1.2 - Theory of Entrepeneurship Flashcards
What is the concept of creative destruction as introduced by Schumpeter?
Schumpeter introduced the notion of “creative destruction” to the discourse around entrepreneurship. It describes a process where innovation causes market changes, economic changes, and disequilibrium.
How does Schumpeter associate the entrepreneur with innovation?
According to Schumpeter, the entrepreneur is the creator or the “disruptor” who causes market change, economic change, and disequilibrium. The entrepreneur is responsible for driving these changes through innovative actions.
What is the gales of creative destruction?
Schumpeter developed the concept of “gales of creative destruction,” which is economic development through radical innovation and change. In this concept, firms are combinations of resources and knowledge, and the difference lies in how these elements are applied in new and novel ways.
What impact does the launch of an entrepreneur’s venture have on the market?
The launch of an entrepreneur’s venture serves as a ‘shock’ that can knock the market into disequilibrium. New possibilities introduced by the entrepreneur may threaten existing products but also stimulate the introduction of new activities by other entrepreneurs.
What challenges do entrepreneurs face according to Schumpeter’s implications?
Schumpeter implies that the entrepreneur is a special person who is likely to face challenges in finding support and finance. They produce “creative destruction,” which makes the existing framework inappropriate and necessitates new approaches.
How does Kizner respond to Schumpeter’s ideas on entrepreneurship?
Kizner argues that entrepreneurs do not necessarily need to be creative like Schumpeter suggests. Instead, they simply need an ‘alertness’ capability, which enables them to recognize opportunities that others might miss.
What are the implications of Kizner’s ideas on entrepreneurship?
Kizner’s ideas do not explain where change comes from in the economy, but accept it as a fact. Alertness in entrepreneurs depends on their knowledge. Factors like information asymmetry and different types of knowledge dictate how opportunities are detected and exploited.
What is the difference between Incremental and Radical Innovation?
According to Schumpeter and Kirzner, there are two types of innovation: radical and incremental. Radical innovation is a game-changer that brings about significant market and economic changes. Incremental innovation is the gradual improvement of existing systems.
How do Radical and Incremental innovation fit with social entrepreneurship?
The Kirznerian social entrepreneur addresses disequilibrium by meeting needs that others will not, often through incremental innovation. The Schumpeterian social entrepreneur, on the other hand, introduces new systems to replace ill-suited ones, typically through radical innovation.
