Introduction
Entrepreneurship is often regarded as a driving force behind economic progress, innovation, and societal change. The contributions of early economic thinkers, such as Jean-Baptiste Say and Joseph Schumpeter, have shaped modern understandings of the entrepreneurial role. Say, in the early 19th century, described entrepreneurs as individuals who “upset and disorganize” existing economic orders by reallocating resources to create value (Say, 1803). A century later, Schumpeter introduced the concept of “creative destruction,” portraying entrepreneurs as agents of innovation who destroy outdated systems to make way for new structures (Schumpeter, 1942). This essay explores these two seminal concepts, examining their relevance to entrepreneurship and small business management. It critically analyses how these ideas manifest in real-world contexts, including examples from Malawi, to illustrate their applicability. The discussion will highlight the disruptive yet transformative nature of entrepreneurial activity, ultimately arguing that these characteristics remain central to understanding entrepreneurship today.
J. B. Say’s Concept of “Upset and Disorganize”
Jean-Baptiste Say, a French economist, was among the first to articulate the role of the entrepreneur in economic theory. In his seminal work, *A Treatise on Political Economy* (1803), Say defined entrepreneurs as individuals who shift resources from areas of lower productivity to higher productivity, thereby creating value. He argued that this process often “upsets and disorganizes” the status quo, as entrepreneurs challenge established norms and practices to generate economic activity (Say, 1803). This disruption is not merely destructive; it is a necessary realignment that fosters growth. Say’s perspective positions entrepreneurs as risk-takers who identify opportunities where others see stagnation, fundamentally altering market dynamics.
In a contemporary context, this concept is evident in various entrepreneurial ventures. Consider, for instance, the rise of mobile banking services in developing economies. In Malawi, the introduction of mobile money services like Airtel Money and TNM Mpamba has disrupted traditional banking systems. These services bypass the need for physical bank branches, which are often inaccessible in rural areas, and provide financial inclusion to unbanked populations. By reallocating technological and financial resources, entrepreneurs behind these innovations have upset the conventional banking model, reorganizing access to financial services (GSMA, 2019). While this has created challenges for traditional banks, it has arguably enhanced economic participation among underserved communities in Malawi, aligning with Say’s view of value creation through disruption.
J. Schumpeter’s Theory of “Creative Destruction”
Joseph Schumpeter, an Austrian economist, further developed the discourse on entrepreneurship with his theory of “creative destruction.” Introduced in his work *Capitalism, Socialism and Democracy* (1942), Schumpeter described entrepreneurs as innovators who drive economic progress by dismantling old industries and creating new ones in their place (Schumpeter, 1942). He argued that this process of destruction is inseparable from creation; outdated technologies, products, and methods must be replaced to make way for innovation. Unlike Say’s focus on resource reallocation, Schumpeter emphasized the role of radical innovation, often through technological advancements, as the hallmark of entrepreneurial activity.
A classic global example of creative destruction is the advent of digital photography, which rendered traditional film photography obsolete. Companies like Kodak, once dominant in the film industry, were unable to adapt to the shift towards digital cameras and smartphones, ultimately leading to their decline. Meanwhile, firms like Canon and later smartphone manufacturers capitalized on this transition, creating new markets and consumer behaviors (Christensen, 1997). This illustrates Schumpeter’s notion that destruction of the old is a prerequisite for the emergence of the new, a process inherently tied to entrepreneurial vision.
In the Malawian context, creative destruction can be observed in the agricultural sector, which remains central to the country’s economy. Small-scale entrepreneurs and firms have introduced solar-powered irrigation systems, replacing traditional, labor-intensive methods. Companies like SolarWorks! Malawi have pioneered affordable solar solutions, enabling farmers to increase productivity while reducing reliance on erratic rainfall (SolarWorks!, 2020). This innovation has destroyed older, less efficient farming practices, aligning with Schumpeter’s framework. However, it also raises questions about accessibility and the potential exclusion of poorer farmers, highlighting a limitation of creative destruction in resource-constrained settings.
Comparing Say and Schumpeter: Convergence and Divergence
While both Say and Schumpeter underscore the disruptive nature of entrepreneurship, their emphases differ. Say’s concept of “upset and disorganize” focuses on the reallocation of resources as a mechanism for creating value, suggesting a more incremental form of change. In contrast, Schumpeter’s “creative destruction” implies a more radical transformation, where entire industries or practices are obliterated to facilitate groundbreaking progress (Drucker, 1985). Both perspectives, however, acknowledge the entrepreneur’s role as a catalyst for economic dynamism, a theme that remains relevant in modern business management.
In Malawi, these dual aspects of disruption are evident across sectors. For instance, the rise of e-commerce platforms, though still nascent, reflects Say’s idea of reorganizing resources by connecting rural producers directly with urban consumers through platforms like Malawi Fresh. Simultaneously, it embodies Schumpeter’s creative destruction by challenging traditional market intermediaries who previously dominated trade networks (World Bank, 2021). Such examples demonstrate that the two theories, while distinct, often intersect in practice, as entrepreneurs simultaneously reorganize and innovate.
Critical Reflections and Limitations
Despite their insightful contributions, both Say and Schumpeter’s theories have limitations. Say’s framework, while practical in explaining resource shifts, lacks depth in addressing the social and ethical implications of disruption. For instance, in Malawi, while mobile money services have expanded financial access, they have also led to concerns over digital literacy and fraud among vulnerable populations (GSMA, 2019). Schumpeter’s theory, though visionary, often overlooks the destructive impact on livelihoods, as seen in the displacement of workers due to technological advancements. Furthermore, both theories were developed in Western economic contexts, which may not fully account for the unique challenges of developing economies like Malawi, where infrastructural and financial constraints can hinder entrepreneurial disruption.
Nevertheless, these concepts remain valuable for understanding the dual nature of entrepreneurship as both a destabilizing and progressive force. Small business managers in Malawi and beyond can draw on these ideas to anticipate and navigate the challenges of disruption while harnessing innovation for sustainable growth.
Conclusion
In conclusion, Jean-Baptiste Say’s description of entrepreneurs as those who “upset and disorganize” and Joseph Schumpeter’s concept of “creative destruction” offer complementary insights into the transformative role of entrepreneurship. Say emphasizes the reallocation of resources to create value, while Schumpeter highlights the necessity of destroying outdated systems to usher in innovation. Examples from Malawi, such as mobile money services and solar irrigation systems, illustrate how these theories manifest in contemporary settings, driving economic and social change while posing new challenges. However, limitations in both frameworks, particularly their limited consideration of social impacts in developing contexts, suggest a need for broader perspectives in applying these ideas. For small business managers and entrepreneurs, understanding these concepts provides a foundation for navigating disruption and fostering innovation, ultimately contributing to economic development. Indeed, as the global and local business landscapes evolve, the disruptive essence of entrepreneurship remains a critical driver of progress.
References
- Christensen, C. M. (1997) The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business Review Press.
- Drucker, P. F. (1985) Innovation and Entrepreneurship: Practice and Principles. Harper & Row.
- GSMA (2019) Mobile Money in Malawi: Country Report 2019. GSMA Mobile for Development.
- Say, J. B. (1803) A Treatise on Political Economy. Grigg & Elliot.
- Schumpeter, J. A. (1942) Capitalism, Socialism and Democracy. Harper & Brothers.
- SolarWorks! (2020) Annual Report on Solar Solutions in Malawi. SolarWorks! Malawi.
- World Bank (2021) Digital Economy Country Diagnostic: Malawi. World Bank Group.
