A few days ago I explained how the concept of the company had evolved over time and to complement this article I have no better idea than to publish a new one analyzing the historical evolution of the figure of the entrepreneur.
The concept of entrepreneur has undergone major changes since the era of mercantilist capitalism to the present day. From being the owner of the company and the decision maker, it has become a much more complex figure, which does not necessarily have to be a natural person or the owner of the company.
18th-19th centuries: the sedentary merchant
At the time of the Industrial Revolution, the entrepreneur is an individual. According to classical school economists such as Adam Smith or Ricardo, the entrepreneur was a sedentary merchant in whom the figures of capital owner and controller of the means of production coincided.
It was not until a few years later that R. Cantillon (1680-1734) first understood the figure of the entrepreneur as a businessman, as he was the agent who bought the means to produce and then resold at an uncertain price. The entrepreneur, therefore, was a figure who took risks because he did not know whether he would recover the disbursement made.
19th century: the organizing entrepreneur
Thanks to the technological advances of the time, the expansion of markets and the emergence of large capital requirements, the large companies, in which several owners jointly finance the company, are emerging for the first time. With the advent of this corporate form, the objectives of the entrepreneur and the capitalist begin to separate for the first time, thus giving rise to what economist Marshall called the organizing entrepreneur.
Capitalism reaches a stage in which capital is divided among a large number of shareholders and the entrepreneur is chosen according to his or her ability. This new entrepreneur is now facing a professional rather than an asset risk since it is not his money he is risking, but his job. The functions of this professional entrepreneur are, therefore, to organize, plan and direct factors in the pursuit of shareholder benefit.
20th century: entrepreneur as a risk-taker
We are referring, as some experts may have anticipated, to the economic theory of economist Knight, according to which the entrepreneur is the person who assumes the risk derived from economic activity since he advances a certain amount of real money with the aim of reaping an uncertain profit.
Knight continued to differentiate between the professional entrepreneur, who was the one who gave the orders for the management of the company and carried out the organizational function, and the estate entrepreneur, who was the one who disbursed the money and therefore assumed the risk.
20th Century: Entrepreneur as an innovator
According to Schumpeter, another economist of the time, it did not risk that explained the entrepreneur’s profits, but innovation and technical progress. According to him, there were three phases of technological change: invention, innovation, and imitation.
For Schumpeter, the entrepreneur was the figure who invented and innovated in the market, in such a way that he forced his competitors to imitate his discovery. While this was happening or not, the benefits to the company were enormous. The aim of the entrepreneur, therefore, was none other than to invent and innovate in order to achieve extra profits that would end up disappearing when competitors imitated him.
20th century: technocratic entrepreneur
The separation between ownership and control of the company that we have already seen means that the size of many organisations and the complexity of the decisions that have to be taken in them are such that many companies cannot be managed by a single person, but by a collegiate body that can be called a technostructure, formed by a group of experts in the different areas of activity of the company. This term was coined by economist Galbraith.
We can say that this management shared by technicians is carried out in large companies, where shareholders are only investors whose sole function is to obtain a return on their invested capital. However, an individual or family businesses, small and medium-sized enterprises, the primitive power of the capitalist or owner remains.
The entrepreneur today
The entrepreneur today has to be an innovator, as well as a good leader and a good strategist to choose the right paths to achieve the objectives. The new figure of the entrepreneur has the following characteristics:
The entrepreneur is no longer necessarily the owner of the business, although in small businesses this is still the case. This is due to the separation of ownership and control.