Schumpeter, Kirzner, and the Field of Social Entrepreneurship

Abstract

Joseph Schumpeter's and Israel Kirzner's ‘classical’ theories of entrepreneurship have contributed much to the field of entrepreneurship but have been underutilized in the emerging field of social entrepreneurship. The argument of this paper is that the utilization of Schumpeterian and Kirznerian theories of entrepreneurship can advance the field of social entrepreneurship in two ways. The first potential contribution from utilizing their classical theories is to guide theory-building for social entrepreneurship. In this paper, a close reading and interpretation of Schumpeter's and Kirzner's work is undertaken alongside a critique of current theories of social entrepreneurship. Five essential theoretical components of Schumpeterian and Kirznerian classical entrepreneurship theories are distilled with respect to social entrepreneurship theory-building: (1) the distinction between entrepreneurial thinking and rational models of decision making; (2) the distinction between entrepreneurship and leadership, capitalism, and management; (3) the ubiquity of entrepreneurship in all human endeavors; (4) the causal functionality of entrepreneurship; and (5) the priority of the process of entrepreneurship over the instrumentality of the entrepreneur. A research proposition is then constructed on each essential theoretical component. The research propositions point to possible research directions for the field of social entrepreneurship, thus representing the second potential contribution of the paper.

Key Words:

• Social entrepreneurship theory
• social entrepreneurship research
• Joseph Schumpeter
• Israel Kirzner

Acknowledgements

An earlier version of this paper was presented at the 2009 International Social Innovation Research Conference at Oxford University (UK). The authors wish like to sincerely thank the reviewers for their very helpful comments as well as session participants at the above conference for their thoughtful comments.

Notes

Nineteen thirty-four was the year of the first publication of Schumpeter's The theory of economic development. Its original publication in German occurred in 1911 (Swedberg 2006).

Searches executed on 28 July 2010.

One can argue that Klein's other two entrepreneurship-research categories of ‘occupational’, which studies self-employment, and ‘structural’, which examines new firm creation and market structure (Klein 2008, p. 176), are more empirically oriented.

See Shockley et al. (2006, pp. 212–214) for a review of the complementarity of Schumpeterian and Kirznerian entrepreneurship.

Dees' (2001) Web article on the meaning of social entrepreneurship is very close to being a ‘classic’ for the field. Rather than settling theory-building for social entrepreneurship, however, one can make the case that the Web article has stimulated it.

The data on social entrepreneurship, now being collected by the Global Entrepreneurship Monitor project (http://www.gemconsortium.org/), is also consistent with this trend.

Similarly, Schumpeter (1950) in Capitalism, socialism, and democracy contends that political entrepreneurs spark revolutionary change, much like technological innovation ‘reform[s] or revolutionize[s] the pattern of production by exploiting an invention’ (Albrecht 2002, p. 651).

In a contemporary assessment, Bygrave and Hofer (1991) not only insist on separating the process of entrepreneurship from the entrepreneur but they also give priority of importance to the former.