A New Undergraduate Research Project

Lucy McGowan is a third-year undergraduate at the University of Missouri. Her major is Food Science, but she has developed a passion for the study of entrepreneurial behavior in the overlapping sectors of wineries, regional foods, and tourism. Her passion has resulted in a study of the networking among older and new wineries in the growing Missouri wine industry, using survey methods and the UCINET network anlysis software. She completed a poster presentation today as part of an all-campus celebration of undergraduate research.

Lucy began her project by reading widely, including Georg Simmel (in translation) on tertius gaudens, as well as a number of classic pieces by Lin Freeman, Ron Burt, and David Krackhardt. She taught herself to use UCINET. It was very rewarding for me to observe her methods. She began her empirical work by attending the statewide wine and grape conference, meeting and interviewing staff from the state board and leaders in the industry to better understand the structure of the industry. She tested questions based upon her literature review with these informants and created a web-based survey, which was forwarded to all members in the industry. I would recommend this design to any graduate student.

A manuscript will be forthcoming as part of her summer research internship. I’ll follow up with another post.

Entrepreneurship in Recession

During a recession, resources are reallocated from lower-valued to higher-valued uses. That’s why we call it a “correction,” after all! Of course, bailouts, stimulus programs, and other government programs can stymie this process. Nonetheless, evidence suggests that a large percentage of successful firms were started during economic downturns.

Simon Parker has produced a valuable new reader for Edward Elgar, Entrepreneurship in Recession, that explores these issues. From the publisher:

This timely volume discusses the role of entrepreneurship in recessions. Simon Parker has selected the key contributions in the literature, which seek to explain why economies enter into and emerge from recession, and the involvement of entrepreneurs in this process. A central theme is the contribution of entrepreneurship to the creation and propagation of business cycles. A combination of theoretical and empirical studies is included, and there is a particular focus on a salient issue which arises in recessions, namely unemployment. The book will be a useful resource for scholars and policy-makers interested in entrepreneurship, business cycles, economic growth and recessions.

Celebrating Failure

Failure is an essential part of entrepreneurial experimentation. Schumpeter famously described capitalism as a “perennial gale of creative destruction,” and we shouldn’t forget the need to understand, embrace, and learn from failure.

In a recent O&M post I referenced Rita McGrath’s work on organizational failure; today she blogs about Tata Group’s prize for the best failed idea. What a great idea!

Entrepreneurship in Cuba

Writing of socialism, fascism, and other forms of government intervention in the economy, Ludwig von Mises (Human Action, 1949, p. 291) describes the struggle of business owners to operate in deteriorating political circumstances. Despite the threat of expropriation and other hazards, entrepreneurs will continue to act:

In the market economy there will always be entrepreneurs. Policies hostile to capitalism may deprive the consumer of the greater part of the benefits they would have reaped from unhampered entrepreneurial activities. But they cannot eliminate the entrepreneurs as such if they do not entirely destroy the market economy.

I thought of this quote when reading today about the emerging entrepreneurial sector in Cuba, which recently took thousands of state employees off the public payroll:

“Cubans are entrepreneurial people and to the extent they are allowed to work and make some money, they will,” said Lorenzo Perez, a former IMF economist and member of the Association of the Study of the Cuban Economy, a nonpartisan Washington, D.C.-based think tank.

But he added the new enterprises face stiff challenges in a country where few have business acumen, raw materials are hard to find, tax rates can be exorbitant and myriad government regulations still restrict basic activities.

“All over the world, the percentage of small businesses that succeed is very small, even in the United States,” Perez said. “In Cuba, the difficulties are enormous, because the environment is not very conducive yet to business … but that doesn’t mean it can’t be done.”

I’ll have more to say about this soon, thanks to an upcoming research project on Cuban entrepreneurship led by Juanamaria Cordones-Cook.

Are Entrepreneurs Generalists?

Keith Sawyer notes the decline of the polymath, the person with world-class expertise in multiple fields. Modern social science has had its share — John von Neumann and Herbert Simon come to mind. I’ve had the privilege of knowing a couple, Murray Rothbard and David Gordon. But the increasing emphasis on hyper-specialization in most academic disciplines makes it hard to be a generalist, unlike, say, the 1800s:

One could acquire a working knowledge of a discipline (materials science, optics and the eye, life insurance) just by reading the few books that had been written on the topic. Today all of these fields have had another 200 years of knowledge created. That’s why creativity researchers have observed a “ten year rule”: that it seems to take ten years of working away in one specialized domain before you can make a significant creative contribution. (This rule was first published in the 19th century, when a study of telegraph operators found that the best operators had ten years of experience.) Ten years roughly corresponds to Professor Anders Ericsson’s finding that it takes 10,000 hours of “deliberate practice” to attain world-class expertise.

And over time, as new knowledge is created and total knowledge accumulates, it should take longer to become an expert.

This brings to mind Ed Lazear’s argument that entrepreneurs are more likely to be generalists, or  jacks of all trades — the polymaths of business. To foster entrepreneurship, and encourage creativity more generally, perhaps educators should worry less about specialization and tolerate a little more dilettantism.