Thoughts on Entrepreneurship Research

8 August 2007 at 10:37 am Leave a comment

| Peter Klein |

The Academy of Management Annual Meeting has been a great success. I’ll blog later about the pre-conference workshop on Austrian economics organized by Nicolai and myself and a few other sessions I participated in. For now I want to share some thoughts on entrepreneurship research drawn from my discussant’s remarks at a session featuring papers by Ciaran Heavey, Zeki Simsek, and Aidan Kelly (“Environmental Scanning and Corporate Entrepreneurship in SME”), Thomas Dalziel, Robert White, and Jonathan Arthurs (“The Influence of Top Management Team Human and Relational Capital on Corporate Entrepreneurship”), Frederic Delmar and Erik Wetter (“The Predictive Strength of Absorptive Capacity on New Firm Performance”), and Brent Ross and Randall Westgren (“The Dynamics of Rent Creation on a Strategic Landscape”). The first three are empirical papers explaining firms’ “entrepreneurial” activity in terms of manager and worker characteristics, while the last one uses an agent-based simulation model to examine the effects of the competitive environment on entrepreneurial behavior.

1. Concepts and definitions of entrepreneurship are all over the map, ranging from abstract notions of alertness, judgment, innovation, and what Ross and Westgren (borrowing from March and Simon, 1958) term “aspiration,” the level of certain returns a firm is willing to forgo for the prospect of uncertain future returns, to concrete measures of R&D expenditures, patent activity, new venture creation, and strategic reorganization. Within the corporate entrepreneurship literature there seems to be a consensus that a composite measure of innovation, venturing, and strategic renewal is appropriate. Of course, one can quibble about these as unique proxies for entrepreneurship because mundane, but equally “entrepreneurial,” activities (production, sales, marketing, and so on) are excluded.

2. Team dynamics matter. Firm behavior varies systematically with the collective experience of the top management team (e.g., prior venturing experience), network ties, the proportion of the workforce with scientific backgrounds, and so on. These findings are hard to square with Kirznerian and Schumpeterian concepts of entrepreneurship as an attribute of individuals. But they fit well with my own (admittedly idiosyncratic) view of entrepreneurship as a manifestation of ownership — assets can be owned by groups as well as individuals, so group characteristics should matter. As an aside, the empirical papers I reviewed seem to treat group characteristics as additive, not paying enough attention to within-group increasing returns.

3. Endogeneity worries me. The empirical papers, coming out of the resource-based (RBV) tradition, treat human resources as the source of sustained competitive advantage. But they say little about how superior resources come to be acquired. Do firms with attractive venturing opportunities hire managers with prior venturing experience? Do highly innovative firms hire workers with scientific degrees? If so then the presence of such resources is a consequence, rather than a cause, of firm behavior. (The usual econometric tricks — panel data with fixed effects, instrumental variables, natural experiments, and the like — seem appropriate, but appear rarely in the empirical literature on entrepreneurship.)

4. There is a lot of interest in the prior venturing experience of corporate managers. But it would be nice to know more about that experience. Gompers, Lerner, and Scharfstein’s (2005) “spawning” approach suggests that not only does prior corporate experience matter for entrepreneurs, but that the nature of that experience — positive and encouraging or negative and frustrating — affects the characteristics of new ventures that are “spawned” from corporate parents. The corporate entrepreneurship literature studies this process in reverse, and presumably a successful entrepreneur who joins a top management team behaves differently from a frustrated entrepreneur who joins the same team. More detailed micro-data are needed to address this issue.

Entry filed under: - Klein -, Entrepreneurship, Management Theory, Strategic Management.

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
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