ENTREPRENEURIAL ORIGINS: A LONGITUDINAL INQUIRY

Joseph Schumpeter recognized what makes capitalist markets tick. The magic of markets lies not in the mechanics of supply and demand, but in the "animal spirits" of the entrepreneurs who keep designing new products, expanding technological horizons, and reducing production costs. As Schumpeter saw it, the relentless quest of entrepreneurs to build a better mousetrap is what makes capitalist markets so efficient and dynamic. Were Schumpeter alive today, he would be impressed by the evident stock of America's entrepreneurial talent. As the National Longitudinal Surveys of Youth (NLSY) document, the "animal spirits" of entrepreneurship are very much alive in America, even among the oft-maligned Generation X. Based on annual interviews of the same individuals every year, the NLSY has constructed a unique longitudinal profile of Generation X, beginning in 1979. An analysis of that data reveals that the quest for a better mousetrap continues in full force: roughly one out of four young workers pursue self-employment. I. BASIC ISSUES Jean Baptiste Say was perhaps the first person to emphasize the critical role that entrepreneurs play in "shift[ing] economic resources out of an area of lower and into an area of higher productivity" (Drucker [1985, 21]). Entrepreneurs later became heros of the Industrial Revolution and were heralded as engineers of creative destruction in the works of Joseph Schumpeter [1942]. Although Baumol later fretted that the formalized theory of the firm had virtually eclipsed the role of the entrepreneur (as Baumol [1968, 66] eloquently put it, "the Prince of Denmark has been expunged from the discussion of Hamlet"), the entrepreneur is still widely viewed as a critical factor in the growth of jobs, output, technology, and product innovation. Despite the conviction that entrepreneurship contributes significantly to economic growth, there is no consensus on precisely what kinds of creativity are "entrepreneurial": Schumpeter himself broadened the concept to encompass corporate managers and even agents in the nonprofit and public sectors (see Gartner [1989, 1990], Carsrud et al. [1986], Brockhaus and Horwitz [1986]). The ambiguity about the nature of entrepreneurship has also frustrated efforts to identify the entrepreneurial persona. Is everyone who starts a small business ipso facto an entrepreneur? Are upstarts like Bill Gates, Steve Jobs, or David Packard still fulfilling an entrepreneurial function after they became titans of industry? Can university scientists or economics professors perform entrepreneurial functions? How about political operatives? According to Drucker's definition of "opportunity seekers," all these individuals might easily be called "entrepreneurs." In the face of such uncertainty about what entrepreneurship is or who performs it, we can hardly isolate the factors that "produce" entrepreneurial talent. Yet, if entrepreneurship is the critical "engine of creative destruction" that Schumpeter suggests, we have reason to explore the origins of entrepreneurial talent. Does "nature" endow certain individuals with "animal spirits" or do identifiable experiences and forces nurture entrepreneurial dispositions? If we could identify the origins of entrepreneurship, we might be able to "invest" more resources into entrepreneurial development. II. PREVIOUS RESEARCH Given the weakness of its conceptual foundation, empirical research on the frequency, origins, or performance of entrepreneurship has largely been ad hoc. Virtually all of the research is based on individuals who have attained successful entrepreneurial status (typically business success). Retrospective data and contemporaneous (psychological) test results are typically used to determine whether a distinctive entrepreneurial profile exists.(1) Most of that research extends the pioneering psychological studies conducted by David McClelland [1976] on "achievement motivation" and by Julian Rotter [1986] on "external" vs. …