Shane Interview in Business Week

24 January 2008 at 10:18 am Peter G. Klein 4 comments

| Peter Klein |

Scott Shane is interviewed in today’s Business Week on his new book, The Illusions of Entrepreneurship. The book is a treasure-trove of empirical data on startups, much of which is familiar to specialists but completely unknown in the business press and in popular culture (e.g., that industry explains most of the variation in failure rates). See also this guest post by Scott on Guy Kawasaki’s blog for more on the basic thesis.

Of course, when Scott writes here about the value of entrepreneurship to society defines entrepreneurship narrowly as busines startups, not some broader notion of creativity, innovation, alertness, or (to ride one of this blog’s favorite hobby-horses) judgment.

Entry filed under: - Klein -, Entrepreneurship, Myths and Realities.

Data Sharing, When It Might Really Matter Law of Unintended Consequences

4 Comments Add your own

1. Brian McCann | 24 January 2008 at 11:29 am

I find it very interesting that you describe a business startup definition of entrepreneurship to be “narrow” compared to the “broader” notions of creativity, innovation, etc.

I tend to think of it in the exact opposite way. How much business behavior is really creative or innovative? If we adopt a Schumpeterian definition of entrepreneurship, I’m not confident that much business activity would qualify. In contrast, using a startup definition allows to examine quite a lbit more activity.

To the extent that I am familiar with it, I agree that your judgment-related definition is broader than an innovation-dependent view. But when judgment is defined as “decision-making when the range of possible future outcomes, let alone the likelihood of individual outcomes, is unknown,” it’s not entirely clear to me how this is differentiated from “business.” I suppose I need to read those Klein-Foss papers more closely.

And by the way, I strongly recommend Shane’s book, even to those who are specialists in the field.
2. Peter Klein | 24 January 2008 at 12:22 pm

Brian, I do recommend spending time with those Foss-Klein papers. But do not do so immediately before driving, consuming alcoholic beverages, or operating heavy machinery.

Seriously, you raise a good point. What I mean is that entrepreneurship in the Schumpeterian, Knightian, or Kirznerian senses (what I call “functional,” versus “occupational” or “structural” concepts) manifests itself in many ways, not only the establishment of new ventures. As we interpret Knight, judgment is a ubiquitous activity that is tied to resource ownership, such that owners of existing enterprises exercise judgment as much as those who establish new ventures.

But I agree that creativity and innovation can be conceived in a narrow sense, as activities that business owners or founders do sometimes, but not all the time. (Alertness, as I read Kirzner, is more of an every day phenomenon, like Knightian judgment.)

Nicolai also distinguish (perhaps not consistently or clearly enough) between a general, loose sense of judgment that all people who owns resources (including their human capital) do daily, and a more specific sense that applies to “business people.”

BTW, everybody, I meant to link to an earlier post by Brian on this topic:

http://managementrandd.blogspot.com/2008/01/reality-of-entrepreneurship.html
3. abusinessprofessor | 25 January 2008 at 3:43 pm

Peter, I noticed you said “entrepreneurship in the Schumpeterian, Knightian, or Kirznerian senses” referring to Schumpeter, Knight and Kirzner’s view of entrepreneurship, and left out Lachmann. I know you are very familiar with Ludwig Lachmann’s work, so am I missing something here?
4. Peter Klein | 27 January 2008 at 10:19 pm

Well, Lachmann has certainly enhanced my understanding of entrepreneurship, but indirectly, through his work on capital structure (Lachmann, 1956), as emphasized here. I don’t see Lachmann having a distinct theory of entrepreneurship per se, in the sense that Schumpeter, Knight, and Kirzner can be said to have one.