) list of entrepreneurs.
Somewhat paradoxically, the degree to which entrepreneurship is manifested in a society is
itself determined by supply and demand. The demand for entrepreneurial services is given by the
expected gains from adjusting one’s resources in the face of the disequilibrium, itself a function
of some characteristics of that disequilibrium. The supply of entrepreneurial capacities is given
by agents’ abilities to perceive and exploit opportunities. Like any economic good, entrepreneur-
ship is valuable and scarce (Schultz 1979, p. 6). Knight and Kirzner treat entrepreneurship as
“extra-economic,” meaning that it is the driving force behind the pricing process, but is not itself
traded and priced on the market. Schultz (1979) insists that entrepreneurial ability, like other ser-
vices available for hire, is a resource with a market price and quantity, though he did not develop
this insight into a fully specified theory of the supply of and demand for entrepreneur-ship.
Schultz conceives entrepreneurial ability as a form of human capital. Like other forms of
human capital, this ability can be increased through education, training, experience, health care,
and so on. While education and other human-capital investments also lead to improvements in
technical and allocative efficiency, Schultz argues that efficiency improvements cannot account
for all of the effects of education on economic performance, particularly in agricultural commu-
nities during periods of modernization. At least part of the returns to education are the returns to
10
improved abilities to adjust to change, for instance by adopting new technology and organiza-
tional practices. Moreover, an economy’s aggregate stock of entrepreneurial ability can also be
increased by the immigration of people with particular entrepreneurial experiences and skills
(presumably in response to increased opportunities for entrepreneurial gain).
3. Approaches to teaching entrepreneurship
As the foregoing sketch makes clear, “entrepreneurship” is a highly elastic term, even within
economics. The academic study of entrepreneurship has been described as “a broad label under
which a hodgepodge of research is housed” (Shane and Venkataraman, 2000, p. 217) and a “ca-
cophony of results and ideas” (Gartner, 1999, p. 27). Underscoring this heterogeneity in theoreti-
cal foundations and research methods, Morris, Kuratko, and Schindehutte (2001) identify no less
than twelve distinct conceptual approaches or frameworks within the entrepreneurship literature.
In this context, it is not surprising that entrepreneurship curricula vary widely in content and
approach. Some focus on particular skills or attributes, while others emphasize a broader “entre-
preneurial way of thinking.” Most programs and courses are housed in business schools, rather
than economics or agricultural economics departments, though this appears to be changing. For
these reasons, the question, “Can entrepreneurship be taught?” (or, alternatively, “How can en-
trepreneurship be taught?”) is too broad. The question must be asked separately for different ap-
proaches to entrepreneurship, or for groups of skills or abilities or modes of thinking commonly
described as entrepreneurial.
Consider, for purposes of the following discussion, a broad notion of the entrepreneurial act.
The Ewing Marion Kauffman Foundation, the largest private foundation dedicated to entrepre-
neurship research and teaching, defines the entrepreneur as “one who takes advantage of knowl-
edge and resources to identify and pursue opportunities that initiate change and create value in
one’s life and those of others.” The University of Illinois’s Academy for Entrepreneurial Leader-
ship describes entrepreneurship as “a process that can lead to creative solutions to social prob-
lems or the formation of new and innovative enterprises.” As such, entrepreneurship “spans op-
portunity recognition and resource acquisition and leads to innovation and invention.” Three as-
11
pects of the entrepreneurial process are identified in these definitions: opportunity recognition,
resource acquisition, and innovation. Schumpeter’s interpretation of entrepreneurship includes
all three of these aspects, while Schultz’s idea of adjustment to exogenous economic change is
largely covered by opportunity recognition and resource acquisition. Knight’s, Kirzner’s, and
Schultz’s concepts of entrepreneurship also suggest a fourth aspect: the management of existing
resources in a new or established organization. All these aspects of entrepreneurship involve
bearing uncertainty, the hallmark of Cantillon’s and Knight’s approaches.
How, and how well, are these aspects taught? Consider each in turn, grouped by decreasing
order of popularity and increasing order of subtlety or complexity.
Managing existing resources. Effective management of existing resources, whether in new or
established organizations, requires not only technical business skills (accounting, marketing, fi-
nance, operations, business law), but also leadership and strategic decision making. These sub-
jects, of course, constitute the core of most undergraduate business programs. Curiously, while
none of the established economic theories of entrepreneurship specifically emphasize new ven-
ture formation, courses emphasizing these skills and activities are usually only classified as en-
trepreneurship courses if they specialize on new or small firms.
3
Such courses typically employ a
combination of traditional classroom instruction (lectures and discussion), applied team projects,
and, increasingly, the case method.
Acquiring new resources. Many undergraduate entrepreneurship courses focus on the acqui-
sition of new resources: writing business plans, acquiring venture or angel capital, marketing
new products, acquiring intellectual property, and so on. These skills are usually taught through a
combination of basic analytical principles, historical case studies and examples, classroom simu-
lations, and real-world projects. (Management of ongoing projects is usually left to other busi-
ness courses, as described above.) While “resources” can be defined broadly (as is indeed the
case within the resource-based approach to the firm), these entrepreneurship courses typically
3
Stewart et al. distinguish conceptually between entrepreneurship and the management of existing enterprises,
though they acknowledge considerable overlap between the two.
12
emphasize financial capital over other resources. The venture capitalist or angel investor is the
party of interest.
Identifying existing opportunities and creating new ones. An increasing number of entrepre-
neurship courses focus not on the mechanics of running a business enterprise, but on identifying
opportunities for creating new sources of value.
4
Opportunity identification involves not only
technical skills like financial analysis and market research, but also less tangible forms of crea-
tivity, team building, problem solving, and leadership (Long and McMullan, 1984; Hills, Lump-
kin, and Singh, 1997; Hindle, 2004). It can involve both the recognition of already existing op-
portunities and the creation, ex nihilo, of new opportunities (Alvarez and Barney, 2005). While
value can of course be created not only by starting new activities, but also by improving the op-
eration of existing activities, courses in opportunity identification tend to emphasize the launch-
ing of new ventures (firms, products, or services).
Opportunity identification is typically taught through innovative problem-solving and crea-
tive-thinking exercises and techniques rather than traditional classroom activities (though some
courses also emphasize financial analysis, intellectual property protection, new products market-
ing, and so on). But can the necessary attributes be acquired in the classroom? McGrath and
MacMillan (2000) argue that particular individuals have an “entrepreneurial mindset” that en-
ables and encourages them to find opportunities overlooked or ignored by others, and that this
mindset is developed through experience, rather than formal instruction. Entrepreneurs with ex-
perience owning and operating small businesses tend to be better at identifying new opportuni-
ties than those potential entrepreneurs who lack such experience. This suggests that opportunities
for teaching opportunity identification may be limited.
Bearing uncertainty, exercising alertness, fostering technological or organizational innova-
tion, and adjusting to change. As discussed above, the economics literature tends to emphasize
broad concepts of the entrepreneurial role such as uncertainty bearing (Cantillon, Knight, Mises),
alertness (Kirzner), innovation (Schumpeter), and adjustment to disequilibrium (Schultz). Be-
4
While entrepreneurship educators have traditionally focused on the creation of economic profit, an increasing
number of courses focus on broader notions of value—social, cultural, artistic, religious, etc.
13
cause these are economic functions, rather than attributes of particular individuals, it is less clear
how such activities can be taught through formal instruction. Mises expresses strong skepticism
on this point. Entrepreneurship, Mises writes, is a fundamentally creative activity: “What distin-
guishes the successful entrepreneur and promoter from other people is precisely the fact that he
does not let himself be guided by what was and is, but arranges his affairs on the ground of his
opinion about the future. He sees the past and the present as other people do; but he judges the
future in a different way” (Mises, 1949, p. 585). Because the future is essentially open-ended
(characterized by Knightian uncertainty, rather than mere probabilistic risk), the entrepreneur’s
understanding of the future “defies any rules and systematization. It can be neither taught nor
learned” (Mises, 1949, p. 585).
It is clear, moreover, in Kirzner’s formulation, that “alertness” cannot be learned, that it can-
not be acquired through investments in education and training or from on-the-job experience.
While the entrepreneurship education literature often associates opportunity identification with
Kirznerian entrepreneurship (e.g., Gaglio and Katz, 2001), Kirzner appears to have a different
concept in mind. Kirzner’s entrepreneur identifies opportunities, but “identification” here means
simply “awareness of,” not “systematic pursuit of.” Entrepreneurs are naturally alert to profit
opportunities, but they do not search systematically for opportunities previously known to exist.
“Entrepreneurship does not consist of grasping a free ten-dollar bill which one has already dis-
covered to be resting in one’s hand; it consists in realizing that it is in one’s hand and that it is
available for the grasping” (Kirzner, 1973, p. 47).
5
This realization, as Kirzner sees it, is an in-
nate ability, one that cannot be acquired through formal education. In the broadest sense, more-
over, alertness is a universal characteristic of all human action, though some individuals special-
ize in being particularly “alert.”
Koppl (2003) tries to reconcile Mises’s and Kirzner’s skepticism about entrepreneurship edu-
cation as follows:
5
Ricketts (1987, p. 58) gives the following illustration: “Stigler's searcher decides how much time it is worth spend-
ing rummaging through dusty attics and untidy drawers looking for a sketch which (the family recalls) Aunt Enid
thought might be by Lautrec. Kirzner’s entrepreneur enters a house and glances lazily at the pictures which have
been hanging in the same place for years. ‘Isn't that a Lautrec on the wall?’”
14
It is true, of course, that no one can teach an entrepreneur the specific innovation
that he creates. What, indeed, would that mean? But one can teach business stu-
dents the tools and skills required to transform a new idea into a practical business
plan. We can also teach them to be not afraid. We can teach them, that is, that
new ideas can become business plans and that they are perfectly free to found new
enterprises and think new things.
Or, as Harvard Business School professor Howard Stevenson puts it, “if people have innate mu-
sical talent, you can't necessarily teach them to become Beethoven. But if they have that innate
talent, then they probably would still benefit from piano lessons” (Stevenson et al., 2002).
We agree that certain skills are undoubtedly necessary for translating entrepreneurial visions
into practice. However, it is not clear that alertness itself can be taught, or even operationalized.
6
Indeed, our own experience teaching entrepreneurship to undergraduates convinces us that while
certain aspects of entrepreneurship—primarly, the process of new venture formation and the
manner in which entrepreneurship manifests itself in the economy—can be studied systemati-
cally, it is not generally possible to teach discovery, recognition, decision-making under genuine
uncertainty, and the nature of the “entrepreneurial” personality.
4. Discussion and conclusions
The foregoing remarks indicate a gulf between economists’ conceptions of entrepreneurship,
as the driving force behind the market economy, and those practical manifestations of entrepre-
neurship studied in the classroom. One source of this gulf may be that economists and manage-
ment scholars approach entrepreneurship through different lenses, with fundamentally different
purposes. Schumpeter, Knight, Mises, Kirzner, and other theorists reviewed above sought to de-
fine entrepreneurship as a function, as a necessary ingredient to a comprehensive understanding
of how a market economy works. This resulted in instrumentalist concepts of entrepreneurship in
which entrepreneurship itself is a black box. For Schumpeter, entrepreneurship is that which
causes technological change and economic growth; for Knight and Mises, it is that which gener-
ates economic profit, as opposed to interest; for Kirzner, it is that which sets in motion the ten-
6
For an attempt to operationalize Kirznerian discovery, in the form of a classroom experiment, see Klein and Dem-
mert (2003).
15
dency for market clearing; and so on. In these formulations, questions about who is an entrepre-
neur, how entrepreneurship is manifested in the economy or society at large, what techniques are
useful for training individuals to be entrepreneurs or recognizing which individuals have entre-
preneurial talent, are simply irrelevant. Hence the leading economic theorists of entrepreneurship
have offered little of value, beyond inspiration and a set of citable scientific authorities, to entre-
preneurship educators.
An analogy may be drawn from the economic theory of the firm.
7
Economists have recog-
nized the importance of the business enterprise from the earliest days of the discipline. However,
the development of an explicit economic theory of the firm is a recent phenomenon, dating from
the 1970s. J ust as it is possible to say much about, say, earthquakes without having a theory of
the nature and causes of earthquakes, it is possible to say much about the firm—the size of a
firm, the size distributions of firms, firms’ market behavior, market structure, and the like—
without having a formal theory of why firms exist, what determines their boundaries and internal
organization, how they use incentive compensation, and so on. The relatively detailed account of
firms’ production and selling decisions found in intermediate microeconomics texts (or even in
advanced treatments such as the Arrow-Debreu model) may constitute a theory about the firm,
even though they do not contain a theory of the firm.
One reason economists neglected the theory of the firm is that they thought the internal
workings of the business firm were beyond the scope of economic analysis. In Pigou’s (1921, p.
463) words:
It is not the business of economists to teach woollen manufacturers to make and
sell wool, or brewers how to make and sell beer, or any other business men how
to do their job. If that was what we were out for, we should, I imagine, immedi-
ately quit our desks and get somebody—doubtless at a heavy premium, for we
should be thoroughly inefficient—to take us into his woolen mill or his brewery.
Robbins (1932, p. 33) argued similarly that “[t]he technical arts of production are simply to be
grouped among the given factors influencing the relative scarcity of different economic goods.
7
This example is taken from Foss and Klein (2006).
16
The technique of cotton manufacture . . . is no part of the subject matter of economics.” Like-
wise, the technical arts of managing existing resources, acquiring new resources, identifying and
creating opportunities, bearing uncertainty, and innovating—the subjects of most entrepreneur-
ship courses—are perhaps regarded as outside the economist’s legitimate expertise.
Contact between economics and entrepreneurship research appears to be increasing, how-
ever, as scholars in both fields begin to recognize potential gains from trade (Foss and Klein,
2005). Ultimately, these gains may be small, on the margin, or even nonexistent. The fact that
exchange opportunities are being explored at all is an encouraging sign, however. The increasing
recognition by economists that entrepreneurship, like the firm, is worthy of analysis, and the par-
allel recognition by entrepreneurship specialists that a more thorough grounding in economics
may be necessary, should lead to more rigorous and consistent approaches to the teaching of en-
trepreneurship.
Are economists well positioned to do the teaching? On the one hand, we bring some baggage
to the table. Our focus on measuring parameters in static optimization models is not particularly
useful for understanding a dynamic, inherently unpredictable process. Our limited concept of
uncertainty (mere probabilistic risk) sheds little light on how entrepreneurs make decisions in
situations characterized by ambiguity regarding key decision variables. Moreover, we are rela-
tively unfamiliar with complementary tools and concepts from management, marketing, sociol-
ogy, philosophy, etc.
Economists do, however, have a history of teaching economics as a “way of thinking.” Our
challenge is to conceptualize and articulate entrepreneurship as a way of thinking, as a multidis-
ciplinary approach to the process of creating economic and social value in the face of uncertainty
and limited resources. We look forward to future efforts to meet this challenge.
17
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