Coordinator Theory of Entrepreneurship
Jean-Baptiste Say (1767–1832)
Writing in the early 19th century, Say looked beyond the mere ownership of capital to identify a distinct human force—a catalyst responsible for turning inert ideas into economic reality.
At the core of Say’s philosophy is the role of the entrepreneur as a bridge builder. He argued that the production of wealth requires the confluence of three distinct elements: land (natural resources), labour (human effort), and capital (financial tools). However, these elements remain disconnected and unproductive on their own. It is the entrepreneur who possesses the unique judgment to unite them, organizing the complex "means of production" into a functioning machine.
"The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield." (quote attributed by Drucker)
Say conceptualized the industrial process not as a monolith, but as a triad of distinct functions. First, there is the Scientist, who discovers the laws of nature and creates theoretical knowledge. At the other end is the Worker, who executes the physical tasks of production. Between them stands the Entrepreneur. This middleman is essential; they take the abstract knowledge of the scientist and apply it to the practical needs of humanity, directing the worker to create value where none existed before.
Any profile of Jean-Baptiste Say feels slightly incomplete without at least a footnote or mention of Say’s Law ("Supply creates its own demand"). This is his most famous contribution to economics and provides the macro-economic context for why the entrepreneur is so vital—they create the supply that drives the engine. This law was later challenged by Keynes for not accounting for the importance of growth in demand.
Connections to other theories
Say’s definition of the entrepreneur as a "coordinator" and "resource-shifter" laid the groundwork for classical economic thought:
- Cantillon Theory: While Cantillon first identified the entrepreneur as a "risk-bearer," Say expanded this by adding the role of managerial judgment. For Say, being a risk-taker wasn't enough; one had to be an effective organizer.
- Schumpeter’s Theory: Say’s famous quote about shifting resources to "higher productivity" is the direct ancestor of Schumpeter's Innovation Theory. Schumpeter simply took Say's "shifting" and rebranded it as the disruptive force of "Creative Destruction."
- Knightian Uncertainty: Say was among the first to acknowledge that the entrepreneur pays for production today in hopes of revenue tomorrow. This gap is the essence of the "uninsurable uncertainty" later popularized by Frank Knight.
- Kirzner’s Alertness Theory: Say’s "Scientist-Entrepreneur-Worker" triad suggests that the entrepreneur must be "alert" to scientific discoveries that can be commercialized—a concept Israel Kirzner would later expand into market alertness.
Foundational Text & REFERENCES
Say, J. Traité d'économie politique (1803) • Catéchisme d'économie politique (1815) • Cours complet d'économie politique pratique (1828)
Drucker, P., & Maciariello, J. (2014). Innovation and entrepreneurship. Routledge.
Comments