Future trends of Entrepreneurship

Introduction

Scientific progress often occurs through phenomena that do not "fit" dominant wisdom--be it the kink in the orbit of Mars that led to Kepler's laws or the Galapagos islands that necessitated The Origin of Species. Entrepreneurship, in our considered opinion, is proving to be such a beast. Over four decades of research have almost always led either to "mixed" results in terms of theories from other disciplines or have actually raised challenges to dominant wisdom in both the disciplines and the functional areas. Take for example, the evidence for and against psychological traits such as risk-propensity (Miner & Raju, 2004; Stewart & Roth, 2001) or the liability of newness, adolescence, and obsolescence (Bruderl & Schussler, 1990). Or the uneasy need for the notion of "institutional entrepreneur" in sociological approaches that otherwise seek to privilege structure over agency (Battilana, Leca, & Boxenbaum, 2009; Dimaggio, 1988). Or the futile struggles of economists to create a place for "The Prince of Denmark" in their otherwise powerful and persuasive morality play (Baumol, 1968; Schumpeter, 1942). Combine this with the growing trends in pedagogy and practice that have moved beyond for-profit firms into social, sustainable, and even public entrepreneurship. All of these cry out for us to confront the possibility that we might have made what philosophers call a "category error"--namely, putting a thing into a class to which it does not belong, or mistaking a larger set or meta-category for one of its constituent subsets (Ryle, 1949). (1)

What if we have been thinking about entrepreneurship the wrong way? What if we temporarily suspend our thinking of it as a sub-discipline of economics or management, or a subset of courses taught in business schools, and recast it as something as large as a social force--somewhat like democracy in the eighteenth century or the scientific method in the seventeenth? In fact, when we examine the history of the scientific method and its incorporation into basic education, the parallels are uncanny. Without getting mired in the philosophical debates surrounding the existence and usefulness of the scientific method, we simply use the name "scientific method" to capture the notion that the world can be systematically studied and understood in terms that do not include divine revelation or special mystical abilities. As the eminent cosmologist and science educator Carl Sagan explained it, key elements of this notion can be traced back to the craftsmen and merchants of Greece, prominent among them being Democritus (Sagan, 1983). However, it was only as recently as the sixteenth century that Francis Bacon urged the idea that the work of navigators, inventors, and craftsmen can be a model for scholars (Bacon, 2004). Eventually, through the eighteenth and nineteenth centuries, the scientific method developed into the predominant and most reliable way to harness Nature's potential for the achievement of human purposes.

The Analogy Between the Scientific Method and the Entrepreneurial Method

For the analogy between the scientific method and the burgeoning notion of the entrepreneurial method to work, we do not particularly need to get into the details of what exactly constitutes each method, although we do not hesitate to outline certain possibilities in Table 1. The point of imminent importance is the realization that such methods can and do exist. Putting this realization to work does not require us to accept a utopian view of either science or entrepreneurship in terms of the outcomes they engender. Nor does it dismiss the role of other ways to achieve positive social impact. Again the point of immediate relevance is not that entrepreneurship or entrepreneurs are universally good or that other methods are to be discarded, but that this new(er) instrument--the entrepreneurial method--is of considerable value worthy of packing in our rucksack as we move forward as a species.

The specification of teachable and learnable principles of scientific approaches to understanding nature and then putting that understanding to work in the pursuit of individual and societal objectives took several centuries. Yet today the scientific method is taught not only to potential scientists in professional schools at graduate or postgraduate levels, but to everyone, starting at an early age, as an essential mindset and skill that forms the core of all education--in line with reading and writing and arithmetic. Such broad and early dissemination has propelled a democratization of what was originally accessible only to a few who were endowed with divine revelation, inborn genius, or the wealth and status that allowed science be pursued as a "gentleman's pastime." The democratization begun in the seventeenth century by Bacon and others, moreover, has now led to millions of "ordinary" scientists working in systematic ways to make possible the amazing industrial, technological, and subsequent social revolutions of the eighteenth, nineteenth, and twentieth centuries. As Shamoo and Resnik (2009) point out, "it is estimated that there are more scientists alive today than all of the scientists who have lived during the past 2,500 years of human history (Weaver & Dickson, 1988)."

We believe a similar path of revolutions is waiting in the wings with entrepreneurship. Based on about four decades of rigorous research into the phenomenon of entrepreneurship, we are beginning to realize that the phenomenon may hide a generalized method capable of changing the way we live, work, and play, and transforming the courses of the careers we build, the shapes of the communities we live in, and the evolution of the socio-political and economic systems we are a part of. That is why delving a little deeper into the history of the development of the scientific method may be a useful task here. Let us begin with Francis Bacon, usually recognized as the earliest of modern philosophers of science to spell out the key elements of what we now know as the scientific method. In the preface to his treatise on the subject, Novum Organum, Bacon states as one of the aphorisms: "The sole cause and root of almost every defect in the sciences is this; that whilst we falsely admire and extol the powers of the human mind, we do not search for its real helps." There are two laments here--the first, that the dominant wisdom of his day overemphasized the traits and abilities of individual scientists and the second, that the philosophers of his day did not search for the codifiable principles and techniques that lay beneath what masqueraded as special abilities a very few people were endowed with. Both laments evoke conversations in entrepreneurship research today.

The first lament is not unusual. Early explanations for science, like those for most endeavors resulting in valuable contributions to human and social welfare, tend to hinge on the observation that these accomplishments can be attributed to a few selected people. Only as we study and understand what these people actually do that a more accessible pattern emerges that can then be codified and taught and propagated widely enough to become a viable tool of value creation writ large. Thus pre-scientific explanations of knowledge creation consisted in the notion that some special people are able to (are even born to) "read the signs"--from the True Book (of God or Nature). In other words, scientific ability was largely an inborn trait or an accident of birth and circumstance, and not a matter of systematic study or training. This strikes us as an interesting parallel to the traits literature in entrepreneurship. It was natural for our field too to begin trying to describe entrepreneurs in terms of their traits (McClelland, 1961) and also to try to isolate what made entrepreneurs different from non-entrepreneurs (Brockhaus, 1982; Stanworth, Blythe, Granger, & Stanworth, 1989; Woo, Cooper, & Dunkelberg, 1991). And even though some believe that this stream of work has been discredited, it appears to resurface in new ways (Baron & Ensley, 2006; Baum, Frese, & Baron, 2007; Gartner, 1988; McClelland; Zhao & Seibert, 2006).

Of course the argument is more nuanced in recent studies and goes beyond simply differentiating entrepreneurs from non-entrepreneurs in general or trying to identify certain traits as predictors of startup and success. Even strong proponents of the importance of personality traits tend to aver that "... a model of the effects of personality traits on business creation and business success must include other individual differences variables as well as nonpersonality variables, such as action strategies, cognitive ability, and environment, which are additional predictors of performance" (Rauch & Frese, 2007).

The second of Bacon's laments is not as usual, and was especially radical for his time. The idea that scholars should observe in detail and actually learn from "craftsmen and tradespeople," however talented, was not easily palatable. Yet, that was indeed the source of the "real helps" that Bacon sought to codify into the principles of the scientific method and techniques such as the "crucial experiment." In articulating these, Bacon had to do two things: on the one hand he had to struggle against the traditions of the times, especially with regard to what counted as "evidence"; and on the other, he had to draw together fragments of ideas from his contemporaries that held the seeds of a new way of thinking about basic concepts such as "evidence." What counted as evidence in his day consisted primarily of testimony and authority. Both of these could involve religious sources such as the scriptures as well as secular ones such as human witnesses and opinions. The idea of evidence as independent of any person or divine revelation, in other words empirical evidence of the kind familiar to us, was just beginning to be spelled out around the time Bacon wrote his thesis on the scientific method (Hacking, 1975).

We believe we too are beginning to grapple with Bacon's second lament as applied to entrepreneurship, namely the central tenets of how to do entrepreneurship as opposed to key traits that differentiate entrepreneurs from other presumably "normal" or mundane human beings. Here too the historical parallels are evocative. In a study of the social origins of the scientific method, Zilsel (2000) showed that real science was born when the experimental method of the craftsmen was adopted by the university-scholar and the humanistic literati. A similar trend can be found in entrepreneurship where in-depth case studies and qualitative research combined with larger empirical tests are beginning to provide details of how actual entrepreneurs make decisions and take action (Baker & Nelson, 2005; Eisenhardt, 1989; Ozcan & Eisenhardt, 2009; Santos & Eisenhardt, 2004; Sarasvathy, 2008). The movement here has the potential to go beyond a purely scholarly one of formulating and testing hypotheses to active interactions between research and pedagogy and practice that can inform and transform one another. If we pursue this potential, the result will be a method of thought and action whose efficacy is established as much through actual applications and the resultant outcomes in the world (i.e., technologies) as through their verisimilitude established through statistical or other types of evidentiary analyses (i.e., theories, models, and laws).

The next stage in this historical progression, from fascinating achievements attributed to individual ability or chance circumstance to the study and codification of a systematic method, is the realization and acceptance that the codification can (and arguably should) be made available to all. This stage is not yet a fait accompli even in the case of the scientific method. As recently as the second half of the twentieth century, Simon (1979), for example, was driven to take the time and effort to argue that there is no qualitative difference between the processes of revolutionary science and journeyman science--i.e., anyone can learn to do science and do it well. In other words, extraordinary scientists are neither a separate species of scientists, nor is the way they do science mystical and beyond the comprehension of more "ordinary" scientists. Furthermore, he had to shore up this argument with a series of experimental and historical studies that laid bare the basic elements of scientific discovery as it actually happens, rather than as it is supposed to happen according to armchair theorists and philosophers of science (Klahr & Simon, 2001). This raises a central issue for entrepreneurship researchers: Can key elements of the entrepreneurial method be the same for the extraordinarily successful entrepreneurs as well as the ordinary entrepreneur (who may or may not ever succeed in terms of standard measures of performance such as return on investment)? In other words, can anyone who wants to learn it be taught to do entrepreneurship well? We believe the answer is yes.

As Feyerabend (1993) and others have provocatively argued, there may be serious holes in the notion of an ironclad scientific "method"--be it the one embraced by Carnap or Popper or others before and after (Hacking, 1983). Yet the notion of a scientific approach to solving problems, especially those related to discoveries about physical and material reality is a meaningful and useful one. We usually know what we mean when say, "Let us approach this scientifically"--as opposed to say, biblically, or politically or any other way. Similarly, the notion of tackling problems in the human realm using an entrepreneurial as opposed to sociological, spiritual, or even an economic approach is a meaningful and useful distinction. Take, for example, effectual logic--a logic of thought and action that has been empirically shown to be an important component of entrepreneurial expertise (Read, Dew, Sarasvathy, & Wiltbank, 2009). This logic, like the logic of experimentation in science, is actionable and consists of mechanisms that specify how to work with readily available means to co-create local transformations through self-selected stakeholder commitments. Yet it is distinguishable both from the logic of collective action and from the spontaneous order of free markets (Sarasvathy, 2008). Therefore, our claim for entrepreneurship as a method akin to the scientific method rests both on the historical parallels and recent empirical findings that feed the possibility of a Novum Artificium, as it were.

With a view to populating this claim with actual content, we pose a series of open questions that involve both a reinterpretation of what we have already learned through past research and a reformulation of existing and future research agendas in the spirit of confronting and overcoming the category error we mentioned earlier. In other words, the questions we pose below are aimed at moving us beyond a view of entrepreneurship as a sub-discipline or "merely" a phenomenon or setting for testing high theory, toward a new view of it as a powerful social force analogous to the scientific method.

Toward the Specification of the Entrepreneurial Method: Three Suggestions for Future Research

To summarize our arguments so far, there exists a distinct method of human problem solving that we can categorize as entrepreneurial. The method can be evidenced empirically, is teachable to anyone who cares to learn it, and may be applied in practice to a wide variety of issues central to human well-being and social improvement. These arguments imply that it could be a useful and valuable enterprise for scholars of entrepreneurship to begin researching entrepreneurship as a method as well as a phenomenon or setting for testing theories from other disciplines. We believe that researching entrepreneurship as a method will entail (1) making the inter-subjective a key unit of analysis, (2) seeing heterogeneity as a basis for the design of human artifacts, and (3) specifying the role of the entrepreneurial method and the mechanisms that embody it.

Making the Inter-Subjective a Key Unit of Analysis

Currently, the dominant convention with regard to psychological and sociological approaches to entrepreneurship research consists in using either the individual or the team as the unit of analysis (Packalen, 2007; Ruef, 2003). An exhaustive search of the literature turned up virtually no journal article on details of the numerous relationships and deals that entrepreneurs routinely negotiate with a wide variety of stakeholders. Even a rare exception such as Rea (1989) used survey methods that call for individual responses from one party to the relationship--venture capitals in this particular case. It is rather surprising that over four decades of empirical work has not even scratched the surface of intersubjective interactions between entrepreneurs and their stakeholders, be they early partners, customers, suppliers, professional advisors, employees, or the local communities within which the fledgling new venture is located. Considerable work has been done on alliances and social networks. But the bulk of these studies seek to identify characteristics of alliances and networks that contribute to firm performance.

Almost the entirety of social networks research takes networks as mostly given and outside the control of human action, hence not a source of valuable input into developing a method of doing entrepreneurship. In a recent and rare exception that examined qualitative case studies of alliances in the wireless gaming industry, Ozcan and Eisenhardt (2009) asserts this: Extant research addresses attributes of high-performing alliance portfolios but not how executives originate such portfolios ... and then goes on to develop an inductive model that seeks to take the literature beyond a deterministic account of dyadic interdependence and social embeddedness. Even scarcer are studies that actually look into the structures of deals and the processes through which the deals came to be structured the way they are. In our considered opinion, an entire unexplored terrain of possibilities lies dormant in the area of how entrepreneurs transform bits and pieces of current realities into valuable new opportunities through productive interaction with others.

Even the literature that is directly focused on negotiations has mostly neglected new venture creation processes. Consider for example, that Bazerman, Curhan, Moore, and Valley's (2000) classic and comprehensive review of the growing literature on negotiations does not include the words "venture" or "entrepreneur" at all. Also, the very idea of "transformation" or "design" or "co-creation" as opposed to "bargaining" is new to the literature on negotiations. Linda Putnam's (2004) exhortation to negotiation scholars to incorporate transformative notions is a case

On the one hand, negotiation research has shown that people often fail to reach mutually beneficial agreements even when they may be readily available (e.g., Bazerman & Neale, 1992; Thompson, Gentner, & Loewenstein, 2000). On the other hand, research has also begun to show that such agreements are reached and even new and unanticipated ones forged through repeated exchanges between the same negotiators (Pruitt & Rubin, 1986; Thompson et al., 2000). Indeed, Lawler and his collaborators have shown that commitment leading to stable group formation occurs through a process of repeated negotiated exchanges:

The development of relational cohesion and commitment is an endogenous process that emerges from the interaction between actors. (Lawler & Yoon, 1996, p. 90)

All these examples from sociological and psychological literatures on relational exchanges and interpersonal negotiations point to fertile untapped resources for future entrepreneurship research. Furthermore, fully embracing the proposition that "Most of our approaches to the world are mediated through negotiation with others," (Bruner, 1986) has important implications not only for new research, but also for re-examining and challenging existing dogma in our field. Furthermore, we believe that a deeper understanding of stakeholder relationships in entrepreneurship can both challenge and contribute to the literature on negotiations and relational sociology.

Seeing Heterogeneity as a Basis for the Design of Human Artifacts

More recently, Davidsson (2008) has argued in some detail that the phenomenon of entrepreneurship exhibits heterogeneity along several dimensions and across every aspect of research including design, sampling, operationalization of variables, and analysis. The study not only catalogs the various types of heterogeneity problems that arise in the context of entrepreneurial/venture performance, but also suggests strategies for dealing with these problems. Several of these fixes have to do with taxonomizing the phenomenon, strictly bounding samples to particular industries or other dimensions of the taxonomy, developing comparable metrics, and seeking to find natural experiments or designing controlled laboratory experiments.

Davidsson's arguments about heterogeneity are also applicable at the level of the entrepreneur. As we pointed out in the beginning of this article, the vast literature on the role of individual traits and personality variables has produced mixed results at best. One reason could be that "entrepreneur" is not a monolithic category. Instead it may be that we need a taxonomy of entrepreneurs (whether organized around motivations, skills, industry, opportunity, or other relevant dimensions) and look for differences between subcategories in the taxonomy. However, we would like to contend that the problem of heterogeneity in entrepreneurial behavior goes deeper than the need to taxonomize entrepreneurial phenomena, that it is a more fundamental characteristic of human beings and human action in general--a peculiar triple helix of heterogeneity at that. Studies ranging from genetics (Lewontin, 1972) to meta-analyses of industry histories (Mairess & Griliches, 1990) all point to a possible fallacy in trying to categorize human behavior according to a priori traits or formal models. In other words, the evidence seems to suggest that heterogeneity is amazingly persistent and continues to appear at every level of analysis. Sarasvathy (2008) described three sources of unpredictability in human behavior as follows:

Whereas heterogeneity as defined here appears to be a species trait that shows up in behavior in spite of institutions that nudge, push, and even compel people toward conformity and coherence, liability and conceptuality appear to be just as likely to be driven through interactions with other individuals as being something innate and individual--i.e., inter-subjective, not merely subjective. Instead of starting with the assumption that human beings can a priori be grouped into stable categories in one way or another, what if we began our theorizing with the opposite assumption--that there are no stable categories; what matters is difference and change, continual flux of one sort or another? At first glance, this seems to make the problem of entrepreneurial (even all behavioral) research intractable and futile. But a second look suggests a productive opportunity for exciting new research. And that is the possibility that all categories are artificial--not in the sense of unreal and useless, but in the sense of carefully, yet interactively and iteratively designed (consider, for example, the U.S. Constitution) and/or emergent through patterned and path-dependent processes (such as technology ventures and standards bodies).

Another way to capture this argument is to begin researching entrepreneurship not only as a social science, but as a science of the artificial (Simon, 1996). Some specific lines of future research along these lines could include: attributing coherence in risk-taking behavior not only to innate traits but also to learned experience and deliberate practice; or, taking traditional conceptions of team building as finding members with shared interests who buy into the leader's vision, and adding to that a conceptualization of leadership as a process of designing goals from partially articulated and partially vague and inchoate preferences of a growing stakeholder network. The latter would be consistent with Geroski's (2003) argument that new markets come not only from well-articulated but unfulfilled demand, but also from inchoate demand that can be shaped through particular product offerings that allow them to coalesce into new preferences, needs, and wants.

Specifying the Role of the Entrepreneurial Method and the Mechanisms that Embody It

If we accept the thesis that entrepreneurship is a method such as the scientific method and/or a social force such as democracy, there is an enormous task ahead of us in specifying when and where exactly the method can be applied, not to mention considering in great detail the mechanisms that constitute the method and how they can be applied. We have argued in this article that the entrepreneurial method can tackle a wide range of problems in the human social realm. It is necessary, however, to investigate and explicate the problem space in more concrete terms. For example, when and how does the entrepreneurial method compete with other approaches such as scientific, regulatory, sociopolitical, etc.? More interestingly, perhaps, how can the entrepreneurial method complement and leverage other approaches, say, in the alleviation of poverty or in the achievement of social justice? We believe recent history is rife with natural experiments that can help tackle the task of greater specification of the problem space. Take the case of climate change, for example. Both nonprofit and for-profit entrepreneurial ventures compete with as well as leverage regulatory reform, R&D initiatives, corporate philanthropy, and international aid in this arena. It would be interesting, not to say impactful, to develop empirically grounded as well as a priori and formal theoretical frameworks that allow us to specify how exactly to mix and match synergistic strategies across different approaches and when and where to allow the methods to compete to let better solutions evolve.

The types of scholarly endeavors called forth by the task described above are also necessary at a more micro-level--namely in the case of particular mechanisms that embody the entrepreneurial method. With the historical advent of democracy as a form of political action, for example, voting mechanisms became a new area of research. Over decades of cumulative research, political scientists, economists, sociologists, legal scholars, and others have developed a vast body of work relating to a variety of voting-related phenomena (Riker & Ordeshook, 1968; Saari, 1989; Schuessler, 2000). We believe a similar fount of intellectual possibilities awaits us in connection with the entrepreneurial method. The mechanism of affordable loss in contrast with techniques such as DCF and real options (Dew, Sarasvathy, Read, & Wiltbank, 2009) provides a glimpse of one such mechanism. Bricolage is another such mechanism (Baker & Nelson, 2005). By mechanism therefore we mean specific learnable and teachable techniques such as those available in accounting, finance, and supply chain management. To be useful for becoming a building block of the entrepreneurial method, such mechanisms have to "hang together" logically--i.e., they have to be internally consistent with each other and "make sense" in terms of the overall purpose of the method, namely to unleash the potential of human nature to achieve desired ends and to generate viable and valuable new ends.

There exist several sources of data for building such mechanisms. Often these are data collected for other purposes. Take for instance the various types of stakeholder contracts that entrepreneurs enter into in building and growing their ventures. Several empirical studies in entrepreneurship use contracts as the basis for analyzing specific aspects of entrepreneurial performance. To cite but a few: Using alliance contracts as primary data, Weaver and Dickson (1998) challenged the importance of resource-based and environment-based factors in alliance performance and Reuer, Arino, and Mellewigt (2006) deepened our understanding of antecedents to governance choices. Franchisor-franchisee contracts have also proved useful in understanding how entrepreneurs create and manage relationships in trying to grow their ventures (Jambulingam & Nevin, 1999; Leblebici & Shalley, 1996). Other studies have looked into research (Deeds & Hill, 1999) and customer (Yli-Renko, Sapienza, & Hay, 2001) relationships and yet others have investigated the VC-entrepreneurial venture relationships through the design and ongoing management of "deals" and term sheets (Cumming, Schmidt, & Walz, 2010; Petty & Gruber, 2009). The relevant fact here is that a wide variety of contracts exist as potential data to examine how entrepreneurs craft and manage relationships with a wide variety of stakeholders. While these have mostly been used to understand performance of particular aspects of venturing, they could also be used as data to begin inductive theorizing about specific mechanisms (say equity versus debt) or particular relational preferences (say control rights over certain types of decisions and not others) that constitute the entrepreneurial method.

Why and how would these mechanisms matter? Until now, for the most part, we have focused on entrepreneurship as a phenomenon and we have tried to understand how to create the conditions for good entrepreneurial performance whether at the firm level or at the societal level. That is akin to asking "What explains the discovery of penicillin or plate tectonics?" or trying to understand the role of government funding in the nature and magnitude of scientific output. To specify the method of science or of entrepreneurship, however, we have to roll up our sleeves and actually observe experienced entrepreneurs in action, read their diaries, examine their documents and sit in on negotiations--as did the scholarly and humanistic literati of Bacon's time. And as we extract and codify the "real helps" of entrepreneurial thought and action, we need to figure out ways to embody them in particular techniques and mechanisms that we refine in the laboratory and the classroom with a view to carefully determining the logical relationships both between these mechanisms and how they connect to the unleashing of human potential. In short, we have an exciting time of hard work ahead of us.

Conclusion

In sum, we have argued here that by thinking of entrepreneurship as a subset of other disciplines such as economics or treating it as a setting for testing theories from these disciplines, we may be in danger of falling into a category error. One way out of this error is to reformulate entrepreneurship as a method of human action, comparable to social forces such democracy and the scientific method, namely, a powerful way of tackling large and abiding problems at the heart of advancing our species. This reformulation puts us on the brink of an exciting new endeavor encompassing pedagogy, policy, and practice in ways that are yet to be invented. Only if we choose to embark on this endeavor may we actively participate in and help shape a revolution that is already tiptoeing into the twenty-first century.