The Spirit of Innovation III Innovation Networks Tacoma – Washington – 14/16 may 2008

1. The Spirit of Innovation IIIInnovation NetworksTacoma – Washington – 14/16 may 2008 Business Creation in Developed Countries at the beginning of 21th century The role of the Resources Potential of the entrepreneur Sophie BOUTILLIER Lab. Rii / University of Littoral Dunkerque - France

2.  Aims of the paper:  Entrepreneurs have been at centre of economists’ (Audretsch, Casson, Gilder, Shane, …) concerns and public policies since the beginning of the 1980s in capitalist economies (Boutillier, 2008). This fact is relatively new: since the end of the Second World War, the paradigm of the big enterprise has prevailed (Schumpeter, Galbraith, Chandler). A paradigm (Kuhn, 1983) is defined as a set of interrogations, assumptions and responses starting from which a given reality becomes understandable. However a paradigm also gives a structure to a scientific community which uses it as a reference.

3. The years of growth that followed the Second World War were marked by phenomena of industrial (vertical) concentration (« technostructure », Galbraith, 1968). The big enterprise imposed itself and together with mass production and salaried employment. Baumol (1968) wrote in a famous article that the entrepreneur had disappeared from the economic literature. • But, we note that only a few number of economists have analyzed the role of the entrepreneur in the economic dynamics : Cantillon (17th)  entrepreneur = Uncertainty + Risk Say (19th)  entrepreneur = Uncertainty + Risk + Innovation Schumpeter (20th)  entrepreneur = Uncertainty + Risk + Innovation + Business cycles  Today, social scientists have put forward three distinct conceptual perspectives to explain the role of the entrepreneur in capitalist economy: (1) Institutional perspective: this perspective focuses on the role of economic, political, and legal institutions, (2) social, cultural values and social networks in promoting or discouraging entrepreneurial activities, and (3) individual characteristics of the entrepreneurs (attitudes toward risk, individual self-confidence, etc.). In these three perspectives, the analysis is based on micro criteria.  We argue that the entrepreneur is an individual, but he is a metaphor to explain the capitalist dynamics. Our analysis is based on this principal.

4. The heroic entrepreneur Heroic entrepreneur BigEnterprises

5. Contents 1- Why did the paradigm of the entrepreneur emerge in 1980s? 2- The paradigm of the big enterprise. 3- The « socialized entrepreneur » or the entrepreneur of the 21th century. 4- The Resources potential of the entrepreneur and the organic square of business activity.

6. 1- Why did the paradigm of the entrepreneur emerge in 1980s? The beginning of the 1980s was marked by a whole set of major transformations that consecrate a sort of rupture from the previous period (the period of the big enterprise): • New public policies (deregulation/privatization). • Development of financial markets. • Emergence of New technologies of information and communication. • Decline of public expenses (for social objectives). • Augmentation of mass unemployment. In this new economic context, the entrepreneur plays a new role. He is not the heroic entrepreneur of the first time of capitalism. He is a socialized entrepreneur.

7. 2- The paradigm of the big enterprise • The 1950-1970s are marked by the domination of big enterprises (« managerial capitalism ») (Schumpeter, Galbraith, Chandler, Veblen, Marx, etc.) which is characterized by mass production (economies of scale), salaried employment and the welfare State. • These big enterprises are governed by a “collective entrepreneur” or a “technostructure” : manager + shareholder. • The economic growth is based on two elements: Mass production + Mass consumption . • The industrial activities are capital intensive (aircraft, petrol, electricity, chemicals, car industries, etc.). • For a lot of economists, the managerial capitalism is the final stage of capitalism, “the end of the History”? The managerial capitalism is the end of competition and the free market. Schumpeter asked: Can Capitalism survive? Galbraith notes convergences between Capitalism (USA) and Socialism (Soviet Union).

8. ManagerialCapitalism Managerial capitalism Mass Consumption Mass production Manager + Shareholder

9. Big entreprises and entrepreneurs since the end of the second World War

10. 3- The « socialized entrepreneur » or the entrepreneur of the 21th century  Schumpeter (1942) was not right. Capitalism has not disappeared. Big multinational corporations dominate the world economy while myriad of small firms are born, grow and die on a regular basis.  The world has changed (fall of the Berlin Wall, end of socialism, etc.).  The entrepreneur still exists, but he is not longer a hero (H. Ford, J. Rockefeller, A. Carnegie, L. Renault…), he has become a socialized entrepreneur.

11. 3- The « socialized entrepreneur » or the entrepreneur of the 21th century • The socialized entrepreneur is not an entrepreneur in a socialist economy. The socialized entrepreneur takes place in the capitalist economy. He is sitting at the interface between two logics: • The logic of the big industrial and financial enterprise that seeks to stimulate the creation of enterprises in order to test new markets. Thus, the socialized entrepreneur takes place in the network enterprise (Castells, 1998). • The logic of the state that seeks by these means to fight against unemployment and promote innovation (Esping-Anderson, 1990).

12. 4- The Resources potential of the entrepreneur and the organic square of business activity  We said that the entrepreneur is a metaphor to explain the capitalist dynamics, • We define the resources potential of the entrepreneur to develop this idea. • The resources potential is built on a synergic analysis between micro and macro levels.

13. Table 1. The Resource Potential of the Entrepreneur

14. The socialized entrepreneur takes place in the Organic Square of Business activity • The three elements of the entrepreneur’s potential of resources are determined by the place he holds in the social organization – in spite of the increasing socialization of the economy (Durkheim, 1893). • The role of the socialized entrepreneur is to innovate (new products, new services or social activities) and to create new jobs (the entrepreneur creates his job and salaried employment).

15. The organic square of entrepreneurship • Public Policies • Fight against unemployment through the creation of enterprises • Stimulate innovation through the creation of enterprises Entrepreneur’s resource potential - knowledge - financial resources - relations E P Socialized entrepreneur B • Big Business • Outsourcing of a part of their productive activities (cost reduction) • - Innovate either through R&D Economic organisation - regulations - financial system - place of large enterprises - level of technical and knowledge development O

16. Table 2. From a paradigm to another

17. Socialized entreprepreneur Logic of the State Socialized Entrepreneur Logic of the Big entreprises Jobs Innovations

18. Thank you for your attention