In his introduction to the book Capitalism, Socialism and Democracy by Joseph Schumpeter Richard Swedberg, a Swedish Sociologist states that Schumpeter “argued that economic life always starts with the actions of a forceful individual and leads to the rest of the economy”, suggesting that there is a knock-on effect to the rest of the economy due to Radical Innovation. Interestingly, there are other Economists who agree with Schumpeter’s idea; Cheah (1990), suggested that Radical Innovation can lead on to Incremental Innovation, the innovation discussed early by Kirzner. The abolishment of the status quo enables other, arguably lesser, Innovation to occur in incremental steps. Even though the new ventures threaten the viability of existing goods and processes, it stimulates the introduction of new entrepreneurs of a range of new processes and developments complementary to the original endeavour.
Mark Casson, a British economist and academic, drew on different theories regarding Entrepreneurship, including those of Joseph Schumpeter’s theory of innovation and Israel Kirzner’s theory of opportunity-seeking, in order to synthase a theory that fit alongside neo-classical ideas. According to Casson, entrepreneurship is the pursuit of risky innovative projects that may contribute to the economy – efficiency and growth. How successful these ventures are depending on the information collected by the individual following by a judgement. Within the theory, Casson suggests that the entrepreneurs, especially the successful ones where good judgement has been shown, are rewards in the form of profits or salaries. Contrastingly to Schumpeter’s views, Casson sees entrepreneurs as risk bearers in the economy. This mainstream School of Thought is one that is arguably most fits with the modern-day definition of an entrepreneur. The Oxford English dictionary describes Entrepreneurship as the “The activity of setting up a business or businesses, taking on financial risks in the hope of profit”. Those entrepreneurs who are confident in the judgement being made will commit their own funds – or use the funds of another – being optimistic of being rewarded.
Based on the Oxford English’s Definition of an Entrepreneur “The activity of setting up a business or businesses, taking on financial risks in the hope of profit” one can argue that innovation is not necessary in order to be classed as an Entrepreneur. As long as an individual is taking a financial risk, such as spending money to start up a business, they will fall into the category. However, this is not to say that it makes one a successful Entrepreneur. In order to compete in a market, you need to be providing something different that is deemed more valuable than a competitor, alternatively if there is no competition in your market then you must have innovated in order to create a new industry or be providing something that others deem superior to what they may seek to create. Both things are essentially Innovation thus it must be noted that Innovation is central to successful entrepreneurship.
To conclude, based on the analysis of different Economic Theories and by looking at the traits of successful Entrepreneurs, it must be concluded that Innovation is a central Aspect of Entrepreneurship, the two terms are links as it is the implementation of Entrepreneurial Behaviour that allows innovation to take place.