Posts filed under ‘Entrepreneurship’
| Peter Klein |
Thanks to Andrew for the pointer to this weekend’s Reading-UNCTAD International Business Conference featuring Mark Casson, Tim Devinney, Marcus Larsen, and many others. Mark’s talk (not yet online) focused on the need for methodological individualism in international business research. “Firms don’t take decisions, individuals do. When you say that a firm pursued an international strategy, you really mean that that the CEO persuaded the individuals on the board to go along with his or her strategy.” As Andrew summarizes:
Casson spoke at great length about the need for research that focuses on named individuals, is based on the extensive study of primary sources in archives, takes social and political context into account, and which looks at case studies of entrepreneurs in different time periods. In effect, he was calling for the re-integration of Business History into International Business research.
And a renewed emphasis on entrepreneurship, not as a standalone subject dealing with startups or self-employment, but as central to the study of organizations — a theme heartily endorsed on this blog.
| Peter Klein |
We have been using the term “judgment-based view” to describe our approach to entrepreneurship. The term “judgment” of course comes from Knight, and was used also by Mises, Casson, and many others. Contemporary entrepreneurship research is still dominated by the opportunity-discovery view, but increasing criticism from the judgement-based view, the effectuation and bricolage approaches, the opportunity-creation view, and other perspectives is challenging the notion that profit opportunities exist, waiting to be discovered, and even that “opportunity” is a meaningful construct at all.
Nicolai and I organized a themed section in the Journal of Institutional Economics on the judgment-based view with papers from Niklas Halberg, Jeff McMullen, and Andrew Godley and Mark Casson. Our introduction reviews the increasing importance of entrepreneurship in economics and management research, explains the relationship between entrepreneurship and economic organization, discusses some microfoundations of judgment, and distinguishes judgment from luck and judgment per se from good or skilled judgments.
The papers are available electronically at the links above, and in hardcopy in the Fall 2015 issue of JOIE.
| Peter Klein |
We’ve featured several posts on the relationship between artistic and entrepreneurial creativity, arguing that great art, like great entrepreneurship, is rarely the product of isolated individuals, toiling away privately and swimming against the tide, misunderstood or ignored by the establishment. Rather, both art and entrepreneurship are usually highly social and commercial activities, with subtle and nuanced relationships among creators, patrons, rivals, and customers.
I’ve been reading two interesting books on modern art that emphasize the idea of an artistic “ecosystem,” a complex set of interactions among artists, curators, critics, buyers, and others with commercial interests, Daniel Seidell’s Who’s Afraid of Modern Art and Sarah Thornton’s Seven Days in the Art World. I see many parallels with the contemporary entrepreneurship literature and its focus on ecosystems of entrepreneurs, funders, suppliers, customers, makers of complementary products, regulators, and so on. Phone and tablet makers depend on app programmers and vice versa; engineers need venture capitalists and vice versa; founders and funders are embedded within clubs, networks, and associations; etc. As Seidell notes:
Serious art in the Western tradition — that is, art that is not content to “imagine” what we think we already know about the world of appearances and experiences, but probes more deeply into the nature of such reality through aesthetic form — has always been inextricably bound up with business. It is inseparable from patrons and collectors, with markets and dealers, with personalities and egos. . . .
Great art emerges out of the warp and woof — some would say the muck and mire — of commerce, of production and distribution that is at the very heart of [the art world].
Seidell is trying to help us understand the modern and contemporary art that frustrates and confuses most of us — abstract expressionism, pop art, Damien Hirst’s formaldehyde shark — by explaining that the value of these works comes not solely from the work itself, or even from the relationship between the work and the viewer, but from the way the work is perceived by critics, curators, collectors, and other artists. Much “high art” is actually produced for them, not for us. Of course, with entrepreneurship, the commercial value of any venture is ultimately determined by us, the consumers who willingly part with our hard-earned money for the services of the company or product. But, like art, entrepreneurship is a social activity, and great entrepreneurs know how to situate themselves within, or create from scratch, the ecosystem that makes their work great.
| Peter Klein |
I hope to see O&M readers and friends at next week’s SMS Special Conference in Santiago, “From Local Voids to Local Goods: Can Institutions Promote Competitive Advantage?” The conference focuses on the relationships among institutions, firm strategy, entrepreneurship, and economic growth. Besides the usual paper and paper-development sessions, Tarun Khanna’s keynote and several plenary sessions should be of special interest to O&Mers.
Before heading to Santiago I will be giving talks in Rio de Janeiro and São Paulo sponsored by Mises Brasil, to celebrate a new Portuguese translation of my 2010 book The Capitalist and the Entrepreneur, as well as visiting my friends and colleagues at Insper, which among other activities is starting a doctoral program in business administration.
O&M is popular in Latin America. Nicolai and I are both on the advisory board of CORS and have given the CORS lecture; Nicolai was at USP last month to give a PhD course in strategy and organization.
| Peter Klein |
David Howden’s generous review of Organizing Entrepreneurial Judgment appears in the March 2015 issue of the International Entrepreneurship and Management Journal. Excerpt:
This ambitious book has a three-fold purpose. First, it seeks to clarify “entrepreneurship” in a manner amenable to both modern management and economics literature. Second, it redefines the theory of the firm in order to integrate the role of the entrepreneur more fully and give a comprehensive view on why firms exist. Finally, and most successfully, it sheds light on the internal organization of the firm, and how entrepreneurship theory can augment our understanding of why firms adopt the hierarchies they do. . . .
Organizing Entrepreneurial Judgment is a massive undertaking, and one that ambitiously spans the unnecessary divide between management studies and economics literature. For the scholar seriously contemplating exploiting this gap further, the book is highly recommended. Having thoroughly enjoyed reading this rendition of their entrepreneurial theory of the firm, it is this reviewer’s hope that Foss and Klein continue to carve out this growing niche straddling the two disciplines. Following up with a more direct and focused primer on their firm would be a welcome contribution to further the growing field.
Also, at last November’s SDAE conference, the book received the 2014 FEE Prize for best book in Austrian economics.
We have several new papers coming out that develop, extend, and defend the judgment-based perspective. Details to follow.
| Peter Klein |
The old Keynesian idea that war is good for the economy is not taken seriously by anyone outside the New York Times op-ed page. But much of the discussion still focuses on macroeconomic effects (on aggregate demand, labor-force mobilization, etc.). The more important effects, as we’ve often discussed on these pages, are microeconomic — namely, resources are reallocated from higher-valued, civilian and commercial uses, to lower-valued, military and governmental uses. There are huge distortions to capital, labor, and product markets, and even technological innovation — often seen as a benefit of wars, hot and cold — is hampered.
A new NBER paper by Zorina Khan looks carefully at the microeconomic effects of the US Civil War and finds substantial resource misallocation. Perhaps the most significant finding relates to entrepreneurial opportunity — individuals who would otherwise create significant economic value through establishing and running firms, developing new products and services, and otherwise improving the quality of life are instead motivated to pursue government military contracts (a point emphasized in the materials linked above). Here is the abstract (I don’t see an ungated version, but please share in the comments if you find one):
The Impact of War on Resource Allocation: ‘Creative Destruction’ and the American Civil War
B. Zorina Khan
NBER Working Paper No. 20944, February 2015
What is the effect of wars on industrialization, technology and commercial activity? In economic terms, such events as wars comprise a large exogenous shock to labor and capital markets, aggregate demand, the distribution of expenditures, and the rate and direction of technological innovation. In addition, if private individuals are extremely responsive to changes in incentives, wars can effect substantial changes in the allocation of resources, even within a decentralized structure with little federal control and a low rate of labor participation in the military. This paper examines war-time resource reallocation in terms of occupation, geographical mobility, and the commercialization of inventions during the American Civil War. The empirical evidence shows the war resulted in a significant temporary misallocation of resources, by reducing geographical mobility, and by creating incentives for individuals with high opportunity cost to switch into the market for military technologies, while decreasing financial returns to inventors. However, the end of armed conflict led to a rapid period of catching up, suggesting that the war did not lead to a permanent misallocation of inputs, and did not long inhibit the capacity for future technological progress.
| Peter Klein |
Some upcoming events of interest to O&M readers:
- “Research and Policy Change Inspired by Ronald Coase,” 27-28 March 2015, Washington DC
- Berkeley-Paris Organizational Economics Workshop, 10-11 April 2015, Paris
- BHC/EBHA Workshop Historical Approaches to Entrepreneurship Theory & Research, 24 June 2015, Miami FL
- TILEC Economic Governance Workshop, “Economic Governance and Social Preferences,” 3-4 September 2015, Tilburg