T.W. Schultz and the Human-Capital Approach to Entrepreneurship*

Abstract

T. W. Schultz’s theory of entrepreneurship is among his least known, but most interesting, contributions. While entrepreneurship is increasingly recognized as an important for economic organization and development, it is not a major component of the economist’s day-to-day toolkit. This paper describes Schultz’s approach to entrepreneurship and compares it to other concepts of entrepreneurship in economics and management. Entrepreneurship and Economic Organization Because entrepreneurs in many ways personify market forces, one might expect them to be the central figures in economics. Similarly, because most entrepreneurial ventures somehow involve a firm, entrepreneurship would seem to be a core element of the economics of organization (represented, for example, by Milgrom and Roberts). However, entrepreneurship has been largely neglected by modern economists. Entrepreneurship is invoked in an ad hoc fashion, when needed, to explain aspects of firm organization (Knight, 1921), economic development (Schumpeter 1911), market dynamics (Kirzner 1973), and leadership (Witt, 1998). Moreover, while many business schools feature entrepreneurship curricula, the phenomenon under investigation is usually small-business management, the study of routine management tasks, relationships with

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