Numerous thinkers have speculated about both the origin and function of the entrepreneur and the nature of entrepreneurship. A large body of research in economics now addresses these topics. Section 2.1 briefly surveys ‘early’ (chiefly pre-1975) views about entrepreneurship. These are mainly concerned with defining and identifying salient aspects of entrepreneurship in a general way. The remaining sections treat ‘modern’ (post-1975) contributions to the economics literature on entrepreneurship. These are typically framed as models of occupational choice between entrepreneurship and paid employment. They tend to be less concerned with definitional issues and usually take entrepreneurship to be any activity where individuals work for themselves and trade off risk and returns, rather than opting for safe returns in a different occupation. For simplicity, the latter will generally be called simply ‘paid employment’ hereafter.

Section 2.2 introduces a basic occupational choice model of entrepreneurship, in which all agents are treated as homogeneous. The analysis is broadened out in section 2.3, where individuals are endowed with heterogeneous entrepreneurial abilities, and also in section 2.4, which endows them with heterogeneous risk attitudes. The theories contained in these two sections predict which individuals become entrepreneurs and which do not on the basis of differences in personal characteristics. In contrast, section 2.5 asks why a profit-making entrepreneurial occupational choice exists at all if entrepreneurs' tasks can also be performed within existing firms. I also consider here the existence of non-profit-making ventures (social enterprises) and family firms.