Saturday, April 07, 2012

Entrepreneurship: The Gap Between Theories and Practice

Kate Maxewell of the Kauffman Foundation writing at the Growthology blog observes of the chasm between entrepreneurial literatures and entrepreneurs in action (bold emphasis mine)

In my reading of the entrepreneurship literature I have been struck by the large gap between entrepreneurs and people who study entrepreneurship. The group of people who self select into entrepreneurship is almost entirely disjoint from the group of people who self select to study it. Such a gap exists in other fields to greater and lesser degrees. Sociologists, for instance, study phenomenon in which they are clearly participants whereas political scientists are rarely career politicians but are often actors in political systems.

But in the case of entrepreneurship the gap is cause for concern. My sense is that all too often those studying entrepreneurship don’t understand, even through exposure, the messy process of creating a business, nor, due to selection effects, are they naturally inclined to think like an entrepreneur might. At Kauffman, we have had multiple scholars say to us that they’ve found that talking to entrepreneurs is useful in their research.

This should be obvious, but it’s not. The result is research that can lack grounding, perspective and credibility. As a researcher I understand the natural impulse to keep things neatly ordered so as to create elegant papers and clear conclusions. But the fact of entrepreneurship is that it is anything but pretty or neat. More importantly, the research product resulting from such a disconnect can present a distorted view of the entrepreneurial process that may actually hinder our understanding of it. Such ill-informed research can then go on to form the basis of a policy directed at entrepreneurs – without ever having involved or understood them.

Like investing in markets, theories and practice are often detached. Yet many cling to the barnacle of academic mirages that perceives entrepreneurship as rigorous methodological science.

And as I earlier pointed out entrepreneurial traits are not acquired from books or from the academia and don’t require ‘new attitudes’. Instead they emanate from observation, knowledge, the willingness to learn from failure, and most importantly, the desire to undertake activities that profits from risk ventures through servicing or producing for the consumers.

As the great Ludwig von Mises pointed out, (bold emphasis added)

In order to succeed in business a man does not need a degree from a school of business administration. These schools train the subalterns for routine jobs. They certainly do not train entrepreneurs. An entrepreneur cannot be trained. A man becomes an entrepreneur in seizing an opportunity and filling the gap. No special education is required for such a display of keen judgment, foresight, and energy. The most successful businessmen were often uneducated when measured by the scholastic standards of the teaching profession. But they were equal to their social function of adjusting production to the most urgent demand. Because of these merits the consumers chose them for business leadership.

In short, as part of human action entrepreneurship represents more a work of art—which attempts to satisfy the preferences and value scales of consumers—than of science.

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