On the Changing Nature of Entrepreneurship

Abstract

This essay examines how the entrepreneurial role has changed over time in the context of an evolving American economy since the Civil War. Because entrepreneurs do what the market has failed to do by itself, entrepreneurs and the market are complementary to each other. It is, therefore, not surprising that as the market evolved over time, the role played by the entrepreneur also changed in a predictable fashion. As the entrepreneur’s role evolved, the characteristics of the firm and the economy also changed as a consequence. The resulting firm becomes a coalition of entrepreneurs, and decision making in the firm is decentralized. Decentralization in decision making, in turn, leads to greater responsiveness to the consumer and more extensive utilization of the market. In short, the resurgence of the entrepreneur in recent years has greatly enhanced the market performance. Introduction Entrepreneurs in an uncertain market environment perform creative acts in the business sphere just as artists, essayists, and scientists do in their respective fields. Specifically, the presence of uncertainty causes the market to be incomplete and the incomplete market, in turn, destroys the market's ability to coordinate production. Entrepreneurs rise to organize production by assuming a part of the allocative role which, according to the traditional theory, is reserved exclusively