Page 14 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

Introduction and Overview 3

and Malthus writing during this period analyzed economic growth through
a dynamic lens involving the effects of capital accumulation and popula-
tion growth (Harrod 1948). While this dynamic conceptualization of
economies left room to study efforts by entrepreneurs, for example, in pro-
ducing new products to satisfy the needs of a growing population, later
economists especially in the Marginal Utility School, posited little direct
role for entrepreneurs in the conditions for economic equilibrium (Dem-
setz 1997).
Schumpeter’s (1934) theory of economic development revived interest in
dynamic accounts of economic growth. In this view, economic develop-
ment starts endogenously with entrepreneurs who destroy the static eco-
nomic equilibrium by introducing innovations in the market place.
According to Soltow (1968), the first academic effort to study entrepre-
neurship began in the late 1920s with N. S. B. Gras pioneering the “busi-
ness history studies” at Harvard University. Although several valuable works
such as the study of Standard Oil emerged under Gras’s leadership, the fo-
cus in the 1940s shifted from entrepreneurship to business policy studies
and management of individual firms.
The interest in entrepreneurship was revived again in 1948 with the cre-
ation of the Research Center in Entrepreneurial History at Harvard. Under
the direction of A. H. Cole, the Center approached the study of entrepre-
neurship from a multidisciplinary perspective with concepts drawn from
economics, sociology, and history. For instance, the sociological concepts of
social role and social sanction were used to understand the behavior of en-
trepreneurs guided by societal norms (Research Center in Entrepreneurial
History 1949).
Evans (1949) summarized the then seminal developments in the field by
highlighting the motives of an entrepreneur (for example, adventure) and
the actions resulting from the motives (for example, innovative products).
Specifically, the motivating forces include financial security (triggered by fear
of bankruptcy or fear of financial embarrassment), adventure (joy of creat-
ing), and power (being one’s own master; controlling one’s own destiny).
Generalizations about entrepreneurial behavior based on past research
can be organized into seven topics as follows:

1. Division of Labor. The owner of the stock (that is, an entrepreneur)
which employs a large number of laborers attempts, for personal gain,
to allocate employment so as to produce the largest quantity of work
possible.
2. Limits of Investment within a Given Field. Each entrepreneur makes
capital investments to push the business to the outer limit of prof-
itability.