INTRODUCTION

The argument that defects in the performance of the British economy can be best explained by lacklustre enterprise and management and a general weakness of the industrial spirit has a long history. Assertions of entrepreneurial failure remain both seductive and appealing, particularly for those who favour cultural explanations. However, in their celebrated 1971 essay on late Victorian business performance Donald McCloskey and Lars Sandberg countered this conventional wisdom. On the basis of the neoclassical conceptual and empirical literature, they found limited evidence for significant and economically relevant instances of failure.

Not all theoretical advances have favoured British entrepreneurs. Institutional approaches reinforce the perspective that entrepreneurs need to be judged against their operating environment. Entrepreneurs interact with institutions, which can both reduce transaction costs and facilitate benefits from exchange, or act as a brake on economic development if ‘institutional rigidities’ are present. Advocates of this approach claim that competing industrial nations displaced Britain from economic pre-eminence by performing better in respect of labour relations, education, industrial organisation, corporate finance and government policy towards enterprise. Thus, institutional writers have challenged the argument of entrepreneurial redemption deeply rooted in the neoclassical analysis of business behaviour.

Cultural approaches to entrepreneurship broadly agree with this challenge; they explain performance differences between countries by reference to a capacity for enterprise and initiative. In Britain, it is claimed, a rigid social structure and the persistence of gentlemanly capitalism eroded the industrial spirit. Advocates of conventional cultural approaches hail ‘the limits of economic explanation’ (Wiener 1981: 167). Scholars writing historically on culture have been reluctant to use formal methods or economic theory as analysis tools, preferring casual empiricism as a framework for explanation.