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Early Thinking Regarding Entrepreneurship

The word enterprise began to appear in the Middle-French language around 1430. The term was a derivation of an old French word entrepren- dre, which was borrowed from the Latin multi-part word entre, meaning inter or between, and prehendere, meaning to grasp, take or hold. By 1475, the term had evolved to imply a “readiness to undertake challenges, spirit of daring”. 12 The French economist, Richard Cantillon (1680-1734), introduced the concept of entrepreneurship and defined the entrepreneur as a person who pays a certain price for a product in order to resell it at an uncertain price. This means there is an admittance of risk. Another economist, Jean-Baptiste Say (1803) saw an entrepreneur as an economic agent who puts together all means of production (i.e., land, labour and capital), which belongs to different people, in order to produce products. By selling the product in the market, the entrepreneur pays rent of land, wages to labour, and interest on capital, and what remains is his profit.13 This concurs with Cantillon’s view of an entrepreneur as being the one who exploits uncertainty and creates value in the hope of generating a profit.14

Following the publication and wide dissemination of Cantillon’s work, the “classical” economic theory emerged as a new way of thinking. “Classical” economic theory is generally regarded to have its origins in Adam Smith’s (1723-1790) Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith argued that all economic growth flourishes and blossoms in a political environment that protects private property, and where markets are free to guide the allocation of resources and reward producers, who by pursuing their own profit-oriented self-interest, satisfy consumer wants. Countries that create institutions that encourage entrepreneurship will experience economic growth while those discouraging it reap poverty.15

Joseph Schumpter (1934) provided a more modern interpretation of an entrepreneur. He defined entrepreneurs as innovators who are able to identify market opportunities and use innovative approaches to exploit them.16 Also, Schumpeter provided a distinction between an entrepreneur and a capitalist. Assumption of risk involving innovation is the role of the entrepreneur, while assumption of risk involving potential for profit is the role of a capitalist. Thus, both an entrepreneur and a capitalist undertake risk, but their domains are different. Individuals who own a business and risk their capital in pursuit of profit, but do not innovate, are capitalists, while those who risk by introducing new innovations are entrepreneurs.17

 
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