THE ENTREPRENEUR AND THE SUPPLY OF CAPITAL 19 
be briefly enumerated. In the first place, the great size of the 
business unit made it impossible for individual business managers 
or groups of managers to raise the necessary capital. Secondly 
and even more important, the form of the capital required— 
fixed in place of circulating—made it impossible for the business 
manager to acquire control by the means of commercial bank 
loans. Such loans, since they were made largely on the basis 
of business ability, could not be used in a large way as a means 
of acquiring the means of production when these had a length of 
life frequently transcending that of the individual. A third factor 
in reducing business ability to a contractual position has been 
the enormous growth of monopoly and quasi-monopoly profits. 
These profits in many concerns are both large and durable. Of 
this momentous change in distribution the corporate form of 
organization is the expression.’ 
It is interesting to observe the place which this great trans- 
formation played in the development of the new theory of profits. 
As far as can be ascertained it was never assigned its true role 
as the actual moving force by the authors of the newer theories 
of profits. Again, it was observation and not the study of chang- 
ing conditions which dominated the theorizing. Thus the cor- 
poration figures frequently, but merely as an illustration of the 
subordination of managerial ability. Thus Professor Clark says: 
That the capitalist, manager and the owner of the product may at 
times be one and the same person does not affect the analysis. The 
three functions are distinct and the rewards attaching to them are 
equally so. The growth of corporations tends in a practical way to 
separate these functions. Capitalists are here a body of stockholders, 
bondholders and business creditors, managers are a body of salaried 
officials; while entrepreneurs, in the limited sense of the term, are 
the stockholders. Pure profit resides in the portion of the dividends 
that is in excess of current interest on the paid-up capital.? 
In most of the modern text-books the same illustrative use is 
made of the corporation. 
'Tt is to be noted that it is not the mere corporate form which is 
important in this connection. Many corporations are nothing more than 
convenient legal forms for carrying on business. In many of these, business 
ability still holds ownership and takes profits. Indeed, the corporation may 
be made an important instrument in securing such ownership by the 
business manager. But in the greatest of modern corporations, business 
ability is hired. Many of the modern problems of corporations—banker’s 
control, non-voting stock, the wrongs of minority stockholders, etc.—are 
the accompaniments of this transition. 
2 Ibid., p. 39.