Archive for March, 2011

Confusing Definitions of Entrepreneurship

| Peter Klein |

Some of you have heard me complain before about the confusing ways “entrepreneur” and its cognates are used in the literature. Sometimes entrepreneurship refers to an outcome or phenomenon (startups, self-employment, high-growth firms), other times to a behavior or attribute (creativity, alertness, innovation, judgment, adaptation). I find the occupational, structural, and functional taxonomy useful, but other organizing schemes may be useful too. In any case, reading the entrepreneurship literature can be a frustrating experience.

I’m glad I’m not the only one who thinks so:

[T]he book’s diversity of approaches and styles is both a strength and also an inherent weakness. Some chapters offer comprehensive descriptions over long periods of time (e.g., Hudson, Hau, Wengenroth, Chan), while others focus on narrow aspects of entrepreneurship (e.g., Yonekura and Shimizu, Mokyr, Wolcott). The first kind appears to be written for a broad audience of noneconomic historians, whereas the second type tends to be drier and more technical. Some authors follow Baumol and distinguish between productive and redistributive entrepreneurship (e.g., Hudson, Mokyr, Cain, Lamoreaux), while others use very broad definitions of entrepreneurship (e.g., Kuran, Casson and Godley, Gelderblom), and yet another group of authors associates entrepreneurship with innovation (e.g., Yonekura and Shimizu, Graham). This extreme diversity of definitions and approaches can overwhelm the reader. As a result, the volume’s ambition of tracing “the history of entrepreneurship throughout the world since antiquity” (p. vii) ends up being an interesting patchwork of insights drawn from different times and places rather than a unifying and synthetic history.

That’s from Michaël Bikard and Scott Stern’s Journal of Economic Literature review of The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (ed. David S. Landes, Joel Mokyr, and William J. Baumol, Princeton, 2010), which we blogged about earlier. Obviously in a work of this scope, a common definition of entrepreneurship is likely to be elusive. But the wide variety of meanings in this lone volume give you a sense of the challenge in making sense of the wider literature.

30 March 2011 at 3:55 pm 9 comments

FAIL

| Peter Klein |

Check out AdmittingFailure.com,

an open space for development professionals who recognize that the only “bad” failure is one that’s repeated. Those who are willing to share their missteps to ensure they don’t happen again. It is a community and a resource, all designed to establish new levels of transparency, collaboration, and innovation within the development sector.

Thanks to Josh Gans for the tip and some interesting discussion of failure in other contexts. (I’m not sure I’d use the term “missing market,” though; M&As, bankruptcy court, and indeed any asset markets could be described as markets for failure!)

Here’s an interesting paper by Rita McGrath on entrepreneurial failure. And of course there are huge academic literatures on divestitures, bankruptcies, and the like. At O&M we’ve often criticized bailouts and stimulus policy for retarding Schumpeterian competition by making it more difficult to identify, rectify, and learn from failures.

28 March 2011 at 11:54 pm 2 comments

Information versus Knowledge

| Peter Klein |

[T]here’s enough information coming at us from all sides to leave us feeling overwhelmed, just as people in earlier ages felt smothered by what Leibniz called “that horrible mass of books that keeps on growing.” In response, 17th-­century writers compiled indexes, bibliographies, compendiums and encyclopedias to winnow out the chaff. Contemplating the problem of turning information into useful knowledge, Gleick sees a similar role for blogs and aggregators, syntheses like Wikipedia, and the “vast, collaborative filter” of our connectivity. Now, as at any moment of technological disruption, he writes, “the old ways of organizing knowledge no longer work.”

But knowledge isn’t simply information that has been vetted and made comprehensible. “Medical information,” for example, evokes the flood of hits that appear when you do a Google search for “back pain” or “vitamin D.” “Medical knowledge,” on the other hand, evokes the fabric of institutions and communities that are responsible for creating, curating and diffusing what is known. In fact, you could argue that the most important role of search engines is to locate the online outcroppings of “the old ways of organizing knowledge” that we still depend on, like the N.I.H., the S.E.C., the O.E.D., the BBC, the N.Y.P.L. and ESPN.

That’s Geoffrey Nunberg reviewing James Gleick’s new book, The Information (Random House, 2011). Gleick burst onto the scene with 1987’s Chaos: The Making of New Science, which introduced the butterfly effect, Mandelbrot sets, fractal geometry, and the like into popular culture. (Don’t blame Gleick for the silly Ian Malcolm character in Jurassic Park, or the even sillier Ashton Kutcher movie.) I haven’t gotten my hands on a copy of The Information (gotta  love the definite article, as in “the calculus”) but, as best as I can tell from the Google books version, Gleick doesn’t get into the Hayekian-Polanyian distinctions between parameterizable “information” and tacit knowledge that particularly interest O&M readers. (Another good quote from the review: “[T]here’s no road back from bits to meaning. For one thing, the units don’t correspond: the text of ‘War and Peace’ takes up less disk space than a Madonna music video.”) Still, the book should be worth a read.

27 March 2011 at 1:17 pm 1 comment

An Early Example of a Hold-up. . .

| Scott Masten |

. . . in which two Irishman sweep fifteen or thirty Italians into an open ditch.

The context is a dispute over a contract for the supply of water to Bayonne, NJ., circa 1896, as reported in The First History of Bayonne, NJ (1904: 92):

At the mayoralty election in the spring of 1895, Egbert Seymour, on the Democratic ticket, was elected Mayor. Several of the Councilmen who were elected at this election, and two or three city officials, were opposed to the new water contract, and attempted a “hold-up.” The trouble reached its height one day during the first year of Seymour’s administration. While employees of the water company were tapping the old mains to make the necessary water connection, some city officials arrived on the scene. Immediately there was trouble.

The New York Times article (Nov. 24, 1896) on the right (click to enlarge) elaborates, amusingly, on the manner in which the holdup was executed.

I have not yet been able to verify it but, according the previous source, “The matter was taken before the Supreme Court of the United States by the water company, and an injunction was obtained against the city. United States marshals were stationed at the scene until the work was completed, to arrest any city official who interfered.” The city eventually bought out the company in 1918.

(Wish that I had found that quotation before completing this.)

25 March 2011 at 8:56 pm Leave a comment

Women and Children First

| Peter Klein |

Everything you ever wanted to know about the Titanic disaster. Well, everything behavioral economists want to know, namely who survived — a case study in “Behavior under Extreme Conditions” (Journal of Economic Perspectives, Winter 2011). Bruno Frey, David Savage and Benno Torgler note that the “common assumption . . . that in such situations, self-interested reactions will predominate and social cohesion is expected to  ate and social cohesion is expected to disappear. . . . However, empirical evidence on the extent to which people in the throes of a disaster react with self-regarding or with other-regarding behavior is scanty.” Fortunately (?), the sinking of the Titanic provides “a quasi-natural field experiment to explore behavior under extreme conditions of life and death.”

Examining data on the social and demographic characteristics of survivors and non-survivors they find that women and children were more likely to survive, other things equal, as well as the wealthy and those in a stronger social network (traveling with family members, or being  part of the crew). A morbidly interesting paper, to be sure.

25 March 2011 at 10:11 am 3 comments

McQuinn Center for Entrepreneurial Leadership

| Peter Klein |

Earlier this academic year I assumed the Directorship of the McQuinn Center for Entrepreneurial Leadership here at the University of Missouri. My colleague (and former O&M guest blogger) Randy Westgren retains the position of McQuinn Chair. The McQuinn Chair was established in 2004 through a generous gift from Al and Mary Agnes McQuinn, and the Center was created soon afterwards by Bruce Bullock, the inaugural McQuinn Chair.

Look for a slate of exciting programs and activities about entrepreneurship, organization, innovation, strategy, and more in the coming months. To keep you up to date on the Center’s activities, as well as news and information from the wider world of entrepreneurship, we’re blogging as well at entrepreneurship@McQuinn.

23 March 2011 at 3:02 pm Leave a comment

Coasian or Coasean?

| Peter Klein |

For years I described things relating to Ronald Coase as “Coasian.” Walter Block continually needled me about this, insisting the proper spelling was “Coasean,” but I resisted. Now I see more people using the latter spelling, and I’ve started using it myself. But which is correct? I beats e, but not by much, in a Googlefight. But I think a more targeted crowdsourcing arrangement is warranted. So, dear O&M readers, which do you prefer? Vote below.

Addendum: Thanks to Scott for pointing out that this was debated before at Volokh, where many of the critical issues — and the most obvious snarks — were already presented. To me, the fact that Coase himself, and people at Chicago Law, use “Coasian” seems a pretty strong argument in favor of the non-standard spelling. But one can make a good case for either.

20 March 2011 at 10:00 pm 17 comments

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
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Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
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