Merriam Webster defines an entrepreneur as “one who organises, manages, and assumes the risks of a business or enterprise.” The Library of Economics and Liberty said successful entrepreneurs find ways to derive greater profit from materials or skills while unsuccessful ones don’t. The website shared this insight to entrepreneurship: “An entrepreneur who takes the resources necessary to produce a pair of jeans that can be sold for thirty dollars and instead turns them into a denim backpack that sells for fifty dollars will earn a profit by increasing the value those resources create… Losses mean that an entrepreneur has essentially turned a fifty-dollar denim backpack into a thirty-dollar pair of jeans. This error in judgment is part of the entrepreneurial learning, or discovery, process vital to the efficient operation of markets.”
Knowing this, it’s not all that surprising that traditional gauges of entrepreneurship measure things like the number of small businesses or self-employed people or business startups in a country. According to The Economist, these measures tend to provide misleading results with Egypt often appearing to be more entrepreneurial than America.
A new paper from the Research Institute of Industrial Economics offers a different way to measure entrepreneurial success. It focuses on Schumpeterian entrepreneurship. Austrian-American economist Joseph Schumpeter believed entrepreneurs were innovators, people whose ideas and execution produced high-growth companies that often upset and disorganised existing models for doing business – think Thomas Edison and electricity, or Steve Jobs and Bill Gates and computing.
The paper looked at Forbes Magazine’s billionaires list from 1996 through 2010 and focused on self-made billionaires who earned their dough founding new businesses. There were almost 1,000 of them in 50 different countries. (By the way, four of every 10 global billionaires are found in the United States, predominantly in California, New York, and Texas.) The researchers’ conclusion was the Forbes’ list offered, “an alternative – albeit imperfect – cross-country measure of Schumpeterian entrepreneurship with more intuitive results than small business activity.”