A new book on Schumpeter’s conceptions of the entrepreneur

In a previous post, I wrote of the recent workshop on evolutionary thinking that occurred in Hertfordshire in late September. One of the delegates was Markus Becker of the University of Southern Denmark. I was pleased to meet him there and thank him for the timely publication of a new book with his college at USD, Thorbjørn Knudsen, and the sociologist Richard Swedberg, The Entrepreneur: Classic texts by Joseph A. Schumpeter. This is a new publication from Stanford University Press in which the editors have presented eight pieces by Schumpeter on the entrepreneur and entrepreneurship that span Schumpeter’s career. Importantly, they add some new translations of pieces that had not been available except in German, especially two pieces from 1928 that bridge the thinking between The Theory of Economic Development (1911) and Business Cycles (1942). The introduction also delivers value to the reader as the editors place the eight pieces in context. Importantly, one can now see the evolution of Schumpeter’s entrepreneur from the early presentations as heroic economic figure to a more appealing agent of the entrepreneurial function, including teams of individuals within large “trustified” firms that share the function.

This is a must-read for scholars interested in the role of the entrepreneur in theory, particularly given the historical context of moving from late 19th century Continental Europe to the tumultuous American economy of WWII.

GROE Workshop on Evolutionary Thinking and Capitalism

Last week, I attended a workshop organized by the Group for Research into Organizational Evolution (GROE) of the University of Hertfordshire in the UK.  A link to the workshop page is here, with further links to the GROE homepage. I was particularly pleased with two organizational elements of the workshop. First, the invited speakers presented uniformly thoughtful and thought-provoking presentations on exploiting evolutionary thinking in the economics and sociology of firms and markets. Secondly, each presenter was allotted about 3/4 of an hour for the prepared remarks, followed by equal time for discussion with the 30+ delegates in the room. As a consequence of these two elements, the quality of discourse in the formal sessions and during meals/tea was high.

I was joined in this venue by a colleague from the University of Missouri, André Ariew. He is philosopher of science, with particular expertise in evolutionary biology. We are contemplating joint work on entrepreneurship and organizational evolution. can you spot the philosopher in the photo?

GROE presenters and delegates

While none of the papers was specifically aimed at entrepreneurship, there was much subtext about the experimental nature of capitalistic economies that is grounded in Schumpeter, Hayek, and others for whom individual action is a matter of interest. Significant in this was Stan Metcalfe’s excellent presentation that made his excellent book, Evolutionary Economics and Creative Destruction, come alive for me. The book was written for/from a series of papers that Stan delivered as the Graz Schumpeter Lectures. His recent thinking on the inevitability of losers when entrepreneurs “win” extends and refines the lectures. Fun stuff. We will wait to see if the papers get posted to the GROE website or compiled in another form.

You can find an interview of the Director of GROE, Geoffrey Hodgson, by one of the invited speakers, the evolutionary biologist David Sloan Wilson at the This View of Life blogsite. DSW also interviewed another speaker, Eric Beinhocker, about his presentation about modeling complex economic phenomena using agent-based models of awe-inspiring scale and scope.

Program for McQuinn-SMG Conference on Strategic Entrepreneurship

Here’s the program for next month’s conference on “Multi- and Micro-Level Issues in Strategic Entrepreneurship,” co-sponsored by the McQuinn Center and the Copenhagen Business School’s Department of Strategic Management and Globalization, 13-14 October in Copenhagen. More information is available at the conference website. There’s still time to register! Read more of this post

Reinventing Entrepreneurship in the Top 30?

We wrote earlier about the Columbia, Missouri based company AdVentures, which with well over 6,000% growth placed an impressive 28th place on the inc500 list. It seems the State of Missouri wants to be part of the enormous growth and have awarded the company $1.5 million in low-interest loans. These loans are expected to provide Columbia with at least 15 new jobs in the near future, a welcome addition to the slow job market.

While AdVentures can likely find more productive use for this money than the State of Missouri, it is doubtful whether this can qualify as an entrepreneurial act from State Treasurer Clint Zweifel given existing entrepreneurship theory. Then what is it? Recent developments in entrepreneurial research focusing the public sector (almost) exclusively focus under the term “political entrepreneurship” on either intra-government entrepreneurship or public-private cooperation in terms of rent-seeking (see e.g. here and here).

But in this case AdVentures have not actively pursued favors from government, an anonymous source explains. Rather, it seems the state government has realized that there is real and sustainable growth going on in the city of Columbia, and they wish to support it. In other words, is it rent-seeking in reverse? This appears to be a new type of  activity that is new to the theoretical literature. What do we call this type of government ex post sponsorship of successful enterprise? Is public entrepreneurship an appropriate term?

The Entrepreneur in the Firm

While the theory of the firm is struggling with the Coasean questions about its existence, boundaries, and internal organization, the entrepreneur is strangely missing. Obviously, an entrepreneur is needed at the creation of firms. By definition. But what is the entrepreneur’s function within the firm? And what is the firm’s function to the entrepreneur? These questions are seldom asked and even more rarely answered.

I make an attempt to connect the entrepreneur and the firm from a historical point of view, summarizing the evolution of the theory of the firm and attempting to identify the relationship between entrepreneurs and their firms. I drafted a theory in a recently published article that we mentioned here. In an article for a not-exclusively-academic audience published today, I discuss how the history of the economic theory of the firm suggests answers to many questions about the firm and the entrepreneur – and how they are interdependent. It was given the title: The Economic Theory of the Firm.

Real Entrepreneurship as Judgment

Three researchers from Babson College write on the HBR Blog Network about how entrepreneurs find opportunity. They illustrate the case with Jim Poss, an entrepreneur who has an everyday epiphany of a problem, then looks into solutions, and organizes a firm to provide it. While I believe the question is wrong – it is not about finding an opportunity but imagining and creating it – the authors show clearly what entrepreneurship is about. It is not simply about Kirznerian alertness to profits or starting firms. It is necessarily about both, and everything in-between.

Jim Poss is disturbed by the immense inefficiency illustrated by that one garbage truck in Boston. This happens to most of us, but what sets Mr. Poss apart is that he imagines a solution to the problem that has not been attempted before. His solution is thinking out of the box and “turn[ing] the problem upside down” in a way that reveals a new solution. He is exercising his judgment (on several levels) and sees that it is an opportunity to do something – and make a profit.

Poss organized a team of people he knew and trusted to work on his imagined opportunity. The first attempts at solutions were unsuccessful. But the opportunity was still there thanks to Mr. Poss’s way of phrasing the question; “anyone” can see that trash collection (in this case) is inefficient, but few have the ability to both see new solutions and take the risks to act on them and organize a team to realize them.

In doing so, Poss is undoubtedly the driver and “ultimate cause” of this business and the one with original judgment. But he relies on the derived judgments of others in his team: they are on board because they have abilities, knowledge, and ways of thinking that Poss knows (or thinks) he will need to solve the problem. The individuals on the team work within the framework of Poss’s original idea or problem and contribute to its solution; they are joining forces and cooperating to realize the original opportunity. Through this common aim their incentives and contributions are aligned; they are an organization.

There are many lessons in this illustration of entrepreneurship. First, we cannot understand it if we focus exclusively on one of the parts of the whole process: alertness, the opportunity, the formation of a startup, or the context. Second, the entrepreneurial process is one of exercising judgment all the way through, first in realizing the problem and figuring out potential solutions, then in finding the right people to form a team, and then to lead the team to success. Third, while there is one original entrepreneur, everybody else in the team work as the entrepreneur’s proxies to figure out and supply solutions or partial solutions aligned with the rest of the group. This implies a fourth lesson: the importance of cooperation and co-specialization between members of the team and hence the constant evolution of the firm’s internal organization as an effect of proxy entrepreneurs working together to continuously improve the product and the production process.

In this sense, entrepreneurship is essential for understanding the firm and answering the Coasean questions: Why are there firms? What are the firm’s boundaries? and How is the firm’s organizational structure determined? It is about time we put the entrepreneur’s judgment at center stage in the theory of the firm.

Int’l Research & Policy Roundtable

Here’s a great opportunity for scholars interested in research and policy issues that relate to high-growth international entrepreneurship. The Kauffman Foundation calls for paper abstracts on this very interesting issue, and the authors of selected papers are invited to participate in the roundtable discussion in Liverpool in March. Here’s the CFP:

The Ewing Marion Kauffman Foundation is seeking experts on high-growth entrepreneurship policy to contribute to the creation of a global policy roadmap for advancing entrepreneurship. Scholars are invited to submit abstracts for papers to be considered for presentation at a roundtable discussion at the Kauffman-sponsored Global Entrepreneurship Congress, March 11-12, 2012, in Liverpool, UK.

This research and policy roundtable will focus on international issues for high-growth firms. The roundtable will provide input into the potential development of a global policy “roadmap” or framework for creating the right environment for building and scaling high-growth firms.

Those interested in participating may submit an abstract on the submission site. Those selected to submit a paper also will be invited to the roundtable event and the GEC in March 2012, where key themes and findings from the papers will be discussed in further detail and potentially published in an edited book. Travel expenses for the conference will be covered by the Kauffman Foundation.

Deadline for abstracts is set to 10/31. More information and submission instructions are available at www.kauffman.org/globalpapers.

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