research on entrepreneurship

Abstract
What is entrepreneurship? To do research on entrepreneurship, we fi rst need to decide what we mean by that term.

A challenge here is that entrepreneurship has many defi nitions and connotations.
As a societal phenomenon, this chapter proposes that entrepreneurship be defi ned as the competitive behaviors that drive the market process , alternatively phrased as the introduction of new economic activity that leads to change in the marketplace .
The chapter elaborates on the advantages and implications of this choice of perspective.

۱.۱ On the Variety of Definitions and Views of Entrepreneurship
Researching entrepreneurship is fun, fascinating, frustrating—and important, if you
ask me. One of the fascinations is the richness of the phenomenon, which leads to
one of the greatest frustrations, namely, the lack of a common understanding of
what precisely entrepreneurship is . Let me put it this way: there is no shortage of
suggestions as to what the phenomenon “entrepreneurship” really consists of. Here
are a few examples:
– New entry (Lumpkin & Dess, 1 996 )
– The creation of new enterprise (Low & MacMillan, 1 988 )
– The creation of new organizations (Gartner, 1 988 )
– A purposeful activity to initiate, maintain, and aggrandize a profi t-oriented business
(Cole, 1949 )
– The process by which individuals—either on their own or inside organizations—
pursue opportunities without regard to the resources they currently control
(Stevenson & Jarillo, 1990 )
– The process of creating something different with value by devoting the necessary
time and effort; assuming the accompanying fi nancial, psychic, and social risks;
and receiving the resulting rewards of monetary and personal satisfaction and
independence (Hisrisch, Peters, & Shepherd, 2008 )
– The occupational choice to work for one’s own account and risk (Stephan &
Uhlaner, 2010 )
– The junction where venturesome individuals and valuable business opportunities
meet (Parker & van Praag, 2012 )
– A specifi c effort by an existing fi rm or new entrant to introduce a new combination
of resources (Lee, Peng, & Song, 2013 )
– The act by which new fi rms come into existence (Bird & Wennberg, 2 014 )
Kirzner ( 1983 ) offered the following compilation of roles assigned to the entrepreneur
by various economic theorists:
– A specifi c kind of labor service
– Assuming the risk
– Innovator
– Arbitrageur
– Coordinator, organizer, or gap-fi ller
– Providing leadership
– Exercising genuine will
– Acting as a pure speculator
– Acting as employer
– Acting as superintendent or manager
– Acting as a source of information
– Being alert to opportunities as yet overlooked in the market
Using an empirical approach to the question of what entrepreneurship is, Gartner
( ۱۹۹۰ ) found the following eight themes to emerge when professional users (academic
and others) of the entrepreneurship concept were asked about its inherent meaning:
– The entrepreneur
– Innovation
– Organization creation
– Creating value
– Profi t or nonprofi t
– Growth
– Uniqueness
– The owner-manager
Similarly, a content analysis of journal articles and books performed by Morris,
Lewis, and Sexton ( 1994 ) yielded the following most common defi nitional
keywords:
– Starting, founding, creating
– New business/new venture
– Innovation, new product, new market
۱ What Is Entrepreneurship

– Pursuit of opportunity
– Risk taking, risk management, uncertainty
– Profi t seeking, personal benefi t
– New combinations of resources, means of production
– Management
– Marshaling resources
– Value creation
Tired yet? Feeling most of the references are oldish? Good! We may be getting
somewhere in this fi eld! At this point it should be superfl uous to point out that no
one can claim to have the one, true answer to the question of what the phenomenon
“entrepreneurship” truly is. So far, in the social construction game of fi lling the
entrepreneurship concept with meaning, none of the existing and partially overlapping
constructions seems to have achieved dominance over the others. Some of the
issues on which the views on entrepreneurship differ are the following:
– Is entrepreneurship something that is restricted to the commercial sector , and is
it an economic phenomenon or something that can present itself within any area
of human endeavor?
– Is entrepreneurship restricted to small or n ew or owner – managed fi rms , or can it be
executed by or within organizations of any age, size, and governance structure?
– Is entrepreneurship an i nnate characteristic (disposition) or a type of b ehavior ,
or does it involve a special type of outcome (e.g., is success required)?
– Does something have to be p urposeful in order to amount to entrepreneurship, or
can processes involving luck and serendipity qualify?
– Is innovation required, or can imitative initiatives exemplify entrepreneurship?
– Is risk taking a necessary requirement?
– Does entrepreneurship involve the discovery (or creation) of ideas for new ventures,
the exploitation of such ideas, or both?
– Is it solely a microlevel phenomenon , or is entrepreneurship a meaningful concept
on more aggregate levels as well?
The language games we play regarding the meaning of entrepreneurship are of
the funny type of games where—unlike sports—it is totally conceivable that two
opposing players both determine that they (according to their own rules) won the
game, whereas the spectators, that is, the fellow researchers who read the arguments,
fi nd that both sides scored points, but since they did not play the same game
on the same fi eld, it wouldn’t be very meaningful to appoint a winner. Like sports,
however, those language games are something some people think are extremely
interesting and important, whereas others couldn’t care less.
I tend to be somewhat ambivalent on the importance of precise, inherently consistent,
and agreed-upon defi nitions. I am pretty sure, however, that underneath the
various constructions of entrepreneurship we shall fi nd interesting and important
social phenomena . Part of me says, “Forget defi nitions—let’s just go and learn and
tell about those important phenomena!” Another part of me, however, strongly feels
that in order to do just that, a researcher must have a very clear idea of what that
phenomenon is and be able to communicate that idea, be it shared or not by most of
the readers. I will let that other part of me speak for a while now. Besides, as you
can tell from Chap. 8 , I have become more convinced over time that clarity about
what we mean by our theoretical concepts is essential.
Some of the variations in entrepreneurship defi nitions, I believe, are relatively
minor and of little signifi cance. They largely refl ect the same underlying social
phenomenon, and therefore the differences in the fi ner nuances do not confuse communication
or hinder knowledge accumulation. Other differences, however, may
have such effects and therefore cannot be disregarded as easily. Over the years,
I have come to the conclusion that the different entrepreneurship defi nitions actually
address two relatively distinct phenomena (Davidsson, 2006 ).
The fi rst equates the term with independent business : entrepreneurship is starting
and running one’s own fi rm (recently increasingly including social enterprises in the
not-for-profi t sector as well, see Austin, Stevenson, & Wei‐Skillern, 2006 ; Mair &
Marti, 2006 ). According to this view, entrepreneurship research studies entrepreneurs
understood as fl esh-and-blood business owner-managers. Such people remain
entrepreneurs for life or at least as long as they are running their own business.
Consequently, any trait, emotion, cognition, behavior, or achievement of such individuals
is an issue for entrepreneurship research.
The second view regards entrepreneurship as the creation of new economic activity
(or, in the most allowing cases, any new activity). The major underlying theme
here is that the development and renewal of any society, economy, or organization
requires microlevel actors who show the initiative and persistence to make change
happen. According to this view, entrepreneur is a theoretical abstraction that refers
to one or more individuals who in a particular case bring about this change as an
individual feat or as a team/organizational effort or in sequence, i.e., different actors
may fulfi ll different roles as an entrepreneurial process unfolds over time (Dimov,
۲۰۰۷ ). The focus is on the activity, on entrepreneur ship . While this requires individual
initiative, it is not necessary to label one individual as “the entrepreneur” in
an entrepreneurial process. Neither is there a particular class of people who are
constantly “entrepreneurs” while others are “non-entrepreneurs.” Rather, entrepreneur
is a role , which individuals exercise on a temporary basis (Schumpeter, 1934 ).
To further illustrate the difference as well as the overlap, we may note that the
creation or emergence of new, independent business is of central interest from both
perspectives. A topic like family business succession problems falls naturally within
the domain when entrepreneurship is understood as the founding and running of
independent businesses, whereas this topic has nothing to do with entrepreneurship
from the creation of new economic activity view—unless the research focuses specifi
cally on, e.g., the effect of succession on the firm’s ability to innovate. Corporate
entrepreneurship—i.e., creation of new economic activities by large, established
fi rms (with dispersed ownership)—is part of the domain from the latter perspective
but an oxymoron when entrepreneurship is understood as starting and running an
independent business.
A problem with many defi nitions of entrepreneurship, as well as many implicit
views on this phenomenon, is that they cover in fact an amalgam of the two social
realities described above. This was certainly the case with the old Domain Statement
of the Entrepreneurship Division of the Academy of Management. The new domain
statement acknowledges both perspectives—and that they are separate:
Specifi c domain: (a) the actors, actions, resources, environmental infl uences and outcomes
associated with the emergence of entrepreneurial opportunities and/or new economic activities
in multiple organizational contexts, and (b) the characteristics, actions, and challenges
of owner-managers and their businesses (Entrepreneurship Division, 2011 ; Mitchell, 2011 ).
My personal development over time has certainly been a drift—like the overall
tendency in the international research community—from embracing an entrepreneurship/
small business view toward being more inclined to include the creation of
new business ventures within any organizational context (at least conceptually) and
at the same time becoming more reluctant to include just any aspects of ownershipmanagement
(Shane, 2012 ). I think that in order to make useful contributions to
entrepreneurship research, the researcher needs to take sides here. I’d be very
pleased if I could convince my readers of that point, whether or not they decide to
follow the specifi c direction I will outline below. “Taking sides” refers to how we
use the E-words, not what research interests we pursue. For example, I have undertaken
quite a bit of research on small fi rm growth and other aspects of small- and
medium-sized enterprise (SME) management that I see nothing wrong in—but
today I would not necessarily apply an E-label to all of it.
The choice is actually not only between the two alternatives outlined above.
There are also more restricted or refi ned alternatives. In order to discuss these, we
take the help of Fig.

ax

One obvious alternative is to choose the entire square B as one’s view of entrepreneurship.
I personally do not see the logical or linguistic reasons for doing so.
We have seen above that entrepreneurship is widely connoted with quite an array of
things that are defi nitely not necessary characteristics of independent businesses. If
one wants to reserve the concept for independent fi rms, the intersection A and B —
entrepreneurial small business, if you like—would seem a more attractive alternative.
This would include, for example, new fi rm formation; small fi rm innovation;
internationalization and certain other aspects of growth of small, independent fi rms;
and possibly the rejuvenation of family businesses as a result of ownership and
management succession.
This is not my own preferred choice. Neither will I argue for the inclusion of the
entire square A . The view of the entrepreneurship phenomenon that I am going to
elaborate on below—and which was fi rst developed and presented in Davidsson
( ۲۰۰۳ )—is instead a more restricted alternative illustrated by the square A ′ , demarcated
by dashed lines at the left and bottom. That is, I propose a “microlevel novel
initiative” view, but for reasons detailed below, I restrict it to economic endeavors—
those dealing with resource utilization—in a market or market – like context . I thus
exclude nonmarket activities such as internal, organizational change per se.
Activities undertaken by existing or emerging independent businesses are certainly
included in this view, as is social entrepreneurship, but only as long as they entail the
introduction of new goods or services or at least new competition in the market.
۱.۲ My Proposed View of the Entrepreneurship
Phenomenon
Hoping that the reader remembers that I have already pointed out that no one can
claim to have the right answer to the question of what entrepreneurship really is,
here is what I propose: a fruitful way to defi ne the societal/economic phenomenon
“entrepreneurship” is the functional notion in Austrian economics that entrepreneurship
consists of the competitive behaviors that drive the market process
(Kirzner, 1973, pp. 19–۲۰). This does not imply a general admiration or preference
for Kirzner’s theorizing over, for example, Schumpeter’s ( 1934 ) or Baumol’s
( ۱۹۹۳ ). I favor this defi nition because it is succinct and gives a satisfactorily clear
delineation of the role of entrepreneurship in society.
Firstly, it is based jointly on behavior and outcomes. The behavior part is necessary
in order not to lose track of the fact that microlevel decisions and actions are
needed for any change to be introduced. As regards the outcome part, I argue that
when we think of entrepreneurship as a societal phenomenon, it is a distinctive
advantage to include an outcome criterion and make clear, for example, that mere
contemplation over radically new ideas or vain introduction of fatally fl awed ones
does not amount to “entrepreneurship.” Entrepreneurship makes a difference, or
else it isn’t entrepreneurship. In order to “drive the market process,” the activity has
to have some direct or indirect success. To those readers who get itches at this stage,
I can only say I hope that the next chapter will solve the problem. So please stay

axx

tuned, because I will relax outcome as a necessary criterion when discussing entrepreneurship
as a scholarly domain. When defi ning entrepreneurship as a societal
phenomenon , I believe it useful to portray it as microlevel behavior that has macrolevel implications.
Secondly, this Austrian notion puts entrepreneurship squarely in a market context
and makes clear that it is the suppliers who exercise entrepreneurship—not
customers, legislators, or natural forces that also affect outcomes in the market.
When suppliers engage in entrepreneurship, they introduce new, improved, or competing
offerings in an emerging or already existing market. They thereby drive the
market process in one or more of the following ways:
۱. They provide customers with new choice alternatives, potentially giving some of
those customers more value for their money.
۲. They stimulate incumbent actors to improve their market offerings in their turn,
which increases effi ciency and/or effectiveness of those actors.
۳. If successful, they attract other new entrants to the market, thus further increasing
competitive pressures toward improved effi ciency and effectiveness (Holcombe,
۲۰۰۳ ; Plummer, Haynie, & Godesiabois, 2007 ).
Importantly, driving the market process does not require that the fi rst mover
makes a profi t but refers to the suppliers as a collective. Even if it eventually loses
out, the fi rst mover contributes to driving the market process if subsequently someone
else gets it right, which leads to a lasting change in the market (see Fig. 1.3 ).
Admitting that change-inducing microlevel initiatives are undertaken in nonmarket
contexts, I believe it an advantage to restrict the use of the specifi c term “entrepreneurship”
for the market or market-like contexts, that is, when the setting involves
customers, suppliers, and (potential) competitors or very close equivalents to those.
The main reason for this restriction is that I think it is valuable for the progress of
entrepreneurship research to make the concept as distinct and well defi ned as possible.
Where does this put social entrepreneurship? Well, does the social venture
directly or indirectly, intentionally or not, have the effect that resources be put to
better use? OK, then it is economic. Does it provide new choices—including a
choice of “something” where previously there was “nothing”—for some type of client,
customer, or the like? If that’s another “tick,” we may not even need the third,
but if the activity also has the capacity to change the behavior of others—incumbents
and followers providing similar services or addressing the same social problem—we
should have no hesitation that it is entrepreneurship we are seeing.
Now, broad agreement in the research community is probably not to be hoped
for. Some would like to defi ne entrepreneurship more narrowly than this, while others
would argue for an even more inclusive perspective. This said (and accepted),
I think it important that individual researchers carrying out specifi c research projects
at least base their use of the entrepreneurship concept on a notion as clear as the
one suggested here. Moreover, those who want to include novelty through “new
combinations” (Schumpeter, 1934 ) in any domain of human behavior in the concept
of “entrepreneurship” may have reason to contemplate the full implications of this choice.

axxx
This would not only allow, for example, novelty in the arts and in the organization
of humanitarian aid activities into the picture, but also novelty in crime and
warfare. And it would certainly make the events of September 11, 2001, an entrepreneurship
masterpiece. To conceive of a fully fueled passenger jet as a missile and
to combine the idea of hijacking with that of kamikaze attacks was certainly innovative,
and in terms of impact—economic and otherwise—it has few parallels.
However, regarding these attacks as driving market processes is far-fetched. This
author would therefore suggest they not be regarded an instance of entrepreneurship.
Put in slightly different words, entrepreneurship according to the suggested
perspective consists of the introduction of new economic activity that leads to
change in the marketplace (cf. Herbert Simon in Sarasvathy, 2000 , pp. 2, 11).
This is illustrated in Fig. 1.2 .
Note that “new” along the market axis means either that an entirely new market
emerges or that an activity is new to an existing market (Dahlqvist & Wiklund,
۲۰۱۲ ). In the latter case, “new” could mean the launch of an innovation, but merely
entering as a new competitor could also qualify. Likewise, along the fi rm axis,
“new” means that either the new activity is an independent start-up, implying that a
new fi rm emerges as a result, or it is an internal new venture, which means that the
fi rm has previously not been making this particular market offering.
Under the suggested defi nition, the left-hand side of the fi gure—quadrants I and
IV—exemplifi es entrepreneurship, whereas quadrants II and III do not. This concurs
also with the argument developed at some length by Baumol ( 1993 ) in that
imitative entry and internationalization are included in the concept, whereas acquisitions,
for example, are excluded.

۱.۲.۱ New Offer as Entrepreneurship
The fi rst entry in quadrant I reads “New offer.” This is when something so new
is introduced that a new market is created (Bhave, 1994 ; Navis & Glynn, 2010 ;
Santos & Eisenhardt, 2009 ; Sarasvathy, 2008 ) or at least no supplier has previously
made the same offer in the same market. There is hardly any disagreement
among scholars that this should be included in the concept of entrepreneurship,
although some might want to restrict the inclusion to situations where a new and/or
independent fi rm is behind the new offer.
The fi rst category, new product or service , corresponds to Schumpeter’s ( 1934 )
“new product” and Bhave’s ( 1994 ) notion of “product novelty,” respectively, and
requires no further explanation. The second category, new bundle , refers to any
combination of product and service components that—as a package deal—is unique
relative to what has previously been offered on the market, although no individual
component may be strictly new. This is what Bhave ( 1994 ) calls “new business
concept” and what Amit and Zott ( 2001 ) have in mind when they talk about “new
business model”—as long as the concept or model includes newness as perceived
by buyers and competitors. In some cases it amounts to Schumpeter’s ( 1934 ) category
“reorganization of an entire industry.” Illustrative cases include the market
entry by IKEA and Dell. The newness they brought to the market was not so much
the product in use, but in the division of labor among different actors—including the
consumer—in the production and distribution of the end product. More recent
successes like Uber and Airbnb can also be put in this category.
IKEA would also qualify under the third category included in “New offer” new
price / value relationship . This does not create a new market but drives the market
process because it changes consumer choices and gives other competitors reason to
change their offerings. Consequently, Kirzner ( 1973 , pp. 23-24) explicitly discusses
offering the same product at a lower price as one form of entrepreneurship. A process
innovation or organizational change (quadrant II) may often be the underlying cause
of a new price/value relationship, but this is not necessarily the case. It may also
represent a strategic change that relies on expected economies of scale or experience
or a switch from low-volume/high-margin to high-volume/low-margin strategy.
۱.۲.۲ New Competitor as Entrepreneurship
The second main entry in quadrant I is “New competitor.” That is, I suggest that not
only innovative but also imitative entry be included in the entrepreneurship concept
(cf. Aldrich & Ruef, 2006 ). This is when a new, start-up fi rm enters the market or an
existing fi rm launches a new product line in a situation where other fi rms already
supply the market with essentially the same product. Now, the reader may wonder
whether the author is incapable of seeing the difference between the entry of yet
another hairdresser or mom-and-pop store on the one hand and the venture capitalbacked
launch of a new, high-potential biotech fi rm on the other. Well, let’s look
back and see how we have defi ned entrepreneurship. Does the new hairdresser provide customers with a new, potentially better alternative? If nothing else is
special about the new actor, it will at least have a different location, which may be
more convenient for some customers. And the closest competitors may well fi nd
reason to reduce their price or ramp up their service level in order to limit the
damage caused by the new competitor. Hence, the reason for imitative entry to be
included in the entrepreneurship concept is that such entry drives the market process
in the sense that consumers get additional choices and incumbent fi rms get reason
to change their behavior to meet this new competition.
Another vantage point for this argument is that studies have found that entry with
complete lack of novelty tends not to appear empirically (Bhave, 1994 , p. 230;
Davidsson, 1986 ). No entrant is a perfect clone of an existing actor. Therefore, trying
to include an innovativeness criterion in the defi nition of entrepreneurship
would create problems. Rather than drawing the line at zero innovation (which
would exclude no cases), one would be forced to defi ne an arbitrary minimum limit
of innovativeness across different industries and types of novelty. All in all, there
are several good reasons to include imitative market entry in the entrepreneurship
phenomenon. However, if the new entrant is inferior along all dimensions, it will
neither succeed nor infl uence other actors’ behavior, and then it does not constitute
an instance of entrepreneurship. And yes, yes, and yes—there is a difference
between a new hairdresser and a new Google or Apple. We will get to degrees of
entrepreneurship shortly.
۱.۲.۳ Geographical Market Expansion as Entrepreneurship
Defi ning entrepreneurship the way we have done makes it logical to also include
quadrant IV—geographical market expansion—in the concept of entrepreneurship.
Some readers may fi nd this to be overextending the entrepreneurship concept.
What makes the “simple” repetition of old success recipes in new contexts
entrepreneurial? The answer lies in the fact that we have defi ned entrepreneurship
from a market perspective. Although the activities may (largely) no longer be
new from the fi rm’s perspective, their introduction in new markets—if not totally
unsuccessful—drives the market process in these new places. When business model
innovators like McDonalds, IKEA, Dell, eBay, or the free newspaper Metro entered
their n th country market, it may well have been as revolutionary for the consumers
and competitors in that market as it was for consumers and competitors in the
markets where these businesses originated. If the entry is successful, it refl ects
Schumpeter’s ( 1934 ) “new market” category of economic development. The alternative
to require newness to the fi rm as a criterion would lead to less desirable
consequences. For example, had Southwest Airlines successfully copied their own
concept in the European market, it would not constitute entrepreneurship. If instead
a new actor (Ryanair) copied the concept and took it to the European market, it
would count as entrepreneurship. This is less than satisfactory from any perspective,
and from a market perspective it makes no sense at all.

۱.۲.۴ Organizational and Ownership Changes
Are Not Entrepreneurship By contrast, according to our conceptualization, the organizational and ownership
changes listed in quadrant II do not by themselves constitute entrepreneurship. At
this point, after the generosity awarded to imitative start-ups and geographical
expansions, some readers may be outright annoyed to fi nd internal reorganizing, no
matter how dramatic and creative, to be excluded from the entrepreneurship concept.
But please bear with me a few more lines or perhaps a few more pages. Perhaps
you can appreciate the internal logic of the argument, regardless of whether you are
inclined or not to fully accept the defi nition of entrepreneurship that I develop here.
I freely admit that it is conceivable (and likely) that reorganization facilitates the
creation of new economic activity by the organization. However, it is not necessarily
the case that organizational and ownership changes lead to such effects. Actually,
there are at least four cases: (a) an organizational or ownership change is intended
to lead to more new market offerings by the fi rm and does so, (b) the same as (a) but
the intended increase in new market offerings does not happen, (c) the change is
undertaken for other reasons and has no effect on the fi rm’s market offerings, and
(d) the change is undertaken for other reasons but has the unintended effect of also
making the fi rm more entrepreneurial in terms of introducing novelty in the marketplace.
I think it is valuable not to lump together all those cases and include them in
the notion of entrepreneurship. Instead, I see it as valuable to conceptually separate
the organizational or ownership change from its effects. With our market-based
defi nition of entrepreneurship, it is the (successful or infl uential) launching of new
business activities that might follow from it, and not the organizational change
itself, that constitutes entrepreneurship. Whether increased launch of novelty to the
market was an intentional outcome or not does not matter.
The argument is perhaps easier to accept if we move to the level of societal organization.
Politicians can decide on changes in how society is organized and introduce
deregulation or other institutional changes which create room for new economic
activity in market x and therefore an increase in competitive behaviors that drive the
market process in that market. In other words, the result is more entrepreneurship in
market x . According to my argument, it is not the politician but the microlevel actors
in that market who exercise entrepreneurship in market x . The political decision
facilitates entrepreneurship. In the same way, a manager may facilitate entrepreneurship
through organizational change, but it is the market- related activities that may
result, and not the organizational change per se, that constitute entrepreneurship.
This conceptual distinction is also the reason why I refrain from including
Schumpeter’s ( 1934 ) “new production method” and “new source of supply” or Bhave’s
( ۱۹۹۴ ) “novelty in production technology” in the defi nition of the entrepreneurship
phenomenon (cf. Davidsson, 2003 ; Kirzner, 1983 , p. 288). According to my argument,
it is only when these events are translated into new offers or a new price/value relation
in the market that we see entrepreneurship. As we shall see in the next chapter, the
study of how organizational change relates to discovery and exploitation of new venture
ideas remain an important question for entrepreneurship as a scholarly domain.

۱.۲.۵ Business as Usual and Non-entrepreneurial Growth
Turning now to quadrant IV, “Business as usual” here is, at fi rst glance, as easy to
exclude from the notion of entrepreneurship, as “New offer” in quadrant I was easy
to include. But full agreement does not seem to exist even here. First, we have von
Mises’ denial of the existence of such a thing as “business as usual” when saying
that “In any real and living economy every actor is always an entrepreneur” (Mises,
۱۹۴۹ , p. 253). One can argue that no market action is completely void of novelty.
For example, when a daily newspaper carries out the totally expected and routine
actions of producing a new issue and distributing it to its subscribers and usual sales
outlets, it is a new issue, and not yesterday’s paper, that is being distributed.
Competitors will equally routinely read it, and it cannot be ruled out that some part
of the contents may have a twist that inspires the competitor to do something in a
future issue, which it otherwise would not have done. In other words, we find an
element of “competitive behaviors that drive the market process” in these routine
actions. Although this seems to lead to a delimitation problem similar to the arbitrary
innovation criterion discussed above, my conclusion in this case goes in the
other direction. That is, there is a lot of “known products for known buyers” activity
going on that is so clearly predominantly of a “business as usual” character that it is
not very diffi cult to classify it as such, both conceptually and empirically, and thus
exclude it from our defi nition of entrepreneurship.
The issue of non-entrepreneurial growth is tricky for slightly different reasons
(see Davidsson, Delmar & Wiklund, 2002 , for an elaborate discussion). When an
economic actor exploits a venture idea, there will be no well-defi ned moment at
which “entry” ends and “continued, routine exploitation” begins. Schumpeter
( ۱۹۳۴ ) held that mere volume expansion was not entrepreneurial, whereas he
included the opening of new markets. It is a similar distinction I have in mind here.
By “non-entrepreneurial growth,” I mean passively or reactively letting existing
activities grow with the market. This would not provide much cause for alarm
among competitors nor give customers new choices.
۱.۲.۶ Entrepreneurship as Microlevel Behavior with Macrolevel
Implications
I pointed out in the early parts of this chapter that one important feature of the
entrepreneurship defi nition I have chosen is that it portrays entrepreneurship as a
microlevel behavior with important implications for more aggregate levels of analysis.
Simplistic conceptions of venture outcomes typically classify them as successes
or failures. However, when you consider multiple levels of analysis, a more
complex picture emerges. It is, for example, possible that a new venture that fails
miserably has important positive effects on the economy at large, because both
those involved and others learn for the future and can come up with smarter solutions
that would not have been within reach without the initial “failure.” This is
what Fig. 1.3 is getting at.
axxxxx

“Venture” could here mean the sole activity of a new firm or a new, additional activity by an established fi rm. Thus, “venture” should not be
interpreted (necessarily) as new fi rm or company, but as a new-to-the-market
activity as discussed above.
If we turn fi rst to quadrant I, we fi nd ventures that are successful in themselves
and which produce net utility to society as well. These ventures are analytically
unproblematic. Their successful entry into the market no doubt “drives the market
process,” and hence they exercise entrepreneurship under the defi nition I have suggested.
Likewise, the failed ventures in quadrant III pose no trouble. They represent
launching efforts that do not succeed in establishing themselves in the market, and
neither do they inspire followers or incumbent fi rms so that the eventual net effect
becomes positive on the societal level. They are, so to speak, completely vain efforts.
The catalyst ventures in quadrant IV are a more interesting category. Moreover,
they are probably much more common than we might fi rst think. Although not successful
on the microlevel—perhaps because they are outsmarted by followers or
retaliating incumbents—they do “drive the market process” precisely because they
bring forth such behavior on the part of other actors. An unsuccessful venture that
inspires more profi table successors does not complete the entrepreneurial process,
but it no doubt contributes to the entrepreneurship phenomenon. The total effect on
the economy is not necessarily smaller for catalysts than for “success ventures.”
Catalyst ventures may therefore be a very important category from a societal point
of view, and I would be very pleased to see more research on this neglected topic.
The importance of catalyst ventures should also serve as a warning against too simplistic
a view on microlevel failure.
The ventures in quadrants I and IV, then, represent entrepreneurship whereas the
failed ventures in quadrant III do not. What about the “redistributive” ventures in
quadrant II? These are ventures that yield a surplus on the microlevel while at the

same time the societal outcome is negative. Examples could be traffi cking with
heavy drugs or—as in an actual case in Sweden—a graffi ti removal operation whose
owners use nighttime and spray paint to generate demand for their business. Thus,
in these cases, those involved in the venture enrich themselves at the expense of
collective wealth. Does this represent entrepreneurship? I would argue that the theoretical
status of “redistributive” ventures is determined by the answer to “toward
what” entrepreneurship drives the market process. Schumpeter ( 1934 ) and Kirzner
( ۱۹۷۳ , p. 73) give seemingly contradictory answers to that question. On closer look,
however, the movement from Schumpeter’s (local) equilibrium and the movement
toward Kirzner’s (global) equilibrium are in full agreement insofar as that entrepreneurship
drives the market process toward more effective and / or effi cient use of
resources . Therefore—admitting a sense of comfort and relief—I hold that there is
theoretical ground to suggest that “redistributive” ventures do not represent entrepreneurship
۱ . Entrepreneurship leads to improved use of resources in the economic
system as a whole, and the redistributive ventures in Fig. 1.3 do not fulfi ll that criterion.
Pick your heroes carefully!
Portraying the possible outcomes the way I have done in Fig. 1.3 is, of course,
still a radical simplifi cation. Outcomes are described as dichotomous and no explicit
time horizon was introduced. What is perceived as socially productive today may be
seen as pure evil in the future. Further, outcomes on only two out of many possible
levels (e.g., venture, fi rm, industry, region, nation, and world) were discussed.
In practice, assessing exactly where individual ventures fi t into this framework
would in many cases be a daunting task, especially when it comes to aggregating
utility across individuals and generations in order to determine what is and is not
socially valuable. Further, if one enjoyed the luxury of a perfect and just institutional
framework, it would be easy to argue that redistributive ventures equal illegal
ventures. Regrettably, we will have to live with the fact that in real economies “legal
yet redistributive” and “illegal yet socially benefi cial” ventures are both possible.
Despite these problems, I think it is useful to highlight the distinctions made here
and to note that as theoretical categories not only “success ventures” but also
“ catalyst ventures” carry out the entrepreneurial function in the economy, whereas
neither “failed ventures” nor “redistributive ventures” fulfi ll this role.
۱.۲.۷ Degrees of Entrepreneurship?
I said earlier that the inclusion of imitative entry called for a discussion of “degrees”
of entrepreneurship (cf. S. Carter, 2011 ; Davidsson & Gordon, 2012 ; Shane, 2009 ;
Wong, Ho, & Autio, 2005 ). Realizing the variations in scope and impact of “competitive behaviors that drive the market process,” it seems natural to treat
entrepreneurship not as a dichotomous variable, but to say that some ventures show
more entrepreneurship than others. But what should be the criterion by which we
judge the degree of entrepreneurship? There are at least three possibilities:
The degree of ( direct and indirect ) impact on the economic system . If we choose this
criterion, we stay true to our defi nition of entrepreneurship as the competitive
behaviors that drive the market process. In a theoretical discussion of entrepreneurship,
then, this should be the preferred criterion, simply because it is the most correct
one. For empirical research practice, the criterion has severe shortcomings
because impact can only be assessed after the fact and not in real time and because
even then it can be very diffi cult to obtain even roughly correct estimates of total
direct and indirect effects on a complex economic system. These problems, however,
should bother us in the next chapter rather than this one. A variation (or an
indicator) of the “degree of impact” criterion is the criterion “amount of wealth created.”
Needless to say, this suffers from the same kind of assessment problems.
The degree of novelty to the market . This is intuitively appealing in the sense that what
is more creative is seen as a higher degree of entrepreneurship. Although the problem
of comparing very different kinds of novelty pertains to this criterion, it has the advantage
that it is not totally impossible to assess in real time (see Dahlqvist & Wiklund,
۲۰۱۲ , and Chap. 6 ). For the very reason of capturing more cases with a high degree of
market novelty, we added a “high-potential” judgment sample to our current, largescale
study of ongoing start-up efforts, the Comprehensive Australian Study of
Entrepreneurial Emergence (CAUSEE). More about that study later. The main downside
with the market novelty criterion is the following: innovative new activities that
are successful are likely to have greater market impact on average. However, it may
actually be more diffi cult for an innovative venture to be successful at all (Semasinghe,
۲۰۱۱ ). There is no guarantee that a high degree of novelty ascertains market effect—
history is full of weird inventions that nobody wanted! Some seemingly marginal
innovations revolutionize markets and create great wealth whereas some radical innovations
have marginal impact or fail altogether. Therefore, the degree of novelty to the
market is at best a rough proxy for degree of entrepreneurship.
The degree of novelty to the actor . Sometimes, you hear expressions like “That was
very entrepreneurial of you” or “That was a very entrepreneurial move for that
fi rm.” Presumably, this means that the action was radically different from what that
actor has done before. The problem is that the same action was not necessarily very
novel or valuable as the market sees it. Relating the degree of entrepreneurship to
the history of the actor rather than to the market has highly undesirable consequences.
For one thing, this type of criterion actually makes previous inactivity or
conservatism increase an actor’s potential for showing a high degree of entrepreneurship!
Moreover, it is a criterion that regards it more entrepreneurial to do something
totally unrelated to one’s prior experience. Theories as well as empirical
fi ndings suggest this may not be a wise move (Barney, 1991 ; McMullen & Shepherd,
۲۰۰۶ ; Sarasvathy, 2001 ; Shane, 2000 ). I would therefore discourage the use of this
kind of criterion for “degree of entrepreneurship.”
In all, there is a conceptual need for discussing “degrees of entrepreneurship.”
Importantly, in my view this variation belongs primarily in the dependent variable
and not in the defi nition of what is entrepreneurial. Admittedly, there is no easy or
straightforward way to actually assess such variation—especially not prospectively.
But if theorizing and researching were easy tasks, they wouldn’t be much fun!
Of the less-than-perfect but available alternatives, the degree of impact on the
economic system is the criterion that best matches the defi nition of entrepreneurship
that I have proposed. Degree of novelty either to the market or to the actor is better
regarded as a possible cause of variations in the degree of entrepreneurship
(or impact of entrepreneurship) than being a direct measure of such variation.
In practice, when conditions do not allow careful, retrospective assessment of
economic impact, researchers will have to accept proxies that are thought to refl ect
potential for higher impact. One example is the development over time in the
Global Entrepreneurship Monitor (GEM) project of indicators of the quality of
each start- up attempt, such as whether it is necessity based or driven by perception
of opportunity, employs new technology, and aims for growth, innovation, or
internationalization (Kelley, Bosma, & Amoros, 2011 ).
۱.۳ Summary and Conclusion
There are almost innumerable suggestions in the literature concerning what entrepreneurship
really is. Noting that no one can claim to have the correct answer, I have
proposed that defi ning entrepreneurship as the competitive behaviors that drive the
market process has much to commend it. I think so for the following reasons. This
defi nition emphasizes behavior rather than assuming a dispositional stance that has
proven largely unfruitful (Gartner, 1988 ; Foss & Klein, 2012 ). It also includes an
outcome that is successful or infl uential. Jointly, this implies that the processes of
discovery and exploitation are included and that mere contemplation over radical
ideas is not an example of entrepreneurship and neither is or the introduction of
completely vain innovations. Further, the defi nition restricts entrepreneurship to a
market context , which gives a more precise and coherent characterization of this
phenomenon. At the same time, the defi nition is permissive in that it does not take
a restrictive stand on purposefulness, innovation, organizational context, or ownership
and personal risk taking. Importantly, it links micro to macro by portraying
entrepreneurship as a microlevel phenomenon with important effects on more
aggregate levels. Finally, relative to many other alternatives, I would argue that the
suggested defi nition has advantages in terms of being clearly delimited , logically
coherent , and easy to communicate (Suddaby, 2010 ).
Of course, my arguments will not convince everybody. To those who want entrepreneurship
to mean “anything that concerns independent businesses,” I can only
say “I’m sorry! Our interests have a certain degree of overlap, but our views on the
entrepreneurship phenomenon are fundamentally different.” Therefore, much of the remainder of this book may be of less value for such readers. Those with particular
interest in social-, institutional-, sustainable/eco-/green-, or sports-related varieties
of entrepreneurship—to mention a few, signifi cant developments of recent times
(see, e.g., Greenwood & Suddaby, 2006 ; Mair & Marti, 2006 ; Ratten, 2012 ;
Shepherd & Patzelt, 2011 )—do not have reason to despair just yet, however. Other
aspects of the perspective I have outlined may be hard to swallow for some, for
example, the inclusion of an outcome criterion and the exclusion of organizational
change per se as entrepreneurship. I remain optimistic, though, and ask doubtful
readers with such objections to please try to make it through the next chapter. There
are good reasons to believe that our differences will be sorted out there. Stay tuned!