Volume 10, No. 2 (Summer 2007)
In his book The Theory of Economic Development, Schumpeter (1934) pointed out that entrepreneurs are prime movers of economic change. The entrepreneurs described by Schumpeter were innovators.They opened new markets, created new types of industrial organization, and introduced new goods, production methods, and new sources of materials. This innovative entrepreneur stands out like an economic hero whose creativity invigorates the economy with new ideas that lead to economic growth. But less imaginative entrepreneurs can also play an important role. They can copy the business ideas of others and, in so doing, play an important role in spreading new business techniques and raising productivity throughout an economy (Baumol 1988). The economic importance of the entrepreneur was again stressed by Birch (1979) who found that new and growing smaller firms account for 81.5 percent of new jobs. Given this role, it raises concern when entrepreneurs fail to seize opportunities and the economy stagnates. It leads to two questions. The first is “why might entrepreneurs fail to seize opportunities” and second “what is the relationship between entrepreneurial failure and economic decline?”
