revisited
William D. Bygrave
Introduction
In 1988, I had one doctorate in physics from Oxford University and was – to say the least – a mature student trying to finish my second doctorate, in business, at Boston University. I was a tenure-track associate professor of entrepreneurship at Babson College. Between my first and second doctor- ates, I worked in the USA and Europe for a Route 128 venture-capital- backed company – actually the first start-up ever to be backed by formal venture capital; founded a Route 128 venture-capital-backed company;
managed a small division of a high-tech company listed on the New York Stock Exchange; and while working on my second doctorate, I took an unpaid leave of absence from academia to co-found a medical database company that we eventually sold to a New York Stock Exchange company.
Along the way I had also been a business angel investor. I was born and brought up in a mom-and-pop business in England; many of my relatives in England owned mom-and-pop businesses. One of my enduring hobbies is the history of science, in particular physics.
Entrepreneurship scholarship at the end of the 1980s
In 1988, very few senior scholars were researching exclusively entrepre- neurship. Most tenured and tenure-track professors in the field of entre- preneurship had appointments in classic departments such as management, policy, strategy, finance and organizational behaviour. There were no departments of entrepreneurship on a par with the classic business school disciplines. For instance, at Babson College, which by 1989 was regarded as a leader in the emerging field of entrepreneurship, the department of entre- preneurship was part of the management division. To be a scholar solely of entrepreneurship was very risky in 1988 for an untenured faculty member because junior professors who had chosen that lonely career path had rarely received tenure, and as it turned out, a few well-known entrepre- neurship scholars were even denied tenure.
There were, however, glimpses that entrepreneurship was gaining legitim- acy as an academic pursuit: a few prominent business schools, most notably Harvard and Wharton, were making significant commitments to
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entrepreneurship. More and more endowed chairs in entrepreneurship were being funded. The annual Babson Entrepreneurship Research Conference with its proceedings,Frontiers of Entrepreneurship Research, was established in 1981; and in 1984 the first doctoral consortium was held in conjunction with that conference. In the USA, the Journal of Business Venturingwas founded in 1985, and in the late 1980s the American Journal of Small Business was repositioned and renamed Entrepreneurship Theory and Practice; in Europe, the Small Business Economics journal was founded in 1987. The Academy of Management reluctantly promoted entrepreneurship from a special interest group to a division in 1986 but did not organize an entrepre- neurship doctoral consortium until the early 1990s. Looking back to the 1980s, it is clear that the entrepreneurship paradigm was in the making.
Development as an entrepreneurship scholar
When I enrolled as a part-time student at Boston University’s School of Management’s doctoral program in 1981, I was the only student – out of more than 80 – who wanted to study entrepreneurship. There was no entre- preneurship department and only one faculty member who specialized in small business. Hence, I had to tailor my own program within the strategy/
policy group. By good fortune I knew Jeff Timmons, who was then at Babson College. Jeffinvited me to join him and Norman Fast (then vice president of Venture Economics) on a major research project on venture capital. Boston University allowed JeffTimmons to be my doctoral adviser.
In those days, earning a doctoral degree at Boston University was onerous. Students were required to have an MBA degree, and if they did not, they had to take MBA courses as well as doctoral courses. Between 1981 and 1989, when I finally completed my dissertation, I took at least a dozen courses or waiver exams at Boston University and received transfer credit for another half-dozen courses from my executive MBA degree.
I learned a great deal from some of the courses, but the most valuable learning came through the papers that I wrote in the seminars. Each paper was focused on my venture-capital research with JeffTimmons and Norman Fast; most of them were presented at the Babson Entrepreneurship Conference and published in Frontiers of Entrepreneurship Research, and some were published in the Journal of Business Venturing. As soon as I had completed the comprehensive exams at Boston University, I wrote a disser- tation based on those papers.
Origins of ‘The entrepreneurship paradigm: A philosophical look at its research methodologies’
To be frank, the doctoral program by and large was not an uplifting experi- ence. Too much of it was bogged down in pedantry that drove out
imagination and creativity. In my bleaker moments, earning a business doc- torate seemed more like a fraternity hazing than a celebration of intellect.
It felt as if I was earning my membership of a guild rather than discover- ing knowledge that would improve the practice of entrepreneurship. As soon as I had completed my doctorate, I rewarded myself by doing entirely different research for a few months.
I was already a reviewer for the three major entrepreneurship journals.
Probably because of my physics background, journal editors had asked me to review papers that tried to introduce the relatively new science of chaos theory into entrepreneurship. Reviewing them actually made me angry because it was obvious that the authors were being opportunistic and simply using ‘chaos’ as a buzzword. It was doubtful that the authors had even read Gleick’s book Chaos: Making a new science(1987) that popular- ized chaos theory, let alone understood even the most elementary math- ematics explaining it. My reviews were the harshest that I have ever written because the papers represented entrepreneurship scholarship at its worst. It was the kind of research that invited ridicule from our academic colleagues in established disciplines.
Partly out of remorse at being so harsh and partly out of curiosity, I decided to read some of the scholarly literature on chaos. That led me to develop mathematical models that were metaphors for entrepreneurial chaos. One of the most exhilarating moments in my life as a researcher was when I made an infinitesimal change to one of the model parameters and the beautifully smooth sigmoid curve representing the growth of an indus- try suddenly and quite unexpectedly broke up into numerous peaks and valleys on the computer screen. It certainly felt like entrepreneurial chaos.
At that point I intended to write a paper on chaos and entrepreneurship, but before embarking on such a task, I decided to look at catastrophe theory, which might be a metaphor for the entrepreneurial event. One thing led to another before I realized that ‘physics envy’ was getting the better of me. So instead of writing a conceptual article on chaos and entrepreneur- ship, I combined my thoughts on entrepreneurship methodology that had been presented to the doctoral consortium at Calgary in 1988 with my work on mathematical models that might be relevant to entrepreneurship theory.
It resulted in two papers, ‘The entrepreneurship paradigm (I): A philo- sophical look at its research methodologies’ (1989), reprinted in this book, and ‘The entrepreneurship paradigm (II): Chaos and catastrophes among quantum jumps’ (1989), followed by a third paper ‘Theorizing about entre- preneurship’, co-authored with Charles Hofer (1991). All three papers were published in Entrepreneurship Theory and Practice.
By 1989 I was already apprehensive about where the infant entrepre- neurship paradigm was heading. My principal concerns were that the field
was being driven more and more by theory often built on flimsy founda- tions; that the research method was becoming dominated by increasingly complex statistical analysis, predominantly SPSS; that there was a dearth of field research; that there were far too few longitudinal studies; that too many studies were on secondary data sets; that too many of the primary data sets were produced from self-reported subjective questionnaires; and that we needed to keep in mind that entrepreneurship is holistic and tends to decompose when researchers try to break it into its component parts.
Assessment of entrepreneurship research in 2005
Let’s see where we have made progress in the last 17 years, and where, in my opinion, we have either stood still or regressed. But before you read this section, I ask you to read the following three articles: ‘How business schools lost their way’ (Bennis and O’Toole 2005), ‘Issues of research design and construct measurement in entrepreneurship: The past decade’ (Chandler and Lyon 2001); and ‘What entrepreneurship research can do for business and policy practice’ (Davidsson 2000).
Demographics of entrepreneurship scholarship
In 2005, there are hundreds of chairs in entrepreneurship at universities throughout the world. The field has grown so rapidly that the demand for entrepreneurship academics is still outstripping the supply. Top scholars are in great demand to fill endowed chairs and as a result salaries have shot up. The number of entrepreneurship doctoral students increased steadily throughout the 1990s and continues to rise. This can be exemplified by looking at the number of students applying to attend the annual Babson Entrepreneurship Research Conference doctoral consortium. This figure has increased from approximately 30 per year in 1990 to more than 80 in 2005. Many more scholars are studying entrepreneurship and they are producing more and more research, as can be seen from the number of abstracts submitted to the Babson Entrepreneurship Research Conference, which rose from 39 at the inaugural conference in 1981 to 354 in 2001 to more than 600 in 2004. What’s more, there is now a proliferation of entre- preneurship conferences throughout the world. Likewise, the number of journals dedicated to entrepreneurship and related fields such as family business has multiplied. However, the question remains, what has this growing army of scholars labouring inside and around the perimeter of the entrepreneurship paradigm produced?
Longitudinal studies
Perhaps the most important advance in the field is the longitudinal studies that have been undertaken or are now under way. The most prominent one
on the world stage is the Global Entrepreneurship Monitor (GEM), which since 1999 has been making annual surveys of the state of entrepreneurship in 46 countries that comprise more than 90 percent of the GDP and two- thirds of the population of the entire world.1 More than 120 scholars throughout the world are involved with GEM research. To date more than 620 000 household interviews have been conducted, as have 5000 interviews with key informants. The long-range objective of GEM is to explain the role that entrepreneurship plays in the growth of national economies, a goal that is breathtakingly ambitious – some might even say arrogant. GEM results are already being used by national governments to help set policies to stimulate entrepreneurship at the national level and in some countries such as Germany, the UK and Spain at the regional level.
GEM built on the research method that was used by the Entrepreneurship Research Consortium (ERC) study, which was started in the mid-1990s, and the US Panel Study on Entrepreneurial Dynamics (PSED) study, which is another noteworthy longitudinal study. PSED’s method has stimulated similar studies outside the USA.
There is still room for more longitudinal studies because according to Chandler and Lyon (2001) only 7 percent of the 416 empirical entrepre- neurship articles published in nine journals between 1989 and 1999 were
‘true’ longitudinal studies. Further, studies of companies as they develop from conception to adolescence are almost never in real time, which is also a severe shortcoming.
Data sets
Some primary data sets such as the GEM household survey (adult popu- lation survey), and GEM key informant interviews, and the PSED are extensive and good but nonetheless have flaws. Too many primary data sets are compiled from subjective replies to multiple-choice questions adminis- tered to anonymous respondents via phone, postal mail or email. Chandler and Lyon (2001), for example, found that 195 entrepreneurship articles in their survey used only primary data sets, of which a whopping 142 used paper or phone questionnaires with multiple-item scales. That might be satisfactory when surveying mom-and-pop businesses, but does anyone imagine that busy entrepreneurs with high-potential businesses have time to respond? Or worse yet, does anyone really believe that general partners of leading venture-capital funds respond to such questionnaires? Having said all that, there is one noticeable improvement in primary data sets:
nowadays, unlike 20 or more years ago, we almost never see research based on questionnaires administered to students.
Too much research is based on convenient, readily available secondary data sets. There are, for example, far too many papers on venture capital,
which funds only one out of 10 000 start-ups, and IPOs (initial public offerings), which fund even fewer businesses. On the other hand there is a shortage of research into bank financing. And there is a dearth of research into funding from informal investors – the so-called 4Fs, founders, family, friends and foolhardy strangers – who fund virtually every new business.
The amount of research is inversely proportional to the importance of the funding source to entrepreneurs. This situation became so acute that the 2002 Babson Entrepreneurship Research Conference deliberately capped the number of venture capital and IPO papers to 20 percent of all the abstracts accepted.
Statistical analysis
There is far too much complex statistical analysis, almost always with SPSS. For example, approximately 395 of the 416 articles surveyed by Chandler and Lyon used statistical analysis; 78 percent (of the 395) used factor, correlation, regression, discriminant or cluster analysis; 9 percent used analysis of variance; 7 percent used logistical regression; and 10 percent used non-parametric statistics. Only 13 percent simply compared means with T-tests. We are now so addicted to SPSS that my 1990 tongue- in-cheek comment that our leading journals should print on their mast- heads ‘Let no one ignorant of SPSS publish here’ is in danger of becoming a reality.
But my greatest gripe with statistical analysis in entrepreneurship is that it is a study of central tendency, whereas Schumpeterian entrepreneur- ship is all about outliers – sometimes extreme outliers such as Wal-Mart, Southwest Airlines, FedEx, Intel, Microsoft, Genentech, Apple, Dell, Amazon.com and eBay that rearrange the economic order. Another related gripe is that when we make a random survey of entrepreneurs or would-be entrepreneurs in the general population, we almost always fail to acknow- ledge that half the respondents in our data set are part-time entrepreneurs, and half the full-time entrepreneurs have no employees other than them- selves. Hence only one-quarter of the respondents have or intend to have employees, and less than 10 percent of those have businesses that have or expect to have at least 25 employees. Thus a data set of 200 responses has only 50 full-time entrepreneurs with employees and only five with 25 or more employees. Put another way, the data set is dominated by part-time and mom-and-pop businesses – hardly the kind of data set from which we should make generalizations to guide our undergraduate and MBA stu- dents with entrepreneurial ambitions. No way is this belittling the import- ant role of mom-and-pops in society; it’s just that I don’t believe that we can learn a lot from mom-and-pops which is relevant to high-potential entrepreneurs.
Theory
No doubt about it, one of the most noticeable differences between articles published in the 1980s and those published today is the increase in the pro- portion of papers with theoretical front ends. In 2005, except for a few rare instances, it is impossible to get a paper without a theory section accepted for publication in a top entrepreneurship journal. This is an issue where I disagree most profoundly with the journal editors and most members of review boards. It seems to me that more often than not theory developed from sociology, psychology and economics tends to develop esoteric or mundane hypotheses that are of little or no value to the practice of entre- preneurship. Chandler and Lyon (2001) found that 30 percent of all the entrepreneurship articles published in ‘A’ journals had no empirical data.
Hence plenty of theory-only papers are being published, so why are editors and reviewers insisting that empirical papers have conceptual front ends?
Reflecting on the first few years of the Journal of Business Venturing, it appears that, in general, authors and reviewers back then had a better sense of what was important to the practice of entrepreneurship. True, authors spent little – if any – effort to root their articles in theory, nor did they use unnecessarily complex statistical machinery, but they had something very important to say to practitioners. What I have in mind is Timmons’s work that helped to set up a classification scheme for venture capital; Wetzel’s pioneering work on angel investors that led to setting up angel networks (Wetzel 1987); and Sahlman and Stevenson’s seminal article on capital market myopia, which is one of only a few journal articles that venture cap- italists and investment bankers have ever read (Sahlman and Stevenson 1985). None of those papers would have been accepted by today’s gener- ation of reviewers; even worse, they almost certainly would have rejected David Birch’s seminal work on job creation, which was published at the end of the 1970s.
Can anyone think of any article published since 2000 in our leading jour- nals that has had as profound an effect on practice as some of the articles published in the 1980s? I should have seen the trend coming in 1988 when one of the reviewers of an article on rates of return of venture capital, of which I was a co-author, commented that it should be presented at a practitioner conference, not the annual conference of the Academy of Management because it lacked theory. Forgive me if this sounds boastful, but the findings in that paper were the most important that I have ever dis- covered. It changed forever venture capitalists’ and their investors’ expec- tations of rates of return.
A more recent example is an anonymous reviewer who rejected an IPO paper submitted to a leading journal because it did not have a strong enough theory section and its empirical method did not pass muster. (I was
the other reviewer of the paper.) Unfortunately, the reviewer’s critique revealed that he or she did not know what a secondary offering was! For all I know, that reviewer might have an encyclopaedic knowledge of finance theory and might have complete mastery of the armamentarium of statis- tics for the social sciences, but clearly he or she is ignorant of very basic practical aspects of raising money on public markets. As a result a solid paper on a current topic of substantial interest to practitioners was not published.
My own publications demonstrate that I do believe in theory develop- ment. It is simply that I am opposed to making theory a prerequisite for an empirical paper. I repeat what Isaac Newton, the greatest natural philoso- pher of all time, wrote: ‘Hypotheses non fingo.’ Newton was not only one of the greatest experimentalists, he was also perhaps thegreatest theorist who has ever lived. He believed that hypotheses should be induced from experiment and that in sound physics every proposition should be drawn from phenomena and then generalized by induction. I much prefer to heed the findings of a well-designed empirical study with generalizable findings relevant to the practice of entrepreneurship than a paper with hypotheses derived almost entirely from theory.
Recently, I read Eve Curie’s touching biography of her mother, Marie Curie, and re-read a compilation of some of the major papers of Luis Alvarez. Curie and Alvarez were two of the greatest experimental physicists of the twentieth century. Both made discoveries that earned Nobel prizes.
Nowhere in their articles do you find a theoretical front end from which they derived hypotheses. If we entrepreneurship scholars want to emulate – albeit subconsciously – the hard sciences, then let’s not insist that every paper must have a theoretical front end.
Future of the entrepreneurship paradigm
If we continue on our present path I am not optimistic about the future of the entrepreneurship paradigm. Look at the evidence: it’s almost impossi- ble to get an empirical-only paper published in an ‘A’ journal no matter how important its findings; our method is almost exclusively quantitative – 95 percent of the entrepreneurship articles published in nine ‘A’ journals used statistical analysis; our prime instrument is the questionnaire – 35 percent of the ‘A’ articles used phone or paper questionnaires with multiple-scale items; only 10 percent were based on interviews, and less than 1 percent on observation; it’s extremely difficult to get qualitative research published in
‘A’ journals; and much of our research is on mom-and-pops instead of high-potentials. Truth be told, our studies derived from theory and driven by methodology produce mostly pedestrian findings that are of little or no interest to practitioners.