Managers and Entrepreneurs

Dream baby dream
Of all that's come and going
--INXS

Baumol (1968) distinguished managers from entrepreneurs. Managers oversee existing processes. They are efficiency minded, and tasked with ensuring that traditional technologies are employed to their utmost to produce outputs that achieve current goals.

Entrepreneurs, on the other hand, are tasked with searching for and implementing new ideas. They are always looking to improve today's practices through innovation.

Baumol goes on to note that entrepreneurs are generally absent from economic theory--a theory that views managers as calculators of optimal values for all decision variables in the firm. They do so, he says, "until exogenous forces lead to an autonomous change in the environment. Until there is such a shift in one of the relationships that define the problem, the firm is taken to replicate precisely its previous decision, day after day, year after year." (67)

Although he does not explicitly say so, Baumol implies that entrepreneurs are the ones that respond to environmental forces pushing against the status quo and demanding adaptation.

Reference

Baumol, W.J. (1968). Entrepreneurship in economic theory. American Economic Review, 58(2): 64-71.