GROUP PRESENTATION

(CBU 4109)

DELIVERED BY
MANAGEMENT CLASS

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 QUESTION

Make a summary of the main schools of

thought on entrepreneurship and compare
the work of two authors of your choice.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 INTRODUCTION

 Focus will be on the main schools of thought that is the Physiocrats, the
Austrian School, Risk taking and Multi-faceted schools of thought.
 Contributions by other authors like McClelland (1961) (energetic and risk
taker definition), Drucker (1964) (maximizing opportunities), Shapero
(1975) (initiative taking, accepting risk of failure), Pinchot (1983)
(intrapreneurship definition) and Hisrich (1985) (value creation and
assumption of risk).
 These were merely appreciating and developing key concepts of the
main schools of thought.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 THE PHYSIOCRATS

 The French school of thought.

 Richard Cantillon (1755) and Jean Say (1815).
 Cantillon saw entrepreneurs as having a key role in
economic development by virtue of their having individual
property rights as capitalists.
 As opposed to wage workers and landowners who
receive a certain or fixed income or rent, the entrepreneur
earns an uncertain profit (Herbert and Link,1988).
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 CANTILLON………

 Entrepreneurs are acting within a social and community

context where they own little tangible capital but
nevertheless add value in terms of social and economic
regeneration.
 Cantillon did not believe that entrepreneurs must be
innovators. Although they are expected to estimate
demand for a product or service they do not have to be
the ones who first create it.
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 CANTILLON……..

Cantillon saw the entrepreneur as someone who

consciously makes decisions about resource allocation,
in that they choose to pay a certain price for a product to
resell it at an uncertain price, consequently also bearing
the risks of enterprise.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 SAY……….

Say saw the entrepreneur as an economic actor whose

activities generated an added value.
The entrepreneur plays a coordinating role in production
and distribution.
Bringing together the different factors of production,
moving resources from less to more productive areas.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 SAY……….

BRINGING THE
FACTORS
OF PRODUCTION
TOGETHER

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 MODERN BUSINESSES

 Concept of ownership and combination of factors of production.

 Sai Enterprises T/A as Bellevue Spar, owned by Raji Modi. Started in
1987 as Bellevue Supperrette and give birth to 8 supermarkets.
Combination of various factors of production (land, capital and labour).

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 THE AUSTRIAN SCHOOL

 Kirzner did not feel that ownership was a necessary

condition of entrepreneurship.
 He claimed that initially the economy is in
disequilibrium and the competition among alert
entrepreneurs leads to equilibrium.
 The markets are not always clear, there is imperfect
knowledge and information.
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 KIZNER………

 Imperfect knowledge and information among agents-the incentive

for entrepreneurs.
 The alert entrepreneur discovers and exploits new business
opportunities-change in consumer tastes and available resources.
 Wherever disequilibrium exists in a market there will be frustrated
buyers or sellers who are willing to accept or pay higher or lower
prices.
 The entrepreneur, being alert to an opportunity for profitable
exchange, can facilitate the deal. That is arbitrage.
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 KIZNER ……………

ALERTNESS TO AN
OPPORTUNITY

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 SCHUMPETER…….

 Schumpeter identified the entrepreneur as someone

who moves the economy out of static equilibrium.
 Creative destruction (creating uncertainty)-driving force
behind economic development (Schumpeter 1949)
 Creativity that disrupts (big bang) what would otherwise
have been a serene market.
 The entrepreneur breaks the “circular flow” and does
that through innovation.
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 SCHUMPETER

 Entrepreneurship employs what Schumpeter called ‘the gale of creative

destruction’ which means to replace in whole or in part inferior
innovations across markets and industries, simultaneously creating new
products including new business models.
 In Schumpeter’s vision, the entrepreneur is the consummate innovator
(associating, questioning, observing, networking and experimenting) and
earns his profits from successful innovations.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 SCHUMPETER……….

He associated innovation by entrepreneurs with five elements:

I. The introduction of a new product.
II. The introduction of a new method of production.
III. The opening of a new market.
IV. The conquest of a new source of supply of raw materials.
V. The carrying out of the new organisation of any industry like the creation
of a monopoly. (Schumpeter,1934:66)

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 CREATIVE DESTRUCTION

M-pesa mobile
money

Henry Ford &

Assembly line Facebook

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 RISK TAKING

 Knight believes entrepreneurs are risk takers although

he says they take calculated risks.
 Opportunity arises out of the uncertainty surrounding
change.
 If change is predictable, there is no opportunity for
profit and the entrepreneur receives a return for making
decisions under conditions of true uncertainty.
MANAGEMENT CLASS : CBU 4109 PRESENTATION
 RISK TAKING…………..

RISKTAKERS WHO
TAKE
CALCULATED RISK

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 MULTI –FACETED ACTIVITY

 Carson saw entrepreneurs as having different skills;

they coordinate scarce resources make judgments and
decisions and take risks.
 He sees change going hand-in-hand with
entrepreneurship as it provides opportunities and
choices for entrepreneurs as to which they will pursue.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 COMPARISON
CANTILLON (FRENCH SCHOOL)
Did not believe that entrepreneurs are
innovators. Ownership of property
rights.
Makes decisions about resource
allocation. Pay a certain price for a
product and resell at an uncertain
price bearing the risk or uncertainty.
Land is the source of wealth creation
MANAGEMENT CLASS : CBU 4109 PRESENTATION
SCHUMPETER (AUSTRIAN SCHOOL)
Believe that entrepreneurs are creative
and innovative.
An entrepreneur moves the economy out
of static equilibrium. Risk is taken
through creative destruction. The big
bang that acts as a dis-equilibrator.
Creativity and Innovation are the sources of
wealth creation.
 COMPARISON
CANTILLON
Entrepreneurs respond direct to the market
and creates equilibrium.
Capitalist society (ownership)
Respond to the existing industry
Risk takers
Research and Development is minimum
(they do not create new products).
MANAGEMENT CLASS : CBU 4109 PRESENTATION
SCHUMPETER
Creative destruction which creates market
disequilibrium.
Socialist Society (ownership irrelevant)
Creation of new industry e.g. Mpesa
Risk takers unless they fund themselves.
Research and development is intensive
SUMMARY

ELEMENTS DEFINING AUTHOR(S)

ENTRENEURSHIP
Risk-bearing Cantillon (1755),Knight (1921)
Value Creation Say (1815)
Innovation Schumpeter (1947)
Opportunity recognition Kirzner (1983)

MANAGEMENT CLASS : CBU 4109 PRESENTATION

REFERENCES

 Casson, M., & Wadeson, N. (2007). The Discovery of Opportunities: Exending the
Economic Theory of the Entrepreneur. Small Business Economics , 28, 285-300.
 Chiles, T. H., Bluedorn, A. H., & Gupta, V. K. (2007). Beyond Creative Destruction
and Entrepreneurial Discovery: A Radical Austrian Approach to Entrepreneurship.
Organization Studies , 28 (4), 469-493.
 Chiles, T. H., Tuggle, C. S., McMullen, J. S., Bierman, L., & Greening, D. W.
(2010). Dynamic Creation: Extending the Radical Austrian Approach to
Entrepreneurship. Organization Studies , 31 (1), 7-46.
 Companys, Y. E., & McMullen, J. S. (2007). Strategic Entrepreneurs at Work: The
Nature, Discovery, and Exploitation of Entrepreneurial Opportunities. Small
Business Economics , 301-322.

MANAGEMENT CLASS : CBU 4109 PRESENTATION

QUESTIONS

MANAGEMENT CLASS : CBU 4109 PRESENTATION

 THE END OF THE PRESENTATION

THANK YOU!

MANAGEMENT CLASS : CBU 4109 PRESENTATION