Posts filed under ‘Entrepreneurship’
| Peter Klein |
A new group blog by Erik Brynjolfsson, Joshua Gans, and Shane Greenstein. Should be interesting and informative. The authors
noticed that there were many blogs devoted to digital developments and consumer products but the selection focussing on economic and business aspects of the digital world was very limited. Digitopoly’s mission is to provide an economic and strategic management perspective on digital opportunities, trends, limits, trade-offs and platforms; expanding commentary in this important space.
The blog’s name — Digitopoly — reflects our broad interests in the impact of digital technology on competition. While, in some cases, our concern is the preservation of competition in the face of pressures toward monopoly, in others we see opportunities for greater competition and welfare benefits.
Our logo is deliberately iconic. The heavy set line in the graph could represent Moore’s Law (for processing power as time progresses) or Metcalfe’s Law (for the value of networks as more join). It overtakes the simple linear trend represented by thin, broken line. This reflects the idea that linear ways of thinking rarely serve us well in the digital economy.
| Peter Klein |
Thanks to Peter L. for his report on the “Austrian Economics and Entrepreneurship Studies” PDW at the Academy of Management conference. Here, for your viewing pleasure, are the slides: my opening remarks on the origins and development of the Austrian school, Henrik’s discussion of Israel Kirzner and his influence on entrepreneurship scholarship, and Todd’s presentation on Ludwig Lachmann’s unique approach. Enjoy!
| Peter Klein |
The Academy of Management conference in San Antonio is in full swing, with lots of interesting activities for O&Mers. Friday I co-facilitated the theory workshop for the Entrepreneurship Division Doctoral Consortium (slides here), and Peter Lewin and I participated yesterday in a great Professional Development Workshop on the role of Austrian economics in entrepreneurship research. Today O&M friend Joe Mahoney will receive the Irwin Outstanding Educator Award. And there are paper sessions, roundtables, keynotes, and other events dealing with organizational design, entrepreneurship, strategy, innovation, regulation, and other topics near and dear to our collective hearts. A good time is being had by all!
| Dick Langlois |
Inspired by Peter Lewin’s recent post on the beauty of Africa, I decided to hop on a plane to Peter’s native South Africa. I haven’t been to a wildlife park, though I have found myself twice down in caves, one containing fossils and one a disused gold mine. I also took in the Apartheid Museum, which seemed to me (as an outsider) to be extremely well done. It didn’t pull any punches but always appeared neutral, even analytical. For me, the museum’s story underscored the point that Walter Williams and others always used to argue while apartheid was going on: that the system required, and was implemented through, central planning and massive government intervention in markets. (Apparently they even had a wacky scheme to move people from their distant segregated homes to and from urban work using high-speed bullet trains.) I was struck by how similar the revolution here was to the contemporaneous one in Eastern Europe. It was a revolt by a middle class that was denied human and political rights — and also economic opportunity — by an increasingly inefficient and distortive state apparatus.
A couple of exhibits at the Apartheid Museum asserted that in the heyday of gold mining the British had “fixed the price of gold.” This price fixing forced the mine owners constantly to lower production costs, which they did by deskilling mining operations – using technology to break the process into simpler tasks (Ames and Rosenberg 1965) — in order to hire cheaper labor. By contrast, the mining museum suggested that there was plenty of skill-enhancing innovation as well, like pneumatic drills replacing the hammer and chisel, which reduced from eight hours to five minutes the time it took a worker to carve out a blasting hole.
Oddly, neither museum mentioned that gold was the monetary standard. (You know this already: it’s not that the “price of gold” was fixed; it’s that the value of the currency was defined in terms of units of gold.) This might sound like an economist’s carping. But I mention it because on this trip I also encountered the strange combination of task design and monetary economics in a strikingly different African context. I’m actually in south Africa not primarily for the tourism (at least in principle) but to visit Giampaolo Garzarelli and his Institutions and Political Economy Group at the University of the Witwatersrand and, as Peter Klein mentioned in an earlier post, to attend a conference on “Open Source, Innovation, and New Organizational Forms,” which took place on Monday. Joel West, another of the participants, has already blogged elsewhere about the conference. One paper, by an MA student from Kenya – Joel has already blogged about this as well – discussed an amazing phenomenon I had never heard about before: crowdsourcing in developing countries using mobile phones. A company called txteagle allows customers to outsource cognitive work by breaking tasks into small pieces, which pieces are then sent to participants via text message. (As phones have become cheaper they have become ubiquitous in the developing world.) For example, the participant could be asked to translate a phrase into his or her local language or to transcribe a voice snippet. The txteagle computers then aggregate the output and use redundancy and artificial intelligence to validate the results. The participant is paid for the task, via the same mobile phone, using M-Pesa, a system I first heard about only a couple of weeks ago. Interestingly, M-Pesa is itself a formalization of a spontaneous monetary system – think cigarettes at a prison camp – in which people without access to banks would save and transact in airtime minutes. The amount a participant can earn in this system is quite meaningful in the context of poor countries with high unemployment.
| Peter Lewin |
I am envious. My brother in law and my nephew are in the Serengeti National Park in Tanzania. He is sending short reports via his Blackberry. His descriptions are graphic — he is awe-struck. Sounds incredible, beyond imagination — to those of us veteran Africans used to having to search hard for game on our game park safaris. In the Serengeti there is game in exaggerated profusion. Lions, leopards, and cheetah virtually next to each other. Huge migrations of herds, hundreds of thousands strong. A trip for a lifetime. I should live so long.
It seems clear that this wonder of nature (a giant crater-bubble full of wild life) would not exist in the absence of the revenue from international tourism. Though government managed, it is subject to vigorous competition from other game parks in that part of Africa. The area is the traditional homeland of the legendary Masai tribe, who have a cattle-based economy. Population growth, technological change, and the pace of modernity threatened to destroy their world. Now they seem to be flourishing. The Masai have turned out to be successful entrepreneurs! I wonder if this is an instance of Ostrom’s successful local initiatives.
More generally, the preservation of wild-life in Africa has turned on the successful management of a plethora of wild-life game parks (many of them quite small relatively speaking), some having the status of super luxury hotels. There is an irony in there somewhere. (I wonder what it is like to have to manage a wild-life park as a business firm).
Of course most of the environmentalists never tell you about the preservation successes of market competition.
| Peter Lewin |
My thanks to Peter Klein (we have to be careful now to indicate which Peter is being addressed :-) ) and to O&M for this wonderful opportunity to participate in this forum. Though I have commented infrequently I have followed its musings with interest and profit. I am delighted to be here.
Perhaps, for my opening post, I might just mention a few areas of my past and current research that might be of interest.
- As part of the Routledge series on the Foundations of the Market Economy I wrote a book entitled Capital in Disequilibrium which was published in 1999. It is still available, but it is very expensive ($200) — certainly not worth that price! Routledge recently released their copyright to me exclusively and I have just got through revising the book for a second edition to be published very soon by the Mises Institute. I had hoped to have some copies available at the upcoming AOM meetings in San Antonio, but this seems very unlikely now. Still, it will be easily available on their website and an open source version will also be there. The price of the book will be $15 I believe. Based on inquiries I have received, this will be welcome news for a few interested scholars.
- I have made very few changes to the book — mainly stylistic improvements and corrections — but I have added a few references to relevant work that appeared after the first edition. For those who don’t know the work, it is basically an evaluative survey of capital theory Austrian-style. Capital theory has often been feared or avoided by economics students, never mind other interested scholars. I hoped and still hope that this book will provide them a comprehensive, sophisticated, yet accessible course in the subject. Of course, the amazing thing is the timing. The relevance of capital theory has, all of a sudden, burst upon the field of management and organization studies. Having discovered and digested Schumpeter and Kirzner, management scholars have now, in turn, discovered Lachmann. How delightful it is for me to see Lachmann’s insights being applied in this kaleidic, digital world. I know this would have pleased him beyond words. (A real paradox of sorts, because I cannot imagine he would ever have mastered the technology for his own personal use :-) ).
- Regarding the book, of course the material is at least twelve years old. Yet, those wishing to understand the recent work using concepts like radical subjectivism, capital heterogeneity, capital complementarity and subsititutability, etc. would probably find it useful — and need not pay attention to the every page. Chapters 2 and 3 seem to me particularly important for an understanding of the concept of equilibrium and disequilibrium about which so much confusion is evident in the literature. Chapter 9, and less so Chapter 10, address specifically the question of capital combinations in business organizations. The final part of the book is about human capital and creates a bridge between the work of Lachmann and Gary Becker. (more…)
| Peter Klein |
Four years ago I helped organize an Academy of Management pre-conference workshop on Austrian economics featuring Nicolai, me, Joe Mahoney, Yasemin Kor, Dick Langlois, and Elaine Mosakowski. It was well attended and very well received and we are doing something similar this year. Henrik Berglund, Todd Chiles, Steffen Korsgaard, and I have put together a Professional Development Workshop (PDW) on “Austrian Economics and Entrepreneurship Research.” Full details below. The conference home page is here. Hope to see many O&Mers at the workshop!
Austrian Economics and Entrepreneurship Research
Please join us Saturday, August 13, from 12:30 to 2:30pm in the San Antonio Convention Center, Room 212A, for a PDW on the Austrian school of economics and its implications for entrepreneurship studies (Program Session #281).
The Austrian school is increasingly well-known in the entrepreneurship field and is typically associated with Joseph Schumpeter’s idea of “creative destruction” and Israel Kirzner’s concept of “entrepreneurial alertness.” But Austrian economics features a number of additional themes, constructs, and emphases — resource heterogeneity, subjectivity of beliefs and expectations, processes of organizational emergence under complexity, and more — that are particularly relevant to research in entrepreneurship, organization, and strategy. Austrian economics is also receiving increasing attention in the broader economics and policy communities, as witnessed by the revival of interest in Austrian business cycle theory as an explanation for the financial crisis and subsequent economic downturn.
This PDW features a panel discussion and interactive table discussions designed to explore Austrian themes in greater detail and examine their applications to research in entrepreneurship and related areas of management studies. The organizers also hope to encourage and help develop the growing community of management scholars interested in the Austrian school.
The program begins with an introduction and overview by session organizers Henrik Berglund (Chalmers University of Technology), Todd Chiles (University of Missouri), Peter Klein (University of Missouri), and Steffen Korsgaard (Aarhus University), followed by breakout sessions organized around particular themes such as alertness and opportunity discovery, heterogeneity of the entrepreneurial imagination, resource heterogeneity and Austrian capital theory, entrepreneurship and equilibration, entrepreneurship and punctuated disequilibrium. Other distinctively Austrian (e.g., opportunities and action, the role of individuals, the individual-opportunity nexus, the market process, methodological individualism) and related (e.g., effectuation and bricolage) ideas will also figure prominently in the discussions.
The groups will then reassemble to share findings and results with the larger group. Ample time will be allowed for informal discussion and networking.
Please contact Henrik Berglund (email@example.com) with any questions.
| Peter Klein |
The March 2011 issue of Business History Review, just now online, contains several excellent papers, including “The Origin and Development of Markets: A Business History Perspective” by Mark Casson and John Lee, “Economics, History, and Causation” by Randall Morck and Bernard Yeung, “Globalization, Development, and History in the Work of Edith Penrose” by Christos Pitelis, and “Economic Theory and the Rise of Big Business in America, 1870–1910″ by Jack High.
Morck and Yeung take the (perhaps surprising, almost Misesian) position that “[i]nstrumental variables can lose value with repeated use because of an econometric tragedy of the commons: each successful use of an instrument creates an additional latent variable problem for all other uses of that instrument,” and that “[e]conomists should therefore”consider historians’ approach to inferring causality from detailed context, the plausibility of alternative narratives, external consistency, and recognition that free will makes human decisions intrinsically exogenous.”
High notes that “by 1910, the entrepreneur was an important figure in American economics. He appeared regularly in textbooks written by American economists and his influence in the economy, especially in large firms, was generally recognized.” Entrepreneurship at that time was not about startups, but coordination more generally: J. R. Commons called the entrepreneur “the speculating, progressive, organizing, inventive, economizing agent of industry.”
| Peter Klein |
ISNIE held its fifteenth annual meeting last week in lovely Palo Alto, California. President-Elect Barry Weingast put together a terrific program, which you can view here. Many of the papers are also available for public viewing here. A few highlights:
Private Entrepreneurs in Public Services: a Longitudinal Examination of Outsourcing and Statization of Prisons - abstract and paper
Sandro Cabral, (Federal University of Bahia)
Sergio Lazzarini, (Insper)
Paulo Furquim de Azevedo, (FGV-SP)
What is Law? a Coordination Account of the Characteristics of Legal Order - abstract and paper
Gillian K. Hadfield, (University of Southern California)
Barry R. Weingast, (Stanford University)
Law As Byproduct: Theories of Private Law Production - abstract and paper
Bruce H. Kobayashi, (George Mason Univeristy School of Law)
Larry E. Ribstein, (University of Illinois College of Law)
On the Evolution of Collective Enforcement Institutions: Communities and Courts - abstract and paper
Scott E. Masten, (University of Michigan)
Jens Prüfer, (Tilburg University)
The ‘Fundamental Transformation’ Reconsidered: Dixit Vs. Williamson - abstract and paper
Antonio Nicita, (University of Siena, and EUI)
Massimiliano Vatiero, (University of Lugano)
In the Shadow of Violence: the Problem of Development in Limited Access Societies - abstract and paper
Douglass North, (Washington University (St Louis))
John Wallis, (University of Maryland)
Steven Webb, (World Bank)
Barry Weingast, (Stanford University)
Alberto Diaz-Cayeros, (University of California San Diego)
Gabriella Montinola, (University of Californa Davis)
Jong-Sung You, (University of California San Diego)
Entrepreneurial Finance and Performance: a Transaction Cost Economics Approach - abstract and paper
Alicia Robb, (Ewing Marion Kauffman Foundation)
Robert Seamans, (NYU Stern School of Business)
Expanding the Concept of Bounded Rationality in TCE: Incorporating Interpretive Uncertainty in Governance Choice - abstract
Libby Weber, (UC Irvine)
Kyle J. Mayer, (University of Southern California)
See the complete list for many more excellent papers.
Bonus (via Lynne Kiesling): the program for a Festschrift conference at Northwestern in honor of Joel Mokyr.
Update: More on the Mokyr conference from Lynne.
| Peter Klein |
Here’s a podcast with my colleagues and good friends Joe Mahoney and Christos Pitelis on public entrepreneurship, part of an ongoing research project on public-private boundaries. Check it out!
| Peter Klein |
- ISNIE, 16-18 June in Palo Alto. Registrations are closed but latecomers could try lobbying the Treasurer to accept a late payment — never mind, that’s me, don’t bother.
- “Open Source, Innovation, and New Organizational Forms,” 1 August in Johannesburg. “This first IPEG conference intends to explore new theoretical and empirical advances in open source organization: the interest is not just on voluntary Open Source Software production and its potential innovation implications, but also on such related ‘open source’ phenomena as collective invention, online collaboration (e.g., Wikipedia), online social networking (e.g., Facebook), open innovation, open science, open source biology, and open standards.” The conference website is not live as of this posting, but organizer Giampaolo Garzarelli can provide details. O&M’s Dick Langlois is a keynote speaker. 500-word abstracts are due 24 June.
- “Achieving Coexistence of Biotech, Conventional & Organic Foods in the Marketplace,” 26-28 October in Vancouver. Speakers include FAO Deputy Director General Ann Tutweiler and Canadian Ag Minister Gerry Ritz. Coexistence conferences have been held every other year since 2003; the first 3 conferences came out of EU Commission efforts, the next was in Australia, and this one is the first to be held in North America. A co-organizer tells me “we hope to bring a more ‘practical’ view of coexistence than is commonly held in Europe.”
| Peter Klein |
- A public service from our good-twin site: What makes a good review?
- History matters? “[T]he descendants of societies that traditionally practiced plough agriculture, today have lower rates of female participation in the workplace, in politics, and in entrepreneurial activities, as well as a greater prevalence of attitudes favoring gender inequality.”
- Another review of The Invention of Enterprise, by frequent O&M commenter Michael Marotta.
- Regression to the mean? A McKinsey report (via Russ) illustrates the difficulty of long-run supra-normal growth: “a startling 44 percent of all companies that grew at rates faster than 15 percent from 1994 to 1997 were growing at rates lower than 5 percent ten years later.”
- Another attempt to model the evolution of cooperation — this time by Acemoglu and Jackson.
| Peter Klein |
Important new paper by Henry Manne on entrepreneurship (Quarterly Journal of Austrian Economics, Spring 2011). It won’t surprise you to know that Henry has a solution to the problem of encouraging entrepreneurial behavior among corporate managers: allow them to trade on inside information.
Entrepreneurship, Compensation, and the Corporation
Henry G. Manne
This paper revisits the concept of entrepreneurship, which is frequently neglected in mainstream economics, and discusses the importance of defining and isolating this concept in the context of large, publicly held companies. Compensating for entrepreneurial services in such companies, ex ante or ex post, is problematic — almost by definition — despite the availability of devices such as stock and stock options. It is argued that insider trading can serve as a unique compensation device and encourage a culture of innovation.
| Peter Klein |
Market competition is often characterized as an evolutionary selection process. “[O]ne of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs” (Mises, “Profit and Loss,” 1951). Within a given population, then, the market process selects for those individuals with the greatest levels of entrepreneurial skill. But can the emergence of entrepreneurial skill as a human trait itself be explained in terms of natural selection? Here’s one attempt:
Evolution and the Growth Process:
Natural Selection of Entrepreneurial Traits
Oded Galor, Stelios Michalopoulos
NBER Working Paper No. 17075, May 2011
This research suggests that a Darwinian evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, risk-tolerant, growth promoting traits generated an evolutionary advantage and their increased representation accelerated the pace of technological progress and the process of economic development. In mature stages of development, however, risk-averse traits gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to convergence in economic growth across countries.
This is a (mathematical) theory paper with “entrepreneurship” modeled as tolerance for risk, so some readers will find the execution less interesting than the idea. But it is good to see these kinds of big-picture issues addressed in the mainstream literature.
| Lasse Lien |
More has been added to Peter’s already considerable pile of honors and distinctions. This time it’s the European Management Review’s best paper award for 2010 for “Toward a Theory of Public Entrepreneurship,” European Management Review 7: 1-15 (2010) by Peter G. Klein, Joseph T. Mahoney, Anita M. McGahan, and Christos N. Pitelis. (Here’s the version at the publisher’s website.)
Congratulations to Peter and coauthors!
| Peter Klein |
The Atlanta Competitive Advantage Conference, otherwise known as ACAC, starts tomorrow. I’m there, along with former O&M guest bloggers Joe Mahoney, Steve Postrel, and Russ Coff, and a whole bunch of interesting and important people in strategy, organization theory, entrepreneurship, innovation, HRM, and more. Check out the program, as well as the main site with information about past and future events. Besides the workshops and paper sessions there are special events like a symposium with Jay Barney on the RBV after 20 years and keynotes from Rebecca Henderson and Joel Baum. The only thing ACAC needs is a spokesperson — I think Gilbert Gottfried might be available.
| Peter Klein |
Forwarded on behalf of Dan Spulber:
CALL FOR PAPERS
Journal of Economics & Management Strategy (JEMS)
Economics and Strategy of Entrepreneurship and Innovation III
JEMS is planning a third special issue on the economics and strategy of entrepreneurship and innovation. JEMS welcomes both empirical and theoretical contributions.
Possible topics include:
- Economics of entrepreneurship
- Innovation and entrepreneurship
- R&D and the entrepreneur
- Intellectual property rights and the entrepreneur
- Entrepreneurship and the theory of the firm
- Entrepreneurship and finance
- Entrepreneurship and industrial organization
- Entrepreneurship and economic growth
Submissions to JEMS will be subject to the standard peer-review process. The submission deadline is July 1, 2011. To submit a manuscript to JEMS, visit ScholarOne at http://mc.manuscriptcentral.com/jems. If you have any questions about JEMS, please contact Susie Caruso at firstname.lastname@example.org.
| Peter Klein |
On the way back from Brazil I will stop in Dallas to speak on entrepreneurship at a conference on economic growth, The 4 Percent Project, sponsored by the newly formed George W. Bush Presidential Center. The main speakers include four Nobel Laureates (Becker, Lucas, Scholes, Prescott), Ed Lazear, Allan Meltzer, Meg Whitman, Art Laffer, and W himself. I’m on a breakout panel with Bob Litan, Maria Minniti, and Jeff Friedman. The conference is the brainchild of O&M friend John Chapman, and should be quite an event!
| 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.
| 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.