Posts filed under ‘Entrepreneurship’
| Peter Klein |
There are too many good AoM sessions to mention them all — there’s even a Tweet Up for social-media freaks (hey, where’s the Insta-Slam?) — but I’ll mention two more Professional Development Workshops of interest:
Myths and Realities of Capitalism: Micro and Macro Perspectives
Session #609, Sunday, Aug 11 2013 4:30PM – 7:30PM at WDW Dolphin Resort in Asia 3
Organizer: Rajshree Agarwal, U. of Maryland
Speaker: John Allison, Cato Institute
Speaker: Yaron Brook, Ayn Rand Institute
Speaker: Paul Green, Morning Star
Speaker: Jay B Barney, Eccles School, U. of Utah
Speaker: Doug Kirkpatrick, Morning Star Institute
Speaker: Peter G Klein, U. of Missouri
Speaker: Edwin A. Locke, U. of Maryland, College Park
Speaker: John Sullivan, Center for International Private Enterprise
Organizer: Hildy Teegen, U. of South Carolina
Speaker: Paul E. Tesluk, U. of Buffalo
The theme of the 2013 Academy of Management Meetings is based on a call into question of the efficacy and merits of capitalism—and the free enterprise system that it entails. However, all of the economic systems in the world today represent varying degrees of free enterprise and government intervention. This PDW addresses the call of examining micro and macro perspectives on some of the myths and realities of capitalism. A critical and informed examination of perhaps the most foundational underpinning of business and management —voluntary trade among producers based on the premise of human rights to life, liberty and pursuit of happiness—is urgently called for. The PDW brings together micro and macro scholars within the Academy, along with leading businessmen and spokespersons from policy institutes. The format of the PDW allows for an articulation of premises that guide both micro individual behavior and macro institutional factors that are required for value creation under a capitalist system, and a discussion of the alleged virtues and vices of capitalism. The workshop is designed in four parts and is structured to provide workshop participants with the opportunity to learn from experts and each other and to co-develop relevant implications for management faculty around the world.
Entrepreneurial Opportunity—The State of the Debate and The Linkages to Management
Session #258, Saturday, Aug 10 2013 10:00AM – 12:00PM at WDW Swan Resort in Mockingbird 1
Chair: Robert Joseph Wuebker, U. of Utah
Discussant: Roy R Suddaby, U. of Alberta
Presenter: Jay B Barney, Eccles School, U. of Utah
Participant: David Audretsch, Indiana U., Bloomington
Presenter: Dimo Dimov, U. of Bath
Presenter: Sharon Alvarez, The Ohio State U.
Presenter: Peter G Klein, U. of Missouri
Presenter: Mike Wright, Imperial College London
Presenter: P. Devereaux Jennings, U. of Alberta
For more than two decades, the field of entrepreneurship has struggled to converge on a definition of a core distinction in the field—entrepreneurial opportunity. The recent publication of a series of reflection papers in the Academy of Management—along with the published reactions, comments on the reactions, and meta-commentary—highlight both the importance of this dialogue to the field and illuminate the competing and mutually exclusive perspectives on (1) the nature of entrepreneurial opportunity and (2) the importance of the debate itself. This workshop offers a structured discussion about the status of entrepreneurial opportunity with the individuals who are at the “sharp end” of the debate, and framed by the journal editors that are directly involved in promoting, framing, and shaping it. We accomplish this through a panel format in which we curate representative positions on the question of entrepreneurial opportunity. Each panelist will reflect on the historical and theoretical roots of their position; note key assumptions and important priors; and elucidate the consequences of each position on the research and teaching program for the field. Following our panel, editors from Academy of Management Journal and Organization Science will offer their perspective and lead a Q&A session between panelists and participants.
| Peter Klein |
Welles was perhaps the greatest auteur of cinema and modern theater, so it’s no surprise that he comes out in favor of flatter hierarchies:
OW: [Irving] Thalberg was the biggest single villain in the history of Hollywood. Before him, an producer made the least contribution, by necessity. The producer didn’t direct, he didn’t act, he didn’t write — so, therefore, all he could do was either (A) mess it up, which he didn’t do very often, or (B) tenderly caress it. Support it. Producers would only go to the set to see that you were on budget, and that you didn’t burn down the scenery. But [Louis B.] Mayer made way for the producer system. He created the fellow who decides, who makes the directors’ decisions, which had never existed before.
HJ: Didn’t the other studio heads interfere with their directors?
OW: None of the old hustlers did that much harm. If they saw somebody good, they hired him. They tried to screw it up afterwards, but there was still a kind of dialogue between talent and the fellow up there in the front office. They had that old Russian-Jewish respect for the artist. All they did was say what they liked, and what they didn’t like, and argue with you. That’s easy to deal with. And sometimes the talent won. But once you got the educated producers, he has a desk, he’s gotta have a function, he’s gotta do something. He’s not running the studio and counting the money — he’s gotta be creative. That was Thalberg. The director became the fellow whose only job was to day, “Action” and “Cut.” Suddenly, you were “just a director” on a “Thalberg production.” Don’t you see? A role had been created in the world. Just as there used to be no conductor of symphonies.
HJ: There was no conductor?
OW: No. The konzertmeister, first violinist, gave the beat. The conductor’s job was invented. Like the theater director, a role that is only 150, 200 years old. Nobody directed plays before then. The stage manager said, “Walk left on that line.” The German, what’s his name, Saxe-Meiningen, invented directing in the theater. And Thalberg invented producing in movies. He persuaded all the writers that they couldn’t write without him, because he as he great man.
Clearly Orson would not agree with my take on entrepreneurship and ultimate responsibility, as applied to the arts. Or do well in a restaurant kitchen. I have to admit, though, that Welles has a certain credibility on the subject of creativity.
| Peter Klein |
Quote of the day, from Peter Gumbel’s France’s Got Talent: The Woeful Consequences of French Elitism, an interesting first-person account of the French educational system:
[T]he patterns of behavior established at [French] school appear to continue in later life, reproducing themselves most obviously in the workplace. If you learn from an early age that volunteering answers at school may prompt humiliating put-downs from your teachers, how active a participant will you be in office strategy discussions in the presence of an authoritarian boss? If working together in groups was discouraged as a child, how good a team player will you be as a grown-up? If you are made to believe as a 10-year-old that it’s worse to give a wrong answer than to give no answer at all, how will that influence your inclination to take risks?
I won’t repeat the apocryphal George W. Bush quote that “the problem with France’s economy is that the French have no word for entrepreneur,” but I will say that I have found French university students to be less aggressive than their US or Scandinavian equivalents. To be fair, when I’ve taught in France it has been in English, and I initially attributed the students’ reluctance to speak up, to answer questions, and to challenge the instructor to worries about English proficiency. But talking to French colleagues, and reading accounts like Gumbel’s (based on his experiences teaching at Sciences Po), I think the problem is largely cultural. The French system tends to favor conformity and memorization over creativity and spontaneity, which may or may not have a harmful effect on the performance of French organizations and French attitudes toward entrepreneurship and innovation.
I’m curious to know what our French readers think (but don’t hammer me with Bourdieu or Crozier references, please).
| Peter Klein |
I am wary of adding yet another conceptual margin for entrepreneurial action but I highly recommend a new (and for the moment, ungated) paper in the Scandinavian Economic History Review by the distinguished economic historian Joel Mokyr on “cultural entrepreneurship.” Starting from a broadly Schumpeterian perspective, Mokyr focuses on individuals who introduce and disseminate novel ideas:
[E]ach individual makes cultural choices taking as given what others believe. It is not a priori obvious how that affects one’s choices. It may affect them positively because conformism implies that there is some social cost associated with deviancy, or because people may reason that if the majority believes a certain thing, there may be wisdom in it (thus saving on information costs). But there can be a reverse reaction as well, with non-conformists perversely rebelling against existing beliefs. What matters for my purposes is that for a small number of individuals, the beliefs of others are not given but can be changed. I shall refer to those people as cultural entrepreneurs. Their function is much like entrepreneurs in the realm of production: individuals who refuse to take the existing technology or market structure as given and try to change it and, of course, benefit personally in the process. Much like other entrepreneurs, the vast bulk of them make fairly marginal changes in our cultural menus, but a few stand out as having affected them in substantial and palpable ways.
Succinctly expressed: “cultural entrepreneurs are the creators of epistemic focal points that people can coordinate their beliefs on.”
Mokyr’s focus, like Schumpeter’s, is not entrepreneurship per se, but its effects, particularly on long-run economic growth, and his entrepreneurship construct is somewhat undertheorized. But he provides fascinating examples, ranging from Mohammed and Luther to Francis Bacon, Isaac Newton, and Adam Smith. He focuses in particular on Bacon and Newton, describing Bacon’s work as “the coordination device which served as the point of departure for thinkers and experimentalists for two centuries to come. The economic effects of these changes remained latent and subterranean for many decades, but eventually they erupted in the Industrial Revolution and the subsequent processes of technological change.” Newton and the Royal Society “raise[d] the social standing of scientists and researchers as people who should be respected and supported and [provided] them with a comfortable material existence.” (Mostly good.)
I’m not an expert on cultural theory or history and am not sure how much the “cultural entrepreneur” construct ads to our understanding of cultural change (other than relabeling, a frequent worry in entrepreneurship studies). But the paper is a great read, highly provocative and informative, and addresses big questions. Check it out.
| Peter Klein |
Microfinance and microenterprise have been touted as a new model for economic development, a way to encourage investment, innovation, and business creation and raise living standards without having to go through large-scale industrialization. We’ve tended to be skeptical, however, particularly about the most touted microfinance providers such as the Grameen Bank. Theoretically, the kinds of repayment plays that make microfinance feasible (high interest rates, strong peer monitoring) seem to limit its scope; besides, not everyone wants to be a business owner. The empirical evidence has not been encouraging — microfinance may achieve some social goals, like a sense of empowerment among microenterprise owners, but does not seem to have much impact on overall economic activity. It may not be possible to jump from a largely rural, agrarian society to an entrepreneurial capitalist one without going through a period of large-scale industrial development.
These musings are inspired by a new NBER working paper from the J-PAL group which uses a randomized controlled trial to study the effects of microfinance in an urban Indian setting. The results confirm the suspicions above: access to microfinance brings about some changes in behavior, but has no noticeable effect on standards of living or overall economic performance. Here’s the info:
The Miracle of Microfinance? Evidence from a Randomized Evaluation
Esther Duflo, Abhijit Banerjee, Rachel Glennerster, Cynthia G. Kinnan
NBER Working Paper No. 18950, May 2013
This paper reports on the first randomized evaluation of the impact of introducing the standard microcredit group-based lending product in a new market. In 2005, half of 104 slums in Hyderabad, India were randomly selected for opening of a branch of a particular microfinance institution (Spandana) while the remainder were not, although other MFIs were free to enter those slums. Fifteen to 18 months after Spandana began lending in treated areas, households were 8.8 percentage points more likely to have a microcredit loan. They were no more likely to start any new business, although they were more likely to start several at once, and they invested more in their existing businesses. There was no effect on average monthly expenditure per capita. Expenditure on durable goods increased in treated areas, while expenditures on “temptation goods” declined. Three to four years after the initial expansion (after many of the control slums had started getting credit from Spandana and other MFIs ), the probability of borrowing from an MFI in treatment and comparison slums was the same, but on average households in treatment slums had been borrowing for longer and in larger amounts. Consumption was still no different in treatment areas, and the average business was still no more profitable, although we find an increase in profits at the top end. We found no changes in any of the development outcomes that are often believed to be affected by microfinance, including health, education, and women’s empowerment. The results of this study are largely consistent with those of four other evaluations of similar programs in different contexts.
| Peter Klein |
That’s the title of a new review paper by Aaron Chatterji, Ed Glaeser, and William Kerr (a gated NBER working paper, unfortunately). Agglomeration has been a huge issue in the entrepreneurship, technology strategy, innovation policy, and economic growth literatures and it’s nice to have an up-to-date, not-very-technical review paper. (Hopefully there is an ungated copy out there somewhere.)
Clusters of Entrepreneurship and Innovation
Aaron Chatterji, Edward L. Glaeser, William R. Kerr
NBER Working Paper No. 19013, May 2013
This paper reviews recent academic work on the spatial concentration of entrepreneurship and innovation in the United States. We discuss rationales for the agglomeration of these activities and the economic consequences of clusters. We identify and discuss policies that are being pursued in the United States to encourage local entrepreneurship and innovation. While arguments exist for and against policy support of entrepreneurial clusters, our understanding of what works and how it works is quite limited. The best path forward involves extensive experimentation and careful evaluation.
Update: ungated version here.
| Peter Klein |
The new issue of the Academy of Management Perspectives features a symposium, edited by Mike Wright, on “Private Equity: Managerial and Policy Implications.” The symposium includes “Private Equity, HRM, and Employment” by Mike with Nick Bacon, Rod Ball, and Miguel Meuleman; “The Evolution and Strategic Positioning of Private Equity Firms” by Robert E. Hoskisson, Wei Shi, Xiwei Yi, and Jing Jin; and “Private Equity and Entrepreneurial Governance: Time for a Balanced View” by John L. Chapman, Mario P. Mondelli, and me. The symposium came out very nicely, if I may say so, covering a variety of strategic, entrepreneurial, and organizational issues related to private equity firms and companies receiving private equity finance.
In his introduction Mike highlights five main contributions:
First, the papers address the need to consider the systematic evidence on the managerial and strategic aspects of PE, in relation to both portfolio firms and PE firms, which has been largely fragmented if not nonexistent. Second, the papers analyze the impact of PE during economic downturns and demonstrate the underlying resilience of PE-backed portfolio firms. Third, the symposium provides an opportunity to develop insights that compare the managerial impact of PE with different forms of ownership and governance. Fourth, the articles in this symposium highlight the heterogeneity of the private equity phenomenon. Finally, in the context of continuing public attention to PE, which has been heightened by the U.S. presidential race and the global recession, the evidence presented in this symposium paints a rather more positive view than the hyperbole of some of the industry’s critics would suggest. Taken together, these contributions indicate a need for caution in attempts to tighten the regulation of PE lest the economic, financial, and social benefits be lost.