Centre for Technology Management

Enterprise and Economic Variety, Colloquium on Diversity in Social Systems and its Relation to Innovation Processes

Garnsey, E.

Centre for Technology Management, Institute for Manufacturing, Engineering Department, University of Cambridge, UK

Abstract

This paper reviews the literature on enterprise and adopts a new approach to explaining entrepreneurial innovation, a critical source of variety in the economy. Recent studies focus on entrepreneurs' pursuit of opportunity. This paper, combining resource-based and evolutionary perspectives, sees the entrepreneurial generation and deployment of resources as no less important in enabling them to connect up supply and demand in new ways. A potential business opportunity is continually reassessed by entrepreneurs in the light of their attempts to resource their venture. Chronically short of resources, they experiment through economy, leverage, new resource combinations and resource creation. Seeking to retain their independence, they enlist others by offering them a stake in future returns. Their partnering activities enable them to realize market opportunities. These stem from the endemic asynchronies in supply and demand that have been identified with �market failure' but are here associated with market dynamics. Entrepreneurs engage in problem-solving within constraints and find creative solutions. From this perspective, scientific, civic and even criminal forms of innovation have entrepreneurial dimensions. The business enterprise is the preferred vehicle of the economic entrepreneur, providing a base from which to pursue further opportunities. In a shifting environment, the new firm's resource base is hostage to fortune and the greater the gains, the less the incentive to remain entrepreneurial. Any one new venture is likely to succumb to unsolved problems or to grow conservative. But wave after wave of new entrants create and propagate new varieties of output and activity. This stream of variety-generating innovations is all the more needed since �lock-in' from the maturation of earlier innovations tends to reduce diversity in economic life.