...Schumpeter: Taking the long view | The Economist 24/08/13 12:14 AM More from The Economist Subscription Log in or register World politics Business & finance Economics Science & technology Culture Blogs Debate Multimedia Print edition This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Review our cookies information for more details Schumpeter Comment (77) E-mail Print Reprints & permissions Taking the long view The pursuit of shareholder value is attracting criticism—not all of it foolish Nov 24th 2012 | From the print edition Tweet 262 Advertisement HE IS the chief executive of a multinational corporation, but Paul Polman sometimes sounds more like a spokesman for Occupy Wall Street. The boss of Unilever (an AngloDutch consumer-goods firm with brands ranging from Timotei shampoo to Ben & Jerry’s ice cream) agonises about unemployment, global warming and baby-boomer greed. He puts some of the blame for these ills on the most influential management theory of the past three decades: the idea that companies should aim above all else to maximise returns to shareholders. He appears to mean it. Since taking charge in 2009, Mr Polman has stopped Unilever from publishing full financial results every quarter. He refuses to offer earnings guidance to equity analysts. He has introduced a lengthy “sustainable living plan” and attracted a new cadre of long-term investors, particularly...
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...Quite a bit of it is an immediate take from Schumpeter. Sixty years on, the confounding parts of Schumpeter's financial aspects and profession have to a great extent been disentangled, because of the accessibility of archival material and recently settled realities about his perspectives on private enterprise. In this paper I will recommend that Schumpeter's idea of free enterprise is significantly more unobtrusive and complex one than his spoilers have perceived. A more adjusted review is currently conceivable of Schumpeter's scholarly intrigues and long term record of free enterprise. Questions about free enterprise: what it is, the manner by which and why it functioned admirably in a few nations and not in others, are among the most vital that individuals and governments have confronted...
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...Schumpeter: A guide to skiving | The Economist 10/23/14, 3:56 PM Schumpeter A guide to skiving How to thrive at work with the minimum of effort Oct 25th 2014 | From the print edition THE best way to understand a system is to look at it from the point of view of people who want to subvert it. Sensible bosses try to view their companies through the eyes of corporate raiders. Serious-minded politicians make a point of putting themselves in their opponents’ shoes. The same is true of the world of work in general: the best way to understand a company’s “human resources” is not to consult the department that bears that ugly name but to study the basic principles of one of the world’s most popular, if unrecognised, sciences: skiving. The first principle of skiving (or shirking, as Americans call it) is always to appear hard at work. This is the ancient jacket-on-the-back-of-the-chair trick: leave a coat permanently on display so that a casual observer—a CEO practising “managing by walking around”, for example—will assume that you are the first to arrive and the last to leave. The skill of skiving is subtle: ensure you are somewhere else when the work is being allocated. Successful skivers never visibly shy away from work: confronted with the inevitable they make a point of looking extremely eager. This “theatre of enthusiasm” has fooled almost everyone. Policymakers bemoan the epidemic of overwork. But as Roland Paulsen, of Sweden’s Lund University, explains...
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...down as follows: * Entrepreneurs are economic actors, i.e. individuals engaged in commercial activity * Entrepreneurs create new ventures through innovation * Innovation consists in combining existing factors of production in new ways We will analyse both Schumpeter’s and modern day entrepreneurs along these and other dimensions in an attempt to place Schumpeter’s concepts in the realities of the 21st century. 2. Schumpeter’s theory of entrepreneurship Economic development One of Schumpeter’s major life works is his book Theory of Economic Development published first in 1911 in German and then republished in an updated version in 1934 in English (Schumpeter 1934), in which he describes a model of economy where entrepreneurs are the main drivers for change and development. In the first chapter of the book Schumpeter introduces an abstract model of static economy existing in a state of equilibrium of supply and demand where nothing new ever needs to be done. Next he argues that economic development can only occur through revolutionary disruptive changes displacing the equilibrium. Also in Schumpeter’s view it’s the “producer who as a rule...
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...meaning “to do something” or “to undertake.” By the sixteenth century, the noun form, entrepreneur, was being used to refer to someone who undertakes a business venture 1730 by Richard Cantillon, who identified the willingness to bear the personal financial risk of a business venture as the defining characteristic of an entrepreneur STUART Mill used the term “entrepreneur” in his popular 1848 book, Principles of Political Economy, to refer to a person who assumes both the risk and the management of a business. In this manner Two notable twentieth-century economists, JOSEPH SCHUMPETER and Israel Kirzner, further refined the academic understanding of entrepreneurship. Schumpeter stressed the role of the entrepreneur as an innovator who implements change in an economy by introducing new goods or new methods of production. In the Schumpeterian view, the entrepreneur is a disruptive force in an economy. Schumpeter emphasized the beneficial process of CREATIVE DESTRUCTION, in which the introduction of new products results in the obsolescence or failure of others. In contrast to Schumpeter’s view, Kirzner focused on entrepreneurship as a process of discovery. Kirzner’s entrepreneur is a person who discovers previously unnoticed profit opportunities. The entrepreneur’s discovery initiates a process in which these newly discovered profit opportunities are then acted on in the marketplace until market COMPETITION eliminates the profit opportunity. Unlike Schumpeter’s disruptive force, Kirzner’s...
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...Competing views of the entrepreneur The term entrepreneur has become to have a broad definition over the years, with many authors debating over the types of characteristics that make up a person who can be classed as entrepreneurial. The word originally came from the French meaning 'one who takes between' but over the years the term has developed with varying definitions from academic literature, the media and often people classed as entrepreneurs themselves, causing great difficulty in finding a universal definition. In the late 18th Century, Cantillion and Say from the French school of thought were amongst the first to recognise the role of the entrepreneur. Cantillion first defined entrepreneurs as a 'risk taker', buying at a certain price and selling at an uncertain price. (Cited in Blaug 1986:220) Jean-Baptiste Say backed this up by stating entrepreneurs are 'the pivot of the economy, a vehicle for economic change. Deakins and Freel (2009). In the years to come, further concepts of entrepreneurs were developed and argued amongst academics. By examining the differing opinions from a broad spectrum of authors since the role was first distinguished, through the years where the meaning has become diverse and arguments have surfaced over the true meaning of entrepreneurship, I hope to make clear whether the term is so unclear to render it worthless or find some way of giving it some true common definition in today's society. To investigate the varying opinions and definitions...
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... laying down a comparative analysis where the insights gained from one theory can be used to fill the gaps of another. Throughout the series I will cover different authors (Henderson, Utterback, Teece, Tushman, Forster, Christensen, etc) and different concepts of innovation (incremental, modular, architectural, radical, product, process, market, disruptive, organizational, complementary, etc). Schumpeter: The first part will be dedicated to the Austrian economist Joseph Schumpeter, a pioneer when we talk about innovation management. Around the 1930s Schumpeter started studying how the capitalist system was affected by market innovations. In his book “Capitalism, Socialism and Democracy” he described a process where “the opening up of new markets, foreign or domestic, and the organizational development [...] illustrate the same process of industrial mutation, that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”. He called this process “creative destruction”. After analyzing the capitalist model Schumpeter tried to understand what companies would be in a better position to innovate. He developed a theory where a company’s ability to innovate was mainly connected to its size. Initially he defended that small...
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...Joseph Alois Schumpeter (Triesch, Moravia, February 8, 1883 - Salisbury, Connecticut, January 8, 1950 (age 66)) is an Austrian economist mid twentieth century, known for his theories of economic fluctuations, creative destruction and innovation . He is the author of a History of Economic Analysis, published in 1954 and still refers. Neither Keynesian nor neoclassical, is often close to the Austrian School of Economics. It is considered economist excitement and it is called heterodox economist for his theories on the evolution of capitalism in democracy, he believes doomed to disappear for social and political reasons. Schumpeter leaves hardly classify an economic school. Whether it was Austrian , he has never been part of the Austrian School with which he was familiar with the teachings of Eugen von Böhm- Bawerk at the University of Vienna. The economist he admired most was undoubtedly Leon Walras , but his analysis goes beyond the neoclassical framework . He was also heavily influenced by the writings of the German sociologist Max Weber. And if he shared some conclusions with Karl Marx, his analysis was very far from Marxist economic designs. Is actually the founder of general economic evolutionism . It is therefore listed in the circle called "heterodox" economists. He believes that the foundation and spring dynamics of the economy are innovation and technical progress. The history of capitalism is a permanent moult. Technology evolves, turns pushing swathes of...
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...Prophet of Innovation: Joseph Schumpeter and Creative Destruction, by Thomas K. McCraw, Cambridge: Harvard University Press, 719 pages, $35. In Joseph A. Schumpeter’s (1883-1950) encyclopedic History of Economic Analysis, Schumpeter began by proclaiming that histories of economics should confine themselves to economic analysis, which he defined as “the analytic or scientific aspects of economic thought" (1954: 1). Schumpeter then proceeded to ignore his own edict, for over 1000 small-print pages. Having preached analysis-only Schumpeter practiced more ecumenically, weaving together intellectual history, biography, and economic sociology. Indeed, Schumpeter spent most of his last decade writing the 800,000 words of the ferociously erudite History, and thereby failing to complete a long-planned work of economic analysis. Thomas McCraw’s splendid new book brilliantly illuminates this Schumpeterian paradox, and the many others that made Schumpeter, as Phillip Mirowski put it, “a living, breathing contradiction” (1994: 5). Prophet of Innovation is not just a beautifully drawn portrait of Schumpeter’s life and times, it is also a distinguished business historian’s meditation on the two opposed cultures of political economy post-1870: history and theory. The Prophet of Innovation, among its other accomplishments, tells the story of how a great and productive intellect wrestled with the two-cultures problem in political economy. In the work of Schumpeter, McCraw finds the very personification...
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...Entrepreneurship Center Sloan note: In the interest of full disclosure, among other universities attended (Maryland, Syracuse, Indiana, Ohio U, Ohio State) I must include Miami of Ohio (Political Science PhD program; voluntarily dropped out at the year mark – I found out what they pay those guys in that discipline! Business is a whopping amount better. In the spirit of due diligence, you can burn a whole lot of time through sheer naiveté). Researchers have been inconsistent in their definitions of entrepreneurship (Brockhaus & Horwitz, 1986, Sexton & Smilor, Wortman, 1987; Gartner, 1988). Definitions have emphasized a broad range of activities including the creation of organizations (Gartner, 1988), the carrying out of new combinations (Schumpeter, 1934), the exploration of opportunities (Kirzner, 1973), the bearing of uncertainty (Knight 1921), the bringing together of factors of production (Say, 1803), and others (See Long, 1983). The outline below presents some authors definitions of entrepreneurship and attempts to summarize these viewpoints into a more meaningful whole. Richard Cantillon (circa 1730); Entrepreneurship is defined as self-employment of any sort. Entrepreneurs buy at certain prices in the present and sell at uncertain prices in the future. The entrepreneur is a bearer of uncertainty. Jean Baptiste Say (1816); The entrepreneur is the agent "who unites all means of production and who finds in the value of the products...the reestablishment of the entire capital...
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...which requires innovative thinking. In this type of market the fluidity, energy, motion, constancy and ubiquitousness of changes in the market occur very frequently and head to head competition between firms is common place and the pace, magnitude and direction of change is continuously accelerated and harder to predict. Teece, Pisano and Shuen (1997) as referenced by Fernald and Solomon in their paper, described today’s dynamic Schumpeterian world of innovation–based competition, price /performance rivalry, increasing returns and the ‘creative destruction of existing compeitencies.”(p.509) "creative destruction" was popularized by and is most associated with Joseph Schumpeter, particularly in his book Capitalism, Socialism and Democracy, first published in 1942. In Capitalism, Socialism and Democracy, Schumpeter popularized and used the term to describe the process of transformation that accompanies radical innovation. In Schumpeter's vision of capitalism, innovative entry by entrepreneurs was the force that sustained long-term economic growth, even as it destroyed the value of established companies and laborers that enjoyed some...
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...Nottingham University Business School Undergraduate Programmes TITLE OF MODULE: Entrepreneurship and Business (N11440 MY) Title of Work: Discuss the relationship between entrepreneurship, innovation and economic development. What role if any do creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion COPY 1 TITLE OF MODULE: Entrepreneurship and Business (N11440 MY) Title of Work: Discuss the relationship between entrepreneurship, innovation and economic development. What role if any do creativity and problem solving play in this relationship? Refer to both theory and examples from the business world to support your discussion COPY 2 Austrian writer, professor, management consultant and self-described “social ecologist,” Peter F. Drucker once said “Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.” (BrainyQuote, 2014) This essay aims to show how innovation, entrepreneurship and economic development are all linked together as shown in the statement above. Even though many a time the spotlight has been shined on entrepreneurship as the propellant towards success, there are still many factors that have to be taken into account such as creativity and problem solving skills...
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...Case Analysis “Creative Destruction”- Economist Joseph Schumpeter The very term “capitalism” is derived from a division of the factors of production into labor, land, and capital (McConnell, Brue & Flynn, 2012). Entrepreneurship is a late comer to this division when it was discovered that the value of output could not be derived from the factors of production that went into producing it; entrepreneurship was introduced to account for the difference. So when we speak of giving capital “free hand”, we are really talking about entrepreneurship: the pursuit of higher returns on capital-profit. Entrepreneurship can increase productivity of capital. Globalization, removing government restrictions, and giving the profit motive an opportunity have led to an explosion in productivity (McConnell, Brue & Flynn, 2012). The gains in productivity are closely related with the development of the network economy and the Internet happened to reach explosive growth in the past few years. The internet started off as a government-sponsored research network that people hooked into. It was only when it started being used for commerce and advertising did it become a significant factor in fostering productivity, economic growth and the stock market boom. The technological innovations, at which the internet is the only one at this time I am speaking of, has also a reflexively connected with the abolition of the regulated monopolies in the telephone industry(McConnell, Brue & Flynn, 2012)...
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...industry. Commonly, an entrepreneur is regarded as the owner of a big company or firm. However, such views portray a narrow and restricted activity of an entrepreneur. In the real world, an entrepreneur does much more than just setting up a firm. It plays a vital role in the flourishing of a country. Joseph Schumpeter believed that “everyone is an entrepreneur only when he actually carries out the new combinations and loses that character as soon as he has built up his business.” (The Theory of Development, 1934). His belief holds true to a large extent and modifies the way we commonly think of an entrepreneur. He describes entrepreneurship to be process or activity that is carried out by a person. Thus the quality of this entrepreneurial spirit is possessed for only a certain period of time and doesn’t last forever. It’s the ability of an entrepreneur to identify what the market is devoid of, reacting creatively to the opportunity with new ideas and acting upon these ideas through a process of innovation to produce new goods, creating demand for it and giving it market value. Such a process leads to correction of market failures and deficiencies (Leibenstein, 1995, Schumpeter 1942). It causes changes in the market by creating disequilibrium of market forces. These changes act as sources of opportunities for the entrepreneur, which can be exploited. An entrepreneur plays the role of a risk taker who is able and willing to experiment with ideas and pool in resources to carry...
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...Case #4: THE BATTLE FOR VALUE, 2004: FEDEX CORP. VS. UNITED PARCEL SERVICE, INC. Synopsis and Objectives • Set in June 2004 • To assess the financial performance of FedEx Corp. and United Parcel Service, Inc (UPS). The two firms have competed intensely for dominance of the overnight express package industry. • This case is intended for use in an introductory discussion of corporate value creation and its sources. It requires no numerical computations; rather, the tasks are to interpret the results and to reflect upon their implications. The contrasting record of the two firms affords a platform to: • Assess economic profit analysis (also known as Economic Value Added) and, more generally, the measurement of financial performance and health. The case provides a complete historical economic profit analysis for both firms, and permits comparison with other classic approaches to historical performance analysis. This comparison affords the opportunity to discuss the attributes of healthy and successful companies, and to explore the strengths and weaknesses of economic profit. Key learning points about economic profit include its dependence on the conventions of generally accepted accounting principles (GAAP) and its ignorance of strategic option value. • Evaluate the financial implications of rigorous competition and corporate transformation. Questions 1. What are the enabling and inhibiting factors facing the two firms as they...
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