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The Invention of Enterprise

The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times

David S. Landes
Joel Mokyr
William J. Baumol
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  • Book Info
    The Invention of Enterprise
    Book Description:

    Whether hailed as heroes or cast as threats to social order, entrepreneurs--and their innovations--have had an enormous influence on the growth and prosperity of nations.The Invention of Enterprisegathers together, for the first time, leading economic historians to explore the entrepreneur's role in society from antiquity to the present. Addressing social and institutional influences from a historical context, each chapter examines entrepreneurship during a particular period and in an important geographic location.

    The book chronicles the sweeping history of enterprise in Mesopotamia and Neo-Babylon; carries the reader through the Islamic Middle East; offers insights into the entrepreneurial history of China, Japan, and Colonial India; and describes the crucial role of the entrepreneur in innovative activity in Europe and the United States, from the medieval period to today. In considering the critical contributions of entrepreneurship, the authors discuss why entrepreneurial activities are not always productive and may even sabotage prosperity. They examine the institutions and restrictions that have enabled or impeded innovation, and the incentives for the adoption and dissemination of inventions. They also describe the wide variations in global entrepreneurial activity during different historical periods and the similarities in development, as well as entrepreneurship's role in economic growth. The book is filled with past examples and events that provide lessons for promoting and successfully pursuing contemporary entrepreneurship as a means of contributing to the welfare of society.

    The Invention of Enterpriselays out a definitive picture for all who seek an understanding of innovation's central place in our world.

    eISBN: 978-1-4008-3358-0
    Subjects: Business, Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Foreword
    (pp. vii-viii)
    Carl J. Schramm

    The importance of history to understanding entrepreneurship cannot be underestimated. Through history, we see the power, the resilience, and the complexity of this phenomenon. We gain a better understanding of the changing nature of entrepreneurial activity over time. We learn more about the complex web of social and institutional influences on entrepreneurship. And we develop a broader awareness of the impact of entrepreneurship over time—on individuals and on society as a whole.

    Historical work in this area complements the increased attention to entrepreneurship among economists in recent years. Among many other topics, economists have elucidated a great deal about...

  4. Preface The Entrepreneur in History
    (pp. ix-xiv)
    William J. Baumol
  5. Acknowledgments
    (pp. xv-xviii)
    William J. Baumol and Robert J. Strom
  6. Introduction Global Enterprise and Industrial Performance: An Overview
    (pp. 1-7)
    David S. Landes

    Western entrepreneurship and technological progress go back centuries and have changed the world for the better. That, at least, is one assessment of the historical record—one with which not everyone would agree. Some scholars there are who, disapproving of Western triumphalism or solicitous of Asian (mostly Chinese) pride and prowess, would date the Industrial Revolution as a late phenomenon in the history of entrepreneurship and treat it as lucky accident (or unlucky, depending on one’s sense of values). It could have happened anywhere, they say; it just fell to Europe’s or Britain’s lot, in large part owing to political...

  7. Chapter 1 Entrepreneurs: From the Near Eastern Takeoff to the Roman Collapse
    (pp. 8-39)
    Michael Hudson

    A century ago economists could only speculate on the origins of enterprise. It seemed logical to assume that entrepreneurial individuals must have played a key role in archaic trade, motivated by what Adam Smith described as an instinct to “truck and barter.” When a Mycenaean Greek site from 1200 BC was excavated and storerooms with accounting records found, the building accordingly was called “a merchant’s house,” not a public administrative center.¹

    There was little room for Max Weber’s idea that a drive for social status might dominate economic motives. Materialist approaches to history both by Marxist and by business-oriented writers...

  8. Chapter 2 Neo-Babylonian Entrepreneurs
    (pp. 40-61)
    Cornelia Wunsch

    The Neo-Babylonian empire under the so-called Chaldaean rulers¹ lasted nearly a century, from 626 to 539 BC. It ended when Cyrus the Great conquered Babylonia and made it part of the much larger Achaemenid Persian empire. Its center and power base was southern Mesopotamia, from where it controlled large parts of the Near East. Babylon, its capital, was situated on one branch of the Euphrates River, circa 75 km to the south of the modern-day Iraqi capital Baghdad.

    From 626 BC on Nabopolassar gradually had seized and consolidated control over Babylonia until his troops, with help by Median allies, finally...

  9. Chapter 3 The Scale of Entrepreneurship in Middle Eastern History: Inhibitive Roles of Islamic Institutions
    (pp. 62-87)
    Timur Kuran

    At least from the nineteenth century onward, certain observers have viewed Islam as a religion that discourages entrepreneurship by fostering fatalism, conformism, and conservatism.¹ Leading Muslim reformers of the nineteenth century, including Jamal al-Din al-Afghani (1839–97), believed that this view confuses a perverted form of Islam, which counsels passive resignation to events, with authentic Islam, which holds individuals responsible for their acts and requires the use of God-given talents (Hourani 1983, 128–29).

    Islamism, which emerged through the works of Sayyid Abul-Ala Mawdudi (1903–79), Sayyid Qutb (1906–66), and Muhammad Baqir al-Sadr (1931–80), generally agrees that Islam...

  10. Chapter 4 Entrepreneurs and Entrepreneurship in Medieval Europe
    (pp. 88-106)
    James M. Murray

    The first use of the wordentrepreneurcomes to us from the late Middle Ages when this French loan word was used to describe a battlefield commander. Only very gradually was the word’s meaning extended to the battlefield of business. Along the way it was used to describe the “director or manager of a public musical institution,” before the late-nineteenth-century economist Richard T. Ely rather sniffily wrote in hisIntroduction to Political Economythat “we have been obliged to resort to the French language for a word to designate the person who organizes and directs the productive factors, and we...

  11. Chapter 5 Tawney’s Century, 1540–1640: The Roots of Modern Capitalist Entrepreneurship
    (pp. 107-155)
    John Munro

    One of the very most remarkable features of the Industrial Revolution era is that Non-Conformists or Dissenters—those Protestants who refused to conform to the officially established Church of England¹—accounted for a remarkably high proportion, perhaps one half, of the scientists and inventors listed in the Royal Society (founded 1660) and the related Lunar Society of Birmingham (founded 1764).² Even more important for the history of entrepreneurship is the fact that they also accounted for at least half of the known entrepreneurs (and other business leaders) of the Industrial Revolution era itself, up to circa 1820. Yet Dissenters were...

  12. Chapter 6 The Golden Age of the Dutch Republic
    (pp. 156-182)
    Oscar Gelderblom

    The Dutch Golden Age is an icon of premodern economic growth. The revolt against Philip II and his successors in the late sixteenth and early seventeenth centuries coincided with an unprecedented economic boom and cultural flowering. Between 1580 and 1650 the Dutch became the dominant player in European trade—an achievement based on their large-scale commercial agriculture and fisheries, market-oriented manufacturing, and low-cost shipping services. In addition, a combined military and commercial effort allowed the Dutch colonial companies, VOC (Verenigde Oost-Indische Compagnie) and WIC (West-Indische Compagnie), to establish a dense network of trading posts in Asia, Africa, and the Americas....

  13. Chapter 7 Entrepreneurship and the Industrial Revolution in Britain
    (pp. 183-210)
    Joel Mokyr

    The “new economic history” has had little patience with entrepreneurial explanations of major economic developments. Ever since the emergence of a cliometric literature on the economic history of modern Britain in the 1970s, economic historians trained in economics have debunked the view that Britain’s late-nineteenth-century decline could be explained in some way by social factors that led to “entrepreneurial failure.”¹ In this chapter I will look at entrepreneurship in an earlier period, the decades of the Industrial Revolution. This subject is at least not nearly as controversial as the “Victorian decline.” The Industrial Revolution has remained a staple of the...

  14. Chapter 8 Entrepreneurship in Britain, 1830–1900
    (pp. 211-242)
    Mark Casson and Andrew Godley

    This chapter examines the role of entrepreneurship in the growth of the Victorian economy over a seventy-year period, beginning at a time when the Industrial Revolution was approaching maturity (see the previous chapter) and ending when the overseas British Empire was approaching its zenith (see the following chapter).

    While the factory system was the major technological innovation of the Industrial Revolution (1760–1830), the introduction of railways, and the switch from sail to steam in oceangoing shipping, were the major technological innovations of the Victorian period (1830–1900). It was not so much in manufacturing, but rather in infrastructure, and...

  15. Chapter 9 History of Entrepreneurship: Britain, 1900–2000
    (pp. 243-272)
    Andrew Godley and Mark Casson

    In 1900 Britain was at the apogee of confidence in the justness and might of its role as world leader. Its rise to mastery through the Victorian Age had been squarely based on economic success. And this had emerged through its early dominance of world textiles markets—cotton and woolens—and then the iron and steel industry, coal, shipbuilding, and other pre-mass-production forms of mechanical engineering—the so-called staple industries. In 1900 British firms enjoyed a 35 percent share of the global trade in manufactured products, when Britain had less than 2 percent of the world’s population (Matthews et al....

  16. Chapter 10 History of Entrepreneurship: Germany after 1815
    (pp. 273-304)
    Ulrich Wengenroth

    The history of entrepreneurship in Germany is as tortured as the history the country inflicted on its neighbors and on itself. For much of the nineteenth and twentieth centuries, entrepreneurs in Germany were confronted by the consequences of political upheaval, shifting borders, major institutional rearrangements in the wake of regime changes, and all the limitations and temptations that went with frequent redefinitions of the rules of the game. With six political systems—two of them side by side for the second half of the twentieth century—two controversial political unifications, two aggressively fought world wars, and continually changing borders, Germany...

  17. Chapter 11 Entrepreneurship in France
    (pp. 305-330)
    Michel Hau

    For decades, there have been two schools of thought about the business development of France in the nineteenth and twentieth centuries: the pessimists’ and the optimists’. The pessimists emphasize that British GNP grew faster than the French during the nineteenth century and exceeded the French by 50 percent at the beginning of the twentieth century. The optimists focus attention on the performance of French small-scale output in the secondary sector and assert that although the French path to economic modernity was different, it was no less efficient. Perhaps both are right: French national data hide large regional variations. In some...

  18. Chapter 12 Entrepreneurship in the Antebellum United States
    (pp. 331-366)
    Louis P. Cain

    What became the United States of America was born of entrepreneurship. When independence was gained, American disposable incomes were among the highest in the world, but, early in the colonial period, entrepreneurial failure was as likely as success (Hughes and Cain 2007, 51). Indeed, Jamestown, the first permanent colony, an entrepreneurial venture of the Virginia Company of London, became the first government bailout of a private North American business when it was converted to a crown colony. By independence, agriculture and trade were well established, but manufacturing was still in its infancy.

    If, as Schumpeter (1934) thought, entrepreneurs seek to...

  19. Chapter 13 Entrepreneurship in the United States, 1865–1920
    (pp. 367-400)
    Naomi R. Lamoreaux

    The half-century or so following the Civil War was a period of extraordinarily rapid economic growth in the United States. Real gross domestic product (GDP) multiplied more than seven times between 1865 and 1920, and real per capita product more than doubled. As the much higher growth rates of total compared to per capita GDP suggest, the economy expanded more by adding new inputs than it did by increasing productivity. Nevertheless, the rate of increase in per capita product (averaging about 1.7 percent per year over the entire period 1870–1920) was higher than ever before in U.S. history, and...

  20. Chapter 14 Entrepreneurship in the United States, 1920–2000
    (pp. 401-442)
    Margaret B. W. Graham

    The special genius of the twentieth-century U.S. economy has typically been characterized as the harnessing of technology by entrepreneurs working within the large vertically integrated American corporation, at first wholly a private sector phenomenon, and then in cooperation with an increasingly interventionist federal government.¹ By the 1970s no sector of the U.S. economy, whether public or private, for-profit, or not-for-profit, was unaffected by this regime. Even nonmanufacturing sectors like entertainment and communications bore the stamp of the scientifically enhanced, and regulated, form of industrialization that consolidated the gains of the second industrial revolution.²

    Closer examination of the twentieth-century experience in...

  21. Chapter 15 An Examination of the Supply of Financial Credit to Entrepreneurs in Colonial India
    (pp. 443-468)
    Susan Wolcott

    In 1968 William Baumol called for a renewed focus on the “determinants of the payoff to entrepreneurial activity.” Understanding the allocation of entrepreneurial talent was crucial, as “the entrepreneur is the key to the stimulation of growth.” In a 1990 paper, on a less optimistic note, he argued that an inappropriate payoff structure, one that rewards unproductive entrepreneurship, is empirically associated with very slow growth.

    India, particularly colonial India, is a fascinating case study of slow economic growth. Post-1948 India developed slowly, most obviously because of bad government policies that stifled growth in obvious ways. The recent removal of some...

  22. Chapter 16 Chinese Entrepreneurship since Its Late Imperial Period
    (pp. 469-500)
    Wellington K. K. Chan

    Until the last decade, the image of China for most of us was that of a country full of people, underdeveloped, poor, and communistic. Indeed, for at least one century, from the late nineteenth to the late twentieth centuries, China’s share of the world’s gross product dropped precipitously, from around 8 or 9 percent to no more than 4 or 5 percent, while its population as a share of the world’s total stayed fairly constantly at approximately 20 to 24 percent. Yet from at least the late sixteenth to the early nineteenth centuries, China alone accounted for between a quarter...

  23. Chapter 17 Entrepreneurship in Pre–World War II Japan: The Role and Logic of the Zaibatsu
    (pp. 501-526)
    Seiichiro Yonekura and Hiroshi Shimizu

    This chapter is the story of the path followed by an economy that came to be characterized, if not dominated, by a relatively small number of very large firms, the zaibatsu. Part of the story is the burst of growth that followed a long period of isolation, in a country suddenly opened up by the military threat of an invading force—the 1853 incursion of Admiral Perry and his fleet. This was followed by a thorough reconfiguration of the structure of government as a critical step toward elimination of the country’s technological lag. The account here will describe the relatively...

  24. Chapter 18 “Useful Knowledge” of Entrepreneurship: Some Implications of the History
    (pp. 527-542)
    William J. Baumol and Robert J. Strom

    The term “useful knowledge” in the title of our chapter is not meant to imply that the utility of historical study of entrepreneurship is in any sense questionable. Rather, we seek to remind the reader that our orientation in this book mirrors the interest of Ben Franklin, America’s first great entrepreneur-inventor, in knowledge that has practical applications. Just as Franklin sought to promote useful knowledge that would improve the quality of life in a new land,¹ so we seek in this book to derive practical lessons regarding entrepreneurship and its relationship to economic growth from the historical accounts in this...

  25. List of Contributors
    (pp. 543-544)
  26. Index
    (pp. 545-566)