How to Resolve Entrepreneurship’s Split Personality Problem
Entrepreneurship as a higher education discipline has something of a split personality. Its roots are in practical instruction and business school curriculum operating as a trade or vocational school, supplying students with skills necessary to manage firms.
In the world of entrepreneurship, this roughly equates to How to Start a Business 101. Consequently, entrepreneurship programs provide practical and hands-on instruction on everything from imagination and ideation to market analysis and business plans. Courses frequently touch on starting businesses both within and outside the classroom.
Many of these aspects are simply expected of entrepreneurship programs, regardless of whether we’re talking about undergraduate majors and minors or graduate degrees. Most entrepreneurship students expect to learn how to become their own bosses during the course of their studies. In general, I’d say we meet these needs quite well.
On the flip side, entrepreneurship is a research discipline focused on empirical studies and theories. This is a significantly different arena, largely because there’s no such thing as theory of what drives success when starting a business or figuring out a future market. Rather, theory addresses how entrepreneurs are different, what makes something entrepreneurial, and the effects of entrepreneurship.
Here’s where the split personality emerges: Practice and theory are often seen as distinct — if not conflicting — goals and activities. Instead, they should complement each other. Entrepreneurs can gain a tremendous amount of insight by understanding how the market works, how to think about value and “demand,” and what effects entrepreneurship has on an economy.
A Multifaceted Theory
Entrepreneurship theory stretches all the way back to economist Richard Cantillon and the early 18th century. Despite that history, it’s still relatively immature as a theoretical field and body of research. Entrepreneurship theory might still be in its adolescence, but we’re making progress.
The theoretical side of entrepreneurship has largely been limited to applying concepts from separate disciplines. While it was firmly rooted in economics before World War II, modern economics has largely turned its back on entrepreneurship because the creative nature of entrepreneurship doesn’t fit formal models for analyzing markets. Others study entrepreneurship with a psychological bent, attempting to figure out what mental processes or states cause individuals to “take the plunge” and start their own businesses. Management and sociology have similarly left their own marks on entrepreneurship theory over the years.
I think of entrepreneurship as the overlap — or gap, I suppose — between psychology and economics. Rather than pure psychological processes, it’s the psychology of taking risks, aiming for the stars, and becoming one’s own boss. Instead of pure economics, entrepreneurship looks at what causes shifts in the economy and what sparks supply and demand curves.
Whether an entrepreneur is a hothead, an innovator, or someone who starts a business out of necessity, she is breaking new ground for herself and others. Relatively few of us are the sort of adventurers willing to embrace this risk and potential reward, but the power of entrepreneurship is undeniable. One person can disrupt the status quo and effectuate change to an entire economic system.
When Henry Ford released the Ford Model T in 1908, the Michigan-born entrepreneur probably didn’t realize the seismic shift his mass-produced vehicle would trigger. Fast-forward a century, and cars are woven into the fabric of society. Similarly, Mark Zuckerberg completely changed the way people interact with friends and family by launching Facebook in 2004.
The site grew from a small network of members to a massive 1.86 billion monthly active users (http://newsroom.fb.com/company-info/) by the end of 2016.
Numerous facets of entrepreneurship are relatively unexplored for the simple reason that neither psychologists nor economists feel completely comfortable with its wide-ranging subject matter. This uncharted territory is where entrepreneurship scholars thrive. It’s also where we find the heart and soul of entrepreneurship.
Connecting the Dots
When I teach entrepreneurship courses, I try to connect every entrepreneurial action — whether it’s market analysis, business planning, or product development — with the situation in which that given action typically occurs. Entrepreneurship is embedded in a specific economic, institutional, and social setting, and I’d argue entrepreneurs can improve their chances of success by truly understanding this “setting.”
I touch on this subject extensively in my book “The Seen, the Unseen, and the Unrealized,” explaining the entrepreneurial dynamic of the market economy from the ground up. While most of us understand the direct effect regulations have on businesses and the economy, we pretty frequently overlook the indirect consequences of those restrictions.
By understanding how to think about economics rather than simply studying formal models, entrepreneurs can learn and grow. A deeper understanding of market dynamics makes it easier to avoid simple mistakes and identify faulty assumptions and outright errors — and perhaps avoid bankruptcy along the way. Understanding of the market is a prerequisite for good business judgment.
Welcome to the promised land, where practice and theory overlap. When these two elements work in tandem, we have brilliant business plans that consider where the business is placed in its specific economic and social setting. A failure to understand this setting means the business plan will be “off” in some ways — something that could have been avoided with more theoretical knowledge.
A successful blend of practical skills and theoretical understanding gives us much better odds of educating and inspiring the next generation of successful entrepreneurs. Thus, they’ll be better prepared to avoid common errors and stave off failure.
This investment will benefit society, with these entrepreneurs fueling higher standards of living by contributing to and generating economic growth. We’re not there quite yet, but I hope we’re heading in the right direction.
Per Bylund is Assistant Professor of Entrepreneurship and Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. His areas of research are entrepreneurship, management and economic organization. Connect with him on Twitter.