HISTORICAL VIEWS

Historically, the term “entrepreneur” has a French origin (from the French verb “to undertake”). Richard Cantillon and his early 18^th century work on economic agents is considered to be one of the first major contributions to defining entrepreneurs and their economic functions. Cantillon described three types of economic agents: landowner, entrepreneurs and hirelings (Hebert & Link, 1989). Cantillon defined entrepreneurs are persons who carry out business engagements in the face of uncertainty (Wennekers & Thurik, 1999).  In the development of entrepreneurship theories, the main historical traditions could be divided into the German Tradition (von Thünen, Schumpeter), the Chicago Tradition (Knight, Schultz) and the Austrian Tradition (Mises, Kirzner, Shackle) (Hebert & Link, 1989).

Schumpeter’s works have been one of the most impactful ones. Schumpeter saw entrepreneurs as innovators, who introduce new combinations to the markets creating disequilibrium (Schumpeter, 1934). Entrepreneurship is viewed as a disruptive and dynamic process. Entrepreneurs are the source of “creative destruction” as they constantly revolutionize the economic structures from within by introducing new consumer goods, new methods of production or transportation, by opening up new markets and creating new forms of industrial organization (Schumpeter, 1942). The creative destruction can be achieved by establishing new business, but it can also take place through existing ones. The incumbent enterprises that are focused on the old ways of doing business are unable to innovate and will self-destruct as customers turn of new competitors (Zacharakis, Bygrave , & Corbett, 2016).  

In Knight’s view, the economic function of entrepreneur lies in bearing uncertainty (Van Praag, 1999). Entrepreneurs make judgmental decisions in the conditions of real uncertainty. Knight differentiates uncertainty from the risk in the situations in which outcomes are not know. Risks can be quantified as their probability is known, but uncertainty refers to events for which the probabilities cannot be measured (Van Praag, 1999). Entrepreneurs have to exercise judgement and take responsibility on what kind products to create and the profit is compensation for bearing the uncertainty. Successful entrepreneurship depends on ability to forecast, in faith in one’s ability, on ability to deal with uncertainty and make to judgements, but also on availability of capital (Van Praag, 1999).

In the Austrian approach, Kirzner sees the role of the entrepreneur in moving economic markets towards equilibrium state (Hebert & Link, 1989). Entrepreneurial discovery is the driving force behind of the equilibration that is “a systematic process in which market participants gain more and more accurate and complete mutual knowledge of potential demand and supply attitudes” (Kirzner, Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach, 1997, lk 62). The equilibrative process is never completed, as the tastes, resource availability, technology is constantly changing and entrepreneurs may have made mistakes in reading the market (Kirzner, 1997). The essence of entrepreneurship lies in the alertness to previously unnoticed changes in conditions which make new profit opportunities available (Kirzner, 1973). The discovery includes deliberate search for information as well as information generated by pure chance (Kirzner, 1997). Common case for illustrating discovery and exploitation of opportunity is a situation in which entrepreneur can sell for high prices something they can buy for low prices (Kirzner, 1973).