EMERGING ISSUES IN ENTREPRENEURIAL RESEARCH

Anna Grandori

Università Bocconi

Milano

ESU Conference 2009

Benevento

A GENERAL TREND

• Unconclusive empirical results and declining attention about the special ‘attributes’ of entrepreneurial personality (Gartner 1989)

• Emerging themes and increased attention about teachable and prescribable structural, process and relational aspects

[A healthy turn, away from the ‘mystique of

leadership’(Popper 1989) and from ‘fundamental attribution errors’ in research]

PROCESSES : cognition and innovation

Rather than possessing special (unreplicable) personal attributes, successful entrepreneurs follow effective ( replicable) cognitive processes and heuristics:

- ‘Entrepreneurial cognition and decision making’ (Gustaffson 2006)

[A revival of the Simonian legacy in entrepreneurship research]

RELATIONS : Networking and Innovation

The generation and exploitation of new ideas is no (longer) a ‘one man show’:

- ‘Entrepreneurial networks’ (Burt 2002; Harrison 2006; Castilla et al 2000; Andretsch and Litan 2009; Graf 2006 )

STRUCTURES : Knowledge governance and Incentives

The generation and exploitation of new ideas can be systematically sustained by organizational structures that provides appropriate mechanisms and incentives for knowledge creation and exchange – both in the founding of ‘entrepreneurial firms’ and in ‘corporate entrepreneurship’ practices

- ‘Entrepreneurial governance’ and the ‘organization of entrepreneurship’ (Casson 2003; Alvarez and Barney 2007; Grandori and Hayton forth)

ENTREPRENEURIAL GOVERNANCE

In a structural view • the entrepreneur is neither a capitalist

nor a worker, but is the ‘organizer of production inputs’ (Say , Schumpeter)

• providing directive labor services and investing human capital, in exchange of property rights (residual reward rights and asset ownership rights) (Knight, Alvarez and Barney 2007)

‘Entrepreneurial governance’

Entrepreneurship is therefore as important and central to the economy as a mode of governance of production, alternative to ‘capitalistic’ and ‘collective’ governance of the enterprise (Williamson 1980); a distinctive form of enterprise (Alvarez and Barney 2007)

[ Hence, entrepreneurship may be ‘innovative’ but also ‘replicative’; and the second is also important for motivational if not for knowledge reasons, as it is an alternative to the growth of a single firm ( Marshall, Cantillon )]

Entrepreneurial Governance

A structural view of entrepreneurship as a form of governance explains, predicts and prescribes hybrid solutions as:

• A mix of ‘corporations’ and ‘entrepreneurial firms’ as a reform of economic systems in the present crisis: a turn, or return, to ‘entrepreneurial capitalism’ as ‘good capitalism’ (Baumol et al 2007)

• A mix of the ‘corporate form’ with the ‘entrepreneurial form’ of firm governance as a clear definition of ‘corporate entrepreneurship’ (Grandori and Hayton forth)

Specific Issues in Entrepreneurial Governance

Beyond the well-established law that VC and FA are effective forms of financing innovative new firms (Clarisse et al. 2006) :

• Is it better (for the VC seen as ‘principal’) to bet on the ‘horse’ (the project) or on the ‘jockey’ (the team)? (Kaplan and Stromberg 2009)

• How can human capital be ‘locked-in’, if at all (Blair 2003) ? Is human capital entirely ‘inalienable’ and ‘non contractible’ or can it be invested in new firms through partnership (rather than principal-agent) contracts (Grandori 2009)?

Specific issues in ‘Entrepreneurial Cognition and Innovation’

Beyond avoiding biasing ‘heuristics’ (e.g.Gustaffson 2006) good innovative entrepreneurship can be sustained by the use of logically sound ‘heuristicsfor discovery’, such as:

• ‘systematic search’ (Fiet 2002, 2008) and research (Taghart and Croft 1999)

• ‘effectuation’ (Sharavasty 2001)• ‘exaptation’ (Villani et al 2008)• ‘robustness’ and ‘multipurposedness’ (Grandori 2007)• ‘real option’ reasoning (Mc Grath 1999)• ‘design’ logic (Liedtka 2000)• ‘theoretical abduction’ (Grandori 2007; Felin and Zenger 2009)

A case on ‘good entrepreneurial heuristics’

The olive water hypothesisThe olive water hypothesis““I am a chemist by training. I founded 5 firms in 25 years. I am also found I am a chemist by training. I founded 5 firms in 25 years. I am also found

of natural food and environment friendly agriculture.of natural food and environment friendly agriculture.My last firm actually was born also thanks to the cultivation of that side My last firm actually was born also thanks to the cultivation of that side

interest. I was thinking of buying a piece of land in Tuscany to spend interest. I was thinking of buying a piece of land in Tuscany to spend some holiday time, cultivate olive trees and produce extra-virgin high some holiday time, cultivate olive trees and produce extra-virgin high quality oil.quality oil.

In reading and studying about oil production I first discovered that in old In reading and studying about oil production I first discovered that in old times (even back to the Greeks and Romans) oil was not produced by times (even back to the Greeks and Romans) oil was not produced by pressing the entire olive, as it is nowadays mostly done, but by pressing the entire olive, as it is nowadays mostly done, but by pressing only its pulp. Being a chemist, I first gathered evidence that pressing only its pulp. Being a chemist, I first gathered evidence that indeed, not only is the juice from pulp sweeter, but that there are indeed, not only is the juice from pulp sweeter, but that there are harmful components coming from seeds, that increase the acidity of harmful components coming from seeds, that increase the acidity of oil (which in fact is then treated and sweetened with additional oil (which in fact is then treated and sweetened with additional substances).substances).

Visiting some farms to see if any had kept some equipment for pressing Visiting some farms to see if any had kept some equipment for pressing olives separately from seeds, I made a second discovery. In the olives separately from seeds, I made a second discovery. In the process of olive pressing (with or without seeds), the liquid produced process of olive pressing (with or without seeds), the liquid produced is stored so as to let oil separate from water, and the water is thrown is stored so as to let oil separate from water, and the water is thrown away.away.

My economic and environmentalist mind made me think: What a waste!My economic and environmentalist mind made me think: What a waste!

A case on ‘good entrepreneurial heuristics’

……segue The olive water hypothesissegue The olive water hypothesis

My scientific and chemist mind me advance the question: ’Do you know what you are My scientific and chemist mind me advance the question: ’Do you know what you are throwing away? Have you ever analyzed that water?’ No they hadn’t. The throwing away? Have you ever analyzed that water?’ No they hadn’t. The hypothesis coming to my mind was the ‘waste water’ (actually a costly and hypothesis coming to my mind was the ‘waste water’ (actually a costly and problematic disposal problem for the industry) could contain precious chemical problematic disposal problem for the industry) could contain precious chemical components. After all some of the beneficial substances present in olive oil may components. After all some of the beneficial substances present in olive oil may well have been present in olive water. I had the water analyzed.well have been present in olive water. I had the water analyzed.

The answer was yes, olive water was very rich in highly beneficial poliphenol, with The answer was yes, olive water was very rich in highly beneficial poliphenol, with tremendous antioxidant capacity, found mainly in olives, responsible for most tremendous antioxidant capacity, found mainly in olives, responsible for most extra-virgin olive oil health benefits, and contained in olive water 300-500 times extra-virgin olive oil health benefits, and contained in olive water 300-500 times more.more.

The possibilities of uses were to be defined, but with that anti-oxidant capacity they The possibilities of uses were to be defined, but with that anti-oxidant capacity they couldn’t be few.couldn’t be few.

I patended the process and constituted the firm, which extracts the poliphenol I patended the process and constituted the firm, which extracts the poliphenol through a proprietary process and technology , and provide it to pharmaceutical, through a proprietary process and technology , and provide it to pharmaceutical, healthcare, agriculture, and food industries and still other applications sectors. healthcare, agriculture, and food industries and still other applications sectors. We also directly produce some dietary products employing the substances”.We also directly produce some dietary products employing the substances”.

Source: Grandori A.Source: Grandori A. ‘Unbounding bounded rationality: A heuristic model of rational ‘Unbounding bounded rationality: A heuristic model of rational discovery’ Columbia Workshop of Knightian Uncertainty, discovery’ Columbia Workshop of Knightian Uncertainty, New York 7-8 september New York 7-8 september 20072007

Specific issues in ‘Entrepreneurial Networks’

Besides the well established fact that connections sustain opportunity recognition and creation, increase founding rates and decrease death rates (e.g. Dubini and Aldrich 1991; Burt 2002; Harrison 2006; Castilla et al 2000; Andretsch and Litan 2009; Gilsing 2005; Graf 2006 ),

• Is it better for an entrepreneur to hold diverse relations, bridge structural holes, set up networks with ‘small world properties’; or to cultivate cohesive, strong tie, similarity based networks (Stuart and Sorenson 2007)? Or most likely both?

• The role of proximity and geography: having clarified that that there are costs and benefits to proximity of various kind (Graf 2006); how actually devising ‘optimally distant’ ties or optimal mixes of close and far ties?

• Emerging attention to Regional (rather than National) systems of innovation as the most promising level of entrepreneurial networking – not only in the European ‘networked and territorial capitalism’, but also in the US (Corona et al 2006)

The ORGANIZATION of ENTREPRENEURSHIP

The typical proposition informing research on organizational architectures and ent’ship, has been that the ‘opposite of bureaucracy’ is effective : ‘flexibility’, ‘autonomy’ , ‘knowledge sharing’, ‘teamworking’, ‘networking’, ‘powerful incentives’ – both in corporations (Miles et al 1997, Hayton 2005), and in entrepreneurial firms (albeit less studied – Baharami 1997, Baron and Kreps 2000); as well as in external networks (Andretsch and Litan 2009 )

Specific issues in the ORGANIZATION of ENTREPRENEURSHIP

There are puzzles and open issues though:

- Trade – offs between autonomy and the pursuit of personal interests (Foss et al 2007)

- Negative or positive complementarities between ‘bureaucratic’ practices, ‘market-like practices’ and ‘communitarian practices’ for innovation outcomes (Roberts 2004; Zenger and Hesterley 1997; Laursen and Manke 2005; Stark 2007; Grandori and Furnari 2008)?

- How to reconcile the need for people mobility with human and technical asset specificities, both important for innovation (Grandori 2003)? And with the establishment of trust (Meyerson et al 1996)? And with the continuity of the firm (Pennings et al. 2007)?

Specific issues in the ORGANIZATION of ENTREPRENEURSHIP

(.. puzzles and open issues):• Emerging firms have been said to exhibit

‘structural inertia’ and maintain their original ‘organizational imprinting’ (Baron-Hannan SPEC Project)? Is that contention really empirically supported? If at all, is it a case in positive or negative rigidity?

• Growth is typically assumed to be an indicator of entrepreneurial performance (Davidsson et al 2006 ). But is it sound? Shouldn’t we ask how much precisely should (different types of ) entrepreneurial firms grow?