‘there is an emerging tendency in the new field of strategic entrepreneurship (associated with scholars at the Fisher College of Business at Ohio State University) to view entrepreneurship itself as a resource, and able thereby
to earn entrepreneurial rents. Here the argument goes that entrepreneurial initiative is associated with some identifiable ‘resources’ such as entrepreneurial cognition (the recognition of opportunities) and entrepreneurial resource-combining
(the exercise of combinative capabilities), brought to the firm by the entrepreneur, and which then earn entrepreneurial rents. According to Alvarez and Busenitz (2001: 759) if the insights and decisions reached with entrepreneurial cognition ‘are indeed rare, if they are difficult to imitate, and if the generated ideas are exploited by the entrepreneurs, then these entrepreneurial insights and decisions are a resource that can potentially lead to a competitive advantage’.
There is an infinite regress involved in such an argument: if this kind of ‘entrepreneurial cognition’ is indeed a resource, then it can be offered by its owner to an entrepreneur building a business and as such can attract a rent. So there will
have to be another entrepreneur B taking advantage of A’s ‘entrepreneurial cognition’—and if entrepreneur B also displays entrepreneurial cognition, then his or her cognition will be available to be used by entrepreneur C—and so on
and on we go, in an infinite regress. This is an inescapable implication of characterizing entrepreneurial characteristics as resources which can earn rents. This is why we need a definition of resources that enables entrepreneurs to combine
and recombine them in a way that builds on complementarities and thereby generates (original) profits. If we take such an approach, then entrepreneurship itself cannot be a resource.’

There are several points here that demonstrate why the RBV as usually promulgated, in its Ricardian setting, and now with the tendency to view entrepreneurship itself as a resource, is leading the fields of organizations and market studies in the wrong direction. Firstly, as Peter recognizes, the notion of entrepreneurship must be given priority in any realistic framing of economic dynamics, in the sense that it is the entrepreneur who sets in motion everything else. This was fundamental to Schumpeter’s perspective, as it was for von Mises — but not, it must emphatically be said, for Ricardo, who as far as I know never uttered the word in any of his writings.

If entrepreneurs set everything in motion, this must include resources themselves, and so we want to know what the strategic criteria might be that guide their choices. The usual formula promulgated in the Ricardian perspective is the VRIO criteria — the resources must be valuable, rare etc. But these are applied only to resources taken individually, and yet the whole point of an entrepreneurial perspective is to see how resources may be added together — to create what Penrose termed a ‘resource bundle’ — to capture complementarities, or synergies. It is entrepreneurial capture of synergies that is entirely absent from the Ricardian perspective — but it is irreplaceable in an entrepreneurial or neo-Austraian or what I am suggesting be termed a ‘Lachmannian’ perspective.

The third point is your useful reference to the source of ‘original profits’. Here we have the core of a strategic approach to economic dynamics, one that distinguishes it from equilibrium-based economics, since it is entrepreneurial original profits that must set the machinery of the entire economy in motion. Neoclassical economics concerns itself with the distribution of rents, but it should be the strategic perspective that concerns itself with the source of original profits. This cannot be done if we regard entrepreneurship as a rent-earning resource.

Further comments would be appreciated.

Warning: Casual thought lies ahead!

I can imagine that some academic could come along and try to argue that everything–ok, all ‘market processes’–relates to entrepreneurship, but then the category (or ‘concept’) of entrepreneurship isn’t very practically useful. So in the name of being practical, perhaps we say that either something (a) relates to entrepreneurship, or (b) does not relate to entrepreneurship.

Let’s say that entrepreneurship and the state of being an entrepreneur are both objective phenomena.

Then suppose we begin saying that entrepreneurship requires value creation. Then those who sell products or services at a loss are not engaging in entrepreneurship? I have not read any research defining entrepreneurship as such.

OK. So entrepreneurship only requires the pursuit of value creation? Who doesn’t pursue value creation? A lazy chap who stays on the couch watching TV or staring out into space could argue that he is creating value by deriving new knowledge that he believes can be salable at a later date, in his head. Then everybody is engaging in entrepreneurship?

Is an entrepreneur based on (i) who you are (e.g. an ‘initial state’), (ii) what you are doing (e.g. behavior) or (iii) what you’ve found (e.g. value)? If option (ii), everybody is always an entrepreneur (or alternatively, it is fundamentally impossible to know whether somebody is an entrepreneur ex ante). If option (iii), an individual can be an entrepreneur one moment and then a non-entrepreneur the next moment. Imagine how painful it would be if you asked your friend Bob whether he was an entrepreneur and he gave you a different, seemingly random answer each time based on whether he made money that day or not. Option (i) represents the possibly the most useful meaning: “I’m an entrepreneur because I’m self-employed. Next year I will not be an entrepreneur because I have plans to work for somebody else.”

Option (iii) trumps option (i) because not everybody is self-employed. Option (iii) trumps option (ii) because very few people change jobs everyday.*

Yes, I chuckle as I write the immediately preceding sentence.

For the record, I think I’ve used the terms ‘entrepreneurship’ and ‘entrepreneur’ to represent all 3 of the above meanings, at some point or another, but while wearing an academic’s hat. (A paper under review–Hsieh, Nickerson, and Zenger–would agree that the entrepreneur is an idea-man/owner.) This post of mine speaks from a (arguably) more practical perspective: how we use terminology to efficiently communicate.

*Incidentally, insofar that entrepreneurs are merely the self-employed, why not just use one term or the other? Rough speculation based solely on experience talking to the type is that an individual calls himself ‘self-employed’ if s/he is humble and/or low-ability. Individuals call themselves ‘entrepreneurs’ if they want to attract attention and/or are high-ability.