Middle ages

Earliest period

One early example of a go – between is Marco Polo, an Italian, who was one of the first Europeans who sailed to the Far East. He attempted to establish trade routes to China. He signed a money contract with a money person to sell his goods. That money person was a forerunner of today’s capitalist. A common contract during that time provided a loan to the merchant – adventurer at a 22.5 percent rate, including insurance. While the money person was a passive risk taker, the merchant – adventurer took the active role in trading, bearing all the physical and emotional risks. After the successful completion of a journey by the merchant – adventurer, the money person took most of the profits (up to 75 percent), while the entrepreneur merchant settled for the remaining 25 percent.

In the Middle Ages the term entrepreneur was used to describe both an organizer of musical performances and a manager of large business projects. In such projects, this person did not take any risks, but merely managed the project using the resources provided. A typical entrepreneur in the Middle Ages was the cleric – the person in charge of great architectural works, such as castles and fortifications, public buildings, abbeys, and cathedrals.

17 ^th Century

The connection of risk with entrepreneurship developed in the 17^th century. At that time an entrepreneur was a person who entered into a contract with the government to perform a service or to supply stipulated products. Since the contract price was fixed, any resulting profits or losses reflected the efforts of the entrepreneurs – the better they worked the more profit they had. One of the entrepreneurs in this period was John Law, a Frenchman, who was the founder of the royal bank of France and the Mississippi Company, which had an exclusive franchise to trade between France and the New World. Unfortunately, the monopoly on French trade led to Law’s downfall when he attempted to push the company’s stock price higher than the value of the assets; this eventually led to the collapse of the company. Richard Cantillon, a well – known English economist at the beginning of the 17^th century, understood Law’s mistake. Cantillon developed one of the first entrepreneur definition. He is regarded by some researchers as the founder of the term. He viewed the entrepreneur as a risk taker because merchants, farmers, craftsmen, and other sole proprietors “ buy at a certain price and sell at an uncertain price, therefore operating at a risk”

18^th Century

Finally, in the 18^th century, the person with capital was differentiated from the one who needed capital. In other words, the entrepreneur was distinguished from the capital provider (the present day venture capitalist). One reason for this differentiation was the industrialization occurring throughout the world. Many of the inventions developed during that time were reactions to the changing world, as was the case with Thomas Edison, the author of many inventions. He was developing new technologies and was unable to finance his inventions himself. Edison raised capital from private sources to develop and make experiments in the fields of electricity and chemistry. Edison was a capital user (an entrepreneur), not a provider (a venture capitalist). In contrast, a venture capitalist is a professional money manager who makes risk investments from a pool of equity capital to obtain a high rate of return on the investments.

19^th and 20^th centuries

In the late 19^th and early 20^th centuries, entrepreneurs were frequently not distinguished from managers and were viewed from an economic perspective: Briefly stated, the entrepreneur organizes and manages an enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of the land, for the services he employs, and for the capital he requires. He contributes his own initiative, skill and ingenuity in planning,

organizing and administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances The net residue of the annual receipts of the enterprise after all costs have been paid he retains for himself. Andrew Carnegie is one of the best examples of this definition. Carnegie invented nothing. Using new ideas he developed new technology into products to achieve economic results. Carnegie, who descended from a poor Scottish family, made the American steel

industry one of the wonders of the industrial world, primarily thanks to his ability to win competitions, rather than his inventiveness or creativity.

In the middle of the 20^th century, the notion of an entrepreneur as an innovator was established: The function of the entrepreneurs is to recreate or revolutionize the pattern of production by introducing an invention or, more generally, by using new technological possibilities for producing a new commodity or producing an old one in a new way, by opening a new source of supply of materials or a new outlet for products; by reorganizing an old industry and creating a new one…

In this definition the concept of innovation an newness is an integral part of entrepreneurship. Indeed, innovation, the act of introducing some new ideas, is one of the most difficult tasks for the entrepreneur. It needs not only the ability to create, but also the ability to understand all the forces at work in the environment. The newness can consist of anything from a new product to a new organizational structure. Edward Harriman, who reorganized the railroad in he United States, or John Morgan, who developed his large banking house by reorganizing and financing the nation’s industries, are examples of entrepreneurs fitting this definition.

These organizational innovations are as difficult to develop successfully as the more traditional technological innovations (transistors, computers, lasers) that are usually associated with the word invention. This ability to innovate is an instinct that distinguishes human beings from animals.The instinct can be observed throughout history, from the Egyptians who designed and built great pyramids out of stone blocks weighing many tons each, to laser beams, supersonic planes and space stations. While the tools have changed with advances in science and technology, the ability to innovate has always been present in every civilization.

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