1.2.1 The âslippery conceptâ
So, what is it that you are studying? It might be reasonable to expect a textbook to be mapping out the scope of the field at this point, and providing its readers with some clear, unambiguous definitions of the key terms. Unfortunately, things are not that simple. Many years ago, the economist Edith Penrose commented that, âEnterprise, or âentrepreneurshipâ as it is sometimes called, is a slippery concept, not easy to work into formal economic analysis, because it is so closely associated with the temperament or personal qualities of individualsâ (Penrose [1959] 2009: 33). Today, entrepreneurship researchers, policy-makers and practitioners are still struggling with this slippery concept, and there is a continuing lack of agreement over the meaning of these terms. So how should we approach the terminology? Clearly, it would be easier if we provided you with one universally accepted definition, but that would also be very misleading. The best approach is to recognise that people may use the same words, yet understand them differently. This is not a major problem because, as we shall discover, the range of interpretations is quite limited. However, it is important to be aware of these differences as you read about entrepreneurship, or listen to people talking about the subject. If you are not sure how they are using terms like âentrepreneurâ, âentrepreneurialâ, âentrepreneurshipâ or âenterpriseâ, try to check their understanding. If you are still not sure about the definition that is being used, bear this in mind when you interpret their comments.
1.2.2 Key terms: âEntrepreneurâ, âentrepreneurshipâ and âenterpriseâ
In this section we review some of the key terminology and provide working definitions of three key terms: âentrepreneurshipâ, âentrepreneurâ and âenterpriseâ. Additional explanations of these and other key terms can be found in the Glossary at the end of the book.
These three words derive from the same linguistic source, the French transitive verb âentreprendreâ (meaning literally to begin, tackle or undertake something) and the associated noun, âentrepriseâ (meaning a company or business). The Irish-born writer Richard Cantillon described the entrepreneur as someone who specialises in taking on a financial risk in his celebrated, Essai sur la Nature du Commerce en GĂ©nĂ©ral, first published (posthumously) in 1755. Other eighteenth-century figures, such as English philosopher and political economist, John Stuart Mill experimented with alternatives such as âundertakerâ (see Chapter 12), but over time it was the original French word âentrepreneurâ that became firmly established in the English language.
Given their widespread use in twenty-first-century politics, economics and popular culture, the terms âentrepreneurâ, âentrepreneurshipâ and âenterpriseâ are surprisingly ill-defined, and you can sometimes find people using the same word to mean entirely different things! Since our book is called Exploring Entrepreneurship, we are keen for you to keep an open mind on their precise meaning and scope for the time being. However, it also seems reasonable to offer you some working definitions as a starting point for your studies. Then, as you discover more about entrepreneurship in the remaining chapters, you can develop a more fully rounded understanding of each term.
âEntrepreneurâ
The term âentrepreneurâ has a variety of meanings. For example, in North America, it is often used to describe anyone who establishes their own business, whatever its size. But does it make sense to use the same word to describe a 30-year-old billionaire who has set up five Internet businesses and the 70-year-old, the semi-retired owner of a small picture-framing business, or a 40-year-old who sets up a community-based enterprise to provide work opportunities for homeless people? Some people argue that the term âentrepreneurâ should be more tightly defined. For example, they would only use it to describe people like the Internet tycoon, and opt for alternatives such as âsmall business ownerâ for everyone else. The main counter-argument is that, while there may be considerable differences between them, there are also some common features that are worthy of more detailed examination.
The Organisation for Economic Cooperation and Development (OECD) and Eurostat have considered this issue at length. They operate an âEntrepreneurship Indicators Programmeâ (EIP) in order to collect better statistics on entrepreneurial activity in OECD member states and around the world. Their definition of the term âentrepreneurâ, which builds on previous reviews of the entrepreneurship research literature, covers people engaged in a wide range of entrepreneurial activities, including those who set up a new business:
Entrepreneurs are those persons (business owners) who seek to generate value, through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets.
We will adopt this OECD wording as our working definition, but how do we resolve the problem of distinguishing between different types of entrepreneur? The most common solution is to insert adjectives based on the sort of activity that is taking place. For example, our Internet tycoon might be described as a âserialâ (i.e. repeat) entrepreneur, while the picture-framer as a âlifestyleâ entrepreneur, and the founder of the community-based enterprise as a âsocialâ entrepreneur.
âEntrepreneurshipâ
The OECD and Eurostatâs EIP team have also agreed on the following definition of the term âentrepreneurshipâ, which we can adopt as a starting point:
Entrepreneurship is the phenomenon associated with entrepreneurial activity, which is the enterprising human action in pursuit of the generation of value, through the creation or expansion of economic activity, by identifying and exploiting new products, processes or markets. In this sense, entrepreneurship is a phenomenon that manifests itself throughout the economy and in many different forms with many different outcomes, not always related to the creation of financial wealth; for example, they may be related to increasing employment, tackling inequalities or environmental issues. (OECD 2016: 12â13)
This definition describes entrepreneurship as a phenomenon that is âassociated withâ entrepreneurial activity. It recognises that, while the activities of individual entrepreneurs clearly play a central role, the entrepreneurship process extends beyond the individual, to teams, organisations, social networks and institutions (e.g. rules and regulations, cultural norms). But what does it mean to describe a particular activity, or set of activities, as âentrepreneurialâ? While founding a small firm or social enterprise might in itself be described as an entrepreneurial act, the owners and managers often settle into a relatively stable routine and may even actively resist opportunities for further growth. The OECDâEurostat definition recognises this distinction between entrepreneurial activity, which it sees as generating additional value by expanding economic activity, and the ongoing management of an existing firm. It is also interesting to note how the OECDâEurostat definition acknowledges different outcomes of entrepreneurial activity, other than simply the generation of financial wealth. This is important because it recognises the role that both social enterprises and commercial ventures can play in creating âsocialâ value, either by contributing to social well-being or by reducing our negative impacts on the natural world.
âEnterpriseâ
This term is often found in discussions alongside entrepreneurs, entrepreneurial activity and entrepreneurship. Though this English word is clearly derived from the same French source, a great deal of time and effort has been spent in attempts to differentiate it from the others. Another complication arises because the meaning of the word âenterpriseâ differs depending on whe...