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the end of entrepreneurship studies

Brayden’s post resonated with me. There is something rotten in the state of entrepreneurship studies. Brayden thinks that the field has a serious definitional problem. Of course, he’s not the first to raise this issue. It’s one of the first things you notice when you start reading in the area.

His post has prompted me to articulate an even more radical position that I’ve been mulling over for a while. I don’t claim originality, I’m sure someone else must’ve said it. So here it goes:

There is no such thing as an entrepreneur. That is, there is no cogently defined group of people whose actions can easily and clearly be defined as “entreprenuerial” because there is no collection of behaviors that can be grouped together as all being “entrepreneurial.” Many of the behaviors that might considered “entrepreneurial” are logically independent of each other and their link to innovation, firm creation, risk bearing, or profit taking are highly context dependent.

There are two claims here. First, if you look at all the people that might intuitively be called “entreprenuers,” you’ll just get too much variation. The craziest example I can think of is from one of Kirzner’s texts, when he claims that anyone who exploits an opportunity is in some sense “entreprenuerial.” Just too broad. Another bizarre example is defining entreprenuers by personality traits (e.g. risk seekers). That’s like defining the class of athletes by height!

Second, I claim that if you define entrepreneurs by a set of actions, then you run into more problems. That list of actions is itself vague, context dependent, and the behaviors don’t logically have  much to do with each other. Example: one famous paper (Garthner 1981) argues that firm creation is a useful framework. One can stick with that, but you can quickly see some problems. Some are purely definitional: for example, if firms split, does that count? What about franchises? New firms appearing from mergers? Shell corporations? For-profits emerging from non-profit forms? Are these really all “entreprenuerial?”

That’s small potatoes compared to a bigger problem. Firm creation involves such a wide range of economic activities that it seems hard to get a grasp on it all. Do the local taco truck, Facebook, and a new auto manufacturer deserve to be together? The article sticks with firm creation because new firms are often innovative, but who says new firms are innovative? Some are, some aren’t. And innovation itself is hard to define. Facebook was highly innovative in some ways (GUI), but not others (the social network concept). This is an example of how the traits that supposedly define entrepreneurship are hard to bundle to together.

I think a lot of this comes from a romantic idea about the heroic profit seeker. The Austrian approach to entreprenuership certainly has this tinge to it. But this also applies, in a more moderate form, to other entrepreneurship researchers. These endless debates over definitions by generations of scholars indicates to me that there is a pointless search for a special class of individuals who are responsible for economic growth. You might call them “Schumpeter’s men.” And entreprenuership studies is defined by this secret army of economic geniuses.

That leads me Schumpter’s fallacy: the false belief that economic growth and the development of markets is driven by one particular profile of person or one particular organizational form. My alternative is this: markets are complex ecosystems of people, ideas, markets, rules, and organizations. Markets probably do have trajectories, or patterns of growth, that require different types of people over time. But even  in the early stages, you’ll need a heterogenous group of people and skill sets. And the degree to which need a particular type of person varies by the product sold or the institutional environment.

What should come after the end of entreprenuership studies? I’d like to think of it as “market formation research.” Instead of focusing on these mysterious, undefinable entreprenuers, why not simply say that markets requires certain things, like firms and products, in particular combinations? Then management researchers would use their various tools to discover what kinds of people are needed for activity X, which could be starting firms of a certain types or inventing a new product? No need to collapse all these people and actions into one concept. You avoid the need to ever define entreprenuers and each discipline can focus on its own version of market formation studies. Economists could study, for example, the pay-off to starting a firm, while sociologists could study how firm starters use their networks and psychologists could study tolerance for risk.

I think the field is already well in this direction. There are tons of empirical studies on various aspects of “entrepreneuship.” All that researchers need to do is simply drop the entreprenuer concept and switch to a more ecological framework. Then you can start the much more productive process of figuring out which traits, skills, and people fit together in the economic process.

Written by fabiorojas

February 22, 2011 at 12:35 am

Posted in entrepreneurship, fabio

11 Responses

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  1. Where to begin? Let’s start with your characterization of “Schumpeter’s men” and growth. Schumpeter did not write about the entrepreneur in the manner that you ascribe to him. The entrepreneur is more metaphor than man, serving roles in economic change – not growth! Remember that Schumpeter’s life work was the study of business cycles not “the development of markets”; he was concerned about entrepreneurship – a function associated with innovation and subsequent changes in the pattern of manufacturing, industry structure, and capital use. There is a nice quote from Schumpeter about this.

    “ Viewed in this light, the entrepreneur and his function are not difficult to conceptualize: the defining characteristic is simply the doing of new things that are already being done in a new way (innovation”. It is but natural, and in fact only an advantage, that such a definition does not draw any sharp line between what is and what is not ‘enterprise’… It should be observed that the “new thing” need not be spectacular or of historical importance. It need not be Bessemer Steel or the explosion motor. It can be Deerfoot sausage.” – taken from chapter 10 of Joseph A. Schumpeter: The Economics and Sociology of Capitalism, Richard Swedberg (ed).

    Read Schumpeter, especially chapter seven in Capitalism, Socialism, and Democracy. Read Swedberg on Schumpeter. Nowhere will you see discussions of entrepreneurial types. Granted, there was some bad science in the journals on entrepreneurial attributes (as distinct from managers’ attributes), but that shouldn’t be laid at the feet of Joseph Schumpeter. He even believed that large firms were ultimately more entrepreneurial than small firms.

    Entrepreneurship is NOT about founding firms. I’ll even agree with you, Fabio, that it is about the ecology surrounding entrepreneurial action. The interplay of resources, markets, competing and cooperating organizations is paramount. Just don’t invoke the sociologists’ population ecology tradition here. It suffers from all the things that you believe are wrong with entrepreneurship studies: “firm splits”, “mergers”, “for-profits emerging from non-profit forms”. The pop ecology mob has glossed over these, and many other issues, in 30 years of population counts, firm foundings, etc.

    Oh, and by the way, you got Kirzner wrong, too. His entrepreneur is a metaphor, not an uber-alert risk-taker.

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    Randy

    February 22, 2011 at 3:10 am

  2. Somewhere out there, in the vast blogosphere, you know there is an “the end of institutional theory” post written by an entrepreneurship scholar.

    Though, I think orgtheory already pronounced the death of institutions (or at least there was some discussion about the vagueness of the “institutions” notion) a few years ago — very entrepreneurial of us.

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    teppo

    February 22, 2011 at 3:50 am

  3. @Teppo: We’ve declared the end of institutions, entrepreneurs, post-modernism, rational choice, the foundations of strategic management, public sociology, sociology theory in general and a bunch of other stuff. This blog is an academic morgue!

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    fabiorojas

    February 22, 2011 at 3:52 am

  4. I mainly agree with Fabio’s post, but we need to add the caveat that while there will never be a coherent body of theory on entrepreneurship — not that there is a coherent body of theory on ‘sociology’ either — it is going to be a subject of teaching. What entrepeneurship has going for it is the demand for teaching. Demand from students who want to start companies and, in Europe, from the governments who want people to start companies.
    Given that strategy scholars tend to concern themselves mainly with listed corporations, I guess it is warranted to have entrepreneurship scholars study small and medium enteprises (SMEs). There are also other topics of interest around entrepreneurship that might not be otherwise covered by innovation, marketing, and leadership. There seems to also be a need for ideological/therapeutic function in business schools to induce a can-do attitude to students aspiring to make it big.
    I personally think the “entrepreneurial opportunity” paradigm is a dead end — it is an enterprise built around intuitively appealing but inherently unobservable ‘thing’ that serves mainly as a post-hoc explanation for firm success (and as a psychological anchor for entrepreneurs in the face of uncertainty). However, whenever I have suggested that, most people simply laugh and say its the biggest thing going. So I’m probably wrong.
    While institutional theory may converge towards a coherent body of theory at some point soon, it is not immediately clear anyone needs it in b-school context. I look forward to reading Rao’s “Market Rebels” book – would that be the best attempt to ‘popularize’ institutional theory to managers?

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    Henri

    February 22, 2011 at 7:31 am

  5. […] This post was mentioned on Twitter by Diana Fine, arriveby25. arriveby25 said: the end of entrepreneurship studies « orgtheory.net: There is something rotten in the state of entrepreneurship … http://bit.ly/i9wHGv […]

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  6. Fabio,
    we expend a lot of time talking about the psicological atributes and none about “where behavioral came from”…some sociologist defend that what differentiate entrepreneurs from non-entrepreneurs is the “entrepreneurial spirit”: a disposition to create an organization.That disposition,logically,is socially determinade by socialization agents.Entrepreneurs/entrepreneurship,is a social construct…

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    Edy

    February 22, 2011 at 8:46 pm

  7. So, innovation studies are dead as well, I assume. And organization studies, due to the above arguments, given by Fabio.

    We all better find a new job. Or just realize that Randy, again, is spot on. It’s way too easy to kill a field, when one hardly knows anything about it.

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    Anonymous

    February 23, 2011 at 9:49 am

  8. You’ve neglected a whole class of strategies for defining entrepreneurship, and that neglect matters, I th fink.

    There is a close parallel here with attempts to define economics as the study of this or that type of action. It turns out that economics is defined by its point of view, not any restricted set of actions that could be labeled uniquely “economic.” Kirzner talks about this in his “The Economic Point of View.” The guy who first really nailed this distinction (between point-of-view and class of phenomena) was Felix Kaufmann. I’ve tried to import Kaufmann’s strategy into entrepreneurship studies in a couple of places, including here:
    “Entrepreneurial Behavior as a Human Universal,” in Minniti, Maria, edited, Entrepreneurship: The Engine of Growth, volume 1, People, Westport, CT and London: Praeger, 2006.

    The point-of-view definition is indeed broad, but it is not empty or shallow, quite the opposite. It helps us clarify what we’re doing when we do “entrepreneurship studies.”

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    Roger Koppl

    February 23, 2011 at 6:08 pm

  9. Heh heh. “I think,” not “I th fink”! Sorry about that.

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    Roger Koppl

    February 23, 2011 at 6:09 pm

  10. Fabio, I was going to write a stinging rebuke, but Randy beat me to it.

    I think the mainstream entrepreneurship literature is often confused, but not for the reasons you give. The classic contributors to entrepreneurship theory — Cantillon, Say, Knight, Schumpeter, Kirzner, etc. — treated entrepreneurship as explanans, as a means of explaining profit and loss, economic growth, business cycles, equilibration, and so on. Much of the modern literature takes entrepreneurship, conceived as startups, self-employment, patents, etc., as explanandum, then gets frustrated trying to map these outcomes to the functional notions of judgment, innovation, alertness, adaptation, and so on.

    I often think it would be useful to drop the word “entrepreneur” and its cognates — if you’re talking about opportunity identification, call it opportunity identification; if you’re analyzing startups, call them startups; etc. But it hardly follows that judgment, innovation, alertness, adaptation, and the like are uninteresting or trivial.

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    Peter Klein

    February 24, 2011 at 3:32 pm

  11. […] 10. The death of entrepreneurship theory […]

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