A RECONSIDERATION OF THE THEORY OF ENTREPRENEURSHIP: A PARTICIPATORY APPROACH Fikret Adaman Pat Devine

What is “entrepreneurship”? the innovative, the market equilibrating, activities whose results might be ‘productive’ or ‘unproductive’. The Problematic: the relationship between entrepreneurial activity and type of economic organisation –especially participatory ones- and the balance between productive and unproductive entrepreneurial success. NEOCLASSICAL AUSTRIAN COMPETENCE-BASED PARTICIPATORY theories of entrepreneurship…

NEOCLASSICAL The management is ‘a passive calculator’: only reacts mechanically to external developments/shocks, has no influence on them. (Baumol) Government failures:  The allocation of the supply of entrepreneurial ability between productive and unproductive activities influenced by the rules of the game. Game Theoretic Approaches:  An interactive game between successful innovators and their saboteurs  Innovator-imitator  technology-sharing consortium Firm theory:  property rights  transactions costs approach

THE AUSTRIAN SCHOOL Two core concepts:  the tacitness of knowledge  entrepreneurship The social mobilisation of tacit knowledge via entrepreneurial actions. ‘In the neoclassical world, decision makers know what they are ignorant about. One is never surprised.’ (Kirzner). BUT For Austrians, however, Entrepreneurship is human action ‘seen from the aspect of the uncertainty inherent in every action’ (Mises).

THE AUSTRIAN SCHOOL (cont.’d) Concepts of Entrepreneurship  The Early Schumpeterian Entrepreneur  The Kirznerian Entrepreneur  A Fusion of the Schumpeterian and Kirznerian

THE AUSTRIAN SCHOOL (cont.’d) Arbitrage, -taking advantage of price differences- :  Kirzner: an entrepreneurial activity  Schumpeter: NOT an entrepreneurial activity Imitation, - following a disruption as a result of an innovation, imitation moves the economy towards a new equilibrium- :  Kirzner: an entrepreneurial activity  Schumpeter: NOT an entrepreneurial activity Casson: entrepreneur is ‘someone who specialises in taking judgmental decisions about the allocation of scarce resources’. the Kirznerian arbitrageur and the Schumpeterian innovator : ‘special cases of the general concept of entrepreneurial speculation based upon self-confident judgement’.

THE AUSTRIAN SCHOOL (cont.’d) The Lack of Firms  Firm behaviour not theorised in the Austrian economics.  Earlier, Schumpeter had an ‘individual entrepreneur’ oriented approach BUT  In Capitalism, Socialism and Democracy (1942) he argued entrepreneurship was largely undertaken by the ‘R&D departments of corporations’.  Schumpeter distanced himself from the Austrian tradition by undermining the individualistic nature and by accepting knowledge within the firm has a codifiable characteristic.

THE COMPETENCE Th. of The FIRM Specific stocks of knowledge in economic organisations are:  Tacit: non-codifiable, person- and context-specific;  Socially produced and reproduced : stems from the interaction between members of economic organisations which creates an accumulation of knowledge that is more than the sum of each individual’s personal knowledge and is typically embedded in routines;  Path-dependent: each economic organisation plays a role in providing a unique framework for the generation, mobilisation and articulation of knowledge. The competence theory ‘is a platform for a new view of the firm as a dynamic, evolving, quasi-autonomous system of knowledge production and application’ (Spender).

THE COMPETENCE Th. of The FIRM (Cont.’d) develop the Austrian insight: knowledge can be held by both individuals and collectivities in either explicit or tacit form. The organisational form of the firm is: ‘a means of acquiring, combining, utilizing and maintaining’ knowledge that is by definition not available to any one single agent (Witt). From the evolutionary literature, takes explicitly the concept of economic development, in particular the development of the firm and its internal organisation: a natural role for entrepreneurship. ‘Means and ends are not simply given to the decision-maker through some unexamined historical process’; ‘means-ends- structures have to be set up by the agents themselves’ : ‘the meaning of the competence known as “entrepreneurship’(Foss).

THE COMPETENCE Th. of The FIRM (Cont.’d) For Schumpeter and the Austrians: methodological individualism, with a role for the firm, if any, only as the vehicle for the implementation of the entrepreneur’s pre-existing insight or vision. Competence theory: imagination draws on and is shaped by the social knowledge embedded in the firm and leadership takes the form of nurturing the firm’s discursive practice and developing consensus around the new means-ends-structures that emerge.

EVALUATION The relationship between entrepreneurial activity and type of economic organisation?  The raison d’être of private ownership is seldom made explicit  Generally socially productive (acknowledging the possibility of government failures) Four roles for entrepreneurship:  The equilibrating activities of alert individuals;  The innovative activities of heroic individuals;  Decision making in conditions of uncertainty;  The exercise of individual or collective competence.

EVALUATION (Cont.’d) Five principal and recurring issues: 1.The tacit nature of much of the knowledge; 2.Tacit knowledge arises in relation to both individuals and organisations; 3.Tacit knowledge is generated, mobilised and articulated through a social process:  for the Austrians: individual rivalry through the market process  for the competence perspective: the internal processes within the firm, mediated by its routines and discursive practices 4.Explicit or implicit recognition that entrepreneurial activity requires access to capital, but why this depends on the private ownership of capital is not discussed. 5.There is the question of the motivation giving rise to entrepreneurial activity, which is often not made explicit.

EVALUATION (Cont.’d) An organisational context in which: The generation, mobilisation and articulation of tacit, social, path-dependent knowledge is facilitated; There should exist:  criteria embedded in the firm’s evolving routines for the internal allocation of resources across potential entrepreneurial and innovative activities;  selection mechanisms that select across the output of the firms making up the economy according to socially agreed criteria of social productiveness and unproductiveness;  processes that allocate capital for future entrepreneurial and innovative activities according to these criteria.

PARTICIPATORY ENTREPRENEURSHIP Following Devine (1988): interlocking network of social relationships, mediated through a set of interlocking institutions, the values and interests of people in the different aspects of their lives interact and shape one another in a discursive process of decision making through negotiation and cooperation. Participation at the intra- and extra-firm levels:  within the firm - tacit knowledge is generated, mobilised and articulated;  outside the firm - the output of the entrepreneurial activities of firms is evaluated and the allocation of, or access to, the capital needed to engage in future entrepreneurial activity is determined. The criteria for success defined at the societal level by the pluralistic interests constituting the relevant community and entrepreneurial activity embedded in the activities of, would be undertaken by, those who would be affected by it.

PARTICIPATORY ENTREPRENEURSHIP Knowledge is now generally recognised as covering a spectrum from tacit to explicit, all knowledge consisting of both in differing combinations. It can be argued that social ownership and the generalised participation that it makes possible is likely to be a more efficient form of economic organisation for the social mobilisation of knowledge than either private or state ownership.