ABSTRACT
Invention and innovation are the heart of the process of industrial change. In most instances, though not in all, inventor and innovator are different individuals, since innovation is the incorporation of a new machine or process into a system of production. The success, or otherwise, achieved by attempts at this is often taken as a major part of the basis for judging the quality of ‘business enterprise’. And it is not difficult to see why this should be so. For, among other things, innovation depends on the businessman's ability to see the commercial value of an invention, to provide the necessary capital for its installation, to organize a suitable work force to operate it, and to find a market in which the final product can be sold at a profit. But it has already been argued that this is far too simple a view of business enterprise when seen against the chance elements of the real world in which the businessman operates. The innovator's decision on whether to switch to a new technique comes down to his estimate of its financial return as set against its total fixed and variable costs, over a given range of output. No matter how remarkable or ingenious an invention may be in itself, from an economic point of view the only criterion for measuring its value is one based on cost and return. Since these calculations can hardly ever be made with a high degree of certainty, particularly since they involve guesses on possible changes in consumers’ tastes, the innovator necessarily becomes a risk taker; and in this respect it is on an assessment of the skill with which the businessman assumes these risks and the manner in which he endeavours to turn them to profitable advantage that judgements on ‘business enterprise’ should be based.
