There is no simple definition in economics of the term ‘‘entrepreneur’’. It is translated from the French word ‘‘to undertake’’, as in someone who undertakes or initiates a project. Thus, entrepreneurs are responsible for the creation of firms and seeing a project from its perception as an idea through to its creation, development and subsequent use. Entrepreneurs also engage in risk bearing, arbitrage and coordinating activities.

The study of entrepreneurship in the economy has been mainly the preserve of economists operating outside the main neoclassical school; this is explained partly by the fact that these traditional models assume certainty of information and rational decision making. In such static models, decision makers respond to freely available price signals and are sometimes described as being entrepreneurless because of the absence of uncertainty. Economists have identified and emphasized various aspects of the role of entrepreneurs in a market economy; together, these give a rounded picture of their roles and activities.

Schumpeter (1934) viewed ‘‘entrepreneurship’’ as the creation of new enterprises and entrepreneurs as the individuals who undertook such tasks. Schumpeter not only considered independent businessmen to be entrepreneurs, but any individual who fulfilled the role whether being an employee of a company or not. He does not include as entrepreneurs the heads of firms who merely operate an established business. He distinguishes between being enterprising and entrepreneurial, on the one hand, and being an administrator or manager, on the other. Entrepreneurs create new organizations to pursue new opportunities, while managers run and co-ordinate activities in existing businesses. Entrepreneurs can be found in existing firms, where they pursue new ideas, create new divisions and set new directions for the firm. Entrepreneurs are not necessarily inventors nor are they necessarily risk bearers, since inventors often see no economic role for their idea and risk can be borne by venture capitalists.

To Schumpeter the entrepreneur is an extraordinary and heroic person, an individual of great energy, a revolutionary and innovator, someone who overturns tried-and-tested conventions to produce novel solutions to problems. He was concerned to analyse economic processes in dynamic rather than static markets. The economy consists of growing and declining markets and firms, and it is in these conditions of disequilibrium that opportunities arise that attract the attention of entrepreneurs. Thus, entrepreneurs as a group help to bring about change and disequilibrium as a consequence of their actions, which include:

1.Introducing new goods.

2. Introducing new methods of production.

3.Creating new markets.

4.Identifying new sources of supply of raw materials and/or intermediate products.

5.Forming new enterprises to compete with existing ones.

Knight (1921) emphasized the importance of uncertainty in the economy. It is in conditions of uncertainty that entrepreneurs have the ability to foresee favourable patterns of change that generate profitable opportunities for those who are able to see them and who have the resources available to exploit them. This Knight viewed entrepreneurs as bearers of uncertainty who are rewarded for having borne it. In an uncertain world, choices are made between rival courses of action, none of which can be fully specified or actualized. Shackle (1984) argued that entrepreneurs have a creative imagination, so that they choose courses of action by comparing the imagined consequences of different actions. A path-breaking new product requires an entrepreneur to have a vision of the new market, including the number of potential customers and their willingness to buy at different prices. Entrepreneurs make decisions on the basis of their assumed conditions prevailing. If they do, then the decision is seen to be successful and profitable; if not then it is seen to be unsuccessful and possibly loss-making.

Casson (1982) introduced the concept of entrepreneurial judgement, ‘‘An entrepreneur is defined as someone who specialises in taking judgemental decisions about the allocation of scarce resources’’ (Casson 1982, p. 23). The essence of a judgemental decision is one, ‘‘where different individuals, sharing the same objectives and acting under similar circumstances, would make di¡erent decisions’’ (Casson 1982, p. 24). Two individuals with the same objectives and the same information about the future would likely arrive at different decisions because they have different perceptions of the information and the opportunities. Thus, one individual would see a profitable opportunity, while another would see an unprofitable opportunity not worth pursuing. For example, television in the UK was essentially provided ‘‘free’’ to the population until the advent of satellite and digital subscription television. With the availability of new requiring viewers to pay to watch, one individual might see this as an opportunity to establish subscription television, whereas another might dismiss the whole notion of consumers paying for television while ‘‘free’’ television continued to be provided. In the UK, Sky TV hired space on the Astra satellite owned by the country of Luxembourg to transmit programmes to the UK. By offerring specialist sport and ¢lm channels, Sky has persuaded a growing proportion of households to install the necessary equipment and pay a subscription to watch these programmes. Being first in pay TV appears to have given Sky a significant advantage over later entrants.

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