«David B. Audretsch Indiana University Donald F. Kuratko Indiana University Albert N. Link University of North Carolina at Greensboro April 2015 ...»
Making Sense of the Elusive Paradigm of
Department of Economics Working Paper Series
David B. Audretsch
Donald F. Kuratko
Albert N. Link
University of North Carolina at Greensboro
Working Paper 15-04
MAKING SENSE OF THE ELUSIVE PARADIGM OF ENTREPRENEURSHIP
David B. Audretsch
Kelley School of Business
Bloomington, IN 47405
firstname.lastname@example.org Phone: 812-855-6766 *Donald F. Kuratko Kelley School of Business Indiana University Bloomington, IN 47405 email@example.com Phone: 812-855-4248 Albert N. Link Bryan School of Business and Economics University of North Carolina at Greensboro Greensboro, NC 27402 firstname.lastname@example.org Phone: 336-334-5146 *Corresponding Author Making Sense of the Elusive Paradigm of Entrepreneurship Abstract The term “entrepreneurship” apparently means different things to different people including scholars and thought leaders. Because entrepreneurship is multifaceted, it is studied from many different perspectives, yet, that has fostered a multitude of definitions. Even the scholarly literature (where normally the deepest understanding would be found) is rife with disparities and even contradictions about what is and is not entrepreneurship. Some have suggested a narrower and more defined focus on entrepreneurship where only bona fide entrepreneurship research theories would explain entrepreneurial phenomena. We believe that constricting the field may the wrong approach. Our purpose then is to try and make sense of the disparate meanings and views of entrepreneurship prevalent in both the scholarly literature as well as among thought leaders in business and policy. We reconcile the seemingly chaotic and contradictory literature by proposing a coherent approach to structure the disparate ways that entrepreneurship is used and referred to in the scholarly literature. We examine three coherent strands of the entrepreneurship literature and identify an emerging eclectic view of entrepreneurship, which combines several of the views prevalent in the main approaches discussed.
Key Words: Entrepreneurship, conceptual, behavioral, performance, eclectic.
JEL Code: L26 (Entrepreneurship); L25 (Firm Performance); L29 (Other).
1. Entrepreneurship: An Elusive Term Over 50 years ago, Harold Koontz pointed out a “management theory jungle” of varying definitions and approaches that was plaguing the field of management (Koontz, 1961). He stated “all [theories] have essentially the same goals and deal essentially in the same world” (p. 182).
Twenty years later he revisited his contention only to be shocked by the increase in theories and approaches to the field (Koontz, 1980). The “jungle” according to Koontz still existed with nearly double the approaches to management that were identified nearly two decades earlier.
Yet, the field of management continued to flourish and mature with greater research and knowledge development over the years.
It appears that the emerging field of entrepreneurship research has been confronting a similar “jungle” in the form of different theories on what constitutes entrepreneurship and the manner in which it is being studied. The word “entrepreneurship” implies many different things.
Innovation, ideas, creativity, new venture development, discovery, and economic growth, just to name a few. Trying to make sense of the scholarly literature on entrepreneurship and reconcile that literature with the way the concept is commonly applied in practice must leave more than a few students, scholars from various academic fields including entrepreneurship, confused and perplexed. The term “entrepreneurship” apparently means different things to different people including scholars and thought leaders in business and policy alike. Why is this term so elusive?
Rocha and Birkinshaw (2007) pointed out that the study of entrepreneurship has been associated with various aspects of analysis such as the person (Cantillon, 1931), traits, (McClleland, 1961), behaviors (Stevenson & Jarillo, 1990), functions (Schumpeter, 1934), actions (Venkataraman, 1997), new businesses (Gartner, 1989), and ownership (Hoang & Gimeno, 2010). They conclude that entrepreneurship is therefore, multifaceted, which is why it is studied from so many different perspectives. Yet, these different perspectives have fostered a multitude of definitions for entrepreneurship.
From a practical view, Business Dictionary.com (2014) considers entrepreneurship to be “the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit. The most obvious example of entrepreneurship is the starting of new businesses.” However, in the most widely cited paper on entrepreneurship, Shane and Venkataraman (2000, p. 217) promote as entrepreneurship as the “discovery and exploitation of profitable opportunities.” By contrast, Parker (2009) considers self-employed people to constitute entrepreneurs. Yet a very different view of entrepreneurship consists of business owners (Martin, Van Stel, Thurik & Wennekers, 2007). Still others, such as Lerner, Leamon & Hardymon (2012) refer to venture capital financed ventures as entrepreneurship, while Stuart and Sorenson (2003) consider IPOs as entrepreneurship. Similarly, McKelvie and Wiklund (2010) consider entrepreneurship in terms of the innovative performance of firms. The European Commission (2014) equates small and medium-sized enterprises (SMEs) with entrepreneurship while the United States State Department (2014) seems to think of entrepreneurship in terms of economic goals, as the Secretary of State, John Kerry, explains, “The United States has learned through its own experience that entrepreneurship is an essential driver of prosperity and freedom.” Thus there exists various differences in the meaning of entrepreneurship and the scholarly literature (where normally the deepest understanding would be found) is rife with disparities and even contradictions about what is and is not entrepreneurship. One reaction to the proliferation of what entrepreneurship actually means has been to suggest that the field needs to become narrower and more defined in its focus on entrepreneurship (Bull and Willard, 1993; MacMillan and Katz, 1992). In this manner, only bona fide entrepreneurship research theories would explain entrepreneurial phenomena in a way that is not explained by some other field or even academic discipline so that it becomes unique to entrepreneurship scholarship (Shane and Venkataraman, 2000). Accordingly, future theories of entrepreneurship should be focused solely and exclusively on aspects of behavior that involve creating and/or discovering opportunities, as well as evaluating and subsequently exploiting and acting upon those opportunities (Shane and Venkataraman, 2000; Wiklund et al., 2011). Yet, as Bruyat & Julien (2001) point out, any definition that is attempted should always serve as a construct that can be used to build theories and carry out more effective empirical research, in order to gain a better understanding of the phenomenon and, eventually and be shared by the researchers with a view to promoting the accumulation of knowledge.
Our purpose then is to try and make sense of the disparate meanings and views of entrepreneurship prevalent in both the scholarly literature as well as among thought leaders in business and policy. We try to reconcile a seemingly chaotic and contradictory literature by proposing a coherent approach to structure the disparate ways that entrepreneurship is used and referred to in the scholarly and popular literature. We reject the concept of narrowing the view of entrepreneurship in order to broaden its meaning and gain in impact and significance both among scholars and practitioners. After examining the three most prominent strands of scholarly thought on entrepreneurship we identify an emerging eclectic view of entrepreneurship, which combines several of the views prevalent in the main three approaches discussed in the previous sections. It is our intention to focus the field of entrepreneurship through multiple lenses in order to allow growth and maturation.
2. Distinct Perspectives of Entrepreneurship There are three coherent research perspectives found in the entrepreneurship literature that attempt to make sense of how the concept of entrepreneurship is actually viewed. In this section we first identify the view of entrepreneurship based on organizational status (such as firm size, age or ownership) or the status of individuals which may be considered to represent one coherent strand of the entrepreneurship literature. We then examine a very different approach, which considers entrepreneurship on the basis of behavior and constitutes a second strand of the entrepreneurship literature. A third strand of the literature is also identified, which considers entrepreneurship on the basis of performance.
One of the main views of entrepreneurship in the literature is based essentially on organizational status. This organizational status upon which the particular theory is based can refer to the status of a firm or an individual, or team of individuals (Eisenhardt and Schoonhoven, 1990; Ruef, Aldrich and Carter, 2003). Various strands of literature have provided empirical tests of theories using the operationalization of entrepreneurship based on a measure of organizational status, such as self-employment, business ownership or new-firm startups.
Theories based on the organizational status of what constitutes an entrepreneur can be at the level of the individual (Morris, Kuratko, and Schindehutte, 2012). According to this view, self-employment, is considered to constitute entrepreneurship (Parker and van Praag, 2012;
(Svaleryd, 2015; Audretsch, 2012). A related measure is business ownership (Parker, 2009). The model of occupational choice, which was applied to the context of individuals deciding whether or not to become an entrepreneur involves either maximizing utility or income Parker (2009).
Measures of business ownership are conducive to the analysis of large comprehensive data bases over long periods of time, since they have been a part of official government statistics for decades in most (OECD) countries (Blau, 1987; Blanchflower and Meyer, 1994; Carree, van Stel, and Thurik and Wennekers, 2001). Studies analyzing the propensity for individuals to become an entrepreneur using business ownership and self-employment data have typically linked this to characteristics specific to the individual, such as gender, age, work experience, human capital, and social capital. A particular focus or concern of these studies has thus been to link the propensity of an individual to be an entrepreneur, that is self-employed or a business owner, tocharacteristics specific of that individual, such as age, attainment of a particular educational level, gender, levels and extent of work experience, and occupational status and experience of parents (Audretsch, 2012; Svaleryd, 2015).
An alternative approach focuses on people who are weighing becoming an entrepreneur.
This strand of literature terms this nascent entrepreneurship (Lichtenstein, et al., 2007; Rocha, Carneira, and Varum, 2015). The organizational context of nascent entrepreneurship also has generated theories with a focus on the individual. Unlike the organizational contexts of selfemployment and business ownership, however, nascent entrepreneurship involves individuals who have not actually started a business but are considering doing so or planning to do so. As is the case for business ownership and self-employment, nascent entrepreneurship also involves the unit of observation of the individual. The major distinction is that while the former are actually entrepreneurs, in that they have actually started a business, a nascent entrepreneur is only considering starting a business (Davidsson, and Honig, 2003; Carter, Gartner, Shaver, and Gatewood, 2003; Minniti and Nardone, 2007; Davidson and Forsythe, 2011; Rocha, Carneira, and Varum, 2015).
A very different view of entrepreneurship focuses not on status but rather on behavior.