So, What Even Is Entrepreneurship and Where Did It Come From?
Entrepreneurship, especially in Silicon Valley, has become a whimsical buzz word with no clear definition. There is a general understanding that entrepreneurship entails starting and operating a business and taking on a significant amount of risk, but where did this concept come from and how has it evolved? The truth is, entrepreneurship is as old as humanity itself, and we most definitely would not be where we are today without it. An entrepreneur is often defined as “one who organizes a new venture, manages it, and assumes the associated risk,” although this definition varies across the board. Carl Voigt, dean of the Marshall School of Business at the University of Southern California, contends that “entrepreneurialism can also mean finding new business opportunities and expansion at existing companies.” In these ways, it is clear that entrepreneurship includes undertaking a significant venture, whether independently or within an existing organization. This also explains the origin of the word, which is borrowed from the French word entreprendre (one who undertakes). Beyond the French origin of the word entrepreneurship, the concept itself is rooted in several different civilizations and periods, ultimately evolving into its current form through modern capitalism.
The first-ever entrepreneurs can be traced back to 17,000 BCE when the first known trading between humans took place in New Guinea. This amounts to the earliest type of entrepreneurship, which was used for millennia by hunter-gatherers to provide for their tribes. Next, during the Agricultural Revolution 12,0000 years ago, specialization created the earliest entrepreneurs in human civilization. By specializing in fishing, cooking, or another of many other professions, individuals became better in their unique fields. As tricks of the trade would be passed down through families, the pace of innovation sped up, furthering the entrepreneurial nature of individuals living in this time. Continuing on, the expansion of trade routes, spurred by ships, donkeys, horses, and camels, enabled trade between civilizations, moving both goods and ideas. These merchants, vendors, and builders profited through these new ventures, demonstrating the development of entrepreneurship. With the invention of money, trade expanded to new levels and built the foundation for the start of the competitive market economy we know today. With finance and money management as parts of the entrepreneurial equation, the Medieval Period, Mercantilism, and the Industrial Age could yield entrepreneurship at unprecedented levels. In the early 18th century, the French Physiocrats, a group of thinkers with a new economic theory, developed a doctrine advocating for laissez-faire government and individualism. One of the Physiocrats, Richard Cantillon, introduced the concept of an entrepreneur after observing the merchants, farmers, and craftsmen of his time. Through these avenues, entrepreneurship evolved from mere trading to a complex financial activity.
Entrepreneurship is also deeply rooted in and nurtured by capitalism. Adam Smith, a Scottish economist from the late 18th century, introduced the concepts of liberal capitalism and entrepreneurial capitalism in his famous book The Wealth of Nations. Centered on free enterprise, his economic theories laid the groundwork for capitalism to encourage innovation and entrepreneurship. Since capitalism depends on harnessing private motives to produce the goods and services that the public wants as efficiently as possible, entrepreneurs are incentivized to create such offerings for the public benefit in a capitalist society. And, entrepreneurs are responsible for what to produce, how much to produce, and what method of production to adopt in a capitalist economy. In these ways, entrepreneurs are the change agents of capitalism as they bring new technologies and concepts into active commercial use. Joseph Schumpeter was an Austrian-American economist and one of the first to study entrepreneurs and entrepreneurial capitalism. He wrote that “innovation and entrepreneurship are closely interwoven…entrepreneurs create ‘clusters of innovations’ that are the causes of business cycles because their actions create disruptive dislocations”. In doing so, entrepreneurship has fueled eras like the Industrial Revolution and gained immense popularity. Schumpeter also identified five types of entrepreneurial activity, including new product/service innovation, new process innovation, market innovation, resource innovation, and organizational innovation. By organizing and distinguishing these various types of entrepreneurship, Schumpeter furthered the public’s understanding of what entrepreneurship is.
Entrepreneurship has come a long way since it first began with trading in New Guinea in 17,000 BCE. As societies and civilizations have grown more complex under the influence of specialization, money, and capitalism, among other new concepts, entrepreneurship has also grown into a complex spectacle. Entrepreneurship dominates and drives the current American economy. Today, approximately 80% of all businesses in America are small businesses run by individuals or small groups of partners. Companies with less than 500 employees pay upwards of 41% of America’s payroll. Entrepreneurship’s rich history and extreme importance mean the field is also forever changing. There are various types of entrepreneurs now, including classic entrepreneurs, multipreneurs, and intrapreneurs. Clearly, the entrepreneurship story does not end here, and witnessing its future should be quite interesting.