Management science has naturally developed numerous reflections on the way in which we create and manage an enterprise in the dynamic sense of the word, i.e. undertaking something new. We speak of entrepreneurship for anything concerning the foundation and growth of an enterprise, with results in terms of value creation and therefore wealth and employment. This can also apply to non-profit organizations, in which case we speak of social entrepreneurship. It is important to emphasize that the entrepreneurial attitude also manifests itself within organizations. We then speak of intrapreneurship, which partially comprises the field of project management.
The economic sciences have dealt with the question of entrepreneurship from a number of angles: in terms of theory, as the foundation of innovation, but also through the range of macroeconomic consequences from the phenomenon and to clarify innovation and economic development policies. If entrepreneurship has taken on so much importance today, it is because innovation is systematically placed within economic and social evolution. It is worth mentioning that the notion of entrepreneurship owes a great deal to the founder of innovation economics, Joseph Schumpeter (Schumpeter 1934, 1942).
According to Schumpeter’s definition, the entrepreneur is not the one who manages an enterprise, but the one who innovates in one way or another, particularly through enterprise creation. This is a person capable of transforming a new idea into an economic reality, which will in turn transform the system according to the creative destruction schema that Schumpeter subsequently endeavors to analyze in all of its consequences, particularly macroeconomic ones like business cycles (Schumpeter 1939).
The figure of the entrepreneur and, along with it, the analysis of the socioeconomic system’s evolution are also developed in another school of economic thought, the so-called Austrian approach, with founding authors like Friedrich Hayek and Ludwig von Mises. This approach was extended by Israel Kirzner in particular, representative of a very lively neo-Austrian school that distinguishes itself from Schumpeterian analysis through its insistence on the portion of creativity provided by the market, in addition to individual initiative (Kirzner 1997).
In a general way, economic theory somewhat excessively reduces innovation to the creation of knowledge, but this notion is much more bountiful in the Austrian school than for Schumpeter because it is more subjective: knowledge is not absolute and universal; it is original and contextual (Witt 1995). Israel Kirzner constructs an interesting concept of entrepreneurial discovery on this basis, where innovation is actually a co-construction by the entrepreneur and the market. This vision is typically one of a complex system whose dynamics are articulated between the microeconomic (entrepreneur) and macroeconomic (market) levels.
The goal of this chapter is to deal with entrepreneurship not only in terms of managerial recommendations, but also through economic science, as the previous statements might suggest. Indeed, it would be artificial to separately consider economics and management science. Before proceeding to more in-depth analyses, we can advance a very simple initial argument to justify a joint approach through management and economics: the fact that innovation is anything but an isolated individual activity. No one innovates alone. The very notion of open innovation (Pénin et al. 2011), which is being mobilized more often to interpret contemporary technical and organizational evolutions, corresponds to the idea of network creativity, including the designer and the user of the new goods or service. At the end of the day, it is the economic system as a whole that is in a systemic relationship with the entrepreneur-innovator, hence the particular pertinence of Hayekian analysis of the market’s role in the economic system’s operations and development.
Not taking this reality fully into account through an overly linear managerial attitude (technical bias) can lead to serious strategic errors in innovation management. Innovative entrepreneurs are not satisfied with designing a good that is adapted to the market; they create their own market. As for the market itself, it is not a theater stage prepared in advance for economic actors, but rather a living environment, where the supply–demand relationship is created and where the product is defined. There is, therefore, a form of osmosis between the managerial process of designing an innovative product and the economic process that compares a potential supply with a potential demand.
The complex creative process spread across time and characterizing all forms of innovation – a dynamic interaction process between the individual actor (or team) carrying out the project and the entire socioeconomic system – has actually been described in the economic literature for a long time now. We need to only re-read the great authors form the last three centuries to find food for thought. This detour through the history of thought is far from futile, for the dominant economic science of today tends to hide entire areas of reflection that are in fact vital to understanding the entrepreneur’s central role. This is masterfully shown by Humberto Barreto’s “The Entrepreneur in Microeconomic Theory. Disappearance and Explanation” (Barreto 1989).
We will dedicate section 4.2 of this chapter to reviewing literature on the entrepreneur as seen by economists, and this will enable us to demonstrate the primary theoretical functions that can be expected of entrepreneurship in society, particularly the relationship with the market. Section 4.3 will complete the idea of entrepreneurs’ creative interaction with their environment by recalling the role of the communities they draw their identity from and which delimit the field of entrepreneurship. Section 4.4 will conclude with the function of the imagination, which is indispensible in formulating projects in a complex system. Before this, we will introduce our goal in section 4.1, which gives a few examples of contemporary reflection on the question of entrepreneurship in order to show the renewed interest in the subject and its multiple facets.
To provide some examples of the current stakes of entrepreneurship, we can refer to the special issue of the European Economic Review (No. 86, 2016), in which we find contributions to the following subjects:
One of the conclusions to be drawn from these works is that economic policies should pay more attention to the analysis of entrepreneurial management and the organizational abilities of firms. It seems to us that managers should also take inspiration from economic findings (and even from what the history and the history of thought can contribute) to understand the societal interweaving of complete innovation development. The professional training received by engineers, who are often in a position as potential innovators when they are inventors, does not always encourage this systemic awareness, hence the risk of thinking of innovation as a linear process brought about by science, then implemented by technology. This linear conception of the entrepreneur’s role as the one who applies new knowledge to the economy is very limiting. It denies the existence of a complex system connecting innovators with their environment from the start of the creation process until the end.
The point of view that we are defending here is that not only microeconomic innovation has consequences for the overall system (Schumpeter’s creative destruction), but is itself a co-creation by the entrepreneur and the system (Muller et al. 2017). Innovation transforms the economy and society, but it is largely conditioned by the socioeconomic environment in return. This takes nothing away from the figure of the entrepreneur, but rather emphasizes that the entrepreneur is necessarily embedded into a certain environment, in the sense that his or her creativity is supported by communities of knowledge (Cohendet et al. 2014) and conditioned by the market’s reaction (Kirzner 1997). The territory is often a receptacle for all of these factors, which interact with the entrepreneur-innovator (Porter 1990; Pecqueur and Zimmermann 2004; Boschma 2005; Levy and Ferru 2016).
Based on some above-mentioned examples, we can actually observe that:
In the studies cited, we note that entrepreneurship has territorial, financial, organizational and gender characteristics. The list does not stop there, though. For example, the founders of enterprises often identify with communities, as we will see in section 4.3. As a conclusion of these preliminary reflections, we can confirm that innovation is the result of an entrepreneur (in the narrow sense provided by Schumpeter, i.e. a figure who is not a simple manager) influenced by his or her environment, by the context of his or her action.
The entrepreneur-innovator’s context demonstrates the characteristics of a complex system. Individual action is inspired, constrained or amplified, modified by the circumstances and the actors involved: chosen partners, rivals who show themselves, a regulatory framework imposed upon them, first users who bring about the creation of useful information for refining the concept of the new product and so on. Interactions are often more dense than it seems at first sight, even with a single actor. For example, prior financers (risk capital) are not satisfied only providing money; they generally condition their involvement in rewriting the initial project. All in all, we can say that if the entrepreneur is responsible for innovation, this does not mean that he or she is an isolated designer.
The great authors in economics have enlightened us concerning innovation: not only Schumpeter and Hayek, whom we have already mentioned, but also before them, Alfred Marshall. Economic tradition, however, subsequently interpreted the questions of innovation according to a vision of the economics of knowledge rather than entrepreneurship. This constitutes a limiting analysis by economists, e.g. the analysis of territorial development based on the creation of innovative enterprises, even though this was a significant starting point for Alfred Marshall’s reflections one century ago. To develop a more realistic vision of innovative territories, we must start with a more general notion than the creation of knowledge, namely creativity (Héraud 2016).
The most orthodox economic research can hardly provide an account of the entrepreneur’s figure. In an article published in 1968, “Entrepreneurship in Economic Theory”, economist William Baumol concluded: “the entrepreneur virtually disappeared from the theoretical literature”, as we are reminded by Humberto Barreto (1989).
Barreto’s work shows that the entire construction of the microeconomy would lose in intellectual coherence what it would gain in realism if it introduced the entrepreneur as an agent distinct from the economic scene. As we will see later, in the early 19th Century, Jean-Baptiste Say, although considered as one of the fathers of classical economics, placed the entrepreneur at the center of economic analysis. In the meantime, the classical English school of thinking and then the currently dominant neoclassical school have turned many economists’ attention from the reality of entrepreneurship to orchestrate the traditional factors of labor and capital. Yet, the entrepreneur is a distinct notion from those of the capitalist or the manager.
What distinguishes the entrepreneur from the manager or the capitalist is the creativity of enterprise action. This functional difference can already be seen in their remuneration: managers receive a salary; capitalists benefit from interest and the entrepreneur earns an innovator’s profit, which is highly random and dependent on the success of the enterprise. If the entrepreneur is first and foremost characterized by his or her creativity, the nature of this creativity must be closely analyzed and contextualized in the socioeconomic system that contributes to it – as well as the entrepreneur’s individual qualities.
We believe that the dominant economic thought – which ends up influencing society, particularly through the culture of the economic and political elite – lends excessive importance to the forms of creativity via formal knowledge like scientific discovery or technical innovation. Entrepreneurial behavior itself largely depends on human qualities like an appetite for risk, the desire to change the world or the ability to coach others. It is more strongly characterized by meta-knowledge than technical knowledge or specialized professional skills. As for entrepreneurs’ motivation, it is partially extra-economic.
Friedrich Hayek’s thought strongly agrees with this point of view. The author explains that the economic system’s efficiency depends on the way in which knowledge is managed, not only to innovate (which implies the creation of new knowledge elements), but also in all economic activities, even the most mundane. The problem with knowledge is that it is largely decentralized. No one has all of the existing knowledge in the economic system: concerning methods of production, quantities produced, prices, offers or demands not satisfied at a given moment and in diverse locations and so on.
The dream of installing central planning was pursued by economics in the past, but we know the difficulties of implementing this and the drama brought by a society where the implementation of such a utopia is forced. Planning, be it public or private, quickly reaches its limits. On the contrary, it is just as unrealistic to maintain, as some liberal economists do, at least implicitly, that markets carry out this function of integrating all information perfectly – and that it would suffice for the microeconomic agent to know the prices to know everything necessary for decision-making. Indeed, markets are not always perfect, as is assumed by the standard model of microeconomic manuals. Adam Smith himself never seriously thought that the “invisible hand” was a solution to all of humanity’s problems; some of his writings even express the opposite. Friedrich Hayek, a great defender of liberal economics against the centralism of socialist utopias, is not so naïve, either, as to believe that real markets will work ideally once the State stops intervening. His position is to critique the relative inefficiency of most hierarchical organizational solutions, particularly public ones, as compared to market mechanisms: which is not the same as claiming that markets are complete and function perfectly!
In a renowned 1945 article, “The Use of Knowledge in Society,” Friedrich Hayek analyzes the informational processes that support economic decision-making. Rather than seeking to concentrate economic information in a central decision maker, who will never know all the contextual details of applying this knowledge, Hayek maintains that we must encourage the transmission of as much knowledge as possible to decentralized actors, who, because they are on site, are most able to deduce adapted economic behavior from this. Of course, some of the knowledge necessary to the economic system can and even must be centralized: this is formal scientific and technical knowledge. However, a large part of the knowledge necessary for economic decision-making is not of this type and is only available and efficient on site, at the level of individual actors. The information likely to enrich the knowledge of the authorities and experts is destined to be centralized, but not necessarily the knowledge concerning management and entrepreneurs.
Unfortunately, the mental representation of managers, engineers and administrative or political executives is always polarized by formal categories of knowledge. As Hayek states quite clearly (1945, p. 2):
“If it is today so widely assumed that an authority made up of suitable chosen experts will be in a better position, this is because one kind of knowledge, scientific knowledge, occupies now so prominent a place in public imagination that we tend to forget that it is not the only kind that is relevant.”
In our opinion, this remark by Hayek not only applies to public decision-making, but also to all forms of hierarchical decision-making in private organizations.
The general debate on the efficiency of decentralized decision-making is even more significant in an evolving system, one that involves the figure of the entrepreneur. Hayek believes that the primary economic problems that are found in society are relative to adaptation to change, particularly circumstances of time and place. It is, therefore, important for decisions to be made as much as possible at a decentralized level:
“The ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them” (Hayek 1945, p. 4)
In a Hayekian world, the entrepreneur’s function is decentralized. Entrepreneurship is the business of everyone in society. It is up to each person, in his or her position, to make the right decisions based on his or her on-site knowledge and circumstances. However, overall complementary information must be provided as best as possible by the system and/or the hierarchy to help individuals optimize their decisions. As we can see, the question of entrepreneurship is tied to that of knowledge for decision-making. Hayek’s position is strongly influenced by the issue of the nature and place of knowledge.
Other standpoints are interesting to consider in order to understand the entrepreneur’s specific creative function. Following this section, we will move onto a review of the four economic traditions distinguished by Humberto Barreto: in addition to the Hayekian and Schumpeterian traditions that we have already seen, the interest of Barreto’s synthesis lies in bringing out the contribution of other schools of thought, starting with that of French economist (and entrepreneur) Jean-Baptiste Say, who was the first to speak of the entrepreneur as a central actor in economics.
What is interesting about Jean-Baptiste Say is that he distinguishes three levels in the division of labor leading to production. At the bottom is the worker, who executes the production plan; at the top is the theoretician (scientist, “philosopher”, etc.) and between the two, we can find the entrepreneur, who has the idea to assemble these elements and is involved in coordinating the process, as well as distributing the revenue generated by production. It is also the entrepreneur who takes it on the uncertainty concerning the enterprise’s future success (or failure). Entrepreneurs partially wager with not only their own personal fortune but also the money they manage to borrow.
As for other production factors, there is an entrepreneur market. This factor has a high value because there are not many people with all the necessary qualities, namely a minimum of personal means to appear solvent, intelligence and reputation, integrity, prudence, “regularity” in his or her actions and a sense of organization.
Jean-Baptiste Say is the first economist to distinguish entrepreneur from the capitalist. He is followed by Schumpeter. For Say, the entrepreneur does not belong to a particular social class. Being rich and knowledgeable is not sufficient to become an entrepreneur. The entrepreneur’s remuneration may partially come in the form of interest on the capital he or she has contributed, but the true remuneration for an entrepreneur’s actions is rather what Schumpeter called “the innovator’s rent”. This is a profit insofar as it is a residual remuneration, only positive in the case of success, and not a salary (manager’s remuneration) or interests (capitalist’s remuneration, profit). We must point out that this vision, very ahead of Say’s contemporary English school of thought, is not unrelated to the author’s professional life as an enterprise manager.
From Ludwig von Mises and Friedrich Hayek to Israel Kirzner, it is human action that lies at the heart of the economic process and not the equilibrating market mechanisms described by the standard model of economics. The Austrian approach is implicitly a theory of creativity when it attributes a central role in socioeconomic development to certain individuals, but it does this through a particular conception of the market – which is a living terrain, subject to constant discoveries by the actors who know how to explore it.
The market is not a single location for arbitrating between supply and demand with perfect information, but much more a perpetual process where actors meet in a somewhat random way and generally confirm the imperfection of their information and the faults in their action plans (which leads them to review these information elements before the next time). The heart of the actual economy cannot be resumed with the optimization of the use of rare resources to achieve determined goals (to revisit the definition made famous by Lionel Robbins). On the contrary, typical economic activity is the discovery of opportunities people had not yet thought of. As such, what characterizes the entrepreneur, a paradigm of human action, is more the ability to discover market opportunities than the ability to calculate an optimal action plan. The first quality of entrepreneurs is to be “alert” to the opportunities they perceive by exploring the market – which is neither definitively given nor completely known to anyone.
The question that asks itself, then, is knowing why and how certain people perceive market opportunities better than others. Kirzner’s position on this stance involves explaining that it is not a question of information per se. Being alert is not the same as knowing (having information). The entrepreneur often has less information than an expert. Instead, he has an important quality, superior foresight. It is somewhat difficult to construct a precise idea around this notion, but what is certain is that the essential quality in an entrepreneur is alertness, i.e. attention turned towards opportunities.
We would like to bring the Austrian concept of attention towards opportunities closer to the contemporary idea of serendipity, which is often used in works on creativity. Here, serendipity corresponds to the discovery of opportunities to arbitrate by exploring the market. The most trivial example of arbitrage involves finding goods offered somewhere at a lower price than the reserve price of another agent (who has not discovered this). The double transaction will allow a profit to be made, constituting the “arbitrageur’s”1 compensation. Let us not forget that in a neoclassical world made up of markets in equilibrium, or tending towards equilibrium, this case scenario is exceptional and transitory. For the Austrian school, on the contrary, it is because the prices are “wrong” or because there are multiple prices that entrepreneurs make money.
A more complex example of arbitrage is the discovery of production means that cost less than those usually required to produce an existing good. This example corresponds to a process innovation. In this case, entrepreneurs are Schumpeterian in the sense that their creativity and the added value they create are linked to innovation. However, the Austrian concept is more general and belongs to a theoretical framework, where the market is seen as a constant process of discovering business opportunities.
Serendipity lies at the heart of the Schumpeterian analysis of economic development: the serendipity of the entrepreneur-innovator. This is a person who seems more creative than a simple “arbitrageur” in Kirzner’s sense of the term. We could say that we are moving from serendipity to creativity in the broadest sense of the term. For Schumpeter, as well as the Austrian authors, entrepreneurship is the basis for change in (unplanned) market economies, but this change is particularly qualitative. Schumpeter proposes a theory of development and not a simple theory of (proportional) growth. Entrepreneurs are truly creative people, because they qualitatively modify the economic and social system. This takes place through the development of new goods or processes that the entrepreneurs introduce into the system. They invent new productive combinations and implement them (here, we can see Jean-Baptiste’s ideas). Another qualitative dimension: entrepreneurs can also show their influence on the system through structural changes like opening a new market for an existing product or creating/tearing down a monopoly. These are also examples of innovation in the Schumpeterian sense.
For Schumpeter, as in the Austrian theory, entrepreneurs benefit from a situation of imbalance to develop new business. Therein lies the heart of Schumpeter’s analysis of economic cycles (1939). In a period of crisis, where production factors go particularly unused (unemployment, uninvested capital, depreciated land assets, etc.), many entrepreneurs undertake experimentation with new products or production process or even create new market structures. This phenomenon lies at the foundation of the economic revival that follows the crisis. Inversely, the growth phase will tend to fizzle out when the economic context becomes less favorable to innovation and thus the spirit of enterprise.
The alternation between phases of growth and crisis corresponds to a sequence of periods that are favorable or unfavorable to radical innovation and thus to entrepreneurship. When the economic system has reached a point of technological maturity, it evolves more in terms of (quantitative) growth than (qualitative) development and the role of entrepreneurs moves to the background. In a period of growth, the economy stages managers in particular. During the crisis and at the start of the subsequent revival, on the contrary, entrepreneurs win back their place: phases of intense imbalance bring out leaders and creativity.
The Schumpeterian entrepreneur often benefits from macroeconomic imbalance – and thus from the imperfection of markets – to create new economic forms. However, creative activity often contributes to producing imbalance such as, for example, the failures of enterprises based on old technologies. This is Schumpeter’s creative destruction.
The great difficulty facing entrepreneurs (in the strongest sense of the term: those implementing radical innovations) is that they cannot find an action model in ordinary circular economics. They are thus, by definition, creative, but they must also have the ability to impose “new productive combinations of factors” upon the system, which many actors will seek to combat because this undermines their established situation. Potential innovation will take away their business prospects and/or steal their production factors (human, natural, financial, etc.). Moreover, entrepreneurs will have not only the actors who are threatened by their innovation against them, but possibly competing actors who have a similar idea as well, not to forget the large majority of people who, in any case, do not want the world to change. In the end, all of this creates a great deal of resistance to the change the entrepreneur wishes to introduce into the system.
Schumpeterian entrepreneurs are far from having ensured success, regardless of the absolute quality of their new idea. In this, the entrepreneur is not a rational economic agent in the orthodox economic sense. The essential motivation for such people is the potential to realize their own dreams, the joy of creating, the pleasure of the fight and so on, and certainly not a future profit coldly calculated with probability functions. This point is important to consider. For Schumpeter, entrepreneurs are certainly first and foremost concerned by uncertainty, but their function in the system is not risk management. They are not insurers. They are actors who know how to make decisions by seizing opportunities, like the Hayekian entrepreneur, but they do this by establishing a new combination of production factors. They are truly creative.
In the notion of entrepreneurship, Jean-Baptiste Say mostly saw the function of coordinating, Kirzner arbitrage on markets and Schumpeter the creative act of innovation. Humberto Barreto (1989) completes the series of the types of entrepreneurs imagined by economic thought by bringing out a fourth function: that of managing uncertainty. He emphasizes (op. cit. p. 33) that in the economic literature concerning the entrepreneur, one of the most often cited roles is that of the “uncertainty bearer”. However, he distinguishes three approaches, which we will list below with comments.
In contemporary economic language, we could say that they support transaction costs as defined by Ronald Coase. These are largely due to uncertainties: concerning prices given quality, concerning the partner’s reliability, concerning the practical methods of exchange and so on. We can therefore interpret Cantillon by considering that every economic actor who accepts to assume a transaction cost is an entrepreneur. Let us note that this is indeed a function and not a professional category or a social class.
In an organization, the true entrepreneur is the person responsible for making decisions. The problem, once the organization has reached a certain size, is that the boss is responsible for all decisions, even those that he or she has not personally made. In fact, many decisions are made within the scope of a delegation of power within the hierarchy. An essential point for the entrepreneur is, therefore, knowing how to choose his or her collaborators. This is where we can see that the entrepreneur’s function goes beyond the simple coordination of production. It is a function of meta-organization: the entrepreneur outlines the system that will have to be organized, and rather largely make its own decisions. In our language, we would say that entrepreneurs take on the function of a self-organized system in advance, which they know they will not be able to control completely (see the concept of self-organization presented in Chapter 2).
Having reached the end of this section dedicated to the notion of the entrepreneur in the history of economic thought, what can we take away? For Humberto Barreto, at least four large functions can be distinguished:
Each of these responses to the question of entrepreneurship’s economic role summarizes a complex and systemic thought in a few words, that of great authors from the last two or three centuries. It seems interesting to us, as a conclusion, to pose the question of the possible perception of the following four statements by an ordinary observer of contemporary economic life.
It appears from all the preceding analyses that the act of starting a business is both inseparable from the macroeconomic mechanism of economic and social development and profoundly individual. Can these dimensions be connected? If the microeconomic decision is, to some extent, the foundation of macroeconomic (and social) evolution, isn’t there also a relationship in the opposite direction? As we will see, if the motivations of entrepreneurs – those who innovate by founding an enterprise – are analyzed, social determinants will be found. The expression of an individual identity in the act of starting a business is often the reflection of a social identity.
One of the most important individual dimensions is the notion of responsibility, as we emphasized above. If there is a difference between the role of an individual and that of a robot or an administrative procedure, then the individual is the one who decides, “in all good conscience”, in other words, to take on the responsibility of decision-making, by weighing the positive and negative consequences of strategic options (affected, moreover, by different uncertainty factors that are difficult to measure objectively).
To illustrate our point, let us cite the representative case of the two French ministers who had to answer for their actions in court, following a scandal involving the transfusion of blood contaminated by the AIDS virus in the 1980s. It would possibly be an option to accuse the administration of that era of not having foreseen the extent of the risks connected to this disease (knowledge of which was still quite limited at the time) and to believe that there was a lack of discernment or foresight and that, at the end of the day, a precautionary principle should have been applied by the Ministry of Health – it is always easy to say this in hindsight. However, the Court de Justice de la République, which gave its ruling in 1999, did not agree with the accusation of involuntary homicide. As for the expression “responsable mais pas coupable”, which gained a great deal of popularity during this time, it is best to refer to the precise declaration made by minister Georgina Dufoix:
“I feel deeply responsible; however, I do not feel guilty, because at the time, we truly made decisions in a certain context that seemed, for us, to be the right decisions.”2
For better or worse, anyone who assumes responsibility for a collective action in a situation of uncertainty in the strong sense provided by Knight is potentially in a situation to be responsable mais pas coupable if things do not go as well as planned. This is part of the entrepreneur’s function as well as that of a political or administrative head.
In terms of managing complex systems, we can conclude that entrepreneurs undertake a new collective action knowing that they cannot completely control the system they are establishing. In particular, they must delegate decisional functions. It is thus a matter of designing a partially autonomous (and thus non-deterministic) system and accepting responsibility while knowing that it is hard to plan and not perfectly controllable.
To understand the individual act of starting a business, we must turn to the human and social sciences. This is what an entire field of literature does in order to provide more than banal analyses like “the founder of an enterprise poses successive questions concerning the target market, consumer needs, and internal resources that must be given added value”. The fundamental psychological reasons that push entrepreneurs to start businesses are never a search for opportunities according to this kind of disincarnated procedure.
It is more interesting to return to the issue with the notion of identity. Studies in the field of corporate identity show the interest of a managerial approach that showcases collective identities. What interests us here is the individual identity of the enterprise’s founder, but we will see that this is often linked to a collective identity. Cardon et al. (2009, 2017) examined the kind of passion that is an impetus for deciding to start a business and perform an analysis in terms of identity. This is how they distinguish:
By studying a sample of the founders of enterprises (in the sporting gear industry), Fauchart and Gruber (2011) proposed a three-category classification: Darwinians, communitarians and missionaries. They base this on a psychosociological analysis that introduces the integration of individuals into communities where individual identities are defined based on the environment according to a mental schema as follows: Who am I?/What is my role? The enterprising act is then interpreted as a way to fulfill oneself regarding this issue – particularly for the last two categories.
Table 4.1. Characteristics of the three types of entrepreneurs
| Type | Characteristics |
| Darwinians | Reference to the classical economic model: Seeking personal interest; concentrating on the firm’s competitive advantages |
| Communitarians | Reference to a community: Supporting the community and benefitting in return from its support |
| Missionaries | Reference to a general mission : Filling a general social role |
The approach guided by Emmanuelle Fauchard and Marc Gruber in their field survey with founders of enterprises is a theory of social identity that they developed from the literature on social cognition – a field of social psychology as described by Moscovici’s collection (1972).
This approach allows us to expend the classical understanding of the entrepreneurship phenomenon, particularly through consideration motivations other than a search for long-term personal monetary gain – which is still the theoretical hypothesis of evolutionist authors or at least the founding father, Schumpeter.
The idea developed, based on the theory of social identity, is that individuals who found a new enterprise act in order to remain coherent with their identities:
“(…) founders perceive as opportunities only those situations that are consistent with their self-concepts as they strive for identity-relevant actions in creating their new firms” (Fauchart and Gruber 2011, p. 952).
This is particularly true in the case of “missionary” and “communitarian” entrepreneurs. The “Darwinians” seem more neutral in terms of identity – except for considering themselves representatives of the liberal norm and playing the role of the habile businessman meant to grow rich. Insofar as there are potentially infinite occasions to start a new business, it is important to understand the logical foundations of restricting the field of opportunities for starting one. In a classical economic vision, we will believe that the only restricting logic is the probable long-term monetary yield, which is concretely unrealistic as a criterion for choosing, given the immensity of all imaginable opportunities. This type of economic rationalization is actually of no help in understanding the concrete phenomenon of entrepreneurship. The social identity approach, on the contrary, allows the field of imaginable projects to be limited, making the explanation for founding the enterprise more realistic. The best example is that of the “communitarians”. In fact, they spontaneously focus on opportunities that allow them to support the community they belong to and be supported by it. Here, we find a much more credible principle of explaining the motives for founding the enterprise than the hypothesis of maximizing future revenues.
Let us take the example of the innovative winemaker who develops a new idea for growing vines, organic wine-making or selling wine. This is done through a passion for the profession, a love of the land and a will to serve the cause of the local community. In the case of success, the ex post rationalization that involves calculating the long-term yield from productive investments is, we can see, completely artificial. Hayekian reasoning on market opportunities is hardly more convincing. It is, however, adapted to describing the behavior of the Darwinian category.
What motivates people to start a business can, as we have just seen, significantly vary. The social identity explanation of the entrepreneurial phenomenon is a relevant start. It considerably differs from the classical explanations:
If we revisit the example of the “communitarian” entrepreneur, we will see that what motivates the head of the project is not cold, rational reasoning on the cognitive opportunities mentioned above, but the will to defend the values of his or her community and to benefit from the help this community provides in return. The community’s forms of contribution are themselves diverse. Some fall under the three categories indicated, e.g. when they are connected to skills specific to a region (inhabitants’ knowledge and skills, specialized local ecosystem, adapted infrastructure, institutional support through cluster policies, etc.), but this may also concern other fields, such as community funding, the image of the registered designation of origin or a captive market to release the product.
What is reductive in classical explanations is the approach exclusively through knowledge. The entrepreneur’s creative dimension is not limited to cognitive aspects in the strict sense of the term. Innovation is never just a matter of new knowledge (unlike scientific discovery). It implies a desire to change the world and requires particular qualities involving risk-taking (for unforeseeable risks) and the pursuit of a dream that is both individual and collective. This does not stop the entrepreneur from hoping to earn money along the way, but without the dimension of a dream and imagination, the enterprise is not possible. In addition to some knowledge elements, the entrepreneur has a vision. Moreover, his or her motivation is often linked to a desire to play a certain role: vis-à-vis a community or in relation to general stakes (ethical, esthetic, political, etc.). Incidentally, in a Weberian interpretation, earning money is also the choice of a particular role in society and the manifestation of adherence to a collective ethic – in a historic analysis by Max Weber, Protestant ethics with various Lutheran or Calvinist inspirations.
In this chapter, we reviewed numerous definitions of the entrepreneur’s role in the economy (and society), finishing with an analysis of the motivations behind starting a business. We also considered the context in which an enterprise’s project is selected – among an infinite number of imaginable opportunities. Now it is time to revisit the central question of this work, namely that of complexity. What is the emergent function from this standpoint? Can we possibly propose a new characterization of entrepreneurship?
When making decisions, entrepreneurs face a complex world. Let us recall that they do not know their market perfectly (decision-making with incomplete information) and they sometimes foresee creating one, an action that is at least as complex and uncertain. The project notion implies a decision in the present with effects on the future, yet these effects can only be partially anticipated since the project is acting on a complex system. What, then, will guide the entrepreneur to assume such responsibility? The response lies in the imagination.
In fact, since reality cannot really be deciphered, the entrepreneur’s work is based on a mental representation of the world. Entrepreneurs do not have objective information on the present and future environment. The information they have is partial, and the choice of their project as well as the decision to take part in a venture will be guided by a particular perception that resembles the construction of an image (a vision).
The notion of perception, the mental construction concerning reality, deserves some explanation. The term, in French or in English, harks back to the idea of deciphering a meaningful form in a complex exterior message, mixing a great deal of information and various sources of noise. Implicitly, the message sought after is present in the environment, but difficult to discern. The German translation of “perception” is Wahrnehmung: “that which is taken to be true”. This belies a slightly different notion, one related to the philosophical idea of truth. In German, perception is a constructed truth. This definition seems better adapted to the entrepreneur’s approach. The choice of a project and the decision to carry it out are based on a structure of the current and future world imagined, then assumed to be representative of reality.
The imagination is essential to act in a complex world, for this is by definition impossible to fully decipher. From this standpoint, the entrepreneur’s fundamental role is to imagine – an activity that partially substitutes that of knowing and understanding.
We can find interesting analytical elements in Peter Earl’s book The Economic Imagination (Earl 1983). In the real world of economic decision-making, it is not a question of knowing how decision-makers optimize their decision, but “how decision makers cope with ignorance and complexity” (op. cit. p. 81). The author revisits a wonderful expression by Kenneth Boulding: “Any decision is a choice among alternative perceived images of the future” (op. cit. p. 28).
In fact, all individuals – not only entrepreneurs – seek to perceive or impose order upon the complex world they are immersed in. The imagination allows the formation of a representation of reality, knowing that we cannot reason about reality, which is itself unthinkable. Reality, on the contrary, will end up manifesting itself as the project is carried out: it is a source of potential surprises for the entrepreneur. What must be understood when observing entrepreneurs is what creates their representation of the world and what motivates their action. Peter Earl provides leads to understand the individual’s choice of a project. In particular, he mentions the following attitudes:
We have already seen the contribution of social psychology, which explains the choice of entrepreneurial project through the desire to play a role in a particular community, to personally express a collective identity. In this case, the entrepreneur’s imagination is largely explained by his or her community belonging. Other patterns exist to explain the project’s nature and genesis, possibly more individual ones, but we always return to an inescapable pattern: the entrepreneur’s project is rooted in his or her imagination. This is itself the product of long-term interaction between the individual and the complex system he or she is immersed in.