An Outline of the Concept of Entrepreneur: Entrepreneurial Activity
As in all previous theories about the entrepreneurial activity, also for Schumpeter the entrepreneur has a functional role, which is not necessarily embodied by one physical person or by a well – defined group of people. The entrepreneur may be capitalist or even manager, but if all such different positions are combined to one or more people, then he depends on the nature of capital markets and on the organization forms of the branch.
Schumpeter went further than his predecessors, reckoning that the same person may be an entrepreneur when he/she is an innovative business person, but he/she loses such character immediately after having built or planned his business and having carried them out in routine. Thus, the current entrepreneurs from the capitalist economy change constantly because the management function of the undertaking is normally mixed with other types of activities. Graphical Simulation
Schumpeter considered that the power of small businesses to create new workplaces comes from the innovative power. Great companies invest huge amounts of money in technology. They are preoccupied to keep such investments no matter the consequences. The entrepreneurs do not have such restrictions. They invest in new technologies and processes. In the main developed countries, such power that the entrepreneurs have is certainly supported by the dramatic technological changes in the technological field. This agrees with Schumpeter’s opinion regarding the business cycles in which he sees dramatic technological changes in each 50 to 76 years. The technology of electronic information is a powerful force nowadays, as the steam engine used to be back in time. Its power may be observed in the dramatic growth of Microsoft Company. When David Birch published his study in 1979, Microsoft did not even exist as a concept. Nowadays, its owner is one of the wealthiest men in the world.
Nevertheless, innovation is not limited to new technologies. It is also present in the new modalities of product trading and in the new methods of company management. Although Bill Gates, Microsoft founder, is nowadays one of the wealthiest men in the world, Sam Walton was his predecessor. Walton built a retail empire (Wal-Mart) based on a sophisticated distribution system that allowed him to sell products in rural cities at low prices, products that up to that point in time were only available in big cities. Thus, he left behind more than half a dozen of heirs ranked among the first 500 richest Americans. The objective of successful entrepreneurs does not only consist of making the fortune; they also wish to improve life quality (Sam Walton) or change the way of action on the product and service market (Bill Gates, Steve Jobs, and others).
For Israel Kirzner and Richard Cantillon, the essence of the entrepreneurial activity consists of the personal vigilance to find potential sources of gain. There is a subtle modification of the emphasis in Kirnzer’s discussion over the entrepreneurial activity compared to Schumpeter’s. Schumpeter portrayed the innovative entrepreneur as an unbalance factor, which disturbs the future balance, while Kirzner describes him/her as identifying the unbalance situation and acting to restore the balance.