Definitions of entrepreneurship

In The Handbook of Economic Sociology, Howard E. Aldrich has a good summary and evaluation of various definitions of entrepreneurship, most of which have also been alluded to on this blog already. According to Aldrich, there are four competing definitions of entrepreneurship:

  1. The setting up of high-growth and high-capitalisation firms (as opposed to low-growth and low-capitalisation ‘lifestyle’ businesses);
  2. Innovation and innovativeness leading to new products and new markets (the Schumpeterian tradition);
  3. Opportunity recognition (the Kirznerian tradition);
  4. The creation of new organisations.

According to Aldrich there are problems with all four of these definitions. There is a strong selection bias with the first two. Whether a firm has high growth and had introduced an innovation can only be established retrospectively and high capitalisation is no guarantee of high growth or innovativeness. I would add that the political consequences of these definitions are also far-reaching, as they may lead to government policies favouring firms that are already in a privileged position, rather than provide support where it’s more needed.

The second and third definition according to Aldrich also suffers from the problem of being applicable to a wide range of situations, with entrepreneurship just being one. The effect of that is most evident e.g. in the afterlife of Schumpeter’s concept, which became more popular in the theory of the firm as a way of describing the R&D function, corporate venturing and intrapreneurship, than new venture formation in entrepreneurship studies. According to Aldrich, entrepreneurship studies had forgotten Schumpeter.

The adoption of Kirzner’s notion of “opportunity recognition” also had a particular disciplinary effect: because “opportunity recognition” has to do with an entrepreneur’s alertness and alertness seems to be a something that happens in the mind, this stream of research turned entrepreneurship into a problem of cognitive psychology, preoccupied with the figure – but especially the mind – of the entrepreneur.

The problem with the fourth definition according to Aldrich is that it is difficult to delineate when actually new organisations emerge as new social entities. It is both a philosophical problem and a methodological problem. Nevertheless, this last definition has been gaining support in entrepreneurship studies and Aldrich also picks it as the one to zoom in on in the rest of his chapter.

What can we make of these rival definitions and corresponding theories and their consequences from an STS/ANT perspective? The problem of selection bias in the first two definitions makes them interesting candidates for considering the political consequences of those theories, and the current work-in-progress UK government policy of channelling support away from ‘lifestyle’ firms to those perceived as ‘high-growth’ firms provides an excellent case study.

At the same time Schumpeter’s theory of innovation/entrepreneurship as “the creation of new combinations” deserves renewed attention. An argument could be made for disentangling these two concepts and clarifying their relationship, bringing into the picture those new firms as well that adopt the “new combination” but in themselves may not fit the “high-growth” and “innovative” label. In effect I’m arguing about establishing a link between definitions 2 and 4 that would not be subject to the selection bias (i.e. empirical work would focus not only on the innovating firm that is already in a high-growth stage with its innovation in diffusion but on any enterprise that participates in some form in the adoption or distribution of the innovation, even if it’s a low-growth ‘lifestyle’ firm and therefore seemingly only a consumer or repeater of the innovation). The Schumpeterian concept of “new combinations of resources” also offers an opportunity to examine the nature and origin of those resources (both human and nonhuman) that are being combined, as well as the very activities and practices that are needed for creating a new combination.

Kirzner’s thoughts on entrepreneurship could also be revisited from a ‘new’ new economic sociology perspective. However, rather than focusing on the thought processes of the entrepreneur, it might be more interesting to focus on the aspect of Kirzner’s theory that deals with the relationship between the entrepreneur and the market and considers the entrepreneur as a market participant.

The fourth definition is of course naturally attractive to an STS-inclined researcher, considering that the emergence of new entities has always been a core interest of STS and ANT studies. When it comes to entrepreneurship however, it would be important to consider the same point as with the Schumpeterian theory, namely that the role of seemingly repetitive or imitative venture creations should not be disregarded in favour of the highly innovative or controversial ones. Perhaps a Gabriel Tarde quote can be helpful here:

The problem can be summed up as follows: to grasp as closely as possible the genesis of inventions and the laws of imitations. Economic progress supposes two things: on the one hand, a growing number of different desires, for without a difference in desires, no exchange is possible, and, with the appearance of each new, different desire, the life of exchange is kindled. On the other hand, a growing number of similar exemplars of each desire taken separately, for, without similitude, no industry is possible, and, the more this similitude expands or prolongs itself, the more production is widened or reinforced. (Psychologie économique, cited in Latour and Lépinay, p. 35)

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Conference on the social aspects of entrepreneurship

The 25th RENT (Research in Entrepreneurship and Small Business) Conference coming up in Bodø, Norway on 16-18 November 2011 has also decided to focus on the social dimensions of entrepreneurship:

Entrepreneurship, Business and Society

The 25th RENT-conference will highlight the interplay between the entrepreneur, the entrepreneurial firm and the society. We will emphasize how new firms are a result of entrepreneurs interacting with stakeholders in their environment, not only in the market but also with interest groups and government institutions. In addition to business entrepreneurship we will highlight community and social entrepreneurship where the entrepreneur is working at community level to create social change and welfare, where success is measured in terms of the effect on the society. Submissions of any aspect of entrepreneurship and small business development are welcome, but preferably concerning the following issues:

  1. Entrepreneurship & growth
  2. Corporate and Strategic Entrepreneurship
  3. The role of universities in fostering entrepreneurship
  4. Spin off processes and knowledge transfer
  5. Entrepreneurial finance and venture capital
  6. Innovation and technological entrepreneurship
  7. Entrepreneurship and regional development
  8. Entrepreneurship and governmental support
  9. Social and community entrepreneurship
  10. Green entrepreneurship
  11. Entrepreneurial culture
  12. Entrepreneurship and gender
  13. Entrepreneurial learning and communities of practice
  14. Studies of new businesses
  15. Studies of business survival
  16. Entrepreneurship and ethnic minorities
  17. International entrepreneurship

The deadline for abstracts has just been extended to 30 May 2011.


Learning from the social studies of finance

The inspiration to start this blog to a large extent came from the Socializing Finance blog, which has set the example of how to practice the ‘new’ new economic sociology in a specific empirical domain, the financial markets in their case, thus aiding the development of the social studies of finance. I thought it would be interesting to see if a ‘social studies of entrepreneurship’ could also be delineated, bringing together sociological and anthropological approaches to entrepreneurship that are sympathetic to the insights of an STS-inspired economic sociology.

In my previous post I tried to distinguish such a focus on the social aspects of entrepreneurship from a focus on social studies of innovation, which have been a mainstay of STS research. I’ve been arguing that entrepreneurship as new venture creation deserves a distinct analytical attention, even if it concerns unglamorous small firms who are considered adopters or repeaters of innovation at best (but which nonetheless tend to contribute half of the GDP and employment in developed countries). Especially the distinction between ‘ambitious’ high-growth ventures and ‘complacent’ lifestyle businesses has become a politicised one, in fact with a £154 million per year price tag, as that is how much the UK government is cutting by withdrawing government support from those designated as the latter (see the quote from the white paper by the UK Department for Business, Innovation and Skills).

How could a ‘social studies of entrepreneurship’ (SSE) learn from the social studies of finance (SSF)? Actually the flier [PDF] for the forthcoming SSF workshop with Daniel Beunza and Yuval Millo at the 2011 Academy of Management conference provides a good summary of the main features of SSF and thus could serve as a prompt for a reflection on how social studies of entrepreneurship could learn from their insights. Let’s take these points one by one.

SSF incorporates into a unified analytical framework three elements that affect the shaping and behavior of financial markets: performativity, materiality of markets and historical outlook. Performativity examines the impact that expert bodies of knowledge, such as accounting (Millo & MacKenzie, 2009), financial economics (MacKenzie & Millo, 2003) and management (Ferraro et al, 2005), have on the dynamics and the shaping of financial markets.

How could this issue of performativity be translated to the domain of new venture creation? I suppose the strong claim would be to say that specific expert knowledges on entrepreneurship and management perform the market for new ventures, directly affecting the rate of new venture formation in an economy. How entrepreneurs acquire their entrepreneurial expertise has been the subject of the nascent field of entrepreneurial learning and education, however it is a slightly different thing to say that specific theories perform new ventures. While there have been studies on the expansion of management knowledge, those have mostly looked at the role of consulting firms and educational institutions in the diffusion of management theories and practices. It would be interesting however to consider what specific institutions, disciplines and theories it takes to construct a new venture and in what sort of space does this actual performance takes place.

Materiality of markets pays particular attention to the technological (Beunza & Stark, 2004; Preda, 2006) artifacts through which prices are produced and market behavior is determined. (…) Among others, SSF scholars have referred to the spatial qualities of trading rooms and the computer programs used (Beunza & Stark, 2004) or the bodily presence and communication of pit traders (Zaloom, 2006) as determinants of market behavior. (…) Building on concepts from science and technology studies, SSF recognizes that financial markets are drenched in information and communication technology. This recognition motivated the SSF approach to look beyond human-to-human connections and to study how connections between machines and humans (e.g. market participants who use computerized pricing models) affect markets.

The material aspects of new venture creation have been long neglected in entrepreneurship studies. The focus is either on the cognitive capacities or personal and professional development of the individual entrepreneur, or on their access to human and social capital. The objects with which the entrepreneur and the start-up deal with and deal in generally do not enter the discussion, as they tend to be considered trivial. Instead, “material aspects” usually mean financial resources, the assumption being that if an entrepreneur has access to finance, he or she can have access to whatever material resources are needed. There is clearly an opportunity here to make a contribution to entrepreneurship studies by bringing objects into the discussion. Information and communications technologies today are just as an integral a part of a new venture as of financial markets, therefore the role of ICTs in new venture creation and their acquisition for and integration into an enterprise seem just as relevant and timely. Not to mention more complex quasi-objects (assemblages) that enterprises may be part of or are being constructed by.

The SSF approach also challenges the exclusive attribution of agency to individuals. In line with the work of cognitive scientist Edwin Hutchins (1995), SSF sees financial markets as an area dominated by distributed cognition, where the ability of an individual to make meaningful decision is framed by other actors, as well market devices such as models, analysts’ reports and computer systems (Beunza and Garud, 2007; Beunza, Hardie and MacKenzie,  2007).

This is a crucial point for entrepreneurship studies, as Juan and I discussed it in the comments section of the previous post. Entrepreneurship studies are in the clutches of the concept of the individual entrepreneur hero and its creative agency. Of course there have been attempts to break free from it by defining entrepreneurship as a business function instead (which, after Schumpeter and especially thanks to followers of Nelson and Winter, became synonymous with innovation that takes place mostly in corporate R&D departments) or in terms of socio-linguistic concepts like cognitive social capital and discourse. However, we still don’t have a good understanding of the main mechanisms at work through which entrepreneurial agency arises, if we suspend the assumption that this agency must coincide with the figure of the entrepreneur. That was certainly the assumption of the UK government when it decided to axe Business Link, the SME support agency, so we are being witnesses to an in vivo experiment as to what happens to entrepreneurial agency when a huge and powerful actor which played a central role in disseminating management practices among SMEs through its business advisers is completely disconnected from small firms.

The historical outlook of SSF is a methodological perspective that sees today’s financial markets as outcomes of historical processes. As such, to understand market dynamics, SSF necessitates the analyses of the long-duration process organizational history of markets and encourages a multifaceted study of intertwined arenas: regulatory, technological and commercial.

This focus on historical perspective would suggest that new venture creation at any given moment is the outcome of particular historical processes and therefore it would make sense to take the longitudinal view on the emergence of not only particular forms of entrepreneurial activity but also the settings within which it takes place. With ethnographic studies of small firms there is often the fear that the researcher will be limited to the “micro” setting, missing the macro aspects of the phenomenon. The ANT perspective is supposed to provide a solution for this, partly by avoiding the micro-macro distinction but also by insisting on the tracing of associations whether they lead near or far.

There is another interesting aspect of SSF which is not mentioned in the flyer: namely, the nature of markets as experimental devices, as testing sites. This is another area where a social studies of entrepreneurship could learn from SSF: by examining the ways in which entrepreneurs engage in experimentation and mechanisms and settings that allow for the testing of ideas, relationships, products, strategies etc. Closely related to that issue is the question of the relationship between a new venture and markets (that it buys from and sells to): what is the role of markets in the entrepreneurial process? What is the role of new ventures in these markets? The financial markets are themselves sites of entrepreneurship, therefore SSF studies of entrepreneurship in the financial sector would be of interest to social studies of entrepreneurship.

Finally, SMEs are totally dependent on the financial sector for their own existence and financing is an important aspect of setting up an enterprise and keeping it alive. One could say that the SME sector was the part of the economy that was most immediately affected by the recent financial crisis, because their interest rates for their overdraft were immediately increased and their access to additional financing was severally restricted, even before the redundancies at banks unfolded. Therefore there is a very strong relationship between what is going on in the financial markets (or even at the derivatives desks of investment banks) and the very existence of small firms and the possibility for setting up new ones. SSF could help with some insights in those areas as well.


Latour on new combinations

A friend from Cambridge wrote to remind me that Latour also uses the term “new combinations” on p. 38 of Pandora’s Hope. When I looked it up I realised that I did have that passage marked but I totally forgot about it. It comes at an important moment in Latour’s “Circulating Reference” chapter, where he is describing the process of scientific innovation, the moment when the botanist ‘translates’ specimens of plants into scientific reference, which she can only do because the specimens have become “mobile and recombinable” (which is of course itself a reference to Latour’s notion of “immutable and combinable mobiles” in Science in Action):

Hardly surprising, then, that in the calm and cool office the botanist who patiently arranges the leaves is able to discern emerging patterns that no predecessor could see. The contrary would be much more surprising. Innovations in knowledge naturally emerge from the collection deployed on the table (Eisenstein 1979). In the forest, in the same world but with all of its trees, plants, roots, soil, and worms, the botanist could not calmly arrange the pieces of her jigsaw puzzle on her card table. Scattered through time and space, these leaves would never have met without her redistributing their traits into new combinations [my emphasis].

This concept of innovation as the creation of new combinations is thus very similar to that of Schumpeter (for whom entrepreneurship is “the carrying out of new combinations”). However, the problem with both conceptions is that they tend to equate innovation with entrepreneurship (in fact Schumpeter subsumes both in his overall concept of ‘economic development’). To be fair to both Schumpeter and especially Latour, they both make the crucial point that invention does not equal innovation, meaning that innovation requires “getting things done” (says Schumpeter), or “translation” (in Latour’s lingo). Still, even if we account for the energy required to disseminate the initial invention or innovation and we will call this dissemination ‘entrepreneurship,’ this inevitably creates a distinction between the type of entrepreneurship which comes up with original innovation that gets disseminated on a global scale, and the type of entrepreneurship which is merely a local adoption of this global innovation or a repetition of some older business model. Another way to put that distinction is high-growth businesses (which are turning the initial new combination into a global network) versus lifestyle businesses, mom-and-pop shops or SMEs that remain ‘local’ repetitions of a more or less stable size. On the one hand you have the likes of Google (the initial “new combination” or innovation that turned into a high-growth global enterprise), on the other hand you have the vast army of SMEs that stay small for ever and in the above sense can’t be considered “entrepreneurial” because their particular “new combinations” never turn into global networks.

Why is this distinction a problem? For one, my (work-in-progress) study of the latter type of small firms revealed that owners-managers of small firms very much think of themselves as entrepreneurs and consider their local “mere repetitions” entrepreneurial. So who is to tell them that “No, in Schumpeter’s sense you are not an entrepreneur”? Okay, one could say that that is a mere semantic point, those small business owners must be using the term entrepreneur ‘incorrectly’. The other problem is that if you observe how these micro-enterprise owner-managers assemble their firms, it does very much look like they are creating new combinations out of heterogeneous resources, it’s just that these “new combinations” are not as radically ‘new’ as let’s say Google’s algorithm and therefore are unlikely to be replicated globally. So this raises the issue of novelty (When is a combination “new”?) and also the issue of potential, as clearly some “new combinations” can effect much vaster rearrangements of the world than others.  Finally, this distinction between “truly entrepreneurial” firms and “not really entrepreneurial” firms (or high-growth firms and lifestyle firms) has some important political consequences. In the UK for instance, this distinction has just been used as the reason (or excuse) to axe Business Link, the government’s enterprise support agency, whose task was to support SMEs:

The Business Link regional services, provided by the RDAs [Regional Development Agencies], have been the principal channel through which businesses have been able to access the Government’s business support offer. (…) At £154 million per annum, the costs of this support have been high and the generalist nature of these regional services means the support has often been poorly targeted, for example, towards so-called “lifestyle” businesses that have no aspiration to grow. (Local Growth White Paper [PDF], p. 41)

I am not actually saying that innovation and entrepreneurship should be thought of as totally separate. Clearly the two go hand-in-hand, and one could say, following Schumpeter’s point but especially Latour’s concept of translation, that there can’t be innovation without entrepreneurship (i.e. the putting in place of institutions that mediate the innovation). However, at the same time we should also acknowledge that even the creation of a small, lifestyle business is an entrepreneurial act: it is a new combination, even if its ‘newness’ is of a different kind. Not to mention that often it is these small lifestyle firms that end up disseminating global innovations in the first place, by adopting them: they are the network that mediates the highly original “new combination.” So that is yet another reason why we shouldn’t exclude small firms, SMEs, or lifestyle businesses from the concept of entrepreneurship.

This distinction between high-growth firms that produce original innovations and ‘lifestyle’ SMEs that are mere adopters or repeaters of innovations points to the thorny philosophical issue of how to conceptualise the relationship between difference and repetition and then how to translate that to this problem of defining what entrepreneurship is. In their 2009 pamphlet on Gabriel Tarde (The Science of Passionate Interests), Latour and Lépinay provide some interesting pointers in this regard:

Difference and Repetition is both the title of Gilles Deleuze’s thesis and Tarde’s fundamental principle. Invention produces differences; repetition allows for their diffusion; conflict is inevitable; no pre-established harmony allows for a solution (…): it is necessary to invent yet other solutions in order to temporarily generate other inventions, which, by repeating themselves, will produce other differences, and the cycle will begin again. That is the fundamental rhythm, the back beat that, alone, allows economic activity to acquire realism. (p. 39)

This passage suggests that, if we substitute Schumpeter’s “economic development” for Latour and Lépinay’s “economic activity,” then the cycle of invention, repetition, opposition and adaptation (as also described on p. 34) are all necessary for economic development to take place. New venture creation (for which we can reserve the term entrepreneurship) is necessary for all these movements to take place, hence it would make sense to distinguish it from the overall invention and innovation (network) that is being created and repeated and eventually modified.

I suppose what I’m arguing for is both a conceptual distinction between entrepreneurship and innovation and terminological discipline not to confuse the two, even though the two concepts are inherently interdependent.


Entrepreneurial Learning and Education – Research Seminar

Entrepreneurial learning is a field that has emerged at the intersection of entrepreneurship studies and organisational learning in the past decade. I’ve become interested in this area because my current research is partly a study of entrepreneurial peer-learning groups. While the majority of this literature considers entrepreneurial learning as a cognitive activity (see my recent literature review), there have also been attempts in recent years to consider the role of artefacts in the organisational learning of small firms, such as Jones, O., Macpherson, A., et al. (2010) “Learning in Owner-Managed Small Firms: Mediating Artefacts and Strategic Space” and Macpherson, A., Kofinas, A., et al. (2010) “Making Sense of Mediated Learning: Cases from Small Firms.”

The Entrepreneurship Special Interest Group at the British Academy of Management is putting on a research seminar entitled “Entrepreneurial Learning and Education: From Theory to Practice,” with contributions, among others, by the above-mentioned Ossie Jones, so  the above topic of the role of objects in learning is likely to come up. I’m planning to go to this one. Here are the details:

Entrepreneurial learning and education are vital enablers for enterprise and innovation. The need for universities to teach students how to be entrepreneurial, seize opportunities, and turn ideas into action is at the top of national education agenda. There is also an increasing interest in scholarly research on entrepreneurial learning in the past decade. Understanding what and how entrepreneurs learn not only helps to advance entrepreneurship as a field, but also helps us to reflect on entrepreneurial education. This seminar will seek to identify themes of past research and challenges for the future. It will also engage in the discussion and debate on how to link entrepreneurship theory with practice and experience, as well as the role of academics in entrepreneurship education.

27th May 2011, 1.30pm-5.10pm, University of Westminster, London


STS jobs in entrepreneurship

Two academic job adverts in the field of entrepreneurship looking for a background in STS:

Senior Research Fellow in Bioentrepreneurship and Innovation

Karolinska Institutet is looking for a Senior Research Fellow at the department of Learning, Informatics, Management and Ethics (LIME).

Description of the work

Assignments comprise research (70 %) and teaching (30%) including supervision of master and PhD students within the area of bioentrepreneurship and innovation. The person applying for this position should be able to conduct independent research at the unit and will also have the opportunity to shape some of the research activities within the unit.

Qualifications

To qualify the applicant must:

  • hold a doctor’s degree or a foreign qualification deemed equivalent to a doctorate within science technology studies, business administration, economics, engineering or sociology.
  • have 2-4 years post-doc research experience, primarily in entrepreneurship and innovation.
  • documented pedagogical skills and commitment to supervision and teaching.
  • successful grant application record.
  • publications in international peer-reviewed scientific journals.
  • have documented skills in qualitative as well as quantitative research methods are strong merits as well as an understanding of research, innovation and commercialization within the life science/health care areas.

Deadline: 31 May 2011

And the second one at the University of Virginia:

Job: Lecturer, STS & business/entrepreneurship, Dept. of STS, Univ. of Virginia

Lecturer STS. Non-tenure track, part-time faculty position. One year with the possibility of renewal. The salary will be $30,000 in the first year. The Department of Science, Technology, and Society (STS) in the School of Engineering and Applied Science (SEAS) at the University of Virginia seeks to hire a person with research and teaching experience in science, technology and society studies beginning Fall, 2011. We are especially interested in candidates whose interests integrate STS, business, and entrepreneurship or candidates whose work focuses on technology policy. The candidate will be expected to teach two courses in the fall and three in the spring. This teaching load will qualify the incumbent for health insurance benefits. The UVa STS Department is an interdisciplinary unit that provides undergraduate courses for engineering students and undertakes research focused on science, technology, society, ethics, and policy. All undergraduate courses have STS, communications, and ethics components. A Ph.D. in STS or a related field is preferred. Please submit a letter of application, CV and contact information for 3 references. These materials must be submitted online at https://jobs.virginia.edu under Posting Number 0607718.

Review of applications will begin on June 10, 2011 and the position will remain open until filled.

The University of Virginia is an equal opportunity/affirmative action employer. Women and minorities are encouraged to apply.


1st ECSB Summer School

1st ECSB Summer School on ‘Entrepreneurship in High-Tech Industries’ – 25-29 July 2011

Time: 25-29 July 2011

Place: University of Beira Interior, Health Sciences Faculty, Covilhã, Portugal

Organizers

The European Council for Small Business and Entrepreneurship (ECSB) is a non-profit organization whose main objective is to advance the understanding of entrepreneurship and to improve the competitiveness of SMEs in Europe. ECSB facilitates the creation and distribution of new knowledge through research, education and the open exchange of ideas between professions and across national and cultural boarders.

ECSB organises for its members high-quality conferences, such as the RENT conference in co-operation with EIASM, in order to facilitate and enhance the exchange of knowledge within the ECSB membership.

In this same line of action, the ECSB and the University of Beira Interior (UBI) will host the 1st ECSB Summer School: Entrepreneurship in High-Tech Industries, next July 25-29 at Covilhã, Portugal.

Objectives

  • Discussion of issues and interesting future developments in entrepreneurship research with Ph.D. students, Post-Doctoral students, junior and senior faculty
  • Sharing the views and results obtained by leading scholars and researchers on entrepreneurship in high-tech industries
  • Meeting young scholars of entrepreneurship, in an international environment

Application form (application deadline is June 3, 2011): http://ecsbschool.ubi.pt/?page_id=34

Further information about the event by contacting Joao Leitao at jleitao71 a gmail.com.