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.