A Brief Historical Sketch
The historical aspect of evolution of entrepreneurship is also interesting. It is worth noting that even the development of theory of entrepreneurship parallels to a great extent the development of the term itself. Thus, it becomes essential to observe the historical dimensions of the emergence of entrepreneurial class. This can be classified into the following historical periods:
i. Earliest Period
V. 19th and 20th Centuries
VI.Entrepreneur in the New Age-21st Century
The word entrepreneur is French. It liberally meant the person as “between-taker” or “go-between.“ An early example is of Marco Polo, who tried to establish trade routes
to the Far East. As a go-between, Marco Polo would sign a contract with a money person to sell him goods. He was forerunner of today’s venture capitalist. While the capitalist
was a passive risk bearer, the merchant-adventurer took the active role in trading, bearing all the physical and emotional risks.
When the merchant-adventurer successfully sold the goods and completed the trip, the profits were divided with the capitalist taking most of them (upto 75 percent), while
the merchant-adventurer settled for the remaining 25 percent.
Middle Ages In the Middle Ages, the term entrepreneur was used to describe both an actor and a person who managed large production projects. In such large production projects, this individual did not take any risks, but merely managed the project using the resources provided, usually by the government of the country. A typical entrepreneur in the Middle Ages was the cleric-the person in charge of great architectural works, such as castles and fortifications, public buildings, abbeys, and cathedrals,
ii.Early references to the entrepreneur in the 14th century spoke about tax contractors-individuals who paid a fixed sum of money to a government for the license to collect taxes in their region. Tax entrepreneurs bore the risk of col.lecting individual taxes. If they collected more than the sum paid for their licenses, they made profits and kept the excess. If they failed to collect enough to match the cost of their licenses, government officials, who already had their money from license fees, could not care less.
The connection of risk with entrepreneurship developed in the 17th century. Here emerged an entrepreneur who entered into a contractual arrangement with the government to perform a service or to supply stipulated products,
Cantillon developed one of the early theories of the entrepreneur and is regarded by some as the founder of the term. He viewed the entrepreneur as a risk taker, observing that merchants, farmers, craftsmen, and other sole proprietors “buy at a certain price and sell at an uncertain price, therefore operating at a risk.”
Richard Cantillon gave the concept of entrepreneurship a central role in economics. According to him entrepreneurs assume the risk of enterprise and consciously make decisions about resource allocations. He always seeks the best opportunities for using resources for their highest commercialyields
In the 18th century, the person with capital was differentiated from the one who needed capital. In other words, the entrepreneur was distinguished from the capital provider (the present-day venture capitalist). One reason for this differentiation was the industrialisation occurring throughout the world. Many of the inventions developed during this time were reactions to the changing world, as was the case with the inventions of Eli Whitney and Thomas Edison. Both Whitney and Edison were developing new technologies and were unable to finance their inventions themselves. Edison raised capital from private sources to develop and experiment in the fields of electricity and chemistry. Both Edison and Whitney were capital users (entrepreneurs), not providers (venture capitalists). A venture capitalist is a professional money manager who makes risk investments from a pool of equity capital to obtain a high rate of return on the investments, Adam Smith spoke of the “enterpriser” in his Wealth of Nations as an individual who undertook the formation of an organisation for commercial purposes. He thereby ascribed to the entrepreneur the role of industrialist, but he also viewed the entrepreneur as a person with unusual foresight who could recognise potential demand for goods and services. In Smith’s view, entrepreneurs reacted to economic change, thereby becoming the economic agents who transformed demand into supply.
V.19th and 20th Centuries It was 19th century entrepreneurs who thrust the world into industrialism. In these centuries, French, British and Austrian economists wrote enthusiastically about entrepreneurs as the change agents” of progressive economies. In these centuries, entrepreneurs displayed the following features:
1. Entrepreneurs were frequently not distinguished from managers.
2. They were viewed mostly from an economic perspective.
3.They acted as innovators..
4.The entrepreneur became the fourth factor” of economic endeavour