Home > Articles

This chapter is from the book

1.5 Why Entrepreneurship Became Important

Here we are going to get a bit academic, so forgive us. You should realize that the terms entrepreneurship and entrepreneur have been around for centuries. Some consider Cantillion in 1755 as having been the first to mention the phenomena in a published work. Still others claim Say (1803) was first. Regardless, Hoselitz (1951) finds early traces in historical dictionaries to the Middle Ages in the normal course of development of the French language. The most general and probably the earliest meaning is “celui qui entreprend quelque chose,” which literarily means “he who gets things done,” in other words an active person. The preceding discussion shows that the term has stirred up considerable academic debate for quite some time even though Schumpeter (1934) is often considered to be the intellectual father of the modern field of entrepreneurship.

It is our considered opinion that entrepreneurship became important in contemporary life in 1987 to be precise. In that year entrepreneurship came to be regarded as a significant factor in national wealth creation, not just personal wealth creation. It thus entered the awareness of the wider, modern, audience. In 1987 David Birch published his book Job Creation in America. This book was the result of a longitudinal study carried out at MIT (Massachusetts Institute of Technology) between 1969 and 1986. The study traced 12 million individual business establishments during this period of time. The raw data was from Dun and Bradstreet (D&B), single unit stand-alone companies; a store, a small plant or a law firm. In 1986 the establishments employed 95% of all nongovernmental workers in the United States. The complete files of D&B were tapped regularly during this time period. The files had information on employment rolls, age, and location of each establishment.

Birch’s study showed that small start-up firms were responsible for more than 80% of all new jobs created in the United States and that large corporations in fact decreased employment. Small firms are more likely to expand than large organizations. If large firms were to create new jobs that would take place through a new business unit, not a new firm. To be blunt: large firms create new jobs through the formation of new business units. Mom and Pop Delis open up a second store managed by the owner’s daughter. Statistics from the U.S. Small Business Administration has over the years remained fairly stable and the same holds for most Western countries; 99.5% of all firms in a country are classified as small firms. This holds for the United States, Australia, Chile, India, or Finland. In 2015 there is evidence from the United States that 310 new entrepreneurs per every 100,000 adults were added each month. This is up from a monthly average of 280 in 2014. This indicates entrepreneurial levels have returned to a more normal pattern since the great recession of 2008. Of equal interest is that in 2013, 23 million people were self-employed, according to the U.S. Census Bureau. For whatever reason, more and more individuals are choosing different paths to being an entrepreneur.

  • + Share This
  • 🔖 Save To Your Account