An article in this week’s print edition of the Economist, Searching for the invisible man, discusses entrepreneurship from the viewpoint of economics. The article focuses on William Baumol and his views on innovation when conducted within large companies with an allocated annual budget on one hand and “wildcat” entrepreneurs on the other. (The image is by Baumol and appears along with others on his homepage.)

Dr. Baumol contends that “among the (rare) innovations that can be considered to be radical, a disproportionate share is provided by independent innovators and their affiliated entrepreneurs”. Established players however, mostly provide “slightly better mousetraps”, i.e. incremental improvements.

But why would any sane person want to become an entrepreneur at all, given the huge risks and relatively low success rate? One of the main qualifications seems to be “a touch of madness”.

The Economist links to this year’s annual meeting of the American Economics Association, where three sessions on entrepreneurship were held in Baumol’s name. A passage in one of the articles there, by Carl J. Schramm, is amusing:

in addition to being a species that is apparently hard to see and difficult to exterminate, [entrepreneurs] play a central role in the undisputed objective of our managed economy, namely, growth.

So, entrepreneurs are the worms (or snails even) in the undergrowth of the economy. Invisible in economic theory, but vital for growth.

This entry was posted on Monday, March 13th, 2006 at 7:55 am and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.