Entrepreneurship

Category: Fields of research

Entrepreneurship refers to the practice of individuals or companies that take risks on the market to gain higher profits. Entrepreneurs are individuals who practice entrepreneurship. The main characteristics of entrepreneurs are orientation toward achievement, taking and managing risks, innovation, and finding unexplored or rarely used niches and paths.

Max Weber, in The Protestant Ethics and the Spirit of Capitalism (1920), argues that the rise of Protestantism inspired the creation of capitalism and entrepreneurship. He believes that each religion has its own economic ethics and that ethics implies practical incentives to perform a certain type of social action, based on a religious view of the world and life. Capitalism is also specifically marked by the inherent capitalist spirit, the main feature of which is the opposition to traditional economic action. The capitalist spirit contains a positive view of work and the acquisition of material wealth. Emphasis is placed on effort, thrift, discipline, and innovation, while laziness, gaining wealth without work, and hedonistic spending are viewed negatively. In pre-capitalist economies, people worked only as much as they needed to achieve a standard of living that was satisfactory to them. The capitalist spirit led to the complete rationalization of economic life. The emergence of Protestant religions and their teachings in the early 16th century had the greatest influence on the development of the capitalist spirit and the rejection of the traditional form of doing business. Of all the Protestant currents, the most important for the development of the capitalist spirit was ascetic Protestantism, and above all Calvinism. Protestantism emphasizes the idea of "vocation", that is, that work is the most sacred duty of man because it enables salvation through the fulfillment of duty to God and therefore represents the highest expression of ethical self-affirmation. Protestantism, by treating labor as a means of salvation, directly refutes the traditional view of labor as God's punishment for original sin. Protestantism believes that success in a business is a confirmation of God's election, but that economic success must be achieved through hard work, thrift, and honesty. With this approach to economics and work, Protestantism has made a key contribution to the emergence and spread of the capitalist spirit.

In Religion and the Rise of Capitalism (1926), Richard Tawney studies the relationship between religious attitudes and the development of capitalism in the 16th and 17th centuries. Unlike Max Weber, he questions the hypothesis of a simple causal link between the emergence of Protestantism and the development of entrepreneurship. Tawney believes that the capitalist and entrepreneurial spirit originated before the emergence of Protestantism, as well as that the rise of capitalism was influenced by other, non-religious, factors.

Werner Sombart introduces a distinction between two types of capitalists - entrepreneurs have fast intellect and good moral reasoning, and that is how the Germans contributed to the development of capitalism, while, on the other hand, there are merchants who are completely intellectually and emotionally subservient to money and profit, which is characteristic of the Jews. Vilfredo Pareto divides the elite into "speculators" and "rentiers". There is a difference in the way of earning between these two groups. Speculators (entrepreneurs) are trying to find new ways to make money, so their economic success depends on talent, hard work, and cunning.

In the book The Theory of Economic Development (1934, in German 1912), Joseph Schumpeter introduces the thesis that the basis of economic development is the actions of entrepreneurs whose main role is to be leaders in introducing innovations. Innovations introduced by entrepreneurs can be very different: new technologies, new goods, new raw materials, new markets, different organization of production, etc. Such entrepreneurial innovations deviate from established ways of producing and doing business, using new methods or an innovative combination of old methods, doing what Schumpeter calls "creative destruction" in order to create a new, better economic system. It distinguishes economic innovations made by entrepreneurs from technological inventions. In that sense, entrepreneurs differ from inventors, capitalists, bankers, managers, landowners, and workers, because only entrepreneurs introduce real innovations into the economy. Although entrepreneurs may, at the same time, have other functions (those mentioned above), they are primarily driven by the desire to innovate and take risks, and not the desire for profit or earnings. Entrepreneurial activities thus represent the basis of capitalism and its development, and in Schumpeter's theory, their activity is crucial for understanding his theories of credit, profit, capital, and economic cycles.

References:

Abercrombie. Enterprise Culture (1991);

Mills. The Power Elite (1956);

Rostow. The Process of Economic Growth (1952);

- The Stages of Economic Growth: A Non-Communist Manifesto (1960);

- Politics and the Stages of Growth (1971);

- Why the Poor Get Richer and the Rich Slow Down: Essays in the Marshallian Long Period (1980);

Schumpeter. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (1934);

- Capitalism, Socialism, and Democracy (1942);

Sombart. Modern Capitalism (2019, in German 1902);

- The Jews and Modern Capitalism (2015, in German 1911);

- The Quintessence of Capitalism: A Study of the History and Psychology of the Modern Business (2018, in German 1913a);