Entrepreneurship and sex

Now there is an interesting topic! The reason I’m bringing this up is not to raise the issue whether becoming an entrepreneur leads to having more or less sex (although who knows, maybe there is something to it). It is also not about entrepreneurship in the adult industry. It’s not even about entrepreneurship and gender. Rather, what got me thinking about entrepreneurship and sex is this BBC News article about recent research on how “worms’ sex life yields advantage over parasites.” The article claims that this is the first convincing evidence on why reproducing sexually has an advantage over asexual reproduction:

Worms forced to reproduce asexually succumbed to a nasty bacterial infection and died.

The researchers say the results are the most convincing evidence to date for a key theory in evolutionary biology.

The theory holds that sex evolved because it lets organisms reshuffle their genes into new combinations to stay a step ahead of parasites.

Reproducing asexually – where organisms clone themselves – makes much more sense; there is no need for an organism to search and seduce a mate, fight off competitors, or risk contracting a sexually transmitted disease. (…)

And yet sex exists; the vast majority of animals and plants reproduce this way.

The link to entrepreneurship and actor-network theory–our main interests on this blog–lies in evolutionary theory. Schumpeter drew on biological evolutionary theory for his definition of entrepreneurship as the creation of new combinations. Latour also described himself as a Darwinian philosopher at the February 2008 Harman Review event. In The Science of Passionate Interests, Latour and Lépinay cite Tarde’s critique of Darwin’s evolutionary theory:

His mistake [...] seems to me to have been in relying far more on the struggle for existence, a biological form of opposition, than on cross-breeding and hybridization, biological forms of adaptation and harmony. [...] And [...] a fertile hybridization, as an exception, is far neater than a hereditary accumulation of small advantageous variations, through competition and selection, to explain the formation of new types of life. (p. 36)

Later on Latour and Lépinay provide another Tarde citation:

And, certainly, it is good that Darwin’s genius pushed this paradox to its limit, for, at present, it is still established that natural selection, that excellent agent of purifying elimination, does not create anything and posits that which it claims to explain–living renovations–in the form of individual variations, and that the secret of these creations of life are hidden from our eyes in the depths of the fertilized egg instead of consisting in the outer shock of organisms fighting each other… (p. 44)

It does sound like the above research findings about the sex life of worms justify Tarde’s insight. What does all this mean for entrepreneurship though?

Schumpeter makes a sharp distinction between entrepreneurship as innovation (the creation of new combinations), and the mere reproduction of existing business models. Using the biological metaphor, it seems entrepreneurs producing innovations are reproducing sexually, while managers who replicate existing business models are reproducing asexually. Who or what would be though the parasites that infect non-innovative firms?

The problem with making this sharp distinction between differentiating and reproducing firms, as I’ve suggested in earlier posts, is that it ignores the fact that for the innovation to survive it actually needs adopters, those that ‘merely’ replicate the innovation (which is of course unlikely to be just a mere adoption and is probably more like an adaptation of the innovation). Although one could argue that adopters of an innovation are part of the overall wave or network of innovation, and therefore they are also guests at the sex party. Who are then those unfortunate asexually reproducing firms then, and what sort of parasites are causing their demise? How to identify both?

Maybe this is not as difficult as it sounds. Even from a pop culture point of view, entrepreneurial ventures and entrepreneurs are celebrated as sexy (Just think of Richard Branson’s Virgin, a company name that is almost an ironic reference to the sexy nature of entrepreneurship). Working for a start-up is risky and dangerous but also exciting and sexy, as opposed to working for a boring firm that is engaged in the repetition of formulas. Still, don’t we need boring firms and asexual reproducers as well to maintain and sustain the stability of the economic environment, which then creates the conditions for sexy entrepreneurship?

(In any case, I do hope all this talk about sex is not going to result in an orgy of spammers.)


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)


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.


Welcome to New Combinations

Taking its name from Joseph Schumpeter’s famous definition of entrepreneurship (“the carrying out of new combinations”), this blog is dedicated to the social study of entrepreneurship from the particular perspective of the ‘new’ new economic sociology, which itself is a new combination between science and technology studies (STS) and new economic sociology, deploying actor-network theory (ANT) to the study of organisations, markets and the economy.


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