Despite his Viennese birth, Peter Drucker enjoys a reputation as a leading American social analyst, particularly on industrial and economic issues. In Innovation and Entrepreneurship, Drucker interprets U.S. management theory and practice within the framework of the free market economy and the open society, as he seeks to define entrepreneurship as “a craft” essential for the vitality of the private and public sectors alike.

Analyzing the United States’ economic dynamics, Drucker refutes the self-appointed “prophets of doom” who in recent years have “bemoaned the de-industrialization of America.” Half of the new businesses are now in manufacturing. While premature memorials were held for the “Frost Belt” and rites de passage for the “born again Sun Belt,” only one-third of the new companies turned out to be in the Southern and Western states, and New Jersey and other Northern states are enjoying a remarkable renaissance. As a Popperian-oriented thinker, Drucker thus contrasts armchair pontification with empirical reality.

Drucker likewise deflates the theories of fashionable “high-tech soothers” such as John Naisbitt, author of Megatrends (1983). In the last decade-and-a-half, a solid three-quarters of all jobs created in this country (about 40 million) remain most decidedly “low tech”; and those took place overwhelmingly in small and mid-size businesses, even during the mini-depression of the Carter Administration. By contrast, the larger Fortune 500 corporations have been steadily losing jobs.

Probably the landmark contribution of this book lies in its argument that real “technology” is driven not by electronics, biogenetics or new materials but by “entrepreneurial management.” Admittedly, the emergence of the “entrepreneurial economy” is as much a cultural (read anthropological) and psychological event as it is an economic or technological one. In his assessment of the ways in which new management approaches have fostered an entrepreneurial economy, Drucker dissents from the views of Riesman, Whyte, Reich, Marcuse, and other “prophets” of recent years. Drucker warns that the rise of professional management (a “social technology”) is not to be confused with the “worship of government centralization and planning.” Government bureaucrats typically can teach businessmen only how not to run their industries, perhaps with an exception here and there.

The problem, as Drucker points out, is that government institutions find it more difficult to innovate than even the most bureaucratic private company. And that seems to be a universal phenomenon.

Drucker regards innovation as the only way that entrepreneurs can “exploit change as an opportunity for a different business or . . . service.” The essence of economic activity is the commitment of present resources to future expectations—which requires both the uncertainty of capitalist risk and the “delayed gratification” that sociologist Peter Berger has consistently stressed in his analyses of successful economies.

In the absence of a profit test, too many government officials make program growth their only criterion for success. Most innovations in the public sector are imposed either by outsiders or by catastrophe. Drucker believes the reversal of these trends and the transformation of the public sector is “the foremost task of this generation.” Because he finds macro-planning incompatible with an entrepreneurial economy, he rejects “industrial policy” of the sort now found in Europe and hailed by some as the economic future of the U.S. Such “policy,” he argues, “is a ‘delusion’: All it can come up with is another expensive flop, another supersonic Concorde; a little gloire . . . oceans of red ink.”

When Alexis de Tocqueville visited this country in 1831, he marveled at its economic vitality. Since then, foreign visitors and foreign-born Americans (like Drucker) have continued to admire our economic vitality. In contrast, many native-born Americans now cling to the anachronistic and pessimistic notion that the entrepreneurship that made us so powerful is no longer possible. Fortunately, millions in North America, including many new immigrants, continue to demonstrate what Tocqueville called the Americans’ “clear, free, original and innovative power of mind.”


[Innovation and Entrepreneurship: Practice and Principles, by Peter F. Drucker (New York: Harper & Row) $19.95]