ABSTRACT
This chapter highlights some of the definitional problems associated with new business activity, and focuses on a distinction between two activities which are sometimes assumed to be the same: firm formation and movement into business. A formation occurs whenever a business organization with its own accounts comes into being. Thus the birth of a new firm may occur without any change in the total size of an industry. It should be noted however that where the whole of a firm is sold to management in a buy-out, no formation. The pure entrepreneur owns no resources; owners of firms are entrepreneurs only in so far as they exercise alertness. The absence of an entrepreneurial function in much of micro theory may be contrasted with the extensive treatment accorded to the entrepreneur in the economic history and economic development literature. Some empirical studies use the term entrepreneur as a label for the new firm founder.
