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  • University Entrepreneurship May Be Failing Its Market Test
  • Carl Schramm (bio)

One of the abiding ironies of business education is the now decades-old teaching of industry "best practices" to improve the performance of any organization, including how to improve the innovative capacity of a profit-seeking firm. For the uninitiated, this concept is as simple as its name suggests. To improve your company's performance, you look for the organization that does something better than everyone else and then copy it. If Procter & Gamble runs its packing line better than you do, by all means, copy its practice.

Such thinking may be a reason we are concerned about the slowing rate of innovation in America. If today's best practice is the standard for emulating, do any firms feel comfortable out on some "better than best" frontier? The very notion of "best practices" suggests the acceptance of a grand average. Except, of course, for those firms that are deemed the best practitioners of "innovation." In a recent book, Inside Real Innovation, Gene Fitzgerald and Andreas Wankerl and I argue that most older and larger firms forget how to innovate,1 a finding suggested long ago by Max Weber.2

Perhaps this is why we have, over the last three decades, intuitively embraced entrepreneurship as a way to bring more innovation to our economy. Indeed, as I have detailed elsewhere, it was the resurgence of entrepreneurial capitalism in the 1980s that got us out of the prolonged recession that characterized the Carter years.3

But the word "entrepreneurship" is beginning to sound a little like the concept of best practices—a phrase that is valued for its inchoate sense of being logical and a self-evidently valuable pursuit. What we mean when we speak of entrepreneur-ship appears to evade definition. Of course, entrepreneurship is connected to creating new profit-seeking firms. That's what might be called the conventional or [End Page 35] "economic" meaning. But common usage permits non-profits to claim that they are entrepreneurial (indeed, many college students want to be "social entrepreneurs"); faculty members doing research self-proclaim that they are "intellectual entrepreneurs," and, my favorite, "bureaucratic entrepreneurs," is a classification for innovative public employees thinking up new programs that cost taxpayers more money.

The risk in all this is that when everything is entrepreneurial perhaps nothing is. Is it time to speak with a new term? Maybe those who undertake the risks of starting a new for-profit company are really in the business of "firm formation." After all, as Daniel Spulber suggests, real entrepreneurs know the special skill of objectifying an idea into the productive realm of commerce.4 They can bring forth a new concept in a manner so concrete that it can be tested in a market context — people will pay for it in a pecuniary exchange? The business of firm formation is not for scaredy cats. There is no gloss of higher motive that many social entrepreneurs implicitly seek as they go about seeking donative funding—a market test of an entirely different nature.

The promiscuous use of the terms "entrepreneur" and "entrepreneurship" in the face of unsettled questions relating to the critical experience of creating new firms seems hardly to bother experts who are absolutely certain that they know just how to teach people to start them. Among this population are government policymakers, venture and angel investors, a plethora of mentor/investors who run new business "incubators" all over the country, and many academics who profess with certainty how the process unfolds as if starting a businesses yields to a prescribed and predictable path.

The typical university course introducing students to entrepreneurship is taught as if it were a settled, path-specific process, one that might parallel a surgeon's knowledge of how best to resect an appendix. In fact, there really is no settled knowledge of how firms are formed and become successful and achieve what Robert Litan and I call "scale growth."5 Notwithstanding the fact that at least six thousand professors teach and do research in the field, there is no fully developed canon of actionable insight.

A process that is essentially creative should be considered...


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