Description
With this detailed data with regards to entreprenorial activity versus entrepreneurship education flavia anghel.
59
ENTREPRENORIAL ACTIVITY VERSUS ENTREPRENEURSHIP
EDUCATION
Flavia Anghel, Bogdan Gl?van
?
Abstract: Entrepreneurship is one of the fastest-growing discipline
throughout the world. However, the importance of entrepreneurship in economic
theory is not new and consistent interest in this topic can be traced back to almost
a century ago. As with any young discipline, the role and content of
entrepreneurship education remains controversial. It seems difficult to decide if
entrepreneurship is rather “science” than “art”, or if can be divided between
teachable and non-teachable elements, or if entrepreneurship courses should
focus on the advancement of personal enterprising attributes or on the ability to
start, develop and manage a firm. This paper questions the relevance and
appropriateness of entrepreneurship education. The results show that there is still
in important gap between the prescriptions of entrepreneurship courses and
training programs, on the one hand, and the insights of entrepreneurship theory,
on the other hand.
Keywords: entrepreneurship education, entrepreneur abilities, innovation,
uncertainty, entrepreneurship theory
JEL Classification: A20, B10, L26
Introduction
Entrepreneurship is considered an essential ingredient for strong innovation
and economic growth, especially in a knowledge-based society. It is widely
believed that entrepreneurial activity can be spurred through entrepreneurship
education. Consequently, entrepreneurship is one of the fastest-growing
disciplines throughout the world. However, the importance of entrepreneurship in
economic theory is not new and consistent interest in this topic can be traced back
to almost a century ago. Economists such as Joseph Schumpeter, Frank Knight
and Israel Kirzner have emphasized the role of the entrepreneur in the market
process of resources’ allocation.
As with any young discipline, the role and content of entrepreneurship
education remains controversial. It seems difficult to decide if entrepreneurship is
?
Flavia Anghel is Associate Professor of Economic and Financial Analysis at the Romanian
American University in Bucharest.
Bogdan Gl?van is Associate Professor of Economics at the Romanian American University in
Bucharest.
Romanian Economic and Business Review – Vol. 4, No. 1
60
rather science than art or if can be divided between teachable and non-teachable
elements, or if entrepreneurship courses should focus on the advancement of
personal enterprising attributes or on the ability to start, develop and manage a
firm. A growing literature attempts to evaluate the effects of entrepreneurship
education and so far the results are rather mixed.
This paper questions the relevance and appropriateness of entrepreneurship
education. It attempts to clarify if entrepreneurship can be taught, in light of the
most important theories of entrepreneurship. The results show that there is still in
important gap between the prescriptions of entrepreneurship courses and training
programs, on the one hand, and the insights of entrepreneurship theory, on the
other hand. Therefore, a closer contact between entrepreneurship courses and
economics should deliver important gains for both disciplines.
Entrepreneurship in economic theory
Entrepreneurship has received much attention in the literature. In what
follows, we offer a brief overview of the notion of entrepreneurship.
1.1. 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 introduces “new combinations” – new products,
production methods, markets, sources of supply, or industrial combinations –
shaking the economy out of its previous equilibrium through a process
Schumpeter termed “creative destruction”.
Perhaps Kirzner best described the market impact of Schumpeter’s
entrepreneur when he wrote: “…for Schumpeter the essence ofentrepreneurship is
the ability to break away from routine, to destroy existing structures, to move the
system away from the even, circular flow of equilibrium” (1973, p. 127).
1.2. Kirzner
Another well-known approach in economics is Kirzner’s (1973; 1979; 1992)
concept of entrepreneurship 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. As in Schumpeter’s vision, Kirzner’s entrepreneurs 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
61
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.
1.3. Cantillon, Knight, and Mises
An alternative to the foregoing accounts is that entrepreneurship consists of
judgmental decision-making under conditions of uncertainty. According to
Cantillon's original formulation, the entrepreneur is a specialist in taking on risk.
He "insures" workers by buying their products (or their labor services) for resale
before consumers have indicated how much they are willing to pay for them. This
idea was refined by the U.S. economist Frank Knight (1921), who distinguished
between risk, which is insurable, and uncertainty, which is not. Risk relates to
recurring events whose relative frequency is known from past experience, while
uncertainty relates to unique events whose probability can only be subjectively
estimated. Changes affecting the marketing of consumer products generally fall in
the uncertainty category. Individual tastes, for example, are affected by group
culture, which, in turn, depends on fashion trends that are essentially unique.
Entrepreneurs, in Mises’s (1949) 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.
Judgment is distinct from boldness, innovation, alertness, and leadership.
Judgment 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 opportunities. 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
uncertainty is entrepreneurial, whether it involves imagination, creativity,
leadership, and related factors or not.
Approaches to teaching entrepreneurship
It is clear that “entrepreneurship” is a highly elastic term therefore it is not
surprising that entrepreneurship curricula vary widely in content and approach.
How are all these aspects of entrepreneurship taught? Let us consider each of
these elements in turn.
a. Managing existing resources. Effective management of existing
resources, whether in new or established organizations, requires not only technical
business skills (accounting, marketing, finance, business law), but also leadership
and strategic decision making. These subjects, of course, constitute the core of
most undergraduate business programs. Such courses typically employ a
62
combination of traditional classroom instruction (lectures and discussion), applied
team projects, and, increasingly, the case method.
b. Acquiring new resources. Many undergraduate entrepreneurship
courses focus on the acquisition of new resources: writing business plans,
acquiring venture 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 simulations,
and real-world projects.
c. Identifying existing opportunities and creating new ones. An increasing
number of entrepreneurship courses focus not on the mechanics of running a business
enterprise, but on identifying opportunities for creating new sources of value.
Opportunity identification involves not only technical skills like financial analysis and
market research, but also less tangible forms of creativity, team building, problem
solving, and leadership. While value can of course be created not only by starting new
activities, but also by improving the operation of existing activities, courses in
opportunity identification tend to emphasize the launching of new ventures (firms,
products, or services). But can the necessary attributes be acquired in the classroom?
McGrath and MacMillan (2000) argue that particular individuals have an
“entrepreneurial mindset” that enables 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 experience owning and
operating small businesses tend to be better at identifying new opportunities than
those potential entrepreneurs who lack such experience. This suggests that
opportunities for teaching opportunity identification may be limited.
d. Bearing uncertainty, exercising alertness, fostering technological or
organizational innovation, and adjusting to change. Because 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 distinguishes 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). It is clear, moreover, in Kirzner’s
formulation, that “alertness” cannot be learned, that it cannot be acquired through
investments in education and training or from on-the-job experience.
Entrepreneurship and economics: is there a trade-off?
The foregoing remarks indicate a gulf between economists’ conceptions of
entrepreneurship, as the driving force behind the market economy, and those
practical manifestations of entrepreneurship studied in the classroom.
63
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 woolen 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, immediately 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”.
Likewise, the technical arts of managing existing resources, acquiring new
resources, identifying and creating opportunities, bearing uncertainty, and
innovating—the subjects of most entrepreneurship courses – are perhaps regarded
as outside the economist’s legitimate expertise.
Or, as Harvard Business School professor Howard Stevenson puts it, “if
people have innate musical 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).
References
Boettke, P. and Coyne, C. 2005. “Concerting entrepreneurship: an
international public good”. In Carlo Padoan and Gavin Boyd (eds.). Structural
Partnering for a New Atlantic Economy: Complementary Entrepreneurship for
Balanced Interdependence Edward Elgar, pp. 199-226
Cantillon, Richard. (1931) Essai sur la nature de commerce en géneral.
Henry Higgs, ed. London: Macmillan [1755].
Casson, M. Entrepreneurship. “The Concise Encyclopedia of Economics”.
Available athttp://www.econlib.org/library/Enc1/Entrepreneurship.html
Kirzner, I.M. (1973) Competition and Entrepreneurship. Chicago: University
of Chicago Press.
Kirzner, I.M. (1979) Perception, Opportunity and Profit: Studies in the
Theory of Entrepreneurship. Chicago: University of Chicago Press.
Knight, F.H. (1921) Risk, Uncertainty, and Profit. New York: August M.
Kelley.
McGrath, R.G., and I. MacMillan. (2000) The Entrepreneurial Mindset.
Cambridge, Mass.: Harvard Business School Press.
Mises, L. (1949) Human Action: A Treatise on Economics. New Haven: Yale
University Press.
Pigou, A.C. (1921). The Political Economy of War. London: Macmillan.
Schumpeter, J.A. (1934) The Theory of Economic Development: An Inquiry
into Profits, Capital, Credit, Interest, and the Business Cycle. Cambridge, Mass.:
Harvard University Press, [1911].
64
Schumpeter, J.A. (1939) Business Cycles: A Theoretical, Historical and
Statistical Analysis of the Capitalist Process. New York: McGraw-Hill.
Stevenson, H.H., R. Hamermesh, P.W. Marshall, and M.J. Roberts.
(2002)“Entrepreneurship: It Can Be Taught.” HBS New Business (Winter).
doc_799364846.pdf
With this detailed data with regards to entreprenorial activity versus entrepreneurship education flavia anghel.
59
ENTREPRENORIAL ACTIVITY VERSUS ENTREPRENEURSHIP
EDUCATION
Flavia Anghel, Bogdan Gl?van
?
Abstract: Entrepreneurship is one of the fastest-growing discipline
throughout the world. However, the importance of entrepreneurship in economic
theory is not new and consistent interest in this topic can be traced back to almost
a century ago. As with any young discipline, the role and content of
entrepreneurship education remains controversial. It seems difficult to decide if
entrepreneurship is rather “science” than “art”, or if can be divided between
teachable and non-teachable elements, or if entrepreneurship courses should
focus on the advancement of personal enterprising attributes or on the ability to
start, develop and manage a firm. This paper questions the relevance and
appropriateness of entrepreneurship education. The results show that there is still
in important gap between the prescriptions of entrepreneurship courses and
training programs, on the one hand, and the insights of entrepreneurship theory,
on the other hand.
Keywords: entrepreneurship education, entrepreneur abilities, innovation,
uncertainty, entrepreneurship theory
JEL Classification: A20, B10, L26
Introduction
Entrepreneurship is considered an essential ingredient for strong innovation
and economic growth, especially in a knowledge-based society. It is widely
believed that entrepreneurial activity can be spurred through entrepreneurship
education. Consequently, entrepreneurship is one of the fastest-growing
disciplines throughout the world. However, the importance of entrepreneurship in
economic theory is not new and consistent interest in this topic can be traced back
to almost a century ago. Economists such as Joseph Schumpeter, Frank Knight
and Israel Kirzner have emphasized the role of the entrepreneur in the market
process of resources’ allocation.
As with any young discipline, the role and content of entrepreneurship
education remains controversial. It seems difficult to decide if entrepreneurship is
?
Flavia Anghel is Associate Professor of Economic and Financial Analysis at the Romanian
American University in Bucharest.
Bogdan Gl?van is Associate Professor of Economics at the Romanian American University in
Bucharest.
Romanian Economic and Business Review – Vol. 4, No. 1
60
rather science than art or if can be divided between teachable and non-teachable
elements, or if entrepreneurship courses should focus on the advancement of
personal enterprising attributes or on the ability to start, develop and manage a
firm. A growing literature attempts to evaluate the effects of entrepreneurship
education and so far the results are rather mixed.
This paper questions the relevance and appropriateness of entrepreneurship
education. It attempts to clarify if entrepreneurship can be taught, in light of the
most important theories of entrepreneurship. The results show that there is still in
important gap between the prescriptions of entrepreneurship courses and training
programs, on the one hand, and the insights of entrepreneurship theory, on the
other hand. Therefore, a closer contact between entrepreneurship courses and
economics should deliver important gains for both disciplines.
Entrepreneurship in economic theory
Entrepreneurship has received much attention in the literature. In what
follows, we offer a brief overview of the notion of entrepreneurship.
1.1. 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 introduces “new combinations” – new products,
production methods, markets, sources of supply, or industrial combinations –
shaking the economy out of its previous equilibrium through a process
Schumpeter termed “creative destruction”.
Perhaps Kirzner best described the market impact of Schumpeter’s
entrepreneur when he wrote: “…for Schumpeter the essence ofentrepreneurship is
the ability to break away from routine, to destroy existing structures, to move the
system away from the even, circular flow of equilibrium” (1973, p. 127).
1.2. Kirzner
Another well-known approach in economics is Kirzner’s (1973; 1979; 1992)
concept of entrepreneurship 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. As in Schumpeter’s vision, Kirzner’s entrepreneurs 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
61
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.
1.3. Cantillon, Knight, and Mises
An alternative to the foregoing accounts is that entrepreneurship consists of
judgmental decision-making under conditions of uncertainty. According to
Cantillon's original formulation, the entrepreneur is a specialist in taking on risk.
He "insures" workers by buying their products (or their labor services) for resale
before consumers have indicated how much they are willing to pay for them. This
idea was refined by the U.S. economist Frank Knight (1921), who distinguished
between risk, which is insurable, and uncertainty, which is not. Risk relates to
recurring events whose relative frequency is known from past experience, while
uncertainty relates to unique events whose probability can only be subjectively
estimated. Changes affecting the marketing of consumer products generally fall in
the uncertainty category. Individual tastes, for example, are affected by group
culture, which, in turn, depends on fashion trends that are essentially unique.
Entrepreneurs, in Mises’s (1949) 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.
Judgment is distinct from boldness, innovation, alertness, and leadership.
Judgment 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 opportunities. 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
uncertainty is entrepreneurial, whether it involves imagination, creativity,
leadership, and related factors or not.
Approaches to teaching entrepreneurship
It is clear that “entrepreneurship” is a highly elastic term therefore it is not
surprising that entrepreneurship curricula vary widely in content and approach.
How are all these aspects of entrepreneurship taught? Let us consider each of
these elements in turn.
a. Managing existing resources. Effective management of existing
resources, whether in new or established organizations, requires not only technical
business skills (accounting, marketing, finance, business law), but also leadership
and strategic decision making. These subjects, of course, constitute the core of
most undergraduate business programs. Such courses typically employ a
62
combination of traditional classroom instruction (lectures and discussion), applied
team projects, and, increasingly, the case method.
b. Acquiring new resources. Many undergraduate entrepreneurship
courses focus on the acquisition of new resources: writing business plans,
acquiring venture 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 simulations,
and real-world projects.
c. Identifying existing opportunities and creating new ones. An increasing
number of entrepreneurship courses focus not on the mechanics of running a business
enterprise, but on identifying opportunities for creating new sources of value.
Opportunity identification involves not only technical skills like financial analysis and
market research, but also less tangible forms of creativity, team building, problem
solving, and leadership. While value can of course be created not only by starting new
activities, but also by improving the operation of existing activities, courses in
opportunity identification tend to emphasize the launching of new ventures (firms,
products, or services). But can the necessary attributes be acquired in the classroom?
McGrath and MacMillan (2000) argue that particular individuals have an
“entrepreneurial mindset” that enables 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 experience owning and
operating small businesses tend to be better at identifying new opportunities than
those potential entrepreneurs who lack such experience. This suggests that
opportunities for teaching opportunity identification may be limited.
d. Bearing uncertainty, exercising alertness, fostering technological or
organizational innovation, and adjusting to change. Because 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 distinguishes 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). It is clear, moreover, in Kirzner’s
formulation, that “alertness” cannot be learned, that it cannot be acquired through
investments in education and training or from on-the-job experience.
Entrepreneurship and economics: is there a trade-off?
The foregoing remarks indicate a gulf between economists’ conceptions of
entrepreneurship, as the driving force behind the market economy, and those
practical manifestations of entrepreneurship studied in the classroom.
63
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 woolen 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, immediately 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”.
Likewise, the technical arts of managing existing resources, acquiring new
resources, identifying and creating opportunities, bearing uncertainty, and
innovating—the subjects of most entrepreneurship courses – are perhaps regarded
as outside the economist’s legitimate expertise.
Or, as Harvard Business School professor Howard Stevenson puts it, “if
people have innate musical 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).
References
Boettke, P. and Coyne, C. 2005. “Concerting entrepreneurship: an
international public good”. In Carlo Padoan and Gavin Boyd (eds.). Structural
Partnering for a New Atlantic Economy: Complementary Entrepreneurship for
Balanced Interdependence Edward Elgar, pp. 199-226
Cantillon, Richard. (1931) Essai sur la nature de commerce en géneral.
Henry Higgs, ed. London: Macmillan [1755].
Casson, M. Entrepreneurship. “The Concise Encyclopedia of Economics”.
Available athttp://www.econlib.org/library/Enc1/Entrepreneurship.html
Kirzner, I.M. (1973) Competition and Entrepreneurship. Chicago: University
of Chicago Press.
Kirzner, I.M. (1979) Perception, Opportunity and Profit: Studies in the
Theory of Entrepreneurship. Chicago: University of Chicago Press.
Knight, F.H. (1921) Risk, Uncertainty, and Profit. New York: August M.
Kelley.
McGrath, R.G., and I. MacMillan. (2000) The Entrepreneurial Mindset.
Cambridge, Mass.: Harvard Business School Press.
Mises, L. (1949) Human Action: A Treatise on Economics. New Haven: Yale
University Press.
Pigou, A.C. (1921). The Political Economy of War. London: Macmillan.
Schumpeter, J.A. (1934) The Theory of Economic Development: An Inquiry
into Profits, Capital, Credit, Interest, and the Business Cycle. Cambridge, Mass.:
Harvard University Press, [1911].
64
Schumpeter, J.A. (1939) Business Cycles: A Theoretical, Historical and
Statistical Analysis of the Capitalist Process. New York: McGraw-Hill.
Stevenson, H.H., R. Hamermesh, P.W. Marshall, and M.J. Roberts.
(2002)“Entrepreneurship: It Can Be Taught.” HBS New Business (Winter).
doc_799364846.pdf