Economic Theories of the Entrepreneur and Business Classification
The Evolution of the Entrepreneurial Concept
Adam Smith (18th Century)
The employer is a capitalist, the owner of the means of production (Factors of Production).
Cantillon (18th and 19th Centuries)
The businessman operates at an uncertain price because they buy inputs, produce, and sell outputs at an uncertain price.
Say (19th Century)
The value of production equals cost + profit (Factors of Production).
Marshall (19th Century)
Large companies requiring huge amounts of capital emerged during this time. The employer plans, organizes, and is a professional seeking the company's growth and power. The shareholder seeks returns on their investment.
F.H. Knight (20th Century)
The employer assumes the risk arising from the business activities the company develops, and is therefore entitled to profit.
Schumpeter (20th Century)
What justifies the profit of the enterprise is its role as an innovator.
Galbraith (20th Century)
Power has shifted from individuals to organizations. The technostructure (directors) consists of specialists and technicians who hold power and information. (Firms are increasing their market power.)
Bennis (19th and 20th Centuries)
The entrepreneur, besides innovative production and management, must be a leader (a person with the ability to influence a group) and a strategist.
The core functions of the entrepreneur are:
- Planning
- Organization
- Management
- Control
These functions are executed by taking advantage of market opportunities, assuming risks, and leading a project.
Company Classification
2.1 Classification by Size
Small Business
- Number of employees: 0–49
- Annual Turnover: up to €10 million
- Total Assets: up to €10 million
- Micro-enterprise: Up to 10 workers, Turnover up to €2 million, Total Assets up to €2 million.
Medium Company
- Number of employees: 50–249
- Annual Turnover: up to €50 million
- Total Assets: up to €43 million
Large Enterprises
- Number of employees: 250 or more
- Annual Turnover: over €50 million
- Total Assets: over €43 million
2.2 Classification by Sector of Activity
- Primary Sector: Agriculture, livestock, fishing, mining, and forestry.
- Secondary Sector: Industry, including construction.
- Tertiary Sector: Service sector, including trade. In developed countries, this sector is the most important (tertiarization of the economy).
2.3 Classification by Capital Ownership
- Private Companies: Funded by private individuals. Example: El Corte Inglés.
- Public Companies: Funded by the state. Example: RENFE and Postal Service (POST).
- Joint Ventures: Funded by individuals and the state. Example: ALTADIS.
2.4 Classification by Legal Form
- Individual: Sole Proprietorship (Self-Employed).
- Corporate/Social: Includes capitalist forms, personalist forms, and social interest forms.