Cantillon and Marshall
Cantillon and Marshall both agree that the ability to bear risk is necessary for successful engagement in entrepreneurship. However Marshall argues that the alert entrepreneur should be innovative to minimize costs. He differs with Cantillon on this aspect as Cantillon does not regard innovativeness as being an important function of the entrepreneur. Marshall is also of the opinion that family background and a good education are important in
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entrepreneurship; however Cantillon’s theory does not mention these factors as being vital for successful entrepreneurship. Cantillon also views the entrepreneur’s activities as leading to equilibrium in society; this is not the case in Marshall’s theory.
Marshall and Jean-Baptiste Say
Say and Marshall’s theories have a number of similarities. Firstly Say and Marshall are in general agreement that the possession of private capital is very helpful towards a good start in entrepreneurship, and those individuals lacking capital would perform equally when they find an opportunity to start in business (Van Praag, 1999: 322). Both Say and Marshall also agree on that knowledge of the industry and occupation increase the probability of success in entrepreneurship. The two theorists are also similar in their assessment of the entrepreneur as a risk bearer. Both of them add managing personnel to the entrepreneurial function (Van Praag, 1999: 328). The major difference between Marshall and Say’s theories is that Marshall emphasizes the importance of the impact that family background has on successful entrepreneurship.
Schumpeter and Marshall
Marshall’s theory is well-suited with the idea of the entrepreneur being in the position of an independent owner, decision maker and manager of the firm whilst Schumpeter’s theory includes employees in the definition of entrepreneurship as, according to him, employees
‘carry out new combinations’ which business owners have ceased to carry out (Van Pragg, 1999: 327). Schumpeter and Marshall’s theories sharply contrast on the entrepreneur’s position as a risk-bearer. Schumpeter is of the view that entrepreneurs are not risk bearers as risk-bearing is the responsibility of the banker. This is the opposite of what Marshall says on the matter as he is of the view that entrepreneurs are responsible for risk-bearing.
Schumpeter’s theory unequivocally omits the supply of capital from the business of the entrepreneur (Van Praag, 1999: 328). Although Marshall mentions access to capital markets in his theory he assumes that entrepreneurs are able to borrow money easily. He however argues that entrepreneurs working on borrowed capital have a disadvantage as they have to pay an additional risk-premium to the banker (Van Praag, 1999: 328).
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Another major difference between Marshall and Schumpeter’s theories is that whereas Marshall gives importance to certain abilities related to management, leadership and industry, Schumpeter assumes that successful entrepreneurship depends on a certain attitude and a willingness to show deviating behaviour (Van Praag, 1999: 328).
Marshall and Casson
Mark Casson places judgemental decision making as the central characteristic of a successful entrepreneur. This is closely related to the factors of intelligence and knowledge that Marshall argues are part of what is necessary for successful entrepreneurial engagement. Marshall and Casson also agree that entrepreneurs are responsible for any risk that is related to the business and they have low risk aversion.
However, whereas Casson emphasizes the importance of optimism and self-confidence as the personality traits essential for successful entrepreneurship Marshall argues for abilities related to management, leadership and industry.
Weber and Marshall
Max Weber’s theory of the Puritan ethic is an attempt to understand entrepreneurship by analyzing it through a religious lens. This is so because he lived in a theocratic society which existed at the time. Marshall’s theory unlike Weber’s is not a theological attempt to explain entrepreneurship. However both theories are in agreement on that the obtaining of profit is the reason for entrepreneurial engagement, although Weber’s Puritans took up entrepreneurship mainly for the reason of social advancement since they were a religious minority at the time.
Marshall and Knight
Both Knight and Marshall view an entrepreneur as “an independent owner, decision maker and manager” (Van Praag, 1999: 327). The theorists also agree that an entrepreneur is a risk bearer although Knight’s entrepreneur is the decision maker whenever uncertainty is involved while Marshall’s entrepreneur is the one responsible for undertaking all the business risk (Van Praag, 1999). Both Marshall and Knight include personnel management to the entrepreneurs’
task, although Knight did so to a lesser extent (Van Praag, 1999: 328). Marshall describes a capital market in which an entrepreneur appears to be able to easily borrow money. Knight
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in contrast describes a capital market which is far from perfect as, according to him, entrepreneurs need enough wealth to pay “production factors their guaranteed remuneration” (Van Praag, 1999: 328). However Knight points out that an entrepreneur can convince a banker to lend him or her capital required to start a business.
Both theorists argue that good luck (Knight) and good fortune (Marshall) can contribute to successful entrepreneurship.
Israel Kirzner and Marshall
The activities of Kirzner’s entrepreneur, unlike Marshall’s, contribute towards the movement of the market to an equilibrium position (Van Praag, 1999: 327). However Kirzner agrees with Marshall on that risk-bearing is an entrepreneur’s responsibility, although uncertainty is central to the activities of Kirzner’s entrepreneur (Van Praag, 1999: 328). Kirzner emphasizes the importance of alertness and foresight and of being able to discover profit opportunities (Van Praag, 1999: 328). Marshall on the other hand gives prominence to certain abilities related to management, leadership and industry (Van Praag, 1999).
According to Kirzner an entrepreneur does not require any special ability or personality to perform their function; she or he could hire all the required labour and business talent (Van Praag, 1999). This is in contrast to Marshall who states that successful entrepreneurs have to be intelligent, should have general ability as well as knowledge of the trade. Kirzner however agrees with Marshall that a very special type of knowledge is required for
successful entrepreneurship. Both theorists also agree on the importance of leadership for successful business engagement. However Kirzner goes on to emphasize that creativeness is a quality required for an entrepreneur to gain financially from business opportunities.
Why Marshall’s theory was chosen
Marshall’s theory of entrepreneurship was chosen as the framework to guide this study because it is more holistic than the other theories in its outlining of the factors that determine successful engagement in entrepreneurship. These include the view that entrepreneurs should have intelligence, are risk-bearers, have knowledge of the trade and that a good background contributes to successful entrepreneurship. The theory also adds that
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entrepreneurial abilities can be learnt and that the economic environment has a bearing on entrepreneurship, among the many other factors it discusses.
Table 4. Determinants of successful entrepreneurship discussed by the Classic Authors
Source: Van Praag, 1999: 32
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