Entrepreneurship and Economic Growth

Examines the role of the entrepreneur in the economic development of underdeveloped nations. Beginning with Redlich's three-part division of the entrepreneurial function into the capitalist function of providing funds to an enterprise, the managerial function of organizing production, and the narrowly-construed entrepreneurial function of planning and innovating, the author deduces general features of economic development from an examination of undeveloped nations' capital sources and a comparison of managerial and entrepreneurial personality types. Capital accumulation in underdeveloped countries either takes the form of government taxation and borrowing or individual borrowing from local merchants and the wealthy. Accordingly, two types of enterprises are typically found in underdeveloped countries: large, government-owned enterprises, which attract manager types, and small, private firms run by entrepreneurial types. After providing a brief overview of industrial relations in nineteenth-century England and in the mid-twentieth-century Soviet Union, the author contends that the predominance of managerial tendencies and their associated enterprise forms in underdeveloped nations will be injurious to the development of democracy. The question is then posed whether a climate of entrepreneurship can be induced in order to ensure that economic development follows the desired path. The author compares the differences in characteristics of capital owned by industrial entrepreneurs and commercial and financial entrepreneurs, as well as the differing characteristics of personality and motivation. He concludes that there is a need to encourage the development of the industrial entrepreneur, which requires encouragement of the appropriate type of person/personality. To promote this form of economic development, there is a need both for the appropriate social institutions and the freedom that allows a range of socially acceptable behavior. (CAR)