philosophies in entrepreneurship

7/28/2019 Philosophies in Entrepreneurship

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Philosophies in entrepreneurship:a focus on economic theories

Luke PittawayInstitute for Entrepreneurship and Enterprise Development, Lancaster

University Management School, Lancaster, UK

Abstract

Purpose To analyse the philosophies underlying economic studies in entrepreneurship and toexplain how they contribute to the understanding of entrepreneurial behaviour.

Design/methodology/approach A range of historical studies is reviewed that examineentrepreneurship from an economic perspective. A framework of social science research paradigmsis used to categorise these approaches according to their philosophical assumptions.

Findings The paper finds that certain philosophies can harm the development of theory and that

study using a wider range could help improve the value of research.

Originality/value This paper fills an identified gap in philosophical discussions by exploring theeconomic theories. In doing so, it provides a structured approach to understanding some of thedifferences that underlie economic policy supporting the promotion of enterprise.

Keywords Economic theory, Philosophy, Entrepreneurialism

Paper type General review

IntroductionThe purpose of this paper is to explore the philosophies underpinning economicapproaches to the study of entrepreneurship. Economic theories have made significantcontributions and are one of the historical roots of the subject (Bygrave, 1989). Despite

these contributions the concept of the entrepreneur and the function ofentrepreneurship in society have ranged extensively within theories (Hebert andLink, 1988). Previous categorisations have shown that the entrepreneur has beenviewed as a class of economic actor, a capitalist, a manager, an owner, an arbitrageur,an innovator and the bearer of uncertainty (Binks and Vale, 1990). These early theoriesof entrepreneurship continue to have a profound affect on the meaning ofentrepreneurship within contemporary society and consequently influence currentdebate in the subject (Kirchhoff, 1991). Although previous research has explored manyof the differences between economic theories contributing to our understanding there isonly limited prior work on the philosophical basis of these differences (Barreto, 1989).The purpose of the paper is to explore these taken-for-granted assumptionsexplaining some of the fundamental differences that exist in key conceptions of the

entrepreneur. Understanding these differences is important because it helps usrecognise the factors which influence policy interventions designed to promoteentrepreneurship and enterprise.

Meta-theory, which can be translated as the philosophical assumptions made byresearchers before they construct theories, plays an important role in how theory isdeveloped and the type of knowledge found when research is conducted (Grant andPerren, 2002). Researchers in entrepreneurship have recently begun to recognise thatideology, or the political basis of ideas, meta-theory and other taken for granted

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assumptions (axioms) have an influence on knowledge construction and they havebegun to explore the issue (Bygrave, 1989; Aldrich, 2000; Ogbor, 2000; Grant andPerren, 2002). This paper makes a contribution to these discussions by exploring thephilosophical assumptions that underpin many of the key economic theories. A review

of meta-theory is carried out by using Burrell and Morgans (1979) paradigms to assessthe assumptions made in economic theories, illustrating their contribution tocontemporary debate. The study conducted is reported and the implications for futurestudy are highlighted.

Philosophies in social scienceDiscussions about meta-theory have become a key feature of academic enquiry inmany social sciences. In organisational studies the publication of Burrell and Morgans(1979) Sociological Paradigms and Organizational Analysis led to considerable debatethroughout the 1980s and 1990s in organisational studies (McCourt, 1999). There arepotentially many gains for the study of entrepreneurship if researchers are prepared to

learn from the experience of these debates. For example, Burrell and Morgans workhighlighted the role of philosophies in research endeavour; it informed researchersabout the complexities of organisational enquiry and raised awareness about theinfluence of research paradigms on knowledge construction (Burrell and Morgan,1979). Figure 1 highlights BMs paradigms as outlined in their original thesis.

The paradigms were constructed by reviewing organisational research according tocertain types of philosophical assumption. These included:

Figure 1.Four paradigms of socialscientific research

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. Ontological assumptions ontology is a branch of meta-physics, a part ofphilosophy that examines the nature of being. Ontological assumptions,therefore, focus on the nature of reality, and are about how reality is constructedand represented in human consciousness.

. Epistemological assumptions epistemology is a branch of philosophy that isconcerned with the nature of knowledge, together with its sources and forms.Epistemological assumptions are about how people understand and conceptualisethe world around them, making assumptions about what constitutes knowledge,how it might be constructed and appropriately communicated.

. Assumptions about human nature focus on the different assumptions abouthuman activity and behaviour that underlie theory. These typically revolvearound a series of debates about human behaviour. For example, one such debatebetween free-will and determinism concerns the degree to which humanbeings have the ability to act on their environment or whether circumstancesbeyond their control determine behaviour.

. Assumptions about the nature of society are assumptions about how societyworks. The main debate focuses on the sociology of order, assuming that everysociety is relatively stable, in contrast to the sociology of conflict, which assumesthat deep-seated structural conflict occurs within society.

An assessment of these philosophies in organisational studies led Burrell and Morgan(1979) to conclude that there were two dimensions to philosophical debate in socialsciences, the subjective versus objective dimension and the regulation versus radicalchange dimension. These dimensions represented different views about the nature ofsocial science which they constructed into four paradigms. The word paradigm wasused to describe different forms of social science demonstrating fundamentallydifferent philosophical orientations. In their view the paradigms are contiguous but

separate (Burrell and Morgan, 1979, p. 22). In this sense the paradigms were originallyconsidered to be incommensurable; if a researcher undertook work in one paradigmthey were likely to be unable to appreciate the philosophical basis of study inalternative paradigms. By contiguous they meant each paradigm had sharedcharacteristics but that there was sufficient differentiation for them to be considered asfour distinct entities. The four paradigms were described as functionalist, interpretive,radical humanist and radical structuralist. Gioia and Pitre (1990) summarise the theorybuilding approaches of each of the four paradigms (see Table I).

Disagreement surrounding the thesis continues and revolves around a number ofthemes. The first theme focuses on the nature of paradigms (Weaver and Gioia, 1994),which has included disputes about how paradigms should be viewed. Someresearchers have argued that paradigms are ways of bringing unification to

organisational study (Pfeffer, 1993). Some have reasoned that the research communityshould protect and foster new paradigms (Willmott, 1993a) and others have arguedthat paradigms are different ways of understanding social scientific phenomena(Scherer and Steinmann, 1999). The second theme has concentrated on the use andmeaning of the word paradigm. For some, the concept of a paradigm has been erodedof its rigour (Holland, 1990) and for others; it continues to represent a valuable meansfor differentiating between philosophical assumptions (McCourt, 1999). In the thirdtheme researchers have engaged in debates about incommensurability, where views

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have ranged comprehensively. They have included relatively strict interpretations(Jackson and Carter, 1991; 1993) seeing little room for communication across paradigms.There have been approaches seeking to question the concept of incommensurabilitybetween paradigms (Hassard, 1988; Holland, 1990; Willmott, 1993a,b), as well as,

attempts to build multi-paradigm communication (Gioia et al., 1989; Gioia and Pitre,1990). Other arguments have suggested that the concept of paradigm is itselfproblematic and have suggested more complex alternatives (Weaver and Gioia, 1994;Scherer and Steinmann, 1999). The final theme has centred on the common divisionsthought to exist in organisational enquiry that underlie Burrell and Morgans schemaand these researchers question these divisions. Critiquing BMs paradigms as an oversimplification of complex philosophical debates they argue that BMs approachoverlooked other important philosophical discussions[1]. Such arguments also questionthe implied duality within the two dimensions outlined, suggesting that these oversimplify complex debates in social science and philosophy (Davies, 1998).

Despite these debates, disagreements and complexities the value of this stream ofwork in organisational studies has been its ability to raise awareness about the

importance of meta-theory when constructing research in the social sciences. Thispaper seeks to build on these benefits for the subject of entrepreneurship by reporting ahistorical analysis that used a technique adapted from this stream of work inorganisational studies. Consequently, the paper will explore the usefulness of theparadigms in a different subject domain and build on other approaches that have usedthem as tools for exploring implicit philosophical assumptions in research. These priorstudies include Hollands work on professional education (Holland, 1990), McCourts(1999) analysis of personnel selection and Grant and Perrens (2002) analysis ofcontemporary study in entrepreneurship. The main contribution of the paper is that itapplies some of the insights identified in organisational studies to an analysis of theeconomic theories in entrepreneurship.

MethodologyThe purpose of the paper, as outlined, is to contribute to debate by applying BMsparadigms as a method to explain the philosophical assumptions used in economicstudies of entrepreneurship. A number of developments were necessary to use BMsthesis outside organisational studies and these will be outlined. There were two keyoperational questions:

(1) Given the incommensurability debate outlined previously, how are theparadigms viewed in this study?

(2) As the subject of entrepreneurship is wide-reaching, how was the analysisreduced, while retaining sufficient depth, and ensuring a representative

understanding of the philosophies used?

Operationalising the paradigmsThe issue of permeability versus incommensurability remains a controversial issue. Inorder to use BMs paradigms to review another field of study it was necessary to makesome decisions about how to view the paradigms boundaries. Researchers supportingincommensurability argue that the boundaries are immutable. By immutable theymean that ideas and concepts cannot easily flow between paradigms because the

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philosophical basis of knowledge in each paradigm is entirely different (Jackson andCarter, 1991). Those advocating permeability between paradigms, however, acceptgreater communication suggesting that while the paradigms are clearly at odds there isscope for knowledge to permeate between them at the transition zones (Gioia and Pitre,

1990). When taking a position on the way in which knowledge is constructed, it isevident that this debate is somewhat of a non-starter, in the sense that the paradigmsand continua constructed by Burrell and Morgan are themselves social constructions(Parker, 1998; Nightingale and Cromby, 1999). They are useful because they can beused as a tool to explore the underlying meaning of theory but exist only in the sensethat they describe current social science research activity. Even as descriptions ofunderlying philosophical assumptions they are less than perfect depending ondualism[2] (Willig, 1999), as represented by the use of continuums, which tends to be anover-simplification of the debates. Consequently, in this analysis the paradigms anddichotomies[3] were viewed as social constructions[4] that could be used to helpdescribe social science research activity. They are considered useful because they can

be used to explore theory (Willmott, 1993a; Parker, 1998; Nightingale and Cromby,1999). Permeability occurs because the research paradigms represent social processeswhere communication between research groups can happen (Willmott, 1993b).Incommensurability also exists because philosophical assumptions when madeautomatically exclude alternatives (Scherer and Steinmann, 1999).

In operational terms problems were encountered when applying BMs paradigms toentrepreneurship. The concept of duality and the use of dichotomies, for example,presented questions when explaining differences of emphasis between meta-theoriesthat derived from the same paradigm. It was also difficult to transfer the originalcriteria used to interpret study in organisational studies, as these were not reportedexplicitly. The first issue was resolved by reconceptualising the dichotomies. Ametaphor of an elastic band was used at the same time as the concept of continua,

individual dualities remain but there are different degrees of emphasis withinparadigms (see Figure 2).

Figure 2.The dichotomous natureof the Burrell and Morgancontinua

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The research followed the approach used by Morgan and Smircich (1980) by allowingfor different forms of approach within continua while retaining the dichotomous natureof the assumptions. The second issue meant that there were no clear criteria that couldbe used to apply BMs paradigms to another research field. This factor initially limited

the transferability of the paradigms and their usefulness as tools of explanation. It wasresolved for the subjective objective dimension by building on the work of Morganand Smircich (1980), which outlined key criteria for six points along each of BMs fourdichotomies. It was resolved for the regulation-radical change dimension byundertaking an analysis of the sociology literature with an emphasis on Marxism,conflict theory and functionalist sociology. From the source material three coredichotomies were identified and six different forms of philosophical assumption withineach were highlighted. The dichotomies represented philosophical assumptions aboutchange, structure and conflict in society. Appendices 1 and 2 provide a summary of thecriteria used for both dimensions.

Focusing the paradigms on the study of entrepreneurshipThe challenge in this study was to capture an understanding of the philosophies guidingstudy in entrepreneurship while creating a manageable research study. A full analysis ofthe subject would have been comprehensive but unmanageable and would potentiallyhave lacked sufficient depth, failing to understand the core philosophical assumptionsembedded in the subject. To resolve this issue a historical approach was taken, whichfocused on the economic approaches to entrepreneurship and the study of entrepreneurialbehaviour (Pittaway, 2000). This research paper focuses on the economic approaches. Itdoes so because the study of the entrepreneur had featured strongly in economics butdisappeared in the 1930s (Barreto, 1989), only reappearing in works deriving fromtransaction cost economics (Casson, 1982) and Neo-Austrian Economics (Kirzner, 1973).The entrepreneurs disappearance from economic enquiry occurred twice, firstly frommacroeconomic enquiry during the split between macroeconomic theory andmicroeconomic theory (Kirchhoff, 1991) and, secondly, from microeconomic theory asthe theory of the firm began to dominate (Barreto, 1989). It is probable; therefore, that thephilosophies on which these approaches were based might have implications for thestudy of entrepreneurship. The contribution of economics to understanding has also beencomplicated in modern theory because of the growing intra-disciplinary conflict betweenmacro- and microeconomics. New interest in economics has been simulated by a greaterfocus on this conflict and it has been argued that entrepreneurship could be a catalyst fora paradigm shift in economics (Kirchhoff, 1991).

Economic approaches consequently provide a useful starting point to examine thephilosophies underpinning the historical roots of the subject because they provide acontext where entrepreneurship was studied but disappeared and where its

re-emergence may have unforeseen consequences for the prevailing paradigm(Hebert and Link, 1988; Barreto, 1989). The following research questions were asked:

RQ1. What are the meta-theoretical assumptions underpinning economic study inentrepreneurship?

RQ2. How can these be categorised according to BMs paradigms?

RQ3. Are there any philosophical explanations for the decline of the entrepreneurin economic enquiry?

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RQ4. Are there any commonly used philosophies that could limit research inentrepreneurship?

DiscussionThese research questions guided the study, which is reported in full in Pittaway (2000).Table II provides a summary of the findings of this analysis using BMs framework.The study used an in-depth historical review of the economic literature and itscontribution to entrepreneurship, starting with the work of Cantillon (1931).

The categorisation of economic theories in entrepreneurship has previously beenundertaken by chronological order (Hebert and Link, 1988; Binks and Vale, 1990;Lydall, 1992) or by school of thought (Ricketts, 1987; Chell et al., 1991). Neither ofthese approaches has captured the underlying differences between theories based ontheir philosophies. As Barreto (1989) illustrates, however, philosophies may haveplayed an important role in the decline of the entrepreneurial concept in economics.The disappearance of the entrepreneur from neo-classical economics (1930s onwards)

was explained in his work by the rise of the theory of the firm and its use ofassumptions that derived from a mechanistic[5] philosophy. Given Barretos argument,it is possible that certain philosophical assumptions may have a pivotal influence onhow entrepreneurship is perceived and understood, even to the extent that theconcept can effectively disappear from theorising. Kirchhoff (1991) illustrates the pointwhen he discusses the axioms[6] that exist within macroeconomic theory:

With these axioms, macroeconomic theory eliminates the role of individually initiatedbehaviour. If these axioms apply, then buyers and sellers are non-decision makers who followset rules in carrying out their day-to-day purchasing/producing functions. Entrepreneurshipcannot exist because it requires rule-violating behaviour (Kirchhoff, 1991, p. 97).

In both macroeconomic theory and the theory of the firm the gradual erosion of

purposeful behaviour has led to an uncomfortable context for entrepreneurship andthis has occurred despite the fact that significant contributions were made tounderstanding in early economic theory. Economic theories continue to contribute tothe field but there are diverse opinions in economics about the nature ofentrepreneurship and whether it exists in a dynamic, static or turbulent economicsystem, as well as, debate about what role it plays in such a system. Within the theoriesanalysed there was considerable difference regarding assumptions about humanbehaviour. For example, in Kirzners (1980) work an assumption of human behaviourcan be illustrated in his definition of the pure entrepreneur:

. . . a decision-maker whose entire role arises out of his alertness to hitherto unnoticedopportunities (Kirzner, 1980, p. 38).

In Kirzners research the role of the entrepreneur derives from an assumption thathuman behaviour is bounded by its context and entrepreneurial capacity arises froman ability to recognise opportunities and make decisions in an existing set ofcircumstances. When compared to Schumpeters (1963) concept of new combinationsthere is a difference in the presuppositions made. For Schumpeter, the assumption ofhuman behaviour has a greater element of agency[7], indeed the role of theentrepreneur is to create new circumstances rather than to be alert to new opportunitiesin existing circumstances. Both approaches apply some idea about human action butthey differ in degree and nature and some form of determinism[8] remains.

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Ontological

assumptions

Epistemological

assumptions

Assumptions

abouthuman

nature

Assumptions

aboutsociety

Paradigm

Neo-classicaleconomics

a

Realityasaconcrete

structure

Tocon

structa

positiv

istsocial

science

Manasa

responder

Socialorder

Functionalist

Englishclassicaltheories

Realityasaconcrete

structure

Tocon

structa

positiv

istsocial

science

Manasa

responder

Societyasan

organicsystem

Functionalist

Frenchclassicaltheories

b

Realityasaconcrete

process

Tocon

structa

positiv

istsocial

science

Manasa

responder

Societyasan

organicsystem

Functionalist

Transactioncosteconomics

c

Realityasaconcrete

process

Tocon

structa

positiv

istsocial

science

Manasanadapter

Societyasan

organicsystem

Functionalist

Information-based

transactioncosteconomic

sd

Realityascontextual

fieldsofinformation

Tostudysystems,

processesandchange

Manasan

information

processor

Societyasan

organicsystem

Functionalist

Calculableuncertainty

schoole

Realityasaconcrete

process

Tocon

structa

positiv

istsocial

science

Manasa

responder

Societyasan

organicsystem

Functionalist

Uncertaintyschool

f

Realityasaconcrete

process

Tostudysystems,

processesandchange

Manasanadapter

Societyasan

organicsystem

Functionalist

Austrianandneo-Austria

n

economics

Realityasaconcrete

process

Tostudysystems,

processesandchange

Manasanadapter

Societyasa

morphogenic

system

Functionalist

Schumpeterianapproache

s

andtheHarvardhistorica

l

school

Realityascontextual

fieldsofinformation

Tomapcontexts

Manasanactor

Societyundergoes

transformation

Functionalistwithsome

interpretiveand

radical

structuralistelements

Notes:aincludingmicro-economicsandthetheoryofthefirm(Barreto,1989);

bexcludingCantillon(1

931);

cincludesCoase(1937)andWillia

mson(1985);

dbasedprincipallyonCassonswork(1982,1990,1998);einclud

esCantillon(1931);fbasedonKnight

(1921)

Table II.A summary of

philosophicalassumptions in economic

approaches toentrepreneurship

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these criticisms. The production function, the concepts of rational choice and perfectinformation all limit the capacity for entrepreneurial behaviour (Barreto, 1989). Theseunderpinning philosophies explain why the entrepreneurial concept is not addresseddirectly by microeconomic theory. In these approaches the firm, for example,

represents its own reality, which is abstracted from the motivations, rationality andfallibility, associated with individuals. The calculation of inputs, including intangiblessuch as quality of decision making, assumes a capacity to measure inputs divorcedfrom specific human capacity, as well as, assuming that unknown events will notdislodge the factors of production. The assumptions of rational choice and perfectinformation create further abstractions in the theory by assuming that everything isknown either deterministically or probabilistically[18]. In its search for amechanistic model it has to take out of theorising individuals and groups making andacting on decisions, based on imperfect information, in uncertain conditions,surrounded by unknown future events that can have unforeseen circumstances. Forexample following his study of contemporary microeconomic empirical research andits contribution to entrepreneurship Kirchhoff (1991) concludes:

Extensive research effort has been invested in economies of scale, industry concentration,market structures, pricing, technology transfer etc. In all these areas, microeconomists haveshredded the axioms of general equilibrium theory to such a degree that few realize thatneoclassical theory continues to dominate macroeconomic policy prescriptions . . . Butadoption of general equilibrium theory leaves mainstream macroeconomists with a dilemma.Entrepreneurship is an important component of wealth creation and distribution . . . Americanpoliticians clamor for information and policies to help the entrepreneurs who have becomepublic heroes. Small firms are a sizable portion of the economy and voting public. By onecount, they total 19 to 20 million voters. But, mainstream macroeconomists have no answers.Their macro theory fails them. This is widely acknowledged, especially by microeconomists.But all the microeconomic research has not led to the development of a theory even close to theelegance and rigor of general equilibrium theory (Kirchhoff, 1991, p. 103).

The failure of neoclassical theory to incorporate entrepreneurship can be explained byits axiomatic assumptions on human nature. It is possible to conclude that equilibriumtheorists apply extremely determinist, realist[19], positivist[20], mechanistic andordered views of social science and the social world and that these can createdifficulties for the conceptualisation of entrepreneurship despite its many guises(Barreto, 1989; Pittaway, 2000).

Disequilibrium theoristsSet against these approaches are those that incorporate concepts of entrepreneurshipinto variations of mainstream economics. These have included two forms oftransaction cost economics. The first introduced a theory of regularity in exchange

processes based on the cognitive limits of human actors (Coase, 1937; Williamson,1985), which moved away from assumptions based on human rationality and perfectchoice. The second sought to directly link concepts based on theories of information,information exchange and information markets to the process of entrepreneurship(Casson, 1990; 1998). Unlike these theorists the disequilibrium theorists, who includedAustrian and Neo-Austrian economists (Mises, 1949; Kirzner, 1982) as well as the workof Knight (1921) and Cantillon (1931), did not attempt to construct equilibrium modelsof the economic system based on general principles but sought explanations based on

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observations of experience. The models created tend to be descriptive rather thanprescriptive and tend to observe that equilibrium did not occur in the real economy.Models based on disequilibrium suggested that there are opportunities for profit withineconomic systems because of inequalities between supply and demand and

entrepreneurial actions are designed to exploit these opportunities, drivingeconomic systems toward equilibrium. This orientation is represented in Cantillonsdefinition of the entrepreneur and Knights critique of classical theories:

. . . set up with a capital to conduct their enterprise, or are undertakers of their own labourwithout capital, and they may be regarded as living of uncertainty (Cantillon, 1931, p. 55).

. . . it is a world of change in which we live and a world of uncertainty. We live only byknowing something about the future; while the problems of life, or of conduct at least, arisefrom the fact we know so little. This is true of business as of other spheres of activity. Theessence of the situation is action according to opinion, of greater or less foundation and value,neither entire ignorance nor complete and perfect knowledge, but partial knowledge (Knight,1921, p. 199).

The disequilibrium group applies two philosophical assumptions that differentiate itfrom the equilibrium theorists. They use more complex assumptions about humanaction and accept greater uncertainty in social systems. Jones (1998) illustrates thisperception of human behaviour when he discusses transaction cost economics:

Indeed, they explicitly rejected imperfect knowledge and unforeseen circumstances asproviding any rationale for the existence and organisation of the classical firm. The newinstitutional theory of the firm that was to follow turned this position on its head, arguingthat in many instances the growth of the firm was designed precisely to overcome marketfailures, especially the costs and difficulties of transacting in markets under conditions ofuncertainty (Jones, 1998, p. 13).

The move away from perfect knowledge as an axiom in transaction cost economics,while retaining elements of equilibrium theorising allowed for a more sophisticatedview of bounded rationality[21] introducing greater uncertainty into exchangerelationships. Although it shares elements with Neo-Austrian economics there is cleardisagreement about the value of opportunistic (entrepreneurial) behaviour withinconditions of uncertainty. In early transaction cost economics opportunistic behaviouris viewed quite negatively while in Neo-Austrian economics it has a more positiveorientation. In the former it is the consequence of disequilibrium while in the latter it isthe equilibrating force. Disequilibrium theorising, therefore, provides a complexdisagreement between humans as positive actors and negative abusers of opportunity.At once being the guiding force behind equilibrium and being the exploiters ofdisequilibrium. Despite these differences, however, both approaches do provide an

assumption about human behaviour that is quite different from that applied inequilibrium theories. Within these theories one can see more voluntarism[22] and lessdeterminism than is present in equilibrium theories, as well as, greater evidence ofhuman action, bounded rationality and concepts of information exchange. The natureof society within the disequilibrium group is also viewed to be more unstable and opento unpredictable changes, for example:

. . . every action is embedded in the flux of time . . . In other words the entrepreneurial elementcannot be abstracted from the notion of individual human action, because the uncertainty of

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the future is already implied in the very notion of action. That man acts and that the future isuncertain are by no means two independent matters, they are only two different modes ofestablishing one thing (Kirzner, 1990, p. 81).

Uncertainty, not predictability enters as the guiding force behind economic systems. Interms of BMs paradigms these approaches remain functionalist in orientation butapply assumptions that allowed for human influence over economic structures,recognising the limits of knowledge, information and expecting greater unknowndisequilibrating forces to impact on economic systems in unexpected ways.

Revolution-equilibrium theoristsThe third group of theorists has been described as the revolution-equilibrium group(e.g. Schumpeter, Cole, Knies, Roscher, Hildeband). The principal philosophiesoriginate from the work of Schumpeter. Within this group three presuppositions exist.First, theorists take the concepts of human action and choice a step further, second,they assume economic and social systems experience radical rather than incrementalchanges and, third, they advocate greater linkage between historical facts andabstract models. Schumpeter (Kilby, 1971) takes the concepts of human action furtherby arguing that while the entrepreneurial function may be mingled with ownershipand management of resources the key function of the entrepreneur was the personwho innovates or makes new combinations of production. Human action isconceptualised at the individual rather than the collective level (Shionoya, 1997). Forexample:

These concepts are at once broader and narrower than the usual. Broader, because in the firstplace we call entrepreneurs not only those independent businessmen . . . but all whoactually fulfil the function . . . even if they are . . . dependent employees of a company . . . Onthe other hand, our concept is narrower than the traditional one in that it does not include allheads of firms or managers or industrialists who merely operate an established business, but

only those who actually perform that function (Schumpeter, 1971, p. 54).The difference for the individual is related to behaviour, in the sense that in a staticsystem the individual can become accustomed to his/her own abilities and experienceand their usefulness. In a dynamic system, however, the individual must becomeaccustomed to uncertainties and must interact with them. Operating a business inconditions of uncertainty is quite different from operating one where certainknowledge exists:

Carrying out a new plan and acting according to a customary one are things as different asmaking a road and walking along it (Schumpeter, 1971, p. 56).

Assumptions about human action, therefore, differ from those applied by theorists inthe disequilibrium group because individuals create new opportunities rather thanrespond to existing ones. This conception may derive from the second philosophicaldifference focusing on the nature of social systems, which holds that economic systemsgo through radical discontinuous changes. Schumpeter moves away from equilibriumtheories by arguing that creative destruction involves periods of stability in economicsystems followed by periods of transformation, within which he places theentrepreneurial function. This departure illustrates far greater usage within thefunctionalist paradigm of concepts of social conflict derived from Marxism and BMsradical structuralist paradigm and these are evident when one analyses in detail the

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concept of creative destruction (MacDonald, 1971). In direct contrast to Ogbors (2000)critique, therefore, within this perspective the entrepreneurial function involves thedestruction of the current social order not its maintenance.

The final philosophies that differentiate this group of theorists derive from their

views about social science research and Shionoya (1992; 1997) has examined these indetail. In summary research is viewed as a more inductive process, theories are used asmechanisms to help explain reality and are viewed as abstractions that can be usedto interpret observations. Such concepts are embedded in their historical context, areaccumulated over time and are socialised within society, for example:

The kind of data that is missing in entrepreneurial analysis could, in Schumpeters opinion,best be supplied through qualitative data or by economic historians and not economicmathematicians . . . According to Schumpeter, it is only through an intimate collaborationbetween facts and theory that it would be possible to make substantial advances in the studyof entrepreneurship (Ogbor, 2000, p. 623).

Nobody can hope to understand the economic phenomenon of any, including the present,

epoch who has not adequate command of historical facts and an adequate amount ofhistorical sense or of what might be described as historical experience (Schumpeter, 1954,pp. 12-13).

This view of social science is near the boundaries between BMs interpretive andfunctionalist paradigms as it illustrates the important place of subjectivity andcontextualism in research.

Results of the analysisThe analysis of the economic approaches using BMs paradigms shows three distinctmodes of theorising based on different philosophical assumptions about social scienceand society. As a consequence entrepreneurship within these modes of theorising isquite different and events based on a variety of philosophies about human behaviour,change and social science have led to mutually exclusive concepts. For example, thedifference between Schumpeters and Kirzners entrepreneur is profound. Thisreview using BMs paradigms also found that any form of purposeful behaviour asimplied in most theories of entrepreneurship is obliterated from enquiry if functionalistassumptions are too extreme. The work of Barreto (1989) and Hebert and Link (1988)support this conclusion, it was highlighted historically by Schumpeter (1954) andconfirmed by Bygrave (1989) and Kirchhoff (1991). Heberts and Links (1988)conclusion captures the point perfectly:

One lesson to be learned from all of this is that the problem of the place of entrepreneurship ineconomic theory is actually not a problem of theory. It is a problem of method. The history of

economic theory clearly demonstrates that the entrepreneur was squeezed from economicswhen the discipline attempted to emulate the physical sciences by incorporating themathematical method. Clearly, mathematics brought greater precision to economics, andthereby promised to increase powers of prediction. Yet the introduction of mathematics was atwo-edged sword. Its sharp edge cut through a tangled confusion of real world complexity,making economics more tractable, and accelerating its theoretical advance. However, itsblunt edge bludgeoned one of the fundamental forces of economic life the entrepreneur.Since there was not then, and is not now, a satisfactory mathematics to deal with thedynamics of economic life, economic analysis gradually receded into the shadows of

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comparative statics, and the entrepreneur took on a purely passive, even useless role (Hebertand Link, 1988, p. 158, added emphasis).

Although this paper would prefer to substitute the term a problem of method for theterm a problem of meta-theory. It is clear from the experience of the theory of the firmthat certain assumptions about reality and knowledge, which may have led to the useof the mathematical method, created difficulties for understanding dynamic economicsystems that depend upon human endeavour. The essential point that can be drawn isthat economic theories that adopted equilibrium models, applying extremefunctionalist assumptions, have tended to eradicate meaningful interpretations ofentrepreneurship from their inquiry as a consequence of the philosophies used.

ConclusionsOgbor (2000) described entrepreneurship as being dominated by the theories of socialcontrol and Grant and Perren (2002) described it as being dominated by functionalistenquiry. On the one hand, this study agrees with both critiques, it does appear that theeconomic foundations of entrepreneurship have applied major axioms within theirstudy. It is further evident that the study of entrepreneurship has not explicitlyanalysed the meta-theoretical assumptions in economic studies and many of thesemeta-theories do indeed appear to be dominated by functionalist enquiry. On the otherhand, both critiques of the subject are somewhat in danger of over simplifying thedifferences, as this analysis found a range of historical works that used assumptionsbased on other BM paradigms and found a great deal of diversity within thefunctionalist paradigm. For example, the core theories derived from Schumpeterapplied Marxist concepts and there are significant elements of human action in manytheories. In general, therefore, the research found that there was evidence of diversityin the meta-theories used but there was less evidence of philosophies drawn from other

BM paradigms, somewhat supporting Grants and Perrens (2002) conclusions. Thisdeduction can perhaps be viewed both positively and negatively. For those wishing toexpand these foundations and draw more widely from other BM paradigms than iscurrently the case the current diversity indicates a tolerance for alternative views andapproaches. For those wishing to create a more scientific paradigm the dominance offunctionalist enquiry does provide a foundation for further consolidation.

Based on the analysis conducted in this study, it is argued that extreme functionalistassumptions do little to help, and a great deal to restrict, the study of entrepreneurship.The main research objective as outlined was to explore if there were any philosophicalreasons why the concept of the entrepreneur disappeared from macro andmicro-economic enquiry. The common thread discovered was the application ofextreme functionalist assumptions in a desire to construct a scientific approach to the

subject. The problems for such philosophical assumptions are outlined as follows:. Extreme realist ontological assumptions tend to hypothesise that the social

world represents an external structure, which is tangible and existing of manyinterrelated parts. Such an objective assumption about social reality has ledtheorists to consider social behaviour to be somewhat unchanging andimmutable, as is evident in the concepts of perfect information and theproduction function in the theory of the firm. Entrepreneurship, however,appears to be about change to social structures and social reality whether that is

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the exploitation of opportunities during periods of disequilibrium, via thedeliberate creation of new opportunities or indeed through new forms ofsensemaking in society. Such realist assumptions as those applied in extremefunctionalism provide little opportunity for the entrepreneurial function to

change society in unpredictable ways.. Relatively strong forms of positivism appear to be problematic for the study of

entrepreneurship because they require greater degrees of mathematical precisionthat depend on accurate definitions. Problems of definition remain inherent to thesubject and where they have been drawn around the firm they appear to lose muchof the complexity and dynamism that is incorporated into wider interpretations ofentrepreneurship. For example, most recently attempts have been directed atmaking entrepreneurship synonymous with the behavioural act of venturecreation. For a positivist this is inherently attractive, but it risks applying the samephilosophical assumptions that led the theory of the firm to cast the entrepreneuras the powerless figurehead of a firm, which itself became the reality

abstracted from the actions of people (Barreto, 1989). A simplification of thedefinition can lead to more positivism and can lead to the development of ascientific paradigm. When focusing purely on venture creation, however, onedisregards Schumpeters argument that entrepreneurship, as a function of changein society, occurs in variety of contexts (Schumpeter, 1934).

. Determinism applied in an extreme way also appeared to present difficulties forunderstanding the subject. Theories can rule out philosophies of human actionand choice, which appear to be crucial to understanding entrepreneurship, bysuggesting that forces outside of an individuals control are the main influence ontheir behaviour. Yet observations of entrepreneurship suggest that theentrepreneur takes control of their environment in order to create new things;that they aspire to have independence from the domination of forces outside of

their control (Chell, 2000). Philosophies based on human action would appear tobe relatively important when conceptualising how entrepreneurship impactson the development of new economic and social realities.

. The use of mechanistic metaphors to explain how social systems work can alsohave negative consequences. Even within the economic theories where the focusof study is the function of entrepreneurship, assumptions about the nature ofhuman behaviour are endemic. It would appear that one of the majorphilosophical dilemmas for the study of entrepreneurship is that it is intricatelytied to philosophies about human nature. Mechanistic assumptions situncomfortably with the subject because they tend to rule out behaviouralcomplexity and ascribe law like qualities to social interactions.

These philosophical difficulties illustrate that the subject of entrepreneurship couldgain significantly if the meta-theoretical base of study is broadened (Grant and Perren,2002). Based on this analysis one can certainly argue for expanding work in both BMsinterpretive and radical structuralist paradigms. Interpretive approaches wouldintroduce greater voluntarism, human action and be able to accept greater diversity insocial meaning, while radical structuralist approaches could build on Schumpetersapplication of Marxist concepts explaining how entrepreneurship, which can beconceived in this context as purposeful behaviour, creates radical change.

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Notes

1. These include structure versus agency, functionalism versus interpretivism, determinismversus voluntarism, causation versus meaning, holism versus individualism, object versussubject and description versus prescription (Astley and Van de Ven, 1983).

2. The term dualism or duality is used to explain the view that certain philosophicalassumptions must always oppose each other (e.g. determinism versus voluntarism; natureversus nurture).

3. The word dichotomy means here the combination of two opposing philosophies.

4. A social construction means here something that has been abstracted from its context viathe use of language to provide order and explanation to something that is complex.

5. Mechanistic applies here to theories that view organisational systems as if they weremachines.

6. Axiom refers to taken for granted assumption, it is often used to mean the baseassumptions on which a subject of study begins.

7. Agency refers to the philosophical view that human beings are agents of their own destiny,

having the ability to change the circumstances of their context.8. Determinism is the philosophical idea that human beings are largely limited by their

context and that their behaviour is consequently influenced by factors that are beyond theircontrol.

9. Subjectivity as applied here refers to the idea that social scientific enquiry is embeddedwithin its context and cannot escape being influenced by interaction with the subject ofstudy (unlike natural sciences)

10. Objectivity refers to the philosophical view that social scientific research must seek toprovide objective conclusions that can be generalised from a specific context (like naturalsciences)

11. Abstract theorising is used to describe theory and empirical study that seeks to abstractunderstanding from its context, normally via the use of mathematics.

12. Practical description refers to research that assumes that theory must be embedded in itscontext and that it loses its usefulness once abstracted from its context.

13. Universal phenomenon means something that has a widespread impact on social systemsacross time and space that will not be changed because of context.

14. Individualistic axiom is a taken for granted assumption in the entrepreneurship fieldidentified by Ogbor (2000). It refers to the idea that entrepreneurship is carried out byindividuals, rather than by groups or organisations.

15. Psychological determinism refers to the idea that something about an individuals personalmakeup (e.g. personality or cognitive style) has a fundamental influence on the way that theybehave.

16. Prescriptive is used to explain approaches to theory building that are designed to predict

the behaviour of something and to provide guidance for practical or policy interventions.17. Rationality axiom is the assumption in micro-economic theory that human beings making

decisions will behave according to rationale rules (e.g. they always seek to make profit)

18. To know something deterministically means that when one can identify the underlyingcauses of an event it can be predicted. To know something probabilistically means that onehas sufficient information to be able to predict the probability that an event will occur.

19. Realist refers to the philosophical assumption that social reality exists in a tangible wayand that its underpinning rules can be identified.

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20. Positivist is an epistemological assumption meaning that knowledge can be abstracted,measured and understood via the mathematical method.

21. Bounded rationality refers to the philosophical stance that human beings can have theability make choices and to change their environment but that this ability to choose is

controlled within a particular context.22. Voluntarism is the philosophical stance that much of human behaviour is open to choice.

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philosophies in entrepreneurship

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