1.1 Entrepreneur in Economic Literature/T1+T2 Defining Start-Ups

Question 1

What does Kirzner say about the Position of the Entrepreneur within the Theory of the firm and especially in equilibrium?

Answer 1

“There is no place for entrepreneurs in equilibrium”

• Theory of the firm:
  Neoclassical Theory: enterprise is reduced to a production function with production factors. The company aims at profit maximisation and efficient factor input. The E. could be seen as an additional production factor.
• Kirzner thinks: we assume that cost and revenue data are already known functions. –> the optimal decision is already implied
  –> in equilibrium there is no place for an E.

Question 2

How does Knight define Entrepreneurs?

Answer 2

“Entrepreneurs are uncertainty-takers”

• Entrepreneurship is management and responsibility
• Entrepreneurs get the residual after agreed upon saleries were distributed –> profit cannot be maximised in advance –> E. are uncertainty takers

Question 3

What is the difference between risk and uncertainty (according to Knight)

Answer 3

Risk: there is a probability distribution on the possible outcomes. It is insurable, there are market prices for risk

Uncertainty: there is no probability distribution on possible outcomes, not insurable, no market prices for uncertainty (also knightian / longitudinal uncertainty)

Question 4

What is Schumpeters perspective on Entrepreneurs especially refering to risk a?

Answer 4

“Entrepreneurs bring about innovations and destroy equilibria”

• entrepreneurs are NOT risk takers: the capitalist takes the risk, the E. looses other people’s money. People act as entrepreneurs, even if they havn´t got enough money
• E. want to be self-employed, they don´t weigh chances and risks, costs and utilities and don´t study possible alternative combinations

Question 5

How does Schumpeter define Entrepreneurs?

Answer 5

Person involved in the production and marketing of innovations as “enterprises”

Question 6

What does schumpeter say is the contribution of an Entrepreneur to the economy?

Answer 6

• entrepreneurs do NOT contribute production factors
• he controbutes the DECISION to direct factor inputs in the selected production process
• he therefore creates a disequilibrium and initiates ECONOMIC DEVELOPMENT

Question 7

How does Kirzner define entrepreneurs?

Answer 7

• they know where and how to get market information, detect profit oportunities
• the pure E. acts because he detects and exploits market situations, where the Selling price exceeds the Buying price
• -> the difference is entrepreneurial profit
• the E. detects something that is “free”
• contradiction to Knight: E. do NOT like uncertainties more than other

Question 8

How could we define an Entrepreneur based on Schumpeter, Kirzner and Knight?

Answer 8

1) owners and founders of enterprises (not managers) who exercise an entrepreneurial function PREDOMINANTLY
2) implements unused opportunities
3) creates and recovers (by arbitrage) disequilibria
4) accepts uncertainty about his future income

Question 9

How does Mark Casson define entrepreneurs?

Answer 9

• E. specialises in jugemental decision making
• mediates btw two owners about scarce ressources–> creates market
• internpret given information based on experience and knowledge

Question 10

How is a Startup Defined acc. to Luger and Koos “Defining and Tracking Business Start-Ups”?

Answer 10

• new (began prod. for first time, not through change in name, ownership)
• independent (not a branch subsidiary)
• active (no paper firms, at least one employee)

Question 11

Acc. to Luger and Koo: what are possible ways of gethering information on start-ups in a region?

Answer 11

• license records: 0/3 criteria
• name reg. records: 2/3 criteria , lack of specifics
• Dun Marketing Identifier: 2/3 criteria, very costly
• ES202: 3/3 criteria , only aggregated data
• Sensus of manufacturers: 3/3 criteria ,costly, aggreg.
• enumeration: variety of sources, reduces biases, costly