NBER Entrepreneurship Research Boot Camp

Here’s a great opportunity to learn more about entrepreneurship research for PhD students and young scholars/career academics. While the boot camp will hardly cover issues such as judgment and imagination, which we commonly research and talk about here at the McQuinn Center, it should provide a great overview of mainstream/mainline entrepreneurship research – particularly what Peter Klein (2008) calls the occupational and structural approaches.

Call for participants below the fold. Read more of this post

The New Coasean Entrepreneur

In a recent issue of Small Business Economics (Vol. 40, Issue 2), Siri Terjesen and Ning Wang interview Ronald Coase (gated copy here). One of the topics touched on is entrepreneurship, and Coase seems to “come out” as quite a Schumpeterian. In answer to the question of what entrepreneurship is, Coase states:

Entrepreneurship involves undertaking new business initiatives, such as setting up a new firm, creating a new market, inventing a new product, experimenting a new way of marketing, retailing, or organizing the production line, and bearing the related risks. These are all novel business endeavors, their outcomes cannot possibly be known in advance. Most of these attempts may fail, but the few successful ones help to introduce fundamental changes to the economy, keeping it innovative.

Interestingly, this entrepreneur is distinct from the “entrepreneur co-ordinator” found in his groundbreaking 1937 essay “The Nature of the Firm,” who is simply a manager who supplants the price mechanism in “directing” resources.

Coase further states that (his Schumpeterian-type) entrepreneurship is important, because it:

is the fountainhead of endogenous changes in the economy, bringing about technological, institutional, and organizational innovation and creating new knowledge. Entrepreneurship drives economic evolution, determining its speed and direction.

Coase also echoes Baumol’s (1968) view that entrepreneurship is absent from economics, for which economics suffers:

[It] is unfortunate … that economics remains detached from the ordinary business of life. … economics does not have much to say about entrepreneurship.

Interestingly, Coase emphasizes that entrepreneurship is primarily of indirect importance to economists, since entrepreneurship has a “lasting impact on the economy.” Coase here goes back to the origin of his ideas, which were spurred by Hayek’s lecture series on the structure of production and the business cycle at LSE in early 1931 – when Coase was an undergraduate business student. As Coase has stated elsewhere, Hayek’s view of capital and the structure of production “absorbed” both students and faculty at LSE for months.

Coase shows how his view on this has not changed, stating that “the structure of production provides a framework to understand entrepreneurship.” In fact, states he: “any trace entrepreneurship leaves on the economy can be found in the structure of production” and it is in this sense that entrepreneurship should be considered and perhaps included in the study of economics.

I have quite a few disagreements with Coase, especially the ideological presumption on which he seems to base his view of transaction costs (which I discuss in a paper currently under review for the Journal of the History of Economic Thought), but his views on entrepreneurship as expressed in this interview is right up my alley. In fact, it dovetails very nicely with my own work on the firm as an entrepreneurial vehicle to establish new structures of production.

Though Coase in his answers repeats some of which has already been made available in articles such as the three lectures published in 1988 (Vol. 4, Issue 1), the interview is a good read. The entrepreneurship part is perhaps that which is most interesting.

Capabilities and Strategic Entrepreneurship in Public Organizations

The current issue of the Strategic Entrepreneurship Journal features a special issue on “Entrepreneurship in the Public Interest,” edited by Jay Barney, Anita McGahan, and Bennet Zelner. It features my article, “Capabilities and Strategic Entrepreneurship in Public Organizations” (with Joe Mahoney, Anita McGahan, and Christos Pitelis). Here’s the abstract:

Capabilities and Strategic Entrepreneurship in Public Organizations

Public organizations are relatively understudied in the strategic entrepreneurship literature. In this article, we submit that public organizations are usefully analyzed as entities that create and capture value in both the private and public sectors and that a capabilities lens sheds important new insights on their behavior. As they try to create and capture value, public organizations can act entrepreneurially by creating or leveraging bundles of capabilities, which may then shape subsequent entrepreneurial action. Such processes can involve complex interactions among public and private actors. For example, public organizations often partner with private firms to produce existing products, create new products, and establish new markets which, in turn, generate new capabilities for both public and private actors. Yet such coevolutionary processes are not guaranteed to create value, and capabilities acquired in the pursuit of public interests may, over time, enable activities that damage those same interests. We show how a capabilities approach helps explain the nature and evolution of public organizations and we apply this approach to a series of cases on the growth and diversification of public organizations, the private provision of public goods, and related issues.

In Memoriam: James M. Buchanan (1919-2013)

James M. Buchanan (1919–2013)

It is almost two months since economist and Nobel Laureate James Buchanan passed away. There are really only two of Buchanan’s many works that ever made an impression on me: his Cost and Choice, and his and Gordon Tullock’s Calculus of Consent.

The former made an impression because it is very good (in my view Buchanan’s best work), clearly written, and takes a firm stand for economic (i.e., opportunity) cost as opposed to accounting cost. In this book, Buchanan comes across as being quitean Austrian. Or, perhaps, as standing firmly in the LSE tradition. To me, Buchanan on cost is as good as Kirzner on capital. Unfortunately, most of Buchanan’s other works mean as little to me as Kirzner’s. And that’s not much.

The Calculus of Consent was difficult to read while fairly assessing it. Don’t get me wrong – it is absolutely not hard to read. On the contrary! But this is a true classic, a cornerstone of public choice theory, and as such much of its great contributions have been iterated a billion times over in later works (often by less known but more modern scholars). So when I finally got to reading it (in 2008?), it was old news – I already knew pretty much all of it. It was a nice read, no doubt, and it made one heck of a difference when it was first published. But as so many classics, whether fiction or scholarly, you already know most of what’s between the covers before you actually pick it up and read it. (A bibliophile like me still thinks it is a thrill to read a classic just because it is a classic, and seeing how the ideas and/or plot originally unfolded – but it is hard to get excited about ideas that one already knows.)

The rest of Buchanan’s work? Never made much of an impression. I have read excerpts, individual chapters, essays, and several summaries of his works and legacy, yet – though his influence was undoubtedly great – I find it difficult to get excited by his work. I have a bunch of his books in my book case, but most of this collection remains unread. Perhaps one reason is that his thinking doesn’t appear to be radically different from many others’. His economics was not all that different from mainstreamers’ economics, but he made “radically” new applications of this theory.

This being said, it would be an unforgivable mistake to simply dismiss the Buchanan legacy.

Perhaps one thing that I always found a bit troubling with Buchanan, but that I was never able to pinpoint and therefore it remained hidden and implicit until very recently, is what David Levy and Sandra Peart summarize as Buchanan’s “ability to rethink a question from the foundations unencumbered by what he had written on the topic.” I realize this can (and perhaps was meant to) be interpreted as something positive in the sense of being willing to change one’s mind, reassess one’s findings, a sense of open-mindedness. But it can also be quite the opposite.

This “ability” of disregarding what one already knows is something that has always bothered me quite a bit with great scholars and thinkers such as F. A. Hayek and Ronald H. Coase. The former called himself a “puzzler” or “muddler” rather than a “master of his subject,” and the latter claimed his thinking was freer and better by not being constrained by [economic] education. One of course has to be able to reassess one’s conclusions when exposed to new data or better explanations. But this is hardly the same thing as (constantly?) rethinking one’s work and “reinventing the wheel.”

In fact, I would be inclined to think scholars occupied doing the latter have failed in their undertaking. Rethinking should often turn out to be a result of poor original thinking, subpar theorizing, and flawed logic, rather than honest open-mindedness and curiosity. This is not to say stubbornness is an important and unfailing quality; but being stubborn when one is right is not a vice, it is a virtue.

Nevertheless, James Buchanan is one of the great economists and scholars of the 20th century. He should be remembered as such.

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