Theories of Entrepreneurship 2

The Classical School of Entrepreneurship 

An examination of the etiology of the term "entrepreneur" provides insight into the classical viewpoint which distinguishes between a "manager" and an "entrepreneur." The word derives from the French verb "entreprendre," meaning "to undertake" and was translated from the German verb "undertake." In the early sixteenth century, entrepreneurs were thought of as Frenchmen who undertook to lead military expeditions. The term was broadened by 1700 to include contractors who undertook to build for the military: roads, bridges, harbors, fortifications, and the like. At that time, French economists also used the word to describe people who bore risk and uncertainty in order to make innovations. These definitions encompass the notion of undertaking (or founding) a venture which has an element of risk and requires some creativity or innovativeness.

The Management School of Entrepreneurship

As in most fields of organizational study, entrepreneurship draws heavily from management theory. The initial definitions of management gained acceptance because they seemed intuitively logical and were thus acceptable. These definitions, many of which might parallel the initial tradition of Henri Fayol, suggest that managers perform a number of functions such as planning, organizing, staffing, budgeting, coordinating, and controlling.

The management school suggests that an entrepreneur is "a person who organizes or manages a business undertaking, assuming the risk for the sake of profit". John Stuart Mill, in describing the entrepreneur, noted that in addition to risk-taking, the functions of an entrepreneur include supervision, control, and providing direction to a firm.

Some of the textbooks on entrepreneurship deal with functions which relate to start-up: strategizing, developing the business plan, getting started, and managing development and growth (Good 1989, Kao 1989). Other writers define the transition of moving from entrepreneurial to professional management as a strategy of coordination which includes the manner in which responsibilities are delegated and the degree of formality with which those tasks are controlled (Roberts 1987). Certain functions might include developing formal business plans, analyzing opportunities, acquiring resources, and working toward goals (Bird 1988). Many university and college courses offered to entrepreneurs use the material gleaned from textbooks written for managers of large organizations. There may not be substantial differences between entrepreneurial marketing and other marketing courses, or between venture capital and other finance courses, or at least not enough to warrant separate courses.

The management school deals with the technical aspects of management and seems to be based on the belief that entrepreneurs can be developed or trained in the classroom. Since many entrepreneurial ventures fail each year, a significant proportion of these failures might be traced to poor managing and decision making, as well as to financing and marketing weaknesses. According to this school, entrepreneurship is a series of learned activities which focus on the central functions of managing a firm. The management school is directed at improving a person's management capability through developing his or her rational, analytic, and cause-and-effect orientation. Since, according to this school, entrepreneurship can be taught, a central aim is to identify the specific functions involved and provide training to existing and hopeful entrepreneurs. Courses such as new venture marketing and new venture finance are quite appropriate. Training in these management functions can, it is hoped, help reduce the number of business failures.