Measuring Historical Entrepreneurship

This paper illustrates how theory and evidence have been, and may be, quantitatively linked in the historical study of entrepreneurship, thereby allowing judgements about entrepreneurship’s causes and effects with increasing precision. First is considered the implications of identifying entrepreneurs with business founders, and the corresponding measure of entrepreneurship, the number of new firms established. The supply of entrepreneurship is then analysed as a choice between employment, selfemployment and, in some circumstances, unemployment. Either the well being, or the expected profit, income or wealth, from the employment options are the objects of choice. Profit or wealth is therefore contemplated as a possible indicator of entrepreneurial performance in particular contexts. The determinants of entrepreneurship are the factors that influence the choice of employment. Credit rationing is especially addressed, since even small businesses require capital, which may not always accompany entrepreneurial talent. The focus then shifts to distinctive historical measurement and estimation problems, including those arising from entrepreneurial culture and social mobility. The survey goes on to address measures of entrepreneurial optimisation, concentrating first on choice of technique of production and then on total factor productivity indices that embody this choice, distinguishing aggregate performance from that of the individual entrepreneur. Examples show how the choice of production technique approach can be extended to product selection and entrepreneurial success, as well as quantifying the gains from reducing the dispersion in entrepreneurial performance. Welsh Institute for Research in Economics and Development Cardiff Business School, Cardiff University Aberconway Building, Colum Drive, Cardiff, CF10 3EU, UK Email:[email protected] ∗ Prepared for I Minoglou and Y Cassis eds Entrepreneurship in Theory and History: Theory and Themes, Palgrave (forthcoming)