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Entraprenuership

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Entraprenuership
Entrepreneurship: Productive, Unproductive, and Destructive
William J. Baumol

There are a variety of roles among which the entrepreneur’s efforts can be reallocated. Some of those roles are not constructive and innovative. At times the entrepreneur may even have a damaging impact to the economy.

How the entrepreneur acts depends heavily on the rules of the game, the reward structure of the economy.

i. On the Historical Character of the Evidence
I shall proceed on the basis of all the main economic periods and places that the economic historians single out for the light they shed on the process of innovation and its diffusion. These will be used to show that the relative rewards of different types of entrepreneurial activity have in fact varied dramatically from one time and place to another and that this seems to have had a profound effect on patterns of entrepreneurial behaviour.

ii. The Schumpeterian Model Extended: Allocation of Entrepreneurship
The analysis of this paper rests on what seems to be the one theoretical model that effectively encompasses the role of the entrepreneur and that really “works” in the sense that it constitutes the basis for a number of substantive inferences. It will be suggested here that only a minor extension of that model to encompass the allocation of entrepreneurship is required to enhance its power substantially in this direction.

Schumpeter tells us that innovations take various forms besides mere improvements in technology:
1. The introduction of a new good – one which consumers are not yet familiar.
2. The introduction of a new method of production.
3. The opening of a new market that the country has not previously entered.
4. The conquest of a new source of supply of raw materials or half-manufactured goods.
5. The carrying out of the new organisation of any industry.

To derive more substantive results from an analysis of the allocation of entrepreneurial resources, it is necessary to expand

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