Abstract - Thesis Index - Next Chapter
This thesis sets out to develop a model of entrepreneurial action that takes its point of departure in entrepreneurs’ experiences of risk-taking, opportunity identification and the role of self [I].
Entrepreneurial action is widely acknowledged as an essential driver of industrial dynamics and growth. The insights and findings of authors like Joseph Schumpeter, Paul Romer (1986) and David Birch (1987) point to technological innovation and the entrepreneurial process as “the fundamental impulse that sets and keeps the capitalist engine in motion” (Schumpeter 1975: 83) in terms of industrial dynamics, economic growth and job creation. Still the majority of new firms fail (Kirchhoff 1997). This has prompted researchers to ask why some people become entrepreneurs [II] and how to best understand what from the outside may seem to be a group of ‘optimistic martyrs’ (Dosi and Lovallo 1997) who sacrifice themselves for the common good.
Economists have traditionally had problems addressing entrepreneurship since the motivations of entrepreneurial action in many respects defy the rigorous systematization that is the hallmark of the discipline (Baumol 1968). Still investigating entrepreneurship, not only on the micro level but also as a social and economic phenomenon, requires an understanding of the nature of entrepreneurial action (Swedberg 2000, Boettke et al. 2004).
Most authors agree that entrepreneurship is about doing things differently or in a non-routine manner, typically developing a venture (Katz and Gartner 1988) with the goal to make profit (Kirzner 1973). Some take an inclusive stance and extend entrepreneurship to non-profit organizations and cultural development (e.g. Steyaert and Katz 2004). Regardless of how the profit motive is viewed, entrepreneurs are typically defined as perceiving situations differently, especially exercising good business judgment in the face of uncertainty (Casson 2003: 14). By virtue of having a unique understanding of a certain situation, an entrepreneur is said to be in a position to bring forth new and potentially profitable innovations. However, just having different perceptions and ideas is not enough. Another crucial characteristic of entrepreneurs is that they ‘get things done’ (Schumpeter 1975). Entrepreneurs not only understand situations differently; they also act assertively to exploit such differences. Were this not the case, entrepreneurship would not have any economic or social impact. Entrepreneurship is thus about perceiving things differently but also getting things done. This combination of thinking and doing puts the notion of action at the center of entrepreneurship studies.
While entrepreneurship is a topic of investigation in many scientific disciplines, the field of economics has a unique influence. Many empirical investigations use methods from psychology and sociology, but it is typically economic discourse that defines the entrepreneurial character. Attempts to delineate the field of entrepreneurship studies also tend to rely on economic theories for both theoretical input and academic legitimacy (e.g. Venkataraman 1997, Davidsson 2003).
Most economists, however, are concerned with understanding entrepreneurship as an economic function, typically comprising innovation and coordination, and only speculate as to the detailed workings of entrepreneurial action. Van de Ven for instance noted that while innovation is very much the engine of Schumpeter’s theory of economic development “he is remarkably silent about the process of innovation, other than observing that they come from entrepreneurs” (Van de Ven 1992: 218). In spite of this limited interest in the specific nature of entrepreneurial action, or perhaps because of it, the most famous economists of entrepreneurship provide some rather inspiring speculations regarding the nature of entrepreneurial action.
“The importance of uncertainty as a factor interfering with the perfect workings of competition in accordance with the laws of pure theory necessitated an examination of foundations of knowledge and conduct. The most important result of this survey is the emphatic contrast between knowledge as the scientist and the logician of science uses the term and the convictions or opinions upon which conduct is based outside of laboratory experiments. The opinions upon which we act in everyday affairs and those which govern the decisions of responsible business managers for the most part have little similarity with conclusions reached by exhaustive analysis and accurate measurement” (Knight 1921: 231).
“What has been done already has the sharp-edged reality of all things which we have seen and experienced; the new is only the figment of our imagination. Carrying out a new plan and acting according to a customary one are things as different as making a road and walking along it. How different a thing this is becomes clearer if one bears in mind the impossibility of surveying exhaustively all the effects and counter-effects of the projected enterprise. Even as many of them as could in theory be ascertained if one had unlimited time and means must practically remain in the dark” (Schumpeter 1961: 85).
It seems that entrepreneurial action goes beyond a priori strategies and that understanding entrepreneurial action requires a closer examination of the convictions and opinions of practicing entrepreneurs as they create and develop ventures in the face of uncertainty. In line with this preliminary insight, the ambition of this thesis is to investigate key aspects of entrepreneurial action and in doing so develop a tentative action framework that takes its point of departure in the entrepreneurial life world [III]. Before this ambition can be more specifically formulated, the notion of action is briefly elaborated.
Action is often defined as behavior or activity that carries subjective meaning to the agent, i.e. doing something with a degree of intentionality or awareness. This is then distinguished from mere thought or from behaviors that happen mechanically (Care and Landesman 1968). This rather wide definition opens up for a number of alternative views, which are also reflected in entrepreneurship studies.
In entrepreneurship studies, most theories implicitly subscribe to some form of the ‘causal model’ of action (see Fig. 1). In this tradition, action is broken down into a combination of intentions and actions, i.e. cognitive or mental states exist in the minds of people and then cause specific actions (cf. Ajzen 1991). This suggests that external factors, intentions and performed actions can be analytically separated and also studied in relative isolation, often with one causing the other. The causal model of action is related to the functionalist paradigm that dominates entrepreneurship research (Grant and Perren 2002). Traditionally, studies have focused on how entrepreneurial actions are caused by personality traits (Delmar 2000), entrepreneurial intentions (Krueger at al. 2000), contextual pressures (Reynolds 1991), and the direct and indirect effects of the entrepreneurial climate (Carter et al. 2004). Many of these studies focus on a specific activity or event, such as the decision to become an entrepreneur, and try to empirically or theoretically identify the causing factors.
In recent years, scholars have also begun to investigate the actual behaviors of entrepreneurs as they take place over time. Typically these investigations focus directly on behaviors and pay relatively little or indirect attention to issues of meaning and intention (cf. Gartner and Carter 2003). By emphasizing either intentions or performed behaviors in isolation, these studies fail to capture important aspects of entrepreneurial action.
Figure 1. A causal model of entrepreneurial action (Krueger 2003).
There are, however, other explanations of action. Many philosophers and sociologists regard intention and action as inseparable and emphasize the importance of comprehending action from the point of view of an engaged actor (e.g. Merleau-Ponty 2002, Giddens 1979, Engeström 1987). If the previous tradition emphasized thinking and intentions as independent causes of actions, authors in this tradition focus more on praxis and reflection-in-action. In this tradition, concepts such as situatedness and social embeddedness become central for understanding human action. The embeddedness is also temporal, where time is seen as a continuous flow of nested events that are grounded in, but not bounded by, the present (Emirbayer and Mische 1998). Action thus takes place in different temporal-relational contexts where actors try to understand and reconstruct their understanding of the past in ways that make it possible to comprehend the emerging present, which in turn affects how the future is enacted.
Many influential organization-theorists emphasize experience and situatedness rather than reflection and planning in their action models (Weick 1979, Brown and Duguid 1991, Brunsson 1993). This approach is argued to be especially relevant for theorizing about creative and innovative action, which requires stepping beyond both rational and normatively oriented views of human action (Joas 1996, Spinosa et al. 1997). It is also reflected in writings that contrast traditional management with the uncertainties and creative demands placed on entrepreneurial action (e.g. Van de Ven 1986, Stevenson and Harmeling 1990, Gartner et al. 1992). The argument is that creative action cannot be understood as the unproblematic execution of a preexisting intention or as following directly from a socially given role designation. Instead, creativity is seen as grounded in a highly practical involvement with the world. Actions are typically intuitive or habitual, but these habits constantly encounter unexpected obstacles in the form of interrupted plans, unattainable aspirations, conflicting goals etc. As such obstacles are encountered, action situations have to be reconstructed to enable continued action. Such reconstruction does not merely serve to overcome obstacles on the path towards fulfilling given goals. Instead the way in which the action situation is understood, including perceived goals and meanings, changes when reconstructions take place. This means that action is not merely restricted by the situation; the situation partly, and in unpredictable ways, constitutes the action by forcing the actor to creatively respond to it. Creative action is thus the situated and imaginative enactment of a specific problematic situation that draws on the individual as a historically and socially embedded being for its resolution. Consequently, the socially embedded and historically experienced person-in-a-situation is seen as the basic point of departure for understanding action (cf. Engeström 1987, Dreyfus 1991, Joas 1996).
Figure 2 provides a schematic image of such a view. This model is taken from activity theory (Engeström 1987) and describes how intentional actions are always situated in a world of mediating instruments, explicit and implicit rules, and shared communities with certain work organizations. While this general view of action, i.e. as historically and socially situated, serves as the analytical point of departure in this thesis, this specific figure is only included for illustrative purposes and should not be seen as an analytical framework for the present investigation.
Figure 2. A model of socially and historically situated action (from Engeström 1987).
The situated view of entrepreneurial action is becoming more common in entrepreneurship studies. Sarasvathy (2001) describes entrepreneurship as a form of open-ended design work grounded in personal identity and network position. A number of authors use Giddens’ structuration theory to theorize issues of social embeddedness (Jack and Anderson 2002) and opportunity identification (Chiasson and Saunders 2005), with others more broadly invoking the linguistic turn to situate entrepreneurship within ongoing discourses (Hjorth and Steyaert 2004). A recent special issue in Entrepreneurship Theory & Practice on ‘alternative perspectives in entrepreneurship research’ explicitly encourages a step away from the dominant functionalist paradigm, with its emphasis on predefined goals and objective measurements, since such a view “tends to write individuals out of the story … and ignores the emotion and personal angst of entrepreneurs” (Jennings et al. 2005: 147; see also Steyaert and Katz 2004).
As seen above, both causal and situated perspectives are represented in entrepreneurship studies, with the overwhelming majority of studies belonging to the first category. There is also a tendency within the latter category to focus on situations to the detriment of individual initiative and agency. Hence there is a need for studies that view entrepreneurial action as situated practice, while retaining focus on the entrepreneur as a reflexive and strategically thinking subject.
The purpose of this thesis is to develop a model that explains venture creation and development in terms of entrepreneurial action. As opposed to behavior, entrepreneurial action is taken to be reflexive and always taking place in relation to specific situations and a broader social and historical context. A theory of entrepreneurial action that builds on the entrepreneur as a reflexive and engaged subject should consequently describe how entrepreneurs experience and conceptualize their actions as they create and develop their ventures.
The working hypothesis is that entrepreneurial action can be understood in terms of the interrelated themes of risk, opportunity and self. These themes are analytically connected in that entrepreneurs seek to attain future opportunities, however vaguely perceived, by taking risky actions that transform this vagueness into a (profitable) enterprise. They are also reflected in the literature. Hébert and Link review the history of economic thought and conclude that “Entrepreneurial action may mean creation of an opportunity as well as a response to existing circumstances. Entrepreneurial action also implies that entrepreneurs have the courage to embrace risks in the face of uncertainty” (Hébert and Link 1988: 159). What is perceived as a risk or a desirable opportunity depends on what stands out as relevant for specific entrepreneurs. This highlights the notion of self as a mediator between subjective and social/structural conditions. Entrepreneurship researchers have historically had a somewhat mechanical view of the entrepreneur with focus on specific personality characteristics, adaptation to structural pressures and more recently different entrepreneurial cognitions. In the present treatment the self is seen as a mix of subjective identity and internalized roles that continuously develop as a result of social interaction (cf. Mead 1934). This means that interpretations of risks and opportunities are both highly personal and influenced by specific situations, and as a result develop with experience.
To reiterate, the working hypothesis is that entrepreneurial action can be understood in terms of the interrelated themes of risk, opportunity and self. These themes are empirically investigated in a number of sub-studies that explore perceptions of risks and opportunities as well as the role of self among technology entrepreneurs, including how these issues are experienced and enacted as part of the venture creation and development process. The results of these studies are then brought together in a more general discussion of entrepreneurial action, with the final goal of proposing a tentative model of entrepreneurial action.
The thesis is structured as follows. Next comes a literature review that covers economic perspectives as well as research in the field of entrepreneurship studies. Following the literature review, the methodological assumptions and procedures are described in some detail. Then the appended studies are summarized and the results elaborated and discussed in terms of what a more general model of entrepreneurial action may look like. Thereafter the results are discussed in terms of theoretical, practical and methodological implications including some suggestions for future research.
[I] The self develops in the process of social interaction, especially in the interplay between the subjective and spontaneous I and the socially informed Me (Mead 1934). The notion of self provides the philosophical basis for inquiries into the self-concept, but is itself intractable for empirical investigation. The self-concept or identity, on the other hand, is the product of this process and consists of the way in which an individual views himself or herself (Gecas 1982). In this thesis the concepts of self, self-concept and identity are sometimes used interchangeably.
[II] Borrowing from Schumpeter, an entrepreneur is seen as a person who innovates, i.e. acts to develop an invention, and who sometimes also invents the underlying technology. In some of the appended studies the term ‘innovator’ is used as a synonym for entrepreneur.
[III] The notion of life world was introduced by phenomenologists such as Husserl and Schütz (van Manen 1990). The life world is the immediate and taken for granted world of everyday lived experience. This world is seen as the basis for all human knowledge, including the perceptions on which action is based. The life world is thus seen as more basic that the theoretical and conceptual worlds typically described by scientists and philosophers.