(PDF) How does Material Culture Extend the Mind?

If mind is investigated as the set of interactions that accomplish a cognitive task, that is, if mind is more than that which occurs inside the head, then how does the interplay of biological and environmental resources produce human cognition? Informed by active externalism, joint action, and distributed cognition, we review and classify a set of cognitive processes mediated by material representations. Specifically, we ask how—in a range of everyday cognitive and cultural practices—we employ objects (1) to scaffold memory, (2) to alter cognitive complexity, (3) to facilitate epistemic experimentation, (4) to enable the division of cognitive labor, (5) to promote confidence and trust, (6) to consolidate social structure, and (7) to support dialogical coupling. We conclude that through cultural practices the stable, “manipulable”, and public properties of objects have come to afford unprecedented modes of extended and distributed cognition.

This chapter introduces cognitive history as one way to study material culture, or to reconsider what many historians of material culture already study. The version of cognitive history we develop here builds on recent discussions of ‘distributed cognitive ecologies’. On this approach, objects, technologies, places and other people can in certain circumstances, in interaction of many kinds with embodied individuals, be full and complementary components in cognitive processes. This perspective, we suggest, can throw light on a range of historical problems of independent interest. Case studies and examples discussed include navigation, performance, and religious practice, before the final section addresses material culture in experiment, natural philosophy, and early modern technology. The chapter concludes with an explicit statement of the ways in which our recommended cognitive approach can encourage and promote effective historical work on material culture. We provide extensive references throughout, hoping to encourage historians actively to engage with and participate in these challenging crossdisciplinary conversations.

H Health of Entrepreneurs Olivier Torrès University of Montpellier South of France, Montpellier, France Stating the Existence of a Blind Spot The French economy has very few statistics regarding occupational health in SMEs, particularly with regard to the employer. This fact, however, is not specific to France. At the current time, it seems that there is very little work and very few statistics from abroad either on this theme. There is thus an almost universal lack of information. Occupational health appears to have been pushed away from the entrepreneurial realm. Nevertheless, one of the founding works on occupational medicine, written by Ramazzini in the 1700s, is entitled the “Traité de la maladie des artisans” (Treaty on the illnesses of craftsmen) (De Morbis Artificum Diatriba). Its aim, wrote Ramazzini, was to understand through observation why certain trade associations seemed preserved from certain dangers, such as the plague, for example, when others presented on the contrary much stronger prevalence. As man spent more time working than doing anything else, the conditions in which he did it, as well as the fact of handling certain harmful or healthy substances inherent to his business, were able to explain his health. Occupational medicine was born. The most notable and most decisive progress with regard to occupational health came undoubtedly from Louis René Villermé who, in the nineteenth century, was interested in the work conditions of the working class in a context of increasing industrialization. His major work, the Tableau de l’e´tat physique et moral des ouvriers employe´s dans les manufactures de coton, de lain et de soie (Table of the physical and moral state of the workers employed in cotton, wool and silk factories), which was first published in 1840, was the origin of a law limiting child labor in factories. The role played by Villermé and the rise of industrial hygienism explain why occupational medicine focused on the effects of mass industrialization on health at work. Occupational medicine probably has a more social mission than other medical disciplines: its genesis in the nineteenth century and its extensions in the twentieth century have, over time, defined an implicit social purpose, to defend the weakest (the work of women and children) and especially the underprivileged classes. In such a context, the working class becomes central, and “workerism” still remains strongly anchored in the writings of contemporary occupational doctors. René Barthe, who was the inspiration for the law of July 28, 1942 in the Vichy regime which established occupational medicine as an obligation and was the author of the first “Que Sais-Je,” on occupational medicine, in 1944, declared “Let us be the good ‘housekeepers’ of our factories, as our farmers are the good E.G. Carayannis (ed.), Encyclopedia of Creativity, Invention, Innovation, and Entrepreneurship, DOI 10.1007/978-1-4614-3858-8, # Springer Science+Business Media LLC 2013 H 828 “housekeepers” of our land. This essay aims to present this new culture, which is a permanent effort for a better life for our working class world” (Barthe 1944, p. 9). The question of workers’ health remained for a long time and is, even today, a profound identity marker for occupational medicine. It is moreover in the bastions of industry that developed the first initiatives for a chair of occupational medicine, such as in Lyon in 1930 or in Lille in 1935, in the heart of the mining cottages of the mining industry in the North. Today, there is still a strong tradition for occupational medicine in Lille. In France, occupational medicine has been highly structured since the law of 1946 (Desoille 1958). It focuses almost exclusively on the occupational health of employees. Barthe considered that a “definition of Occupational Medicine is easy to find if we restrict ourselves to its general principle: it is a Social science directed toward the protection of employees in their very place of work” (Barthe 1944, p. 6). This focus on employees only has had two consequences. On one hand, occupational medicine has allowed numerous forms of social progress to develop and analysis of employees has been perfected with subtle subcategorizations: workers are divided into qualified and unqualified. Similarly, statistics make a distinction, with good reason, between executives and senior executives. On the other hand, the disadvantage is that the self-employed are totally excluded from the tables and any data calculated on such matters. Only directors with employee status are covered by occupational medicine, although only 170,000 companies have such directors and are a tiny minority with regard to the 2,411 million nonwage earners counted by INSEE (National Institute for Statistics and Economic Studies) in France in 2008. For this reason, as soon as it is a question of nonwage earning independent workers, there are less statistics, and those that are there are more vague because they are very heterogeneous. Sometimes storekeepers and craftsmen are included. Sometimes there are the liberal professions, as if master bakers or stonemasons can be Health of Entrepreneurs compared with professionals such as attorneys and lawyers! Where are the business managers, who are neither craftsmen, nor storekeepers, and even less liberal professions? How do we make a distinction between the leaders of very small firms, small firms, and medium-sized companies? Do the statistics for occupational health take into account managerial contingencies, in particular those related to the size of workforce? Experts were skeptical at first, but no longer have such doubts today. The concept of SME, taken in its full complexity, is not a relevant category for the medical sciences. Nevertheless, independents work in conditions with many particularities. Although health is an essential topic, the health of business managers is an unrecognized aspect. Nevertheless, the health-capital of the director, whether he is a craftsman or a storekeeper, is probably the first immaterial asset in the company because dependence on the director is all the greater if the company is small, and this is precisely the main feature of small shops and the craft industry (Mouzaoui and Horty 2007). Henri Fayol, in his Administration Industrielle et Ge´nérale makes health and physical strength the first cardinal value of the business manager. “The qualities and desirable knowledge for all CEO are as follows: 1. Health and physical strength 2. Intelligence and intellectual strength 3. Moral qualities: well-thought out, firm desires, and perseverance; activity, energy and, if necessary, audacity; the courage of responsibilities; a feeling of duty; and a concern for general interests 4. Good general knowledge 5. Administrative capacities 6. General notions of all the main functions 7. The widest possible range of skills in the particular profession that is characteristic of the company” The director’s health is often synonymous with the good health of the company, whereas on the contrary, a health problem can bring down the whole company (Chao et al. 2007; Massey et al. 2004). Fayol adds that “the absence of health can cancel out all other qualities together” Health of Entrepreneurs (Fayol 2005, p. 84). It is enough to think of the devastating effects which a health problem can have on small-sized companies, as Chao et al. (2007) do with AIDS to show the value of cross-referencing medical sciences and entrepreneurship sciences. All these considerations plead in favor of a study of the health-capital of directors, in the style of what Bournois and Roussillon (2007) did in the context of the directors of large groups, but instead adapting it to the specificities of SMEs (small- and medium-sized enterprises). The objective of this contribution is to draw up a corpus of hypotheses on the occupational health of entrepreneurs. Then, it presents the fundamental equation for entrepreneurial health. What researchers know about the working environment of entrepreneurs pushes them to believe that their working system is pathogenic (work overload, stress, uncertainty, loneliness. . .). But, in reference to the works on “salutogenesis” (BruchonSchweitzer 2002) which can be traced back to the middle of the 1990s in the field of health psychology, this entry will show that these negative effects are probably compensated for (in whole or in part?) by a system of beliefs which can be beneficial for health. The key question is to know in which direction the scales are tipped. Given what is at stake, studying the beliefs, attitudes, and behaviors of entrepreneurs with regard to physical and mental health is a surprisingly virgin field of research (Kaneko et al. 2011). The results of such research could be very interesting. The initiative behind the AMAROK observatory, the first observatory for entrepreneurial health, is part of this perspective. Certain aspects of this observatory are presented in the conclusion. The Failings of Health Statistics for Entrepreneurs “Self-employed” is a banner label for all independent workers with no employer, employers themselves, and home helps. In 2008, they represented 9 % of the active population in France. The lowest percentage (5 %) is found in the Paris area, while Languedoc-Roussillon has the highest, with 13.5 %. To answer the question of the health of this population, the observer is 829 H obliged to notice that the existing statistics are profoundly insufficient, both at the quantitative and qualitative levels. The first notable fact is the almost total absence of data on the health of SME directors. It is true that SMEs are not regarded as a relevant dimension for studies on health. Among the most commonly selected variables, there is a high frequency of age; gender; average revenue; socioprofessional categories; level of study; and, to a lesser extent, place of residence and marital status. It is thus very difficult to obtain statistics which are dedicated exclusively to SMEs. It is, however, possible to obtain some statistics which get closer to the world of SMEs, even if they do not exhaust the subject: it is the statistics which are interested in the social and occupational group of craftsmen and storekeepers. Even if these statistics are invaluable when it comes to tackling the problem of the health of directors of SME, they are nevertheless presented under a common category of extremely heterogeneous situations. These statistics often group together the category of storekeepers with that of craftsmen. However, the trade and craft industries have notable differences with regard to the relationship to work and know-how and trade union representativeness (Medef/CGPME for the trade vs. UPA (Professional Union of Craftsmen) for craftsmen). Similarly, craftsmen develop the use of manual work much more than in trade, and manual work often involves a more intense use of the body, which can result in specific pathologies. Shopkeepers and craftsmen are thus two similar fields of activity as they are often keen to preserve their independence but which nevertheless have differences. These differences, in terms of health, deserve greater differentiation. But the worst is that sometimes studies are based on figures which mix craftsmen, tradesmen, and liberal professions. Although the liberal professions are also concerned by independence, as evidenced by the professional orders which govern them, they have very considerable differences with craftsmen and tradesmen. For example, the “level of study” variable is generally high in liberal professions and much lower among craftsmen and H H 830 tradesmen. Yet, it has been proven that this variable has an impact on health (Bruchon-Schweitzer 2002). Another variable that has an incidence on health is the capacity for organization of liberal professions when in work collectives. Lawyers, chartered accountants, medical specialists, solicitors, land surveyors, and receivers work much less on their own than previously. Increasingly, they group together as partners, which greatly facilitates the pooling of means (secretarial department, office) and resources (clientele, network), as well as making possible a better management of absences, particularly in case of illness or vacation time. In addition, the feeling of loneliness is reduced, and certain works have shown that loneliness has a pathogenic impact on health (Bruchon-Schweitzer 2002). Storekeepers and craftsmen, on the other hand, are often very much alone in their jobs, and this can be an almost insoluble problem when they fall ill or wish to take time off. Another point which deserves to be underlined is the total ignorance of the size of the staff for which storekeepers and craftsmen are responsible. Although most storekeepers or craftsmen work alone, sometimes with the assistance of their spouses or children (what statistics refer to as family help), many businesses have employees, sometimes several dozen. This gives these storekeepers/ craftsmen the role of an employer business manager. But the statistics never provide information regarding the size of the company of which the storekeeper or craftsman is the director. In other words, the size of the staff is never indicated, and it is a shame, as it is a situation which strengthens the impression that the statistics for health in the work place are not interested in SMEs. In spite of all these limitations associated with the heterogeneity of the craftsmen and storekeepers socioprofessional category and the even greater heterogeneity of the craftsmen, storekeepers, and liberal professions category, we can, by cross-referencing the few statistics available, nevertheless obtain a body of evidence which converges on the same observation: craftsmen and storekeepers sometimes have a state of health more like that of workers than that of senior executives. Health of Entrepreneurs The Entrepreneurial Health Equation: Pathogenic Factors Versus Salutogenic Factors The health of entrepreneurs is subject to permanent conflict between pathogenic factors, which have a negative impact on health, and salutogenic factors, which are beneficial. The equation for entrepreneurial health is thus: On the one hand, although occupational doctors have long been aware that overwork, stress, uncertainty, and solitude are long-term pathogens for employees (Leclerc et al. 2008; Niewiadomski and Aı̈ach 2008), they have never wondered what effect these factors have on employers. But how is it not possible to see just how much entrepreneurs often accumulate these four factors? Many works have been published on overwork and the resulting increase in stress (Buttner 1992; Akande 1994; Mcdowell-Larsen 2007; Ahmad and Salim 2009) among company owners, who often work more than 60 h a week (Boyd and Gumpert 1983; Roussillon and Duval-Hamel 2006). Uncertainty is also one of the fundamental elements of the entrepreneur, one of whose characteristics is that he has variable income, unlike the regular monthly salary paid to employees. In certain sectors, the order book does not go further than a few months in advance, sometimes just a few weeks in times of crisis. The director must deal with this uncertainty on a permanent basis. Finally, Gumpert and Boyd (1984) have insisted heavily on the isolation, or even solitude, of directors, to the extent that the use of entrepreneurial networks, or associations of peers, is often salutary. Such isolation makes the director fragile, and when difficult decisions – such as redundancy – have to be made, directors are often filled with doubt and remorse (Torrès 2009). On the other hand, health psychologists (Bruchon-Schweitzer 2002; Fischer and Dodeler 2009) are aware that the internality of the locus of control, endurance (hardiness), self-efficacy, and optimism are all salutogenic. . . even though they have never noticed that they are simply entrepreneurial attitudes and beliefs! Once again, how is it possible to not notice that these are characteristics that are often associated with entrepreneurs? Although empirical studies hoping to validate the Health of Entrepreneurs 831 Internal locus of control Stress Loneliness Hardiness Uncertainty Overwork Pathogenic factors Optimism Self efficacy Salutogenic factors The entrepreneurial health equation Health of Entrepreneurs, Fig. 1 The entrepreneurial health equation (Source: Torrès 2012) locus of control theory have never been able to establish even a modest correlation between this psychological characteristic and entrepreneurs, it nevertheless remains positive (Janssen and Surlemont 2009, p. 41). Verstraete (1999, p. 165) also evokes the importance of the internality of the locus of control in entrepreneurial behavior. Finally, Filion (1997), by identifying the works from what is known as the “school of characteristics,” showed that optimism and perseverance are psychological traits common to entrepreneurs. The same can be said for self-efficacy (Bradley and Roberts 2004). Entrepreneurship, is it good for health (Volery and Pullich 2010)? (Fig. 1) Hence, this fundamental equation for entrepreneurial health: on the one hand, we accept the work of occupational medicine is interesting; there is a system of constraints to which a large number of directors are subject and which seems to be pathogenic. And, on the other, recent works from the field of health psychology, which show that the entrepreneurial attitude and belief system is in fact salutogenic. The question this raises is thus how do we know when the scales are going to tip one way or another? Conclusion and Future Directions It was in the aim of resolving this entrepreneurial health equation that the initiative of creating the H AMAROK observatory is appeared, the first such structure for the health of SME owners. AMAROK is an Inuit name that means wolf. It refers to a legend, the moral of which is that a society must protect those who support it. AMAROK is an observatory with a scientific and experimental vocation, the aim of which is to study the beliefs, attitudes, and behaviors of SME owners, craftsmen, and tradesmen with regard to their physical and mental health. Based on the theories governing the specificity of SMEs, this observatory also aims to devise and propose practical actions in the field both in terms of prevention and cure. The priority population is that of SME owners and craftsmen. The objective of this observatory is to combine medical and entrepreneurship sciences. The AMAROK project is complex and requires a multidisciplinary approach. The scientific skills mobilized involve occupational medicine and public health, entrepreneurship and management, health and workplace psychology, as well as the economy and geography of health. However, this observatory remains anchored primarily in management science because the ultimate purpose is to improve SME management. By combining the two sides of the employers’ health equation (i.e., the pathogenic and salutogenic aspects), AMAROK hopes to attain an ambitious goal: ideally, AMAROK would like to produce the first medium-term statistics on the health of employers. The issues at stake are perfectly matched to this ambition. • Either AMAROK discovers that the owners of SMEs, craftsmen, and tradesmen put their health in danger without their knowledge and brings to light a public health scandal • Or, on the contrary, AMAROK will discover that entrepreneurship is beneficial for health. In the latter case, AMAROK will have one of the best arguments for promoting human-sized enterprises and craft industries: SMEs are good for your health! In the medium term, the aim of AMAROK is to create one of the first epidemiological records of a cohort of SME managers. The stakes are high because the sums involved are substantial and the commitment must be long term (one to several H H 832 decades) (Bousquet; Dreyfus Daures, Demoly, 2004). It is important to know that there is no such register anywhere in the world. Cross-References ▶ Entrepreneur ▶ Entrepreneurial Capability and Leadership ▶ Entrepreneurship and Social Inclusion ▶ Individual determinants of Entrepreneurship References Ahmad SZ, Salim FAA. Sources of stress and the coping mechanism for Malaysian entrepreneurs. Afr J Bus Manag. 2009;3(6):311–6. Akande A. Coping with entrepreneurial stress: evidence from Nigeria. J Small Bus Manag. 1994;32:83–7. Barthe R. La médecine du travail. Presses Universitaires de France, Paris, Coll. Que sais-je?, 1944, n 166, 128p. Bournois F, Roussillon S. Les dirigeants et leur capital santé. dans de Bournois F, Duval-Hamel J, Scaringella JL, Roussillon, S sous la dir. Comités exécutifs : Voyage au cœur de la dirigeance. Editions Eyrolles; 2007. pp. 206–211, 862 p. Boyd DP, Gumpert DE. Coping with entrepreneurial stress. Harv Bus Rev. 1983;61:44–64. Bradley DE, Roberts JA. Self-employment and job satisfaction: investigating the role of self-efficacy. J Small Bus Manag. 2004;42(1):37–58. Bruchon-Schweitzer M. Psychologie de la santé – Modèles, concepts et méthodes. Paris: Editions Dunod; 2002. 440 p. Buttner HE. Entrepreneurial stress: Is it hazardous to your health? J Manag Issues. 1992;4(2):223–40. Chao LW, Pauly MV, Szrek H, Sousa PH, Bundred F, Cross C, Gow J. Poor health kills small business: illness and microenterprises in South Africa. Health Aff. 2007;26:474–82. Desoille H. La médecine du travail, première édition. Paris: Presses Universitaires de France; 1958. 128 p Fayol H. Administration industrielle et générale. Paris, Editions Dunod, première édition 1916, 2005. 133p. Filion LJ. Le champ de l’entrepreneuriat: historique, évolution, tendances. Rev Int PME. 1997;10(2):129–72. Fischer GN, Dodeler V. Psychologie de la santé et environnement – facteurs de risque et prévention. Editions Dunod, Coll. Topos; 2009. 150 p. Gumpert DE, Boyd DP. The loneliness of the smallbusiness owner. November–December: Harvard Business Review; 1984. p. 18–24. Janssen F, Surlemont B. L’entrepreneur : ses caractéristiques et ses motivations. dans Janssen F, sous la dir, Healthcare and Innovation Entreprendre – une introduction à l’entrepreneuriat. Bruxelles: Editions De Boeck; 2009. pp. 33–48, 343 p. Kaneko S, Ogyu H, Torrès O, Kamei K. Mental Health of managers of small and medium enterprises as seen from the viewpoint of risk management. J Disaster Res. 2011;6(2):204–11. Leclerc A, Kaminski M, Lang T. Inégaux face à la santé – du constat à l’action. Paris: La Découverte; 2008. 298 p. Massey C, Harris C, Lewis K. Death, divorce and disease: personal life event and the business life-cycle. In: European Council for small business, RENT XVIII conference, Copenhagen, 2004. Mcdowell-Larsen S. L’effet néfaste du stress sur les dirigeants. dans de Bournois F, Duval-Hamel J, Scaringella JL, Roussillon S, sous la dir. Comités exécutifs : Voyage au cœur de la dirigeance. Editions Eyrolles; 2007. pp. 185–190, 862 p. Mouzaoui H, L’Horty Y. Quels emplois pour les PME? Étude sur les PME et l’emploi en France, Regards sur les PME, Paris, OSEO, 2007: n 15, 194p. Niewiadomski C, Aı̈ach P(coordonné par). Lutter contre les inégalités sociales de santé – politiques publiques et pratiques professionnelles. Presses de l’EHESP, Coll. Recherche Santé Social; 2008. 286 p. Roussillon S, Duval-Hamel J. Le stress des dirigeants : mythe, compétence clé, risque pour l’entreprise?. Cahier de recherche EM. LYON Business School 2006; 2006/03: 30. Torrès O. L’inaudible et inavouable souffrance patronale : le cas du licenciement en PME. dans de Lecointre G, sous la dir. Le grand livre de l’économie PME. Galino Editeur; 2009. 639 p. Torrès O (ed). La santé du dirigeant – de la souffrance patronale à l’entrepreneuriat salutaire, Bruxelles: Editions De Boeck, 2012, 217p. Verstraete T. Entrepreneuriat, connaı̂tre l’entrepreneur, comprendre ses actes. Paris: Editions L’Harmattan; 1999. 207 p. Volery T, Pullich J. Healthy entrepreneurs for healthy businesses: an exploratory study of the perception of health and well-being by entrepreneurs. N Z J Empl Relat. 2010;35(1):4–16. Healthcare and Innovation Piera Morlacchi Department of Business and Management, School of Business Management and Economics (BMEc), University of Sussex, Falmer, East Sussex, UK Synonyms Medical innovation Healthcare and Innovation Innovation is viewed as fundamental in healthcare, leading to advances in medicine, and individual and public health but also to economic growth and generation of wealth. When people think about innovations in healthcare, they normally focus on technological innovations such as drugs, devices, and diagnostics that have advanced medical practice and the treatment of diseases. This leaves a gap and, therefore, a need to further define and explain the nature of “healthcare systems,” “healthcare innovations,” and “healthcare innovation process.” Health, Healthcare, and Healthcare Systems Health has been defined by the World Health Organization (WHO) as “Health is a state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity” (WHO 1946), and healthcare is about the prevention, treatment, management of diseases and illness, and the preservation of health and well-being through the services delivered by healthcare providers. These healthcare providers include medical and allied health practitioners and professionals such as physicians, nurses, medical technicians, therapists, pharmacists, nutritionists, paramedics, complementary and alternative therapists, and community health workers. Healthcare or healthcare system is the organization of the healthcare services to meet the needs of a target population. There is a wide variety of healthcare systems around the world which are characterized for instance by different levels of access, funding, and structure of provision of healthcare services. The main actors which are common to many healthcare systems are hospitals and other medical facilities (e.g., primary care centers, clinics, and other specialized medical facilities such as IVF clinics), universities and research institutes, industrial firms and their suppliers (e.g., pharmaceutical companies but also specialized suppliers of electronic components for medical devices and of reagents and animal models for scientific laboratories), governments and public agencies (e.g., National Institute of Health (NIH) in 833 H the USA), regulators (e.g., Food and Drug Administration (FDA) in the USA and the National Institute of Clinical Excellence (NICE) in the UK), payers (e.g., third-party payers in USA like Medicare and Medicaid), professional bodies and societies, medical charities, patient associations, the media, and the public at large. Most people have direct experience of part of the healthcare system constituted by the providers and facilities involved in the delivery of healthcare (e.g., physicians, nurses, and hospitals), whereas other parts of the system such as the healthcare industry (e.g., medical device sector) and the medical research community (e.g., research centers and academic institutions) are less visible. Healthcare is important also in economic and financial terms in many countries around the world. With its subsystems such as healthcare delivery and healthcare industry, it is one of the largest and fast-growing industries in developed countries and consumes high rate of gross domestic product (GDP) also in developing countries. Healthcare Innovation In order to understand healthcare innovation, it is useful to start with what is known about innovation more in general. Innovation refers at the same time to something new (e.g., a product, process, or an idea) and to the act or process of innovating, which is coming up with an innovation. Other terms used to indicate the innovation process or parts of it are technological change, technological progress, technological evolution, and technological development. Innovations can be classified according to “types” (e.g., new product, new methods of production, new ways to organize business) and to how radical they are compared to what is already in use (e.g., radical vs. incremental innovations). Among other findings, studies of innovation have pointed out for instance that although an important distinction is normally made between “invention,” “innovation,” and “diffusion” – where invention is the first occurrence of an idea, while innovation refers to the first attempt to use out an idea and diffusion to the spread of it in practice – those are stages of a continuous process. A “linear model of H H 834 the innovation process” sees it as constituted by a sequence of activities that goes from basic research through applied research, targeted development, manufacturing and marketing, until adoption (or diffusion), and use. A more simplified version is a two-step model that distinguishes only between development and diffusion. The linear model of innovation assumes that either scientific research and technological development (“technology push” model) or market demand (“demand pull”) are the main drivers of innovation. Although the linear model has been shown inadequate to represent what happens in empirical terms where feedback mechanisms and loops among different stages can be observed, this simplified view of the innovation process remains widely held in the public at large and in some parts of the medical community. A more productive approach to understand innovation is to unpack different stages of the process such as development and diffusion and the feedback mechanisms and loops among them. From studies of innovation in different domains, it became clear that the organization for innovation and innovation processes can have varying configurations in different contexts and evolve over time. It follows that general findings and theories about innovation need to be validated in specific contexts. This is the case for innovation in the context of healthcare where innovations and the processes that lead to their development and use have some specific characteristics. The popular image of healthcare or medical innovation is the one in which a group of biomedical scientists in a research laboratory come up with an idea that moves in a linear manner from the bench to the bedside. However, innovation studies have shown that this linear conceptualization of medical innovation is misleading. Important issues are related to the nature of healthcare innovations, their development, diffusion in healthcare organizations, and regulation of the overall innovation process. The Nature of Healthcare Innovations When people think about innovations in healthcare, they normally focus on technological innovations such as drugs, devices, and diagnostic that have advanced medical practice and the Healthcare and Innovation treatment of diseases such as antibiotics, pacemakers, and ultrasound. Other health innovations such as clinical procedures (e.g., minimally invasive cardiac surgery), organizational innovations (e.g., intensive care units or ICUs), and infrastructural innovations (e.g., such as information and communication technologies such as computer-based hospital information systems) have less visibility and have been less studied. The Development of Healthcare Innovations Although healthcare innovations and the dynamics of their innovation processes are quite diverse, studies have focused on the study of technological development in medicine and in particular drugs. General findings on technological development in medicine are the importance of the interaction between developers, clinicians, and regulators; the feedback mechanisms between different steps of the development process and between the development and use (including diffusion); and the importance attributed to randomized clinical trials to provide evidence of efficacy for new treatments. Pharmaceutical innovation is useful to illustrate some of these findings in the context of the development of new drugs. Research on pharmaceutical innovation has highlighted that it is science-based or depending on advances in life sciences (e.g., molecular biology), lengthy and expensive, and uncertain. The process of drug discovery has become increasingly complex and sophisticated. It was based on random screening of compounds to find new drugs until 1940s, later on began a transition to a more “guided” process or “drug development by design” drawing heavily on advances in molecular biochemistry, pharmacology, and enzymology until 1970s, and more recently on tools of genetic engineering. After a new drug has been identified, it goes through a development process that includes preclinical research (e.g., animal testing), clinical trials (i.e., testing in humans), and in some cases regulatory approval. Clinical trials are a set of procedures used to collect data on safety (e.g., adverse drug reactions and adverse effects of other treatments) and efficacy of new drugs, used both in the process of Healthcare and Innovation development and regulatory approval of new drugs and other therapeutic interventions. It can take between 10 and 20 years between the start of the process of discovery and when a new drug reaches the patients for normal clinical use, and many new drugs considered promising in drug discovery fail to do so. The development of a drug does not end necessarily with the adoption in clinical practice because new indications for existing drugs can be found (e.g., use of beta-blockers in the treatment of heart disease) or better compounds can be developed from learning by using in the treatment of patients. Close relationships among industry, academia, and government have been always crucial to drug discovery and development, because basic biomedical and clinical knowledge created in university and public funded settings are exploited in industrial laboratories, which also conducted basic research and drug discovery. However, over time, the division of labor between actors involved in the process has changed leading the industry to focus their investments more on final stages of drug development and testing and to leave the initial and more uncertain stages to academia and publicly funded research institutions. Although the development of other medical technologies like devices and diagnostics are less studied than drugs, some general findings like the importance of the interaction between developers, clinicians, and regulators or casted difference of industry, academia, and government, and the importance and role of research, regulation, and uncertainty also stand in these contexts, but some differences can be noticed. For instance, the process of development of new devices and diagnostics is in many cases shorter than drugs, even when regulatory approval is necessary before introducing a product on the market (e.g., hip replacements). Moreover, although also a large proportion of the market in the medical device and diagnostic sectors are concentrated in the hands of a few multinational firms, differently from the pharmaceutical sector (also including the biotechnology side of it), they are populated by large number of small firms that contribute to innovation dynamics. 835 H The Diffusion of Health Innovations in Healthcare Organizations Research on the diffusion of medical innovations focuses on explaining why and how an innovation spread and got adopted in clinical practice or generally used. Studies on the diffusion of innovations in healthcare organizations pointed out the following factors: the nature of the innovation itself in terms of, for instance, complexity of use, relative advantage to existing technologies, and possibility to try and observe the innovation; the adoption and implementation processes also in terms of communication and influencing process (e.g., existence of innovation champions and lead users); and the organizational context and its immediate environment (e.g., reimbursement mechanisms that shape financial incentives for the purchasers such as hospital administrators to adopt new innovations, but also reputational effects brought by the adoption of new technologies). The Regulation of Healthcare Innovation In many countries, healthcare and healthcare practices are highly regulated (e.g., standardization of medical practice through guidelines which are issued by professional bodies with the aim of guiding decisions and criteria regarding diagnosis, management, and treatment in specific areas of healthcare). This extends also to healthcare innovation, where both innovations and the process that leads to their development and use are regulated. Healthcare innovations such as drugs and devices are reviewed and evaluated by appointed bodies in each country (e.g., in the USA is the Food and Drug Administration (FDA)) on the basis of data on safety and efficiency collected in some cases through clinical trials before they are introduced in clinical practice and released on the market. The level of scrutiny depends on the level of risks attributed to different products, and in some cases, the monitoring of their performances continues also after they have been introduced in the market (e.g., risky new devices such as pacemakers and heart valves are evaluated before their introduction on the market but also after they are introduced in clinical practice through the compulsory reporting of adverse events and malfunctioning, and defective products can be ordered to be recalled). H H 836 The Nature and Direction of the Healthcare Innovation Process The Nature of the Healthcare Innovation Process Although the nature of innovation process in healthcare can be characterized as dynamic and systemic, a linear view of the medical innovation process still prevails. The assumption of the linear model is that scientific knowledge developed through basic scientific research and engineering knowledge developed in the biomedical field or through technology transfer from other fields (such as in the case of laser and ultrasound) are driving innovation in healthcare. However, the linear conceptualization assumes first of all that it is possible to make a clear distinction between research and development on one hand and adoption and use on the other, whereas in many cases, like medical devices but also therapeutic drugs, the development does not end with the adoption of an innovation, but there are incremental changes. Moreover, the development occurs not only in industrial R&D laboratories but also in the context of clinical practice. This is the case for laser that was introduced for the ophthalmologic and dermatological purposes, but new indications of use were discovered in clinical practice such as in oncology, thoracic surgery, gynecology, and other specialties. An alternative conceptualization to the linear model is a dynamic (or more evolutionary) model where there are feedback mechanisms in the process between the phases of adoption and use and applied research and development, i.e., after the introduction of the first-generation innovation in clinical practice through learning by using important information about improvements can be generated and embodied in new generations of the innovation. The interactive and distributed nature across time and space and across areas of medical practice and institutions of healthcare innovation process can be labeled as “systemic.” It follows that approaches that study the systemic nature of the healthcare innovation process focus on the components of the system or actors and their interactions in specific contexts. The difference Healthcare and Innovation among some approaches is in the way in which they determine the boundaries of the systems: national and regional approaches focus on geopolitical boundaries and sectoral or technology approaches identify actors that operate in the same product market. The Role of Users and Other Actors The development and use of new medical innovations is also shaped by the demand for these innovations, which is traditionally related to the needs and preferences of users like physicians and the end customers, i.e., the patients. Physicians are users of medical technologies, but they play an important role also in their development, establishing a close interaction with manufacturers. The supply and demand of healthcare innovations has complex dynamics that go beyond the interaction between developers and users. In recent years, the innovation process in healthcare came to be more and more significantly influenced by other groups of actors such as hospital administrators, payers, and regulators but also patients and their families, patient (advocacy) groups, and the media. However, there is still a limited understanding of how the interaction of supply and demand influences the aim, direction, and rate of innovation in healthcare. The Direction of Healthcare Innovation In recent years, the biomedical perspective of health has been challenged by evidence that the steady reduction in mortality and increased longevity in many developed countries in the last century was mainly due to improved sanitation and nutrition and general improvements of living standards and not to advances in medicine. Furthermore, healthcare and medicine are becoming more and more driven by science, technology, and industry on a global scale. Finally, the current trend of healthcare expenditures is unsustainable, both in developed and in developing countries. This problematic situation has triggered different reactions. One of these is the rise of the complementary and alternative medicine (CAM) movement, where patients turn to health practices other than Western medicine (e.g., acupuncture, chiropractic, Ayurveda, etc.) to deal with illness and well-being. Currently, there is Healthcare and Innovation 837 H also an intense scrutiny of pharmaceutical industry by part of the biomedical community, the media, and the public at large of the pharmaceutical industry, previously considered unquestionable and viewed as the producer of lifesaving products. Pharmaceutical productivity has declined and new drugs are difficult to come by, and the costs of developing them increased together with the total R&D expenditures. Moreover, there are still unmet medical needs and health inequalities, especially in areas such as infectious diseases where drugs are available but not affordable for many in developing countries. Finally, the discussions about the role of public and private sectors in healthcare are leading to examples of social experimentation (e.g., public-private partnerships) and measures of cost savings and efficiency making it difficult to see how they can solve fundamental issues in healthcare affected by the need of dealing with chronic diseases in an aging population and the costs of high-technology medicine. “biomedicalization” or how healthcare and medicine have become increasingly driven by science, technology, and industry on a global scale, leading to unpack and study in depth several processes such as the increasingly scientific and technological nature of medicine, the transformation on how biomedical knowledge is produced, distributed, and consumed, and the political economy of biomedicine (Clarke et al. 2003). An evaluation of healthcare innovations that aims to be comprehensive and multidimensional is a challenging undertaking. The multidisciplinary field of health technology assessment (HTA) examines beyond costs, efficacy, and safety the social, political, and ethical aspects of the development, diffusion, and use of health technologies. The ethical aspects of healthcare innovation like organ donation, healthcare rationing, and questions related to emergent technologies in biology and medicine stem cells, genomics, and human enhancement are also studied in the field of bioethics. Studies of Healthcare Innovation: Unpacking the Economic, Social, Political, and Ethical Aspects The study of healthcare innovation is characterized by multiple approaches and areas of interest that is undertaken in many separate academic fields. Traditionally, approaches such as economics of innovation, health economics, and innovation management have focused on the economic, financial, and managerial aspects of innovation. Science and technology studies that have focused on health and medicine have taken more sociological and historical approaches to study the development and use of medical innovations, focusing on the controversial and negotiated aspects of them such as in the case of allocation of resources between basic scientific research on finding cure for diseases and public health measures for prevention or ethical issues on emergent and promising but risky new technologies like xenotransplantation (i.e., the use of animal organs in humans) or stem cells. Another field involved in the study of healthcare innovation is medical sociology where a more critical approach is taken for instance to explore Conclusions and Future Directions The debate about high-tech medicine and its impact on the raising of costs of healthcare pointed out that the fundamental problem in today’s healthcare systems is the weak correlation between the types of innovations generated by the innovation process driven by the medical research community and industry and the needs of healthcare delivery. However, solutions on how to close the gap between medical research and healthcare delivery or how to innovate the healthcare innovation process are hard to come by. Disruptive healthcare innovations that are at the same time affordable to all should be the priority for theory, policy, and practice. Cross-References ▶ Invention Versus Discovery ▶ National Innovation Systems (NIS) ▶ Nonlinear Innovation ▶ Patterns of Technological Evolution ▶ Product Innovation, Process Innovation H H 838 References Blume SS. The significance of technological change in medicine: An introduction. Res Policy. 1985;14: 173–177 Callahan D. Taming the beloved beast. How medical technology costs are destroying our health care system. Princeton: Princeton University Press; 2009. Clarke AE, Shim JK, Mamo L, Fosket JR, Fishman JR. Biomedicalization: technoscientific transformations of health, illness, and U.S. biomedicine. Am Social Rev. 2003;68(2):161–94. Gelijns AC, Rosenberg N, Moskowitz AJ. Capturing the unexpected benefits of medical research. N Engl J Med. 1998;339:693–8. Greenhalgh T, Robert G, Macfarlaine F, Bate P, Kyriakidou O. Diffusion of innovations in service organizations: systematic review and recommendations. Milbank Q. 2004;82(4):581–629. Lehoux P. The problem of health technology. Policy implications for modern health care systems. New York: Routledge; 2006. Morlacchi P, Nelson RN. How medical practice evolves: learning to treat failing hearts with an implantable device. Res Policy. 2011;40(4):511–25. Roberts EB, Levy RI, Finkelstein SN, Moskowitz J, Sondik EJ, editors. Biomedical innovation. Boston: MIT Press; 1981. WHO (1946) Preamble to the Constitution of the World Health Organization as adopted by the International Health Conference, New York, 19–22 June, 1946; signed on 22 July 1946 by the representatives of 61 States (Official Records of the World Health Organization, no. 2, p. 100) and entered into force on 7 April 1948 Heroic Entrepreneur, Theories Sophie Boutillier1,2 and Dimitri Uzunidis1,3 1 Research Unit on Industry and Innovation/ CLERSE–CNRS (UMR 8019), University of Lille Nord de France, Research Network on Innovation, Dunkerque, France 2 Research Unit on Industry and Innovation, University of Littoral Côte d’Opale, Dunkerque, France 3 Political Economy, Research Unit on Industry and Innovation University, University of Littoral Côte d’Opale, Dunkerque, France Synonyms Business; Individual initiative; Industrial activity; Industrialization; Risk Heroic Entrepreneur, Theories The economic theory of the entrepreneur is defined in the analysis of R. Cantillon at the beginning of the eighteenth century, who draws a distinction between those who are a “known quantity” and those who are an “unknown quantity,” the entrepreneur belonging in the second category. That is effectively how the framework of the entrepreneur is constructed. The entrepreneur is the economic agent who supports risk emanating from the erratic functioning of the market. However, Cantillon distinguishes neither risk nor uncertainty. About a century later, J-B Say defined the entrepreneur as the intermediary between the savant who produces knowledge and the worker who applies it to industry. In this way, Say introduces a nodal element in the definition of the entrepreneur: innovation. Schumpeter too joins the original diptych. He, along with Cantillon and Say, constitutes the founding fathers of the theory of the entrepreneur. Both Schumpeter and Say, as distinct from Cantillon, put the accent on the introduction of novelty (and thus innovation) into the economy. The object of this entry, then, is to revisit the work of those economists who since Cantillon have placed the entrepreneur at the heart of the analysis of capitalism. In this context, the marginalist theory initiated by Léon Walras stands out because, although well-founded on the base of liberal market economics, it notably promotes the hypothesis of market transparency and thus the absence of uncertainty. Economic agents, who are considered as rational beings (perhaps better expressed as beings whom there is no reason not to consider as rational), take decisions (e.g., an entrepreneur who takes a decision to invest, based on a rational cost/benefit analysis, is being assumed that he has available to him all information necessary for such analysis) At almost the same moment in 2011, the Austrian economist Carl Menger (1840–1921) places himself also in the marginalist paradigm without, however, signing up to the same definition of rationality. For Menger, the rationality of economic agents is limited. Going on from this Austrian “current,” the economic analysis of the entrepreneur has been able to develop fruitfully over the course of the twentieth century. Joseph A. Schumpeter, R. Coase, F. von Hayek, Heroic Entrepreneur, Theories L. von Mises, I. Kirzner, and others would seek to replace the uncertainty and risk at the heart of their economic model by giving space to the emerging concept of the entrepreneur. The heroic entrepreneur is the one who formed the link between the preindustrial period (around the end of the eighteenth century) and the industrial maturity of the start of the twentieth century. He built a new economic and productive logic on the ruins of the feudal system. The general idea advanced by R. Cantillon or J-B Say is that the weight of the market economy rests on the entrepreneur, while the greater part of the population (including the country’s leaders) seems to ignore or pretend to ignore him. From another angle, en economist such as Karl Marx highlights the nodal role (albeit temporary) of the bourgeoisie which contributes through its entrepreneurial dynamism to increasing the speed of technical progress. But that argument shifts all the risk on to the weakest segment, the proletariat. Marx, like Schumpeter, is an economist of transition who concentrates on the procedures of the passage from the capitalism of the heroic entrepreneurs toward socialized entrepreneurs. Following on, Walras reinvents a liberal model (the theory of pure and perfect competition) where uncertainty and risk have been ousted. And by the same token the entrepreneur. Walras succeeds, almost in spite of himself, in demonstrating up to what point the entrepreneurial function is intimately linked with the uncertainty/risk diptych. The Economic Thought of the Entrepreneur During the First Industrial Revolution Richard Cantillon: “People of Unpredictable Worth” Close to being a physiocrat, Richard Cantillon (1697–1755) was also a critic. However, if he shares an important aspect of physiocratic analysis, he privileges the virtues of free exchange. In this context, the entrepreneur occupies an important place. The entrepreneur assumes the role of the managed order of the mercantilists. He takes on, too, the role of the prince, great organizer of the mercantilist order. Cantillon in fact distinguishes two types of economic agent, those of predictable worth, and those of unpredictable 839 H worth. He classifies the entrepreneur in the second category. The entrepreneur takes risks in committing himself firmly, without guarantee as to the solvency of his client or his backers. Without fortune of his own, thanks to his projects, the entrepreneur manages to bring progress to the economy, but society does not trust him and rejects him. Cantillon was himself an entrepreneur, even a kind of adventurer. He associated himself with John Law and died in obscure circumstances (probably by assassination). But if the economy is the science of business, as Schumpeter held, Cantillon was most certainly a great economist, since he accumulated a sizeable fortune, precisely thanks to his capacity to take risks in his affairs just as in life. His main work “Essay on the Nature of Commerce in General” was only published in 1755, several years after his death. In this work, the entrepreneur embodies what would later become the “invisible hand” of Adam Smith in the form of “catalyst of production and exchange.” Cantillon did not have primacy in this idea. He was preceded in his task by other distinguished authors. In 1675, Jacques Savary published “The Perfect Merchant” a veritable best seller on the right of merchants. But this work appears to be rather a code of business practice than a manual of political economy. It was Cantillon who gave a new dimension to the entrepreneur by conceptualizing his behavior. He distinguishes two types of economy, a centralized economy (symbolized by a great managed domain along feudal lines) and the managed economy. In the first system, wealth is concentrated in the hands of landowners; under the “new” system, it is the entrepreneurs who concentrate the wealth. The task of the entrepreneur is to identify demand and to manage production so as to satisfy it. He takes risks and scouts out the way ahead to find potentially profitable activities. The entrepreneur is present both in production (farming, manufacturing, and the provision of services) and in exchange (wholesaling and retailing). The first are the productive entrepreneurs and bring together a wide range of professions, bookmakers, carpenters, doctors, lawyers – even H H 840 beggars and thieves. On the other hand, he accords only little importance to manufacturers, with the exception of cloth makers – doubtless because, in the seventeenth century, this represented a fairly well-developed industrial activity. Adam Smith: The Invisible Hand Masks the Entrepreneur Smith (1723–1790), contrary to Cantillon, was not an entrepreneur but an academic. He travelled widely in Europe and sympathized with the philosophers of the Enlightenment. However, he expressed little interest in the entrepreneur as such (such doers of projects inspired little confidence in him). His underlying sentiment was that only the market is capable of bringing wealth and prosperity, without overshadowing the state, as a reducer of uncertainty, and whose role is to create an environment propitious to the development of business. His analysis is contained in the famous concept of the “invisible hand” according to which the sum of individual interests is equal to the general interest. In the whirlwind of business, enterprises are created and developed. The same applies to the ownership of capital. Smith interested himself in the development of limited companies. The separation between management and ownership seemed to him likely in the longer term to damage individual initiative. The shareholder has no particular interest in the future or the enterprise apart from the dividends which he may be able to withdraw as net company worth progresses. Companies having shares are by their nature less efficient than companies managed directly by their owners, since the interests of the shareholders are not necessarily the best interests of the company. This tends not to be the case for the shareholder who thinks strategically in terms of accumulating or trading blocks of shares. As in Schumpeter nearly two centuries later, capitalism seems to lose its soul in socializing itself. Jean-Baptiste Say or the Profession of the Entrepreneur Jean-Baptiste Say (1767–1823), in the image of Cantillon, accords a central role to the Heroic Entrepreneur, Theories entrepreneur. In his time, he was the best known of all French economists. He obtained the first chair in economics at the Collège de France and at the National Conservatory des Arts et Métiers and was a minister of finance during the first empire. One of his brothers founded the sugar refiners Say, which in 1973 became Béghin-Say. He was also a journalist. Adapting the ideas of Adam Smith, which he attempted to popularize in France, in 1803, he published his Treatise on Political Economy, where he identified the advantages of free enterprise and the market. This treatise was poorly received by the government of the day. He was unable either to publish a second edition or to carry on the profession of journalist. He became an entrepreneur, creating a business in cotton which had all the hallmarks of modernity for the times. The business prospered rapidly. Undoubtedly benefitting from his theoretical certainties and his entrepreneurial experiences, Say defined the “profession of the entrepreneur” according to the following criteria: 1. The entrepreneur acts for his own account. But entrepreneur and chief executive are not entirely synonymous. The entrepreneur does not necessarily have recourse to the labor input of others. He sets up his business mainly through a desire for independence. 2. He can carry on different professions – clock maker, farmer, dyer, etc. It is in innovating that he becomes an entrepreneur because he is an intermediary between the worker carrying out his tasks and the original work of the scientist. Say thus distinguishes three kinds of “industrial operations,” “scientific research,” “its application by the entrepreneur,” and “its execution by the worker.” This art of “application,” which forms an essential part of production, is the occupation of a class of men that we call entrepreneurs of industry (Say, cited by Boutillier and Uzunidis 1995, p. 17). In this sense, his work is productive in the same way as that of the scientist or the worker. 3. He is the principal agent of production. The other operations are of course necessary for the creation of products, but it is the entrepreneur who gets the process under way, Heroic Entrepreneur, Theories 4. 5. 6. 7. who gives it a vital impulsion, and who recovers the value at the end of the process (Say, cited by Boutillier and Uzunidis 1995, p. 18). Production is the application of science or of “notions.” This application concerns the whole of the “needs of man.” In order to satisfy these needs, the entrepreneur must prove he possesses a “certain intellectual combination.” It is a question of appreciating not only the physical needs of man, but also his “moral constitution” (his customs and habits, his tastes, the degree of civilization he has attained, the religion he professes). The entrepreneur must be endowed by providence with a certain “capacity of judgment.” It is he who judges the needs of his fellow men and above all the means of satisfying them and who formulates the end according to the means available to him. The union of these qualities in a single individual is uncommon because “this type of work demands moral qualities which are rarely found in a single person” Say (cited by Boutillier and Uzunidis 1995, p. 18). The entrepreneur organizes and plans production and bears all the contingent risks. This is in sharp contrast to those secondary agents he employs: “a clerk or a worker receives his salary or other remuneration whether the enterprise is in profit or loss” (cited by Boutillier and Uzunidis 1995, p. 18). The profits are thus not the “fruits of despoliation” because their achievement depends on a great number of uncertain factors which the entrepreneur cannot control. He must be ready to bear all the consequences of bankruptcy should it occur. The entrepreneur combines the “natural productive services,” such as those of work and capital and must be aware of the state of the market. His head is accustomed to an ongoing series of calculations so that he can “compare the costs of production with the value of the product when it is put on sale.” Say, just as later Schumpeter, puts the accent on the entrepreneur’s capacity for innovation. In order to surmount the multiple obstacles raised before him, there is no way he can accommodate 841 H routine. He must ceaselessly invent, that is to say, to have “the talent to imagine all at once the best targets for speculation and the best means of attaining them.” The Entrepreneur in the Neoclassical Theory Léon Walras and Carl Menger: The Diverging Marginalists At the end of the nineteenth century, the neoclassical economists recentered their work on the founding principles of Adam Smith (competition and private property) and forged a series of scientific investigatory tools. The enterprise disappeared and became a combination of factors of production, in other terms, a function of production. This concept of the function of production forms an abstraction as much of the enterprise as of an organization composed of a varying number of individuals and which obeys a grouping of functional rules laid down by the entrepreneur as decider. The model of pure and perfect completion evacuates the uncertainty and the risk. In this conceptual setting, the entrepreneur in fact disappears – not on account of the bureaucratization of productive activities (cf. development of managerial capital) but because the risk (and consequently the profits) disappears. In the neoclassical theory such as formulated by Léon Walras (1834–1910), the entrepreneur is a sort of intermediary between the markets (factors of production, of goods etc.) who bends without resisting to the will of the market through the price mechanism. Among numerous criticisms levied at the Walras model that of Joan Robinson is entirely pertinent, not to say debunking, since she affirms that the pure and perfect competition model can only function efficiently within a planned economy, in other words, in the absence of uncertainty and risk. We can add to the rout of Walras that the pure and perfect competition model is not a representation of economic reality but a kind of deal which the real economy endeavors to approach. A paradox? Walras has not constructed a clear theory of the entrepreneur, even though the thinking behind it is based on free enterprise. The entrepreneur is an economic agent just like H H 842 the worker or the consumer. The Walrasian entrepreneur, in contrast to the descriptions given by Cantillon or Say, is not an exceptional individual. Nor is he distinguished by exceptional faculties. In the Walrasian theory, the theory of the entrepreneur, that of the firm and of production, is superimposed on one another. The entrepreneur can be perceived as a function of production in the same way as the firm, a kind of black box whose workings remain unknown. Walras also affirms that the function of the entrepreneur corresponds to a service given free of charge. In lesson n 19 of “Elements of Pure Economy,” whose first edition dates from 1874, Walras (1988) describes the entrepreneur as a personality (he can be either an individual or a firm) who purchases raw materials from other entrepreneurs, then rents a parcel of land from a landowner, pays a wage for the personal services of his workers, pays interest on capital to his backer(s), and finally, heaving applied productive processes to the raw materials, sells for his own account the products obtained. The entrepreneur has thus for his task, with regard to the present definition, to combine these different resources. Walras pursues his definition and specifies that there exist different types of entrepreneurs, in agriculture, industry, and commerce. Whatever the sector of activity where he operates, the entrepreneur makes a profit if he sells his products or goods at a price higher than the costs of production. Explaining innovation or economic crises did not fall within Walras’ ambitions. Is it perhaps for this reason that he casts aside the entrepreneur in imagining a world without either uncertainty or risk? Carl Menger: The Limited Rationality of the Entrepreneur Although generally associated with the works of Walras as cofounder (with S. Jevons) of marginalism, Carl Menger (1840–1921) built a different theoretical framework, since he placed the accent on uncertainty which influences, and is influenced by, the rationality of economic agents. His economic analysis (contrary to that of Walras) tends to retrace the evolving dynamics Heroic Entrepreneur, Theories of capitalism by putting the accent not on situations in balance but on imbalance. The essential cause of progress resides in the growth of knowledge. But where does such growth originate? And what are the economic agents that mobilize it? The answer is relatively contrasted. The process which leads economic agents to take decisions is relatively more complex than that imagined by Walras, in the first place, because the information available to the economic agents is not only objective but also a great deal more diffuse. This knowledge is capable of being mobilized into action, that is to say, across the interactions of individual behavior patterns. In his way, and well before the birth of theories on social networks, Menger puts the accent on the formation of networks of social relations which play a nodal role in the formation of business opportunities. Thus, Menger puts the accent on the process of apprenticeship during which the agents acquire knowledge. Such knowledge is in some degree discovered by particular economic agents. But Menger also puts the accent on the acquisition of knowledge linked directly to the activities in which the economic agents are engaged. Throughout the acquisition of knowledge the economic agents create, without the intention of so doing, institutions which permit them to reduce uncertainty. Such social institutions are the spontaneous result of the interactions of individual behavior, interactions which permit in particular the mobilization and the spread of tacit knowledge. The discovery of this tacit knowledge stems from a limited number of individuals showing innovative behavior. These individuals are in some way “agents of clairvoyance.” These agents do not possess in themselves a maximizing behavior. They pursue objectives of their own in a context of uncertainty and consequently are susceptible to error. No two individuals have the same vision of the world, for each individual has his own such vision. One can speak in this sense of limited responsibility, even though this concept correctly stated only goes back to the end of the 1940s under the pen of H. Simon. The Mengerian entrepreneur acts in a context of uncertainty. He has no objective vision of the economic situation into which he is Heroic Entrepreneur, Theories plunged. His vision is subjective because it depends on the position he occupies in the market but equally on his own identity. Each economic agent is unique and marked by his own characteristic traits. Alfred Marshal: Managers and Entrepreneurs Alfred Marshall (1842–1924) was Professor of Economics at the prestigious Cambridge University. Among his various students was the (later) illustrious J. M. Keynes. Keynes, like his teacher, never ceased to rework the neoclassical model. He is highly critical in his principles of political economy with regard to the world of business, for the modern economy “provides new temptations for dishonest conduct in business. The progress of science has permitted the discovery of new ways of giving things an appearance other than reality . . . . The producer is now far removed from the final consumer, and his misdemeanors do not receive the severe and prompt punishment which falls on the head of a person obliged to live and die in the village where he was born.” For the term “competition,” he substitutes the expressions “freedom of industry or work” or “economic freedom” and emphasizes that nearly all the inventions without number which have been given to us by the power of nature have been the products of independent workers. From the primitive society to which he often refers, Marshall shows that the economy has progressed and that the division of labor has become considerably more complex. In this context, the entrepreneur has secured for himself an important place. The localization of industry and the appearance of the system of capitalist entrepreneurs were parallel phenomena due to the same general causes, and each one helped the progress of the other. “Economic freedom” led to the triumph of “the men most capable of founding a business, and organizing and managing it.” This is without calling to mind the “most clairvoyant” (economic) agents of Menger. The appearance of the entrepreneur predates capitalism. In the proto-industrial system, the entrepreneur reigned over what is now called working from home, “a system of small tradespeople managed by the workers themselves . . ..” 843 H Then came the system of large firms, where the entrepreneur specializes in one function of management and organization of the firm. These upheavals, which put an end to the customs which had become “too late to train oneself and too blind to act only when the time to act is already past,” call out to “the men of energy”, ready for anything, counting only on themselves, and “considering their success as being due to their own energy.” The spirit of enterprise which inhabits these men is what distinguishes the modern economy from the primitive economy. The entrepreneur is nonetheless an unloved creature. His fortune is often suspect in the eyes of the common man, despite which the profits he earns are no more than the just remuneration for his labor. The entrepreneur is an entrepreneur because he manages “to do noble and difficult things simply because they are noble and difficult” (Marshall 1919, vol. 2, p. 391). Despite this, the evident hostility of society adds a bitter pill to the actions of the entrepreneur! In industry and trade (1919), Marshall interests himself in economic history from the angle of concentration of capital. He distinguishes several types of firms typical of different stages of economic history. The typical firm takes on at least two different forms: the individual firm, embodied by the entrepreneur, owner of the capital, and then the limited liability company, embodied by the manager (the shareholder plays a relatively minor role). During the preindustrial period, entrepreneurs were the businessmen who purchased goods in a particular locality and resold them in another. Such traders all through the Middle Ages ran great risks, and international trade offered wide possibilities for economic initiative and perspicacious foresight. From the industrial revolution onwards, the industrial entrepreneur occupied a central position. He had to be able to estimate with precision the required investment and recruit the necessary labor. From the end of the nineteenth century, the socialization of capital divided the function of the entrepreneur between on the one hand the manager and on the other hand the shareholders. The manager took charge of the strategic direction of the H H 844 business, but he is a salaried member of staff, and thus takes none of the risks inherent in management. In the case of failure he risks, according to Marshall, simply put, his reputation and his employment. The shareholders, in contrast, bear the risks but delegate nearly all their functions as owners of the business to the managers. Thus the entrepreneur and the manager divide the market between them. The first survives thanks to his dynamism and his capacity for innovation. The second relies on the solidity of a large organization which shields him from the dangers of uncertainty. Certainly, he is lacking in energy and initiative relative to that deployed by the entrepreneur, nevertheless the important financial means at his disposal allow him to put to use the entrepreneur’s new ideas. The role of each one is clearly different. The entrepreneur is not obliged to justify the decisions he takes. This is the reverse of the case of the manager who must obtain the approval of his board of directors and possibly the whole body of shareholders meeting in assembly. Marshall puts the accent on the charisma of the entrepreneur which allows him to motivate his personnel. The vitality of the small firm is closely linked to the qualities of its owner, more diligent, more assiduous in watching over the business, and more intimately connected with a multitude of details. In a larger organization, on the other hand, the working ambiance is far more codified, even coasting along as the result of bureaucratic habits such as to impede any initiative which might disturb it. The main fault of large firms lies in their excessively centralized administration. To the extent that this risks imposing higher costs on smaller firms, the entrepreneur gives way to the manager. Large firms dominate numerous markets by reason of the superiority of mass production methods. However, certain sectors of production, or certain steps in the production process, are less expensive to carry out on a small scale, thus a division of labor exists between large and small firms. Furthermore, if the entrepreneur does not disappear, his independence is clipped because his order book depends on the activities of large firms. The state has to accompany this evolution of the productive Heroic Entrepreneur, Theories system, by putting in place legal mechanisms to guarantee the contribution of each shareholder. Its role is to maintain confidence, by guaranteeing the stability and harmony of the working of the market thanks to public services rendered by the police, the justice system, and the construction and maintenance of infrastructures. Two worlds coexist for Marshall, that of the small, innovatory firm (which by definition is exposed to uncertainty and risk) and where the entrepreneur has a key role, and the large firm, having a share capital, and which rests on a bureaucratic organization and mass production. The large firm has the capacity by virtue of its size to control the market (it plays an important role in the fixing of prices at high levels). The small firm (just like the artisanal proto-industrial business) is close to the consumer and knows his or her needs, in contrast to large industrial groups. Inevitably its situation is more precarious. The Economists of Transition We have grouped together three economists, Marx, Schumpeter, and Coase, under the title “economists of transition.” There is no question here of evoking the progress of mechanisms of the planned market in the direction of capitalism, or the reverse, but rather of studying the mechanisms involved in the transition of the heroic entrepreneur to the socialized entrepreneur. What are the spurs to growth in the size of firms? What becomes of the entrepreneur in an economy dominated by large firms? Finally, if a certain trend in the concentration of capital has been in progress since the beginning of the twentieth century, is this process in fact unacceptable? Karl Marx: Entrepreneurs or Capitalists Karl Marx (1818–1883) is not a theoretician of the entrepreneur; however, an in-depth reading of his works is rich in information as to the role and the place of this figure in the dynamics of capitalism. Marx (2004), though, rarely employs the term “entrepreneur,” preferring the word “capitalist.” The latter is frequently qualified as “fanatical agent of accumulation” who “forces men without mercy or truce to produce for the sake of Heroic Entrepreneur, Theories producing. . ..” “Accumulate, accumulate! That is the law and the prophets”. One could equally well replace “accumulate” with “innovate.” The propos of Marx are not necessarily distorted. Nor does he abandon the term of entrepreneur, to which he always attributes a place and a precise role in the dynamic of accumulation. According Marx, the movement of social accumulation thus presents, on the one hand, a growing concentration in the hands of private entrepreneurs of the reproductive elements of richness, and on the other hand, the dispersal and multiplication of points of accumulation and of relative concentration, which repel reach other from their own particular orbits. The capitalist entrepreneur is caught up in a kind of endless spiral. His capacity for initiative (of action) is limited by the coercive law of the market. He is, besides, alienated from the worker he exploits. In the Communist Party Manifesto Marx and Engels (2005) qualify the bourgeoisie as the agent without will of his own and with no resistance to the forces of industry. Even though Marx may have qualified capitalism as revolutionary on the technological level, he failed to establish an explicit relation between innovation and the entrepreneur. Invention had become “a branch of business” and the application of science to immediate production determines inventions at the same time that it solicits them. Marx concentrates his analysis on the general dynamic of the accumulation process. Capitalism is caught up in a kind of dynamic which overtakes it, but which, it also seeks to master. Competition is tough. Uncertainty is high. The sharks eat the minnows. Business must either expand or disappear. The competition which is the quintessence of capitalism adapts itself. Large firms emerge (performers on an international scale) which seek to control more and more tightly the uncertainty proper to the functioning of the market. Productive activity becomes more and more socialized. Capitalism changes its nature. Marx leans on the theory of the end of history (which Schumpeter also takes up), where he evokes the possibility of a new form of organization of the economy where the market and private property 845 H have disappeared. The state would then take over the management of things. In the absence of the market, uncertainty and risk are also eliminated, and consequently, the entrepreneur can force open the market with no resistance. However, the entrepreneur is not perceived by Marx as an autonomous economic agent, master of his own decision-making. Capitalism, founded on the principles of competition, and consequently on risk, evolves progressively towards a managed economic system, where risk and uncertainty have all but disappeared in the same way as all the other economic principles attached to capitalism, whether it be the market, prices, or currency. Joseph A. Schumpeter: The Metaphor of Capitalism At the beginning of the twentieth century, J.A. Schumpeter (1883–1950) developed his theory to compensate for the gaps in the Walrasian model (which despite this he admired), and which had proved incapable of providing explanations for technical progress, growth, or even economic crises. Against this, the Schumpeterian entrepreneur introduced the idea of movement (1980, 2010). Schumpeter defined the entrepreneur as the economic agent who innovates. But this is an irrational agent in the Walrasian sense of the term. His behavior is not guided by any economic calculations. In the image of what was the very existence of Cantillon, the Schumpeterian entrepreneur is a player. He assumes in his basic conditions both success and failure at the same time. The entrepreneur is the motor of “creative destruction.” According to Schumpeter, capitalism, let us repeat, constitutes by its nature a type or a method of economic transformation and not only is it never stationary, but it could never become so. Then, he explains that the fundamental impulsion which starts off and maintains the capitalist machine owes its being to new products of consumption, new methods of production and transportation, new markets, and new types of industrial organization – all the elements created by capitalist initiative. He calls this evolutionary process unique to capitalism the process of creative destruction. This process of Creative Destruction constitutes the basic element of H H 846 capitalism: it is this element that in the last analysis comprises capitalism and any capitalist firm must, with good grace or otherwise, adapt to it. The motivation of the Schumpeterian entrepreneur resides in the challenge, change, and the game. His aim is to go against the established economic order. The entrepreneur is thus instrumentalized in order to explain the dynamics of capitalism or “economic evolution.” The most important idea that we retain is that of innovation by opportunism. Innovation is not limited for Schumpeter to the creation of new products or the introduction of machinery into the workshops. Innovation is, roughly speaking, that which allows the entrepreneur to grow his business and his dominant position on the market. Additionally, even if the entrepreneur is not entirely certain of the effect of his discoveries, the latter can become, in the case of success, a means of conferring on him provisionally, (through its effects on competition) a monopoly position. By the power of innovation, the entrepreneur goes beyond the limits of his own market; he establishes his own rules, so as to master the uncertainty otherwise inherent in the functioning of the market. Human motivations are never strictly individual but always form part of a social and historical reality. In other words, the entrepreneur invests in such or such a sector of activity because it is the state of the economy, of society, science, or technology which permits him to do so, while bringing solutions to the problems posed. The Schumpeterian entrepreneur is the economic agent who introduces “new combinations of factors of production” which provide by the same token opportunities for investment. Such factors manifest themselves in multiple forms: the making of new products, transferring of production methods from one branch to another, opening up of new sales outlets, development of new sources of raw materials or of semimanufactures, and achievement of new market powers (e.g., a monopoly). These new combinations appear very close to the practices denounced by Marshall, according to whom businessmen hold up the progress of science in order to put a new appearance on things in an artificial way. Heroic Entrepreneur, Theories The characteristics of the Schumpeterian entrepreneur are the following: 1. His independence is limited by the effects of competition and consequently by uncertainty. 2. The execution of new combinations is “difficult and only accessible to people having the quality of strong determination.” Only a few people “have the aptitudes needed to be able to take charge in such a situation.” 3. Being an entrepreneur does not always signify “having lasting relations with a particular business.” One is not an entrepreneur for life. The entrepreneur is only an entrepreneur when he puts into practice new combinations of production factors. Such a situation is by definition unstable because, by virtue of the dynamic of creative destruction, other entrepreneurs can be led to innovate, and this process is ongoing. Whence comes a virtually permanent situation of uncertainty in which the function of the entrepreneur is embedded. 4. Being an entrepreneur is not to be summed up by combining the factors of production, an activity which (maybe paradoxically) becomes routine. But only the entrepreneur can bring to bear new combinations of production factors. Managing the daily business of production is part of routine. This is not the function of the entrepreneur. Our eyes, someone is in principle not an entrepreneur unless he carries out new combinations; furthermore, he loses his character (as entrepreneur) if he continues to carry on the existing business without breaking out of the already established procedures. 5. The entrepreneur links the world of technology with that of the economy in introducing his new combinations of production factors. Achievement of this objective carries risk. That is why it interests the entrepreneur. 6. The quest for profit is secondary, although that does not mean to say it is neglected by the entrepreneur. He is a kind of gambler for whom the joy of creating carries him forward on the wave of research intrinsic to the gain. But, if profit merely crowns the success of new combinations of production methods, it is the expression of the value of the entrepreneur’s Heroic Entrepreneur, Theories contribution to production, just like the salary is to the worker. 7. The Schumpeterian entrepreneur is a clever calculator because he is able better than others to predict the course of demand, which gives him a degree of power to channel the uncertainties he faces. 8. The Schumpeterian entrepreneur has charisma and authority. The importance of authority cannot be absent; it is often a question of surmounting local resistance, of winning relationships, and being able to support heavy challenges. 9. But the term “leader” does not turn the entrepreneur into the equivalent of a military chieftain. The entrepreneur does not distinguish himself by specific qualities. The task of the leader is very special: he who can master it has no need of specific connections, nor any particular intelligence, nor to be interesting or cultivated, nor to occupy in any sense a “higher ground”; he may even appear ridiculous in social situations where due to his success he may find himself. By his very essence, but also by his history (the two do not necessarily coincide) he is, away from his office, typically seen as a parvenu; he is without tradition, what is more he is often uncertain of himself, he appears anxious, in short he is everything but a leader. He is the revolutionary of the economy – and the involuntary pioneer of social and political revolution. His own colleagues disown him whenever they manage to steal a march on him, so effectively that he runs the risk occasionally of being excluded from the ranks of established industrialists. A number of economists have attempted to search in the economy for the true Schumpeterian entrepreneur. But the entrepreneur described by Schumpeter lacks consistency. One cannot find an individual who embodies the stipulated qualities in a durable way. For example, Henry Ford only became an entrepreneur when he created the “model T”? For Schumpeter, being an entrepreneur is not a profession and certainly not a lasting state of affairs. Did not J.K. Galbraith try to affirm this when he wrote that one may compare 847 H the existence of the great entrepreneur to the male aspis meblifera which accomplishes the act of procreation at the price of his own existence? The condition of the entrepreneur is therefore not a permanent state. Anyone is in principle only an entrepreneur if he puts into practice new combinations – and thus he loses this quality if he continues thereafter to manage the business according to existing principles – consequently, it is comparatively rare to see someone remain an entrepreneur on top form for decades; whereas, the businessman who has never been an entrepreneur, to however modest a degree, is a far more common species. The existence of the entrepreneur is consequently a precarious and uncertain one. But, that is not only on account of the place and the role attributed to him in a capitalist economy; it lies in economic theory so far as it exists. The entrepreneur, and most particularly the Schumpeterian entrepreneur, incorporates a dynamic disembodied from capitalism. The general definition which Schumpeter gives to innovation suffices largely to explain profit as an exceptional and temporary source of revenue which rewards the entrepreneur, that is to say, the economic actor who has taken the risk of breaking the monotony of the Walrasian equilibrium, a situation where profit is nil. The link between “innovation,” “entrepreneur,” and “economic growth” is brought about by the concept of the arrival of a group of entrepreneurs in a strategic market. This phenomenon is for Schumpeter the start of a long cycle of expansion. These pioneering entrepreneurs play an essential role because they “suppress the obstacles confronting others not only in the branch of production where they feature, but also, conforming to the usual nature of obstacles, they suppress them ipso facto in other branches of production. The example works by itself; many gains made within a particular branch serve other branches as well, as is the case for the opening of a market, an abstraction stemming from circumstances seemingly of secondary importance which soon appear: increase of prices etc. . . . This is how the action of the first leaders exceeds the immediate sphere of their influence, and the whole group of entrepreneurs increase business H H 848 still further than would otherwise be the case. Thus the national economy is affected faster and more completely than would normally be thought in the process of reorganization; this constitutes the period of lift-off.” R. Coase: Alternatives to the Market Coase (1910–) does not go along with the same theoretical current as Marx and Schumpeter. He asks neither the question of the disappearance of the entrepreneur nor that of capitalism; the theoretical model which he constructs belongs rather to the set of problems of transition such as we have posed in the above arguments. Coase even imagines an extreme situation where the market becomes confused with one sole and single firm, a situation of absolute monopoly, where uncertainty has disappeared and there the firm in question has complete freedom to fix prices. But this situation only corresponds to an academic case study set by Coase. He does not envisage it as a situation likely to arise. Coase distances himself from the neoclassical definition of the firm; he conceives the firm not as an instrument of production, but an as organization. It is not a question in the Coase analysis of the size of the enterprise (by what criteria in any case should this be defined? By the number of employees? By the amount of capital employed?). But the firm is conceived as an organizational form standing as an alternative to the market. Two alternatives can be offered: either the entrepreneur is himself responsible for production or else he delegates this task to other firms by means of subcontracting. In this case, the activity of production takes the form first and foremost of a contractual relationship. Coase thus plays in a dialectic fashion on a particular relationship between the firm and the market. The setting up of a firm encompasses within itself the functions of the market, at the same time, endogenizing the uncertainty proper to the functioning of the market itself. The Coase analysis constitutes an important theoretical advance for the neoclassical theory because it leads towards legitimizing the existence of the firm in the eyes of those fervent liberal economists who are partisans of the Heroic Entrepreneur, Theories market. But, the Coase analysis also brings to bear a pertinent explanation as to the size of firms (which distinguishes itself from basic analyses of pure and perfect competition, in the first place that of the atomicity of the market). The size of a firm grows when additional transactions (which may be exchanges coordinated by the market, that is to say by the price mechanism) are organized by the entrepreneur. The size of the firm shrinks when the entrepreneur abstains from such transactions. It is then possible to deal scientifically with the question of the size of firms. The advantages of internal coordination do not lead towards the universal firm because the creation of a firm also implies costs to be set principally against the decreasing yields of management. For Coase, there exists an optimum sharing of coordination between the firm and the market which allows determination of the size of the firm thanks to reasoning at the margin. A firm grows when additional transactions (which might be exchanges in the context of the price mechanism) are organized by the entrepreneur, and it diminishes when the entrepreneur fails to pursue such transactions. Coase (1937) resumes his argument by setting out three situations in which a firm might assume a growth trend, which would allow it by the same token to take on the functions of the market, and consequently to channel the uncertainty inherent in the working of the market: 1. If the number of transactions increases, while the costs of the organization and their elasticity remain weak. 2. Still within the hypothesis of an increase in the number of transactions, if the entrepreneur is unlikely to commit errors and the rate of errors decreases. 3. When the offer price of production factors falls (or increases only slightly) the size of the firm can increase to a significant extent. However, to the extent that the size of the firm increases the organizational costs, losses due to errors can increase. But, these organizational costs can be reduced thanks to technical innovation. Coase gives the examples of the telephone and the telegraph, as innovations reducing organizational costs. Heroic Entrepreneur, Theories Following on from the contribution of Coase, Williamson (1986) brought together the contributions of two other economists, North and Akerlof. The contribution of the first resides in the existence of institutions, while that of Akerlof resides in the asymmetry of the information existing between sellers and buyers, which leads the first to keep their best products to themselves and to select inferior goods to sell. The institutional environment determines the rules of the game so far as concerns the methods of governance. The firm and the market are, for Williamson, the two institutions of the economy. However Williamson’s contribution includes other aspects: the use of concealed information is also an important aspect of the economic game which goes beyond the Walrasian hypothesis of the maximization of profits; Williamson considers that economic agents act by opportunism which he defines as being the will of individuals to act in their own interests by voluntarily pursuing the deceit of others. In these conditions, uncertainty results not only from the opacity implicit in the behavior of some economic actors, but also from the deliberate will of certain economic agents to develop concealed strategies. These strategies have precisely as their aim the attempted channeling of the uncertainty inherent in the functioning of the market. Under these conditions, what is the fate of the limited rationality sketched out by Menger? Williamson postulates implicitly that economic actors seek to combat uncertainty by creating their own sources of information, which by virtue of their strength in the market-place impose themselves in the face of other protagonists. We are thus placed in the following situation: either the firm (which is essentially according to Coase a collective object, centralized and planned) or the market which responds to a spontaneous order and a decentralized decision process. The firm (contrary to what Coase affirms) does not present itself as a tangible, material reality. It seems to grow or to regress according to the progression of an environment which is itself shifting, and which changes in accordance with movements in prices. In these conditions, growth 849 H in the size of firms is seen as a means of counteracting the uncertainty inherent in the working of the market whilst itself forming part of the market mechanism. Thus, the Coase analysis tends to show in an implicit way that firms, whatever their size, are capable of adaptation. During the 1970s Williamson (1965, 1985) followed in the same direction in stressing that the costs of transaction, as put in evidence by Coase, are linked principally to the degree of complexity and uncertainty in the economic environment. Of course, demonstrably the hypothesis of market transparency rejects uncertainty. Conclusions and Future Readings Inserted into the market economy (by reason of its uncertainties) the entrepreneur is by definition a risk-taker. The entrepreneurial function is closely linked to the risk taken in a situation of doubt or uncertainty. It is in seeking to avoid or reduce risks that the entrepreneur plays his role of innovating. Innovation thus acts as a relative reducer of uncertainty because it endows the entrepreneur with a temporary power of monopoly; by his innovation, the entrepreneur contributes to the transformation of the market. But, in this permanent movement of uncertainty there can be no final result in the permanently enveloping mist of the business world. Now, it is precisely by means of these keywords that the function of the entrepreneur has been progressively and more precisely defined ever since the eighteenth century, at the dawn of industrialization (cf. Cantillon). Ever since then, the theory of the entrepreneur has been enriched, but the duo uncertainty/risk still remains at its base. As an agent for change, the entrepreneur is singled out by his capacity to take risks, and forms part of the “people of uncertain worth.” Even the term entrepreneur lends itself to confusion as it designates from the outset a character undoubtedly real in economic life, despite economists frequently using the term as a metaphor. The paradox of the theory “of the entrepreneur resides in the very term of entrepreneur which designates a kind of economic actor who can H H 850 without difficulty be identified as such in the real economy (e.g., head of a business), but from another perspective, this is not the position that economists adopt, whatever their position may actually be. In fact, the entrepreneur does become a metaphor, that of movement or progress in a capitalist economy. The entrepreneur, from Cantillon to Coase, materializes the movement of the economy, in its dynamic, growth, or in a recession the contrary. He is identified with risk taking since in a context of uncertainty he detects investment opportunities by anticipating the needs of consumers. By innovating, that is to say, by launching a new product or service on the market, he creates a pocket of uncertainty both for his own business and for others because he is incapable of anticipating the reaction of consumers. Will they accept or avoid the novelty? Cross-References ▶ Business Cycles ▶ Creative Destruction ▶ Entrepreneur ▶ Entrepreneur: Etymological Bases ▶ Schumpeterian Entrepreneur References Boutillier S, Uzunidis D. L’entrepreneur. Une analyse socio-économique. Paris: Economica; 1995. Coase R. The nature of the firm. Economica. 1937;4 (16):386–405. Marx K. Capital, critique of political economy. London: Penguin Classics; 2004, first edition 1867. Marx K, Engels F. Communist manifesto; 2005. 1st ed. London: Public Domain Books; 1848. Marshall A, Industry and trade; 1919. http://socserv2. socsci.mcmaster.ca/econ/ugcm/3ll3/marshall/Industry %26Trade.pdf Schumpeter JA. Theory of economic development. An inquiry into profits, capital, credit, interest and business cycles. 1st ed. New Brunswick: Transaction Publishers; 1980; 1942. Schumpeter JA. Capitalism, socialism and demcracy; 2010. London: Routledge, first edition 1942. Walras L. Eléments d’économie pure ou théorie de la richesse sociale. Paris: Economica; 1988, first edition of 1874. Heuristics Williamson OE. A Dynamic Theory of Interfirm Behavior. The Quarterly Journal of Economics. 1965;79:579–607. Williamson OE. The Economic institutions of capitalism: firms, markets and relational contracting. New York: The Free Press; 1985. Williamson OE. Economic organization: firms, markets and policy control. Brighton: Wheatsheaf Books; 1986. Heuristics ▶ Strategic Thinking and Creative Invention Higher Education and Innovation Elke Park Institute for Science Communication and Higher Education Research (WIHO), University of Klagenfurt, Vienna, Austria Synonyms Disruptive innovation in higher education; Higher education institutions; Teaching and research/teaching-research nexus; Tertiary education; University (research university); University governance Introduction The two main functions or contributions by higher education institutions to innovation processes in today’s knowledge society are teaching and research. On the one hand, universities and other higher education institutions (HEI) fulfill the task of educating and training a skilled workforce capable of dealing with the – increasingly complex – demands of the knowledge economy and the labor market; on the other, they act as central institutions in the creation of new, original insights and ideas, and among other players, they still play a fundamental role in the production of Higher Education and Innovation knowledge (see also contributions on University Research and Innovation; Mode 1, Mode 2 and Innovation; Mode 3). HEI thus occupy a central position in innovation processes and societal and economic development, in fact, higher education has been considered “a cornerstone of the global knowledge society” (UNESCO et al. 2009). Whereas traditionally universities or HEI where shielded from market pressures, operating in a protected realm believed to be most conducive to scientific inquiry and the production of scientific knowledge, a process of organizational change has affected institutions of higher learning and research which increasingly opened universities up to market forces. It has been argued that a marketization or quasi-marketization (Musselin 2010) of higher education has occurred. This process is also related to the transition from elite to mass higher education starting in the 1960s as the organizational setup of elite higher education began to prove increasingly insufficient in accommodating mass access to tertiary education. Today, teaching and research are considered valuable “products” of HE, providing the basis for sustainable economic growth as “science and technology are seen as the main source of competitive advantage on the national and regional level” (Carayannis and Campbell 2012, 2). Restructuring processes within higher education also aim at “unlocking and capturing the pecuniary benefits of the science enterprise” (ibid.). Thus, market mechanisms of supply and demand and, more generally, capitalist modes of production, for example, specialization or differentiation processes, aspects of “mass production,” competition, and the ultimate rule for cost efficiency increasingly apply in and shape higher education. The Teaching-Research Nexus Teaching and research – at universities, these two functions or outputs of higher education were linked in a special way since the inception of the modern research university in the early 1900s. The specific connection between teaching and research has been the characteristic of the Western research university ever since, and to 851 H many it still represents the ideal of what it is that higher education does. However, over the last 30 years, a rupture of the teaching-research nexus took place, a separation of tasks based on an increasing differentiation of or within HE institutions. Schimank and Winnes (2000) speak of pre-Humboldtian systems where teaching and research are institutionally separated (as in France) or post-Humboldtian systems where teaching and research take place at the same institution but are funded separately and carried out by different staff (as in the UK). Still, the most prominent and influential model based on a unity of teaching and research within one institution and in the person of the professor was the Humboldtian model which originated in Germany in the early 1900s and heavily influenced the US-American system (especially on the graduate level). The unity between teaching and research was first proclaimed and instituted by Wilhelm von Humboldt, and it represents a special way of producing, expanding or advancing, and disseminating new knowledge. What happens at a (research) university, how does the process of knowledge production ideally works at these institutions? According to the very influential Humboldtian ideal a professor shares his or her knowledge and research interest and the questions and problems he is working on with his students in the setting of a seminar or discussion round (later, labs), and he or she involves them in his or her research and in turn receives input, critique, feedback, and new ideas by his students who are supposed to grow themselves in the process both as independent thinkers and as experts in the field. Also, students are not merely “taught” – teaching as a mere appropriation of content is, in Humboldt’s view, the task of secondary education – they are expected to engage independently on (research) questions and problems provided by their professor or mentor who acts as their supervisor, not their teacher (see Humboldt 1993, 191). Ideally, the most talented students would be selected to remain and progress on to an eventual career in academe or research. This is, simply put, the basic functioning of the modern research university, the teaching-research nexus in practice. In short, it H H 852 is learning (research) by doing (research). However, finding or securing a place and making it to this elite circle of students engaging in discussions with the most eminent experts of their field, was limited to a small elite of the population that underwent severe – and highly socially predetermined – selection processes before entering tertiary education. The Massification of Higher Education With the onset of massification of higher education in the 1960s and 1970s, political leaders increasingly recognized that economic growth could only be sustained through an increase in the qualification of the workforce (see Fischer 1974, 591 in Preglau 1986, 194), and massive spending in secondary and higher education followed. Vice versa, a growing middle class recognized – and realized – the potential for social mobility through (higher) education. General demographic changes (population increase, with the baby-boomers entering higher education in the 1960s) further contributed to the phenomenon of rapidly rising student numbers. The 1960s are thus considered the “take-off phase” of mass (higher) education (Preglau 1986, 202). Accordingly, student enrollment grew at a rapid pace, and the quantitative increase in student numbers over the last 50 years is rather impressive: Since 1960, student enrollment in the USA more than quintupled (a 560 % increase, compared to a 72 % population increase); in Germany, more than six times as many students were enrolled at universities in 2009 compared to 1960 (a rough 640 % increase); at Austrian universities an almost eightfold student increase occurred since that time (790 %) (Data for the USA: Schuster and Finkelstein 2006, US Bureau of the Census; for Germany: Statistisches Jahrbuch der BRD; Statistisches Jahrbuch der DDR; for Austria: Hochschulbericht 1969; uni:data, www.bmwf.gv.at). Further, these numbers pale in comparison to Asian tigers such as China and Korea which show even higher growth rates (see Brandenburg and Zhu 2007 for a discussion of enrollment numbers in China, for example, accepted students after entrance exam in 1976: 270,000, in 2007: 5.67 million). Higher Education and Innovation Martin Trow (1973, 7) has identified three phases in the evolution of higher education: an elite system (participation less than 15 % of the age group), mass higher education (participation between 15 % and 50 %), and universal higher education (participation more than 50 %). Today, some countries (Korea, Canada, and Japan) already exhibit universal participation rates, while most OECD members currently show tertiary attainment rates at around 40 % (OECD 2011, 40). Differentiation of Higher Education Institutions Under the circumstances of mass or universal higher education, the above-mentioned special institutional setup and focus of research universities following the Humboldtian model became problematic. Policy makers, expert organizations, and higher education researchers alike increasingly insisted on the necessity of a differentiation and diversification of HEI by also including and fostering other HE institutions focused more on teaching and knowledge proliferation as well as training in practically oriented skills: Guri-Rosenblit et al. (2007, 1, also quoted in Meek and Davies 2009) summarize the two main arguments advocating increased institutional diversity in higher education: First, most experts agreed that it is impossible to teach all of the large numbers of students in research universities which are extremely expensive to sponsor. Therefore, it seemed obvious that other types of higher education institutions geared mainly for teaching and professional training are appropriate for absorbing the growing numbers of students (Clark 1983; Trow 1973, 2000). Second, a growth of diversity of backgrounds, talents and motives of job expectations among the rising number of students should be accommodated by heterogeneous higher education providers. Again, with participation rates of over 40 % in many, if not most, industrialized countries, policy makers were confronted with the following problems: (a) if providing – expensive – research-oriented training for more than half of the population or age group is financially viable; (b) if the “production” of a research-oriented workforce makes sense in regard to the demands Higher Education and Innovation of the labor market; and ultimately (c) if research training is in fact what most people aspire to or expect from their education, if it fits their needs and capabilities and corresponds with participants’ own goals. It is often claimed that more practice and learning-oriented programs better serve the needs of the workforce and the labor market. On the other hand, in defense of the research university, it can be argued that the cognitive abilities developed in research-focused training, namely, independent, critical thinking, and the ability to extract relevance out of a vast knowledge base, are exactly the qualifications needed in today’s ever more complex labor market (see also Huber 2004). A recent OECD report further underlines the importance of a diversified range of institutions in a HE system. First, highlighting again the argument for cost efficiency, Lynn Meek states that while “recognizing the importance of both research and research-intensive universities to the development of knowledge economies it needs to be recognized that no nation can afford to fund all of its universities at a level commensurate with world-class research universities” (Meek and Davies 2009, 64). She goes on to say that the quality or success of a higher education system is based not so much on the number of “world class” research universities but instead relies on a balanced “world-class system” of higher education with highly differentiated institutions answering to a multitude of demands: “There is evidence to suggest that world-class systems of higher education are differentiated systems. These are systems that address the increasing needs of society and the diversity of student backgrounds that result from massification” (ibid.). Accordingly, a variety of institutions emerged in the field of tertiary education over the last 50 years, and the numbers of institutions focusing on teaching and knowledge proliferation in more applied, practical fields increased rapidly: polytechnics (UK), universities of applied sciences (Germany, Austria, Switzerland), or community colleges in the USA. The latter saw especially high enrolment growth rates over the last 30 years (currently 44 % of undergraduates are enrolled at community colleges) with peaking growth rates 853 H during the economic crisis of the late 2000s (see Fry 2009). On the other hand, especially in systems where diversification is not – or only slowly – taking place vertically between institutions, an internal horizontal differentiation within institutions can be observed (see Chiang 2012, 140; also Guri-Rosenblit et al. 2007; Clark 1997). On the European continent, a shift of research-based teaching (i.e., the teaching-research nexus) to the higher levels within an institution (to the graduate level or doctoral education) is currently taking place. It can be argued that due to the growing complexity and specialization of the knowledge base which has to be appropriated and taught in the first place on the undergraduate level (and can no longer be provided by secondary education alone, as Humboldt envisaged it) research-based training in its original sense makes most sense on the graduate level. Clark 199, 246 states that “the trend from elite to mass to universal higher education brings enormous growth in the teaching of beginning and intermediate students who ostensibly must master codified elementary materials before they can go forward to advanced work.” Experts agree that a strong research focus on the undergraduate level would have adverse effects on learning as it leads to a “patchy coverage” of the curriculum (Trowler and Wareham 2007: 3–5. quoted in Meek and Davies 2009, 70ff). Thus, truly research-based training is more and more reserved to the graduate level. What occurs on the undergraduate level is teaching. This clearly noticeable shift is much deplored especially in the German-speaking countries (see also Clark 1997, 247) where a tendency to increasingly turn university education on the undergraduate level into school instruction (“Verschulung”) oriented toward a fast appropriation of content in the curriculum met with strong protests and was criticized as the beginning of the end of the Humboldtian ideal of the university. This was also related to changes brought about by the socalled Bologna process and the harmonization of European degrees introducing the three-tier structure of bachelor-master-PhD. In the AngloAmerican area, especially in the US where the H H 854 Humboldtian model (i.e., seminars) was emulated originally more on the graduate level, the undergraduate level traditionally had a broader focus aimed at providing a general education (Clark 1997, 248) and was less targeted on research training in one specific discipline. Research orientation there traditionally took place in graduate schools. Equity and Access to Higher Education The teaching-research nexus and the traditional Humboldtian research university which provided the prominent model for HEI over much of the last two centuries is under siege. Due to the massification of higher education and the concurrent attempts to accommodate rising student numbers at a low cost, a clearly visible differentiation is taking place. Research-based teaching is either shifting to the top levels within an institution or to top-level research universities within a HE system. Will this result in a new elitist function of the research university with only a select few progressing on to the top tier of university education (this time ideally based on merit and accomplishment not on social status, however, the line is thin here)? Will researchbased training as a consequence only take place in a small elite sector and will this most expensive form of training be reserved again to a minority? Finally, will it lead to the resurrection of new (old) elites with socially or financially disadvantaged groups receiving their training in lowerranking, more practically oriented, and cheaper colleges or online classes? Indeed, recent studies begin to show that, as a result of differentiation processes, socially disadvantaged groups tend toward nonresearch-oriented forms of higher education – such as UAS in Germany – while more privileged groups opt for an education at research universities (see, for example, Lörz 2012). In highly differentiated systems such as the USA or the UK, it is certainly positive that cheaper forms of instruction provide access to those parts of the population that formerly did not participate in higher education – which is why US president Obama referred to community colleges as the “unsung heroes” of the American Higher Education and Innovation education system, because they – in principle – provide open access with at least theoretical possibility to move up to higher, even the highest-ranked institutions if qualified. However, institutional stratification as a result of massification is considered highly problematic on the European continent. There, especially in the German-speaking area, the free and open access to the best possible (research-based) education for all is considered a societal accomplishment (and a human right) and a powerful social and political achievement and agenda which is not easily abandoned or given up in favor of more hierarchical structures. Providing research-based training to all students is a mission laid down in most institutional charters of German-speaking comprehensive research universities, a claim that is becoming increasingly harder to fulfill for all students on all levels. Access to these institutions – some of them the top universities of the respective countries – is, with few exceptions, open to all high school graduates with little or no tuition fees. It must be noted that the open access policy in these countries originated from a tradition where only a very small elite was able to complete secondary education and thus obtained the right to enter university. As a sign of the ongoing persistence of these traditions, the tertiary attainment rates in countries with full open access policies to research universities are still notably lower than the OECD average (see Pechar 2010). Today these systems struggle with severe financial difficulties possibly to the detriment of both teaching and research at these institutions. European comprehensive “mass research universities” face a dilemma as they try to accommodate both being a top-rated research university based on the Humboldtian model and providing (research-based) training to comparatively very high numbers of students while at the same time confronted with shrinking government funding: These universities, often being left to deal with this problem autonomously, struggle in trying to make the impossible possible. Research and Institutional Prestige Ironically, an increased focus on research in recent years has partly counteracted the development Higher Education and Innovation toward institutional differentiation and the rupture of the teaching-research nexus. Research output denotes status in academe; it is one of the main pillars of institutional reputation, and thus the basis for success in the HE marketplace by attracting more or better students and/or increased funding (see Luhmann 1970). This development was in large parts also fostered by popular university rankings which exhibit and promote a strong focus on research performance. Thus, many institutions tried to follow and emulate the model of the research university, for example, Universities of Applied Sciences in Germany are trying to raise their status by incorporating scientific practice into their profile, mission, and activities; they try to improve their standing by focusing more strongly on research either by increasing the publication output of faculty or by incorporating more “scientific” methods and standards in teaching. A strong focus on research has partly also had detrimental effects on the quality of teaching within research universities. Teaching was neglected as it did not count as strongly in performance evaluations; however, there are signs and initiatives which begin to reward excellence in teaching more strongly. Still, most institutions orient themselves toward the ideal of top research institutions in order to gain visibility on rankings and institutional prestige to attract students and/or funding. “Disruptive Innovation” and the Challenge or Opportunity of Online Learning A strong proponent for increased differentiation between institutions and a separation of the teaching-research nexus is Hayden Christensen, Harvard business scholar and cofounder of the concept of “disruptive innovation.” He argues that “the historical strategy of trying to be great at everything and mimic institutions such as Harvard is not a viable strategy going forward” and favors an increased focus on “institutions focused solely on knowledge proliferation”: Advocating a clear separation of teaching and research between institutions and limiting research-based learning to a smaller number of institutions, he claims in the pronounced jargon of business economics (teaching and research are considered two different “business models”) that 855 H [Research] institutions of higher education remain vital – indeed those that focus on research as well as those that train people for the academy will still be critically important for the country’s future. Most of America’s elite colleges and universities will continue to fulfill this job. But we should no longer force those institutions that are focused on teaching and learning to compete on the same metrics and play by the same rules. Pushing these institutions to adopt a mission of knowledge creation has created institutions that have two conflated value propositions and business models – and added significant overhead costs. We need institutions focused solely on knowledge proliferation – and need to regard those that do a good job on this dimension as being of high quality at what they were meant to do. (Christensen et al. 2011, 5) In this context, the business scholar applies his concept of “disruptive innovation” to higher education. According to Christensen, disruptive innovation occurs when a formerly sidelined or “low-end” product enters or “disrupts” a domain (or market) that was formerly only accessible or reserved to a limited few because its products and services were complicated, expensive, and inaccessible, to allow a whole new population of consumers access to a product or service (e.g., the personal computer vs. the mainframe computer, mobile phones vs. fixed lines, and US community colleges vs. 4-year colleges (see Christensen et al. 2011, 2 for a detailed definition). In higher education – a domain which could certainly also be considered as historically only accessible to consumers with a lot of money or a lot of skill – Christensen sees the use of new media and online learning as the product or element resulting in a process of “disruptive innovation” as it offers cheaper and easier to use products that can serve new audiences. Computer-based online education and the use of new technologies in (higher) education has been a frequently debated topic for almost two decades now with little concrete or visible changes taking place so far; however, this could be about to change: Christensen states that, today, growth rates in online learning are increasing rapidly, and he estimates that, while roughly 10 % of students in 2003 took at least one online course, the fraction grew to 25 % in 2008 and was nearly 30 % in the fall of 2009. He projects it will be H H 856 50 % in 2014 (Christensen et al. 2011, 3). The use of computer-based online learning would certainly cut costs – and make education more affordable thus providing a financially viable transition from elite to mass education. According to Christensen, a diversification of tasks and purposes (community colleges vs. elite research-oriented universities) would also lead to the inclusion and participation of students who were formerly not able to attend higher education institutions (“and if a postsecondary education is fundamentally affordable – meaning lower in cost, not just price – this will also answer the question of how to extend access by enabling students to afford a higher education,” ibid., 9). Increased access via new technologies is certainly a good thing, both economically and personally, however, while the use of online-based learning could provide cheaper access to higher education, the question remains if institutional differentiation as outlined by Christensen would result in a new institutionalization of elites and an increased social segregation whereby lower social status groups attend cheap online programs or community colleges and elites afford top research universities (see above). It is argued here that the most fascinating, possibly revolutionary and truly disruptive aspect of online-based learning technologies and the use of social media in higher education is not the emergence and use of “cheaper, nonresearchbased schools for the masses” but possibly – as an increasingly less utopian vision – the free or remarkably cheaper access to knowledge on the undergraduate level at all HEI, including top-tier research universities. Already, Princeton and other top-tier US research universities are beginning to offer so-called “massively open online courses” (MOOC) whereby thousands of students from all around the world participate in online classes linked by social media, thus, also providing for the possibility of interaction (see Kolowich 2012). Knowledge, even at the highest possible level and at the highest quality, is free (freely accessible). This could indeed be considered a fundamentally disruptive innovative process, seriously undermining the cost-efficiency argument that guided policies and strategies in Higher Education and Innovation higher education in recent years and troubled (European) HE systems still maintaining full open access to top research universities. While private universities in the USA do not yet foresee accreditation mechanisms (Princeton so far declines offering certifications for free online courses), others, especially state-run institutions show a certain willingness to issue certifications. This development could provide state-funded universities with a possibility of maintaining open access while – to an extent – disregarding or alleviating cost-efficiency considerations and at the same time providing education for all that in terms of quality does not necessarily have to be inferior to classroom instruction. In fact, it most likely surpasses overcrowded classrooms with little to no personal contact to a professor as it often is the case at mass research universities today. The free access to knowledge through the internet for those who are motivated, interested, and capable of learning is actually the most fascinating aspect of “disruptive” new developments in higher education. It could contribute to fundamental changes in higher education by challenging the driving argument for cost efficiency which implies that research-based training for all is too expensive. A “seminar” supervised by a professor, guided by his research questions – the Humboldtian model – could in theory also be possible for hundreds of thousands of students, although practically the system works better on the undergraduate level or in the humanities where lab equipment is not necessary even on the graduate level. MOOC do not necessarily have to be limited to the mere proliferation of knowledge, in the sense of passive appropriation of content which already increasingly takes place on the undergraduate level in open access universities today, but would allow for interaction and participation, for questions and new ideas, and for the assignment of tasks – in short, for researchbased teaching in the Humboldtian sense. In fact, the teaching-research nexus could be maintained rather than disrupted through the use of new online technologies. Obviously, practical problems, for example, how to effectively tutor and grade tens of thousands of students present themselves. Suggested solutions include peer tutoring Higher Education and Innovation by students or the use of artificial intelligence in evaluating and sorting students’ contributions (see further Kolowich 2012). Also, ideally, research output could be enhanced by increasing the brain-pool working on and discussing a problem in new online fora. Through online learning, a truly disruptive innovation could lead to the replacement of more traditional forms of higher education, and by entering elite institutions, it could have an equalizing effect where cost – at least on the undergraduate level – no longer matters. It is argued that higher education, however, “has yet to experience the kind of disruption and subsequent gains in productivity realized by other knowledge-based industries” (http://icw.uschamber.com/publication/college-20transforming-higher-education-through-greaterinnovation-smarter-regulation). On the Marketization and Commodification of Higher Education “Cost efficiency, productivity gains, and new ‘business models’ offering products and services at a lower price” judging by the terminology used in policy making and research higher education has turned into a market or quasi-market and, to a certain extent, market-like structures of supply and demand have taken over the sector. Knowledge and educated human “resources” have become a direly needed and valuable good, a tradable commodity; in fact, a nation’s competitiveness and ultimately its economic stability strongly depend on the output of HEI. It is argued here that massification – triggered by the insight that education is “good” to attain, both on the individual/personal level to promote life chances and on the system or state level to promote productivity and thus revenue – has currently resulted in a marketization or “capitalization” of higher education or, rather, an approximation toward capitalist modes of production in higher education. It was shown above that the onset of massification of higher education in the 1960s was accompanied by a massive increase of state funding. Following the enormous expansion of the postsecondary education sector, this generous funding level could not be sustained, and since 857 H the 1980s the (public) funding level for universities has relatively decreased leading some to speak of an ongoing “fiscal crisis” for universities (Ordorika 2006: 2–3, quoted in Meek and Davies 2009, 46). Universities and other HEI are increasingly forced to act in a market-like environment competing for scarce resources faced with societal pressures for more direct “return on investment.” Not only has the funding level relatively decreased, the formerly untargeted distribution of funds to universities has given way to conditional funding based on tangible and measurable performance and output. Institutions are held more directly accountable for the effective and efficient use of public funds, and they have to show – tangible – results to justify public investment. Why this “withdrawal of the state” expressed most notably in the reduction of public resources or the “reduction of trust” by society (Ordorika 2006, 2 and 10 quoted in Meek and Davies 2009, 44) at a point when the significance and increased importance HEI play in the societal innovation and production process should have become most obvious? First, it could be argued that, with participation rates of over 40 % untargeted resources growing equally in proportion to student numbers and allocated mostly to – expensive – research universities could simply no longer be sustained at the same level as in an elite sector (and it must be noted again that historically the state only sponsored a very small elite and its access to higher education): It was increasingly recognized that “nations will attempt to structure their higher education systems in order to produce the highest educated population at the lowest possible cost” (Meek and Davies 2009, 64). Clark 1997, 247 argues that “governments increasingly indicate that they are not prepared to pay the unit costs of mass higher education at the level of elite education. [. . .They] also make clear that they are not willing to pay throughout a national system for the increasingly high costs of research and research-based teaching and learning.” Thus, vertical differentiation between institutions was enhanced. Second, the role of the state vis-à-vis its agencies has changed dramatically over the last 30 years: governments were apparently no longer willing or able to maintain direct control either due H H 858 to an increased complexity which can simply no longer be steered centrally or because of an underlying belief that a sector of this importance could best be “regulated” by (partly) opening it up to market or market-like forces and by introducing managerial concepts such as efficiency, performance, and accountability in the steering process. This neoliberal agenda which has pervaded political systems and their subunits also strongly affected HE systems. Ironically, but not surprisingly, it is the success, importance and size of the sector from a former elite sector to an almost all encompassing one that contributed to its marketization as the outputs of HE turned into central “products” of the knowledge economy. One author argues, “Once they have conceded that knowledge is a commodity to be traded, universities become subject . . . to the full and ruthless protocols of the market” (Bertelsen 2002, 1 quoted in Meek and Davies 2009, 53). Changes in University Governance In Europe, the concept of new public management (NPM) which originated in the 1980s in the UK drastically altered the relation between the state and its agencies, among them higher education institutions and universities. The basic idea behind the concept is a more market-oriented approach to public management and administration by emulating practices derived from private enterprise in the public sphere (Park 2012b), with the aim of achieving (cost-) efficient results and to enhance the “productivity” of the respective sector. European universities – such as other publicly funded bodies – have been radically transformed in line with the demands of this central new approach to public management. According to Ferlie et al. (2008) NPM-inspired reforms in higher education are characterized by an increased level of competition and financial pressures, a stronger vertical differentiation between institutions, a heavier emphasis on performance, and the introduction of nonacademic executive leadership as well as a top-down management style. De Boer et al. (2007) further establish five relevant dimensions of NPM in the governance of HE. On the basis of these criteria, the authors formulate a hypothetical “NPM Higher Education and Innovation standard” which would ideally be set to: (1) state regulation ¼ low, (2) academic self-governance¼ low, (3) external guidance ¼ medium to high, (4) managerial governance ¼ high, and (5) competition ¼ very high. Their so-called governance equalizer, an analytical tool comprised of these five dimensions, enables them to measure the extent of NPM policy in the various national higher education systems. The UK currently still represents the European system closest to this hypothetical NPM standard, whereas in other European HE systems, only certain aspects of the NPM scheme were implemented, with each country showing a specific combination or focus (see Park 2012b). In the course of NPM-inspired reforms, a decoupling from state authority and the direct control of the state took place in several countries. In the Netherlands and Austria, for example, universities were turned from state agencies into autonomous entities under public law competing for funding and students; they are thus no longer directly responsible to the state or the ministry in their internal steering processes. Control is exerted indirectly through ex-post-evaluation and performance measurement to justify the spending of public funds and at the same time to create competition for public funding among institutions (the most notable example would be the rigorous RAE in the UK). Institutional autonomy is also counterbalanced by an increased influence of various external stakeholders (“stakeholder guidance”), such as governing boards composed also of members of private industry, and the state has become merely one stakeholder. Further, as a result, the internal organization and governance mechanisms at universities underwent unprecedented transformation processes in the last decades. One of the most drastic effects as a corollary of NPM-inspired reforms on universities has been the curtailing of academic self-governance. Whereas traditionally the academic profession – or the so-called academic oligarchy (Clark 1983) referring to the full professoriate, not all university employees – had a strong influence on the internal governance of their institution (“republic of scholars”); the steering of universities is now increasingly turned over to professional executive university Higher Education and Innovation managers who are expected to guide the institution effectively through an ever more competitive HE landscape. The degree and importance of collective decision making and academic selfgovernance by scholars has been a longstanding characteristic of the Western university. For centuries, professors represented in collegial bodies such as the academic senate and other committees decided collectively upon most internal and academic matters in often cumbersome and slow procedures – a decision-making process possibly unfit for flexible, quick reaction to market pressures. Thus, in many countries following the NPM paradigm, nonacademic and more topdown leadership structures were established which challenged the once “donnish dominion” of scholars over their institution (Halsey 1992). Strategic decisions are now increasingly taken by management (the president, vice-chancellor, or in the rectorate), whereas formerly the rector was considered a primus inter pares simply voicing the decisions the collegiate arrived at communally. In some countries, the once powerful senate has been reduced to dealing with purely academic matters, such as the development of curricula (see also Park 2012b). The university as an independent and self-governing entity shielded from outside pressures is turning into a more corporate entity following organizational models derived by private enterprise. This shift toward more entrepreneurial notions of the university as an organization is also reflected in changes of employment contracts and employment relations. The marketization and “capitalization” of HEI also had drastic effects on the academic profession, and in the last decade a trend toward more flexible work contracts and increasingly insecure employment situations at universities emerged as management is aiming to maintain institutional flexibility. Academic tenure, generally understood as permanent employment until retirement with a high degree of dismissal protection for professors, was once considered the “cornerstone” or the “sacred cow” of the academy. Also, academic selfgovernance relied to a large degree on the power and privileges of full professors. It can be argued that currently an “erosion of tenure” 859 H (Park 2012a) is taking place referring both to the shrinking numbers of tenured positions within universities and the diminishing strength or degree of employment protection tenure offers. The “rise of the part-time profession” (UNESCO et al. 2009) and the increase in off-track appointments have recently been regarded as the most important development and prominent “threat” to the “full professor.” The American Federation of Teachers states: “In recent years, the most notable – and potentially the most destructive – trend in higher education has been a significant shift away from employing tenured and tenuretrack faculty members in favour of employing full-time non tenure-track faculty members, part-time/adjunct faculty members and graduate employees” (AFT, American Academic 2009, 3). Schuster/Finkelstein (2006) even speak of an “appointment revolution,” and they demonstrate that the proportion of full-time faculty who were in fixed-term contracts (non tenure eligible) was barely perceptible in the 1960s but has risen to over a quarter of the full-time faculty over the last 30 years. Finkelstein (2007, 149) shows that 58,6 % of new hires in 2003 were nontenured, off-track positions. The full-time professoriate is in retreat and a recent UNESCO report concludes pessimistically: “The professoriate faces significant difficulties everywhere [. . .and] the decline of a real full-time professoriate is undermining high-quality higher education.” (UNESCO et al. 2009, 89f., see also Park 2012a). Conclusions and Future Directions It was argued here that the massification of HE and the problems associated with effectively financing growing student numbers and accommodating various differing needs both on the personal as well as on the system level resulted in an increased differentiation of HE institutions. The (Humboldtian) research university based on a unity of teaching and research no longer serves as the sole model for higher education institutions; in fact, the teaching-research nexus is only upheld in an increasingly smaller segment of the higher education sector, possibly leading to a renewed elite function of the research university. Systems where the research university still H H 860 serves as the prominent model are currently encountering severe financial difficulties. Further, changes in higher education policies over the last 30 years were fueled by an underlying belief in the regulatory forces of the market and ultimately answer to the argument for cost efficiency. On the organizational level, the question arises if the university is turning into a business organization like any other, a knowledge producing and/or disseminating firm with private-sector employment regulations and increasingly less staff participation in the decision-making process. A firm competing for funding and students, trying to prevail in a competitive market setting relying on effective strategic management to find their market “niche” – be it world-class research on the one hand or affordable quality education on the other. In relating the above to the discourse on innovation, innovation is conceptualized here as constant renewal or change, as a process of “creative destruction” in the Schumpeterian sense, continuously bringing about new and “better” or more efficient ways of doing things. It is also an essentially capitalist notion or endeavor, as constant innovation and improvement leading to growth is at the core of capitalist modes of production. In the words of Josef Schumpeter: “This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in” (Schumpeter 1950, 83). It is based on the underlying assumption of getting more or qualitatively better output with less effort thus “incessantly revolutioniz[ing] the economic structure from within, incessantly destroying the old one, incessantly creating a new one” (ibid.). This was already stated by Marx who claimed that “the bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and thereby the relations of production, and with them the whole relations of society” (1848). Leaving normative assessments aside, besides unleashing an enormous creative potential and power, capitalist modes of production can also have an equalizing effect, as (certain) hierarchies stand in the way of and hinder optimal output (they are simply not as efficient) as is evident in the transition from feudal to modern structures. Higher Education and Innovation The development from craft shop to factory is often quoted as an essential innovative step. Interestingly, governance changes at (European) universities over the last 30 years make for an impressive example for a similar transition. Humboldtian research universities were transformed from self-governing organizations resembling a feudal guild structure of ordinary professors or chair holders who ruled their institution as members of a privileged “estate” to a more capitalist notion of the university with strong leadership and nonacademic management vis-a-vis employed staff or knowledge workers. Also, under the conditions of mass higher education, the master/apprentice relationship between professor and student can no longer be upheld. The personal “craft-shop style” formation of the Humboldtian model possible in times of elite higher education is increasingly impossible to sustain unless extreme costs are incurred. It remains up for debate if specialization/ differentiation and NPM-inspired practices and policies in higher education can be termed as “social innovation” (in the sense of finding new and better or more efficient ways to distribute funds, or the search for creating more efficient or beneficial regulatory frameworks, for example), a “societal innovation” or merely an “organizational innovation process” (aiming toward more cost-efficient results under the conditions of mass production). What seems clear, however, is that innovation and thus capitalist modes of production itself have taken hold of an age-old bastion of social organization – next to the catholic church, the university is considered one of the oldest surviving institutions of the Western hemisphere (Stichweh). Innovation enters the system itself, and it is undergoing a process of change or renewal based on considerations of cost efficiency. Constant innovative effort and improvement are at the heart of the capitalist enterprise; in higher education, this translates to how to make education and knowledge production more or most efficient, how to educate the largest amount of people with the least amount of cost, or how to organize and foster scientific research most optimally in order to guarantee economic advantage. Higher Education and Innovation However, and most importantly, it was argued here that currently a change or “revolution” in the means of production in the higher education sector is on the verge of taking place: Innovation as creative destruction has brought about a change in the way teaching and research are carried out by introducing new, computer-based modes of (higher) learning. It is important to note that this change was initiated by technological advances and innovation not by social innovation per se which seems to follow and again appears derived. As a – utopian, but increasingly visible – outlook and conclusion to this segment, the special creative destruction processes inherent in capitalist modes of production highlighted by both Schumpeter and Marx could – through new modes of production, that is, social media and computer-based technologies – initiate a truly disruptive innovation process in higher education fundamentally challenging the argument for cost efficiency currently plaguing systems maintaining full open access policies (and thus – paradoxically – challenging the capitalist paradigm based on cost efficiency itself). Innovation could contribute to turning higher education and especially research universities into an easily affordable and accessible and at the same time extremely valuable product open to all. 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In: Flitner A, Giel K, editors. Wilhelm von Humboldt. Stuttgart: Schriften; 1993. p. 198–200. Higher Education Institutions ▶ Higher Education and Innovation Higher Order Learning ▶ Epidemiology of Innovation: Concepts and Constructs Higher-Order Thinking ▶ Dialogical Critical Thinking in Children, Developmental Process How does Material Culture Extend the Mind? Highly-Leveraged Transaction (HLT) ▶ Entrepreneurship and Financial Markets Homophily ▶ Networks and Scientific Innovation Hospice ▶ Palliative Care and Hospice - Innovation at End of Life 863 H compasses and barometers; external memory aids like calendars, books, and maps; calculating instruments like abaci and slide rules; and highly specialized tools like imaging software. Even a brief look around one’s desk suffices to indicate that humans are surrounded by artifacts that are specifically designed to perform a variety of cognitive tasks. Why do humans rely so extensively on external tools? What are the kinds of cognitive tasks that material culture helps them to accomplish? How are they instrumental in helping them complete such tasks? This entry of the extended cognition literature will look at these questions in more detail and pay special attention to their relevance to creativity, starting out by considering different ways in which material culture enhances cognition and then briefly reviewing three models of extended cognition. This entry ends by outlining practical applications of the extended cognition literature for innovators. How does Material Culture Extend the Mind? Extended Cognition: Key Concepts Johan De Smedt1,2 and Helen De Cruz3,4 1 Department of Philosophy & Ethics, Ghent University, Ghent, Belgium 2 Uehiro Centre for Practical Ethics, University of Oxford, Oxford, UK 3 Somerville College, University of Oxford, Oxford, UK 4 Centre for Logic and Analytical Philosophy, Katholieke Universiteit Leuven, Leuven, Belgium Synonyms Cognitive integration; Cognitive scaffolding; Epistemic engineering; Extended cognition; Extended mind; Extended mind thesis Material Culture and the Brain Humans rely extensively on material culture when they are thinking, including when they are involved in reasoning tasks that require creative solutions. Examples are measuring devices like Epistemic Actions Kirsh and Maglio (1994) draw a useful distinction between epistemic and pragmatic actions. Like pragmatic actions, epistemic actions involve some physical manipulation of the external world, for example, a Scrabble player who rearranges tiles on her tray, an engineer who draws a diagram, or a carpenter who makes a pencil mark on a piece of wood to indicate where sawing has to take place. The chief difference between pragmatic and epistemic actions is that the main aim of pragmatic actions is to bring about changes in the world, for example, driving from home to work, whereas epistemic actions are mainly performed in order to aid and enhance cognitive processes, for example, driving around in order to explore the neighborhood one just moved into. Although epistemic actions are primarily aimed at acquiring information and improving cognitive performance, they have pragmatic consequences as well. Drawing a map does not physically alter the environment, but makes it easier to navigate – one does not have to level the terrain or fell trees to get H H 864 a comprehensive overview. Carpenters who stick to the dictum that one should measure twice and saw once avoid wasting material. Epistemic actions are often performed in the context of creative problem solving. “Creative problem solving” refers to forms of problem solving that involve the generation of solutions that go beyond established action patterns, or that combine existing ideas in new ways, for example, by applying an approach used in one domain to a different domain. Performing epistemic actions helps one to test run novel combinations of ideas and behavior patterns in a virtual manner, avoiding the costs of real-world trial and error. Epistemic actions are therefore vital to creativity. Examples include an engineer who tinkers with a prototype in order to test the effects of varying parameters to her design and a composer who tests the effects of different harmonic structures in a novel composition by trying them out on the piano. Epistemic Tool Use Many animals rely on epistemic actions. Ants make pheromone trails to find their way back from a food source to the nest; birds and other territorial animals frequently inspect their territory to check for intruders. However, tool use specifically aimed at gaining knowledge – known as epistemic tool use or epistemic engineering – remains rare in the animal kingdom. No animal has ever been observed to make tools (i.e., intentionally modify objects) primarily for cognitive functions. Humans, by contrast, make use of a myriad of artifacts that are specifically designed to help them fulfill epistemic actions. Early examples of epistemic tool use include a 30,000-year-old lunar calendar from Abri Blanchard (French Pyrenees), which not only kept track of the phases of the moon but also of its actual position upon its ascent in the spring sky, and a notched bone from Ishango (Congo) dated to about 25,000 BP, which has notches grouped in numerically interesting ways, for example, prime numbers (De Smedt and De Cruz 2011). These examples predate the earliest emergence of writing by over 20,000 years. Epistemic tool use is not only ancient but also cross-culturally ubiquitous. Even people with How does Material Culture Extend the Mind? a relatively sparse material culture rely on epistemic engineering. For example, traditionally, Australian aboriginals (who lived a nomadic lifestyle that precludes hoarding large amounts of material culture) used message sticks to relay coded information to distant groups; bark paintings, which captured features of the landscape, like water sources and mountains; and cave paintings, which remarkably preserved biological knowledge of species that have gone extinct for thousands of years, such as fruit bats and giant marsupials (De Smedt and De Cruz 2011). Epistemic tool use is a human universal and has been so for thousands of years. The next sections will review some of the ways in which epistemic tools help humans to perform disparate cognitive tasks, with a focus on creativity. Lightening Cognitive Load Perhaps the best-known function of epistemic tools is to extend and supplement human biological memory. Keeping the diverse elements of a complex task in memory is cognitively demanding, and there is always a good chance that some elements get misrepresented, overlooked, or forgotten. By externally representing elements of a task, the mind is relieved from having to represent them internally and can focus better on creative aspects of the enterprise. Even for those cognitive tasks that can be held in biological memory, it makes sense to use external representations that simplify them. For example, while many people would be able to mentally calculate 231 43, a pocket calculator is faster and less error prone. Drawing up to-do lists, subdivided in urgent, less urgent, and contingent tasks, relieves a person’s memory from keeping in mind what to do next and reduces the chance of overlooking pressing assignments. Interestingly, external representations can differ in the way they lighten cognitive load, as Zhang and Norman (1995) showed in their comparison of different numerical notation systems. They found that nonpositional systems like Roman numerals are more challenging to calculate with than positional systems, in particular, because the former offer fewer opportunities to perform some parts of the calculation externally, while the latter How does Material Culture Extend the Mind? allow, for example, for carrying numbers. By contrast, nonpositional systems provide straightforward, visual representations of quantity that positional systems lack. For example, one can see at a glance that XXXIII is larger than XII, whereas a user of Arabic numerals needs to retrieve the values of 1, 2, and 3 from memory to assess whether 33 is larger than 12. Improving Conceptual Stability Creativity involves a complex manipulation of conceptual structures. These need to be represented in such a way that some parts of the representation can be altered (e.g., combining new ideas with old ones) while at the same time keeping other parts unaltered. For instance, the available physical space where an architectural solution needs to be implemented typically remains unchanged regardless of the solution that carries the day. Hutchins (2005) notes that the complexity of creative tasks can be greatly increased if the stability of the representation is improved. One obvious way to increase conceptual stability is to simply carry out creative solutions in the real world instead of representing them mentally. Painters, for example, often test different compositional ideas on their canvas by lightly outlining them (as x-rays of historical paintings indicate), or even by altering their design while the painting progresses (the older layers with earlier solutions, the so-called pentimenti, are sometimes still partly visible). This allows them to accurately assess the effects of compositional alterations. Also, they typically do not mix colors mentally, but directly test different color combinations on their palette. When reasoning about features of the environment, it is often cumbersome and suboptimal to make an internal, mental representation of them. When testing compositional ideas in the mind, it is difficult to keep some elements unchanged while altering others. By using the external representation as its own best model, a designer can directly interact with it, making her thinking easier, faster, and more reliable. Because they do not involve internal reconstruction, such real-world interactions with the environment are less liable to error. 865 H Making Hidden or Nonobvious Properties More Explicit Although the world is often its own best model (Brooks 1991), it is not always possible to rely on direct interactions with the world to solve creative problems (e.g., in architectural or airplane design). Moreover, making a new external representation of some features of the world sometimes reveals properties that were hitherto hidden or nonobvious. Kirsh (2010) provides the example of visual designers, who shift between scale models, pen-and-paper diagrams, computer-generated fly-throughs, and various other media. By making multiple representations, they discover structural properties that were previously undetected. A 3D model allows engineers to approach the design from different angles. By observing it from unusual viewpoints, they can see structural relations and detect violations of constraints that would not be detected otherwise. Scale models have the advantage that their relations logically and physically are independent from the designer. Unlike a mental representation, an actual physical model needs to be selfconsistent. It can be examined and manipulated independently of the designer’s prior ideas and allows for discussion, since its structural elements are there for all to see. Pen-and-paper diagrams do not allow for such rich and detailed inferences (especially not the multiple angles), but allow one to keep a sense of the big picture, the basic ideas underlying the design. Flythroughs, on the other hand, can give one a phenomenological impression of what the design would look and feel like once executed. Providing a Handle on Concepts That Are Difficult to Grasp Not all ideas are equally easy to comprehend and handle. Cognitive anthropologists have examined how the structure of the human mind influences the way we acquire and transmit ideas. Consider a child who learns that a platypus is an animal. From this information alone, she can rely on a rich body of knowledge she already possesses: she can infer that platypuses need food and drink, can reproduce, will die, and so on. The concept platypus is thus a relatively easy concept to learn. H H 866 One cannot rely on this earlier-stored tacit knowledge for all concepts. Few people have a good grasp of quantum mechanics or relativity theory, because both run counter to our commonsense conception of physics. Even a concept like heliocentrism is difficult to represent, as is clear in people’s inability to solve problems such as why there are different seasons. Most laypeople think it is because the Earth is closer to the Sun in summer than in winter, but realize this cannot be correct, since this does not explain why seasons differ between geographical locations. External representations, such as a model of the solar system that clearly indicates the eccentricity of the Earth’s orbit, can facilitate this. Without external representations, some solutions to cognitive problems are almost literally unthinkable. For example, mathematical solutions like algebraic rules to solve second- and higher-degree equations would be impossible without some way of representing these problems externally, either through symbols, as in western mathematics since the sixteenth century, or diagrams, as in ancient Greek and medieval Islamic mathematics. Costs of Epistemic Tool Use Epistemic tool use clearly provides many cognitive benefits, but may also carry cognitive costs. In a world where large chunks of information can be stored and transmitted with high accuracy, thanks to its external storage and where diverse channels can be used to transmit these, people can have too much information pushed at them, resulting in a cognitive overload as irrelevant data do not get filtered out. This problem, however, is not so much caused by the amount of information but, rather, by lack of control over it. Employees who return to work from an extended holiday are typically confronted with a large pile of paper mail and dossiers, an overflow of unanswered e-mails, and recordings of missed phone calls. All this information must at least be sifted through in order to decide whether and how to respond, causing stress and anxiety. Potential cognitive costs not only present themselves for information that is provided but also for information one can freely retrieve. How does Material Culture Extend the Mind? Take the so-called Google effect on memory. In a series of experiments, Sparrow et al. (2011) presented participants with a large set of trivia they had to type on a computer. Half of the participants were told they could use the computer to retrieve facts later on; the others were told the computer would erase the typed information. Participants who thought that they could not rely on the typed notes showed a superior recall. Those who were deceived into expecting they could use the typed notes recalled the information poorly. In a variation on this experiment, Sparrow et al. (2011) let students type information in several folders on a computer. Again, the subjects who were led to believe that they could retrieve the data later on were less good at recalling the facts they stored. Strikingly, they were better at remembering where it was stored than at recalling the information itself. The widespread use of search engines and digital storage thus alters the way human natural memory functions: people shift from recall of facts to recall of where these facts are stored. This in itself may not be a problem, but it can become a problem if information becomes temporarily unavailable, or gets accidentally destroyed (e.g., hard drive failure). As the authors were finishing this entry (January 19, 2012), there was a blackout of Wikipedia, causing disruption and frustration among students and redaction rooms worldwide. Theoretical Background and Open-Ended Issues Material culture plays an indispensable role in human reasoning processes. There are several theoretical models to describe how material culture accomplishes this: internalism, active externalism, and cognitive integration. Internalism Internalism is the standard view in cognitive science. It maintains that although epistemic actions play an important role in improving our cognitive capacities, they are not genuinely part of cognitive processes. Internalists think that cognitive processes are as a matter of fact purely How does Material Culture Extend the Mind? intracranial, that is, they only take place inside the skull. An analogy with pragmatic tool use, offered by Adams and Aizawa (2001), illustrates this. A person who uses lopping shears to cut thick branches is accomplishing something he would not be able to do with his bare hands, but this does not imply that the muscular processes within his hands and arms actually extend into the shears. Similarly, although microscopes and diagrams are involved in our epistemic actions, this does not imply that one should attribute cognitive agency to these objects. Some authors writing in the field of extended cognition (e.g., Menary 2007) have criticized internalism because it places severe constraints on what counts as cognitive. Obviously, creative reasoning also relies on internal cognitive processes, such as when one makes a chain of associative thought or when ideas one has previously been “brooding on” combine to yield a sudden insight. However, as outlined in section “Extended Cognition: Key Concepts”, without external media, creative solutions would be highly constrained, not only in their complexity (purely internal mental representations are hard to stably keep in memory), but also in their kind (some creative solutions are literally unthinkable without external representations). Hence, internalism does not seem to be a fruitful theoretical model to explain what goes on in creative reasoning. Active Externalism Active externalists think of cognition as a coupled process, where internal cognitive operations causally interact with epistemic actions. For example, multiplying two numbers using pen and paper consists of internal cognitive processes (e.g., mental arithmetic) coupled with external cognitive processes (e.g., carrying numbers, writing down results). A possible worry is that by granting cognitive status to epistemic actions, one might overextend cognition to every object that is somehow causally involved in cognitive processes. Do a pencil and notepad become part of cognition because these objects were used in a cognitive task? To adjudicate which instances of epistemic tool use are cognitive, Clark and Chalmers (1998) propose the parity principle. Roughly, this holds 867 H that if one characterizes a process that takes place in the brain as cognitive, one also ought to characterize a structurally similar process that takes place outside of the brain as cognitive. Take an Alzheimer’s patient who relies on a notebook to keep track of facts and appointments: if one is happy to concede that the neurologically normal person is informed by her (internally stored) beliefs about facts and appointments, one should, according to Clark and Chalmers (1998), also regard the externally stored information in the notebook of the Alzheimer’s patient as beliefs and thus treat his use of the notebook as cognitive. Cognitive Integration Although the parity principle may be useful to overcome some traditional ways of thinking about cognition, it is quite limited when it comes to describing what actually goes on when one is engaged in epistemic tool use. Indeed, in many cases, thinking with the help of external media is radically different from thinking in a purely internal way. An engineer who engages in real-world interaction with a model or penand-paper diagram is thinking in a very different way compared to one who ponders about his design using mental representations only. The real-world interactions allow for more consideration of details and can bring to light properties that remain undetected when engaged in internalized cognition. Thus, some authors (e.g., Menary 2007) have argued that the parity principle may not be a good starting point for thinking about extended cognition. Cognition should not be limited to those instances of intracranial processing and external actions that happen to be isomorphic to them, but rather, cognition should be conceived of as an integration of internal and external processes. This involves a causal, dynamic interaction between both types of processes, where the practices of manipulating external objects can lead to structural changes in the way internal cognitive processes take place. The Google effect on human memory, where an increased reliance on the Internet and other external sources has altered internal memory processes, provides a good example of such integration. H H 868 Practical Applicability of Extended Cognition Research for Creativity and Innovation This entry of the extended cognition literature indicates that humans rely on material culture to perform a variety of epistemic actions. These are not merely duplicates of internal cognitive processes but are often structurally very different. Although the extended cognition literature is at present mostly concerned with describing how material culture enhances human cognition, one can draw some practical conclusions for its role in human creativity and innovation. As reviewed here, epistemic actions provide a handle for ideas that are difficult to keep in mind; they allow one to detect properties that are not obvious and improve conceptual stability. Given that different external representations facilitate diverse solutions, creative workers frequently use disparate media to work on the same problem. The chance that an undetected problem or unconceived solution becomes apparent increases as one uses different ways to externalize the problem one is working on. However, engaging in epistemic actions does present a cost in terms of time, energy, and resources. Using a new software program can provide benefits, but requires an initial learning period before these become apparent. Developing external representations (e.g., scale models) requires time, money, and energy. Individual reasoners will therefore have to make trade-offs between what they are willing to invest in the development of external representations that aid their cognitive processes (e.g., make a computerized fly-through or a scale model) and the expected payoffs of this in facilitating or promoting creative solutions. Since humans have access to a variety of epistemic tools to an unprecedented extent, innovators will need to consider carefully when deciding which tools they will use. For tasks that require creative solutions, it seems important to choose external media that: • Help to lighten cognitive load, so that more attention and cognitive resources can be devoted to envisaging new solutions How does Material Culture Extend the Mind? • Enhance conceptual stability, which allows one to consider more complex problems and to develop more true-to-life solutions • Bring to the fore features that were previously undetected, increasing the pool of possible creative solutions • Allow to represent ideas that are hard to conceive internally, expanding the range of novel ideas that can be applied in problem solving Conclusions and Future Directions The role of material culture in human reasoning, especially in tasks that involve novel, creative solutions, is substantial and unavoidable. Coming up with creative solutions would not only be more cumbersome and labor-intensive – without epistemic tools, some solutions would just be unthinkable. Recognizing the importance of epistemic tool use for creativity highlights the importance of choosing good external representations. Sometimes, the world is its own best model, but in many cases, innovators need to develop new external representations to solve creative problems. By choosing the right epistemic tools, one can facilitate creative discovery to a considerable extent. The cognitive study of the use of material culture can benefit significantly from a closer look at real-world examples, and this is an important direction where future research can be carried out. Until now, a large part of this literature has been concerned with in vitro psychological studies that take place in the laboratory, where the available epistemic resources are highly restricted (e.g., Kirsh and Maglio 1994; Sparrow et al. 2011). Next to this, mostly theoretical and philosophical considerations play a role (e.g., Clark and Chalmers 1998). Examining the actual practice of creative individuals like engineers or architects at work in R&D departments or design studios can bring to light what informs the choices made by creative individuals about which epistemic tools they will use. Such in vivo psychological studies have up to now mainly been conducted in science labs and military settings (see, for instance, the work of Bruno Latour, Kevin Dunbar, and Edwin Hutchins). Hypothetical Thinking Studies like these can shed light on what drives real-world creative work and the role of epistemic tools therein, for instance, trade-offs between time and money constraints and the advantages of epistemic engineering. 869 H Hub ▶ Clusters, Networks, and Entrepreneurship Cross-References Human Inequality ▶ Adaptive Creativity and Innovative Creativity ▶ Cognition of Creativity ▶ In Search of Cognitive Foundations of Creativity ▶ Invention and Innovation as Creative ProblemSolving Activities ▶ Research on Creativity ▶ Political Leadership and Innovation Human-Computer Interaction H ▶ Interaction, Simulation, and Invention References Adams F, Aizawa K. The bounds of cognition. Philos Psychol. 2001;14(1):43–64. Brooks R. Intelligence without representation. Artif Intell. 1991;47(1–3):139–59. Clark A, Chalmers D. The extended mind. Analysis. 1998;58(1):7–19. De Smedt J, De Cruz H. The role of material culture in human time representation: calendrical systems as extensions of mental time travel. Adapt Behav. 2011;19(1):63–76. Hutchins E. Material anchors for conceptual blends. J Pragmat. 2005;37(10):1555–77. Kirsh D. Thinking with external representations. AI Soc. 2010;25:441–54. Kirsh D, Maglio P. On distinguishing epistemic from pragmatic action. Cognit Sci. 1994;18(4):513–49. Menary R. Cognitive integration: attacking the bounds of cognition. Basingstoke: Palgrave; 2007. Sparrow B, Liu J, Wegner DM. Google effects on memory: cognitive consequences of having information at our fingertips. Science. 2011;333(6043):776–8. Zhang J, Norman DA. A representational analysis of numeration systems. Cognition. 1995;57(3):271–95. Hyperkinesis ▶ Attention-Deficit/Hyperactivity Disorder and Creativity Hyperkinetic Disorders ▶ Attention-Deficit/Hyperactivity Disorder and Creativity Hypothetical Thinking ▶ Imagination

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