Next Monday, 18 November 2019, marks the beginning of the Global Entrepreneurship Week 2019. To celebrate it, as an enthusiast doctoral researcher in Entrepreneurship, I thought to get in touch with a legend in the entrepreneurial research field, Paul D. Reynolds.
Currently an Honorary Professor at Aston Business School, Birmingham (UK), in 2004 he received the annual Swedish International Award for Entrepreneurship and Small Business Research, the leading Prize for outstanding research contributions in the area, and in 2012 the Dedication to Entrepreneurship (Research) Award from the Academy of Management Entrepreneurship Division, a recognition given to individuals or organizations for activities that have significantly advanced the field of entrepreneurship.
Indeed, over the past four decades, he has been the author or the co-author of five books, seven edited collections, forty-two research reports and monographs, eighty-five peer-review journal articles and book chapters, eight data sets placed in public archives, not to mention over two-hundred presentations to professional and policy audiences.
He also served as the director of the Babson Research Conference from 1996 to 2000 and as co-director of the George Washington University-ICSB research conference from 2010 to 2012.
To maximise my chances of success, I asked Edward Elgar Publishing for a review copy of his latest fatigue, Business Creation, Ten Factors for Entrepreneurial Success, which they promptly provided to me.
Using data from two U.S. PSED cohorts, acronym which stands from Panel Study of Entrepreneurial Dynamics, research programmes designed to improve the scientific understanding of how people start businesses, he investigated the nature of the start-up process.
Addressing three main questions on what the actions to increase participation in business creation should be, how to increase the proportion of nascent ventures that reach profitability, and how to reduce the social costs associated with business creation, he eventually dragged down ten lessons to bear in mind for nascent entrepreneurs, scholars, and policy-makers alike.
Those include, for example, advice on how to put nascent entrepreneurs at ease in the transition from a start-up initiative into a profitable new firm and how to get more people involved in pursuing entrepreneurial careers.
I have loved reading the book. Packed with data and best-in-class analysis, this is not the typical book on how to start a business. It requires time to be properly digested and I am still in the process. But the narrative style used throughout the text helps the reader to fully enjoy the volume. An example? He writes:
“Money doesn’t start businesses, people do. But people often need money for two things to complete the start-up process. The first are the living expenses of the start-up team; everybody needs to eat and a place to sleep. The second is for resources to implement the new venture. There is a substantial variation in both the amount of funds required and when financial support is needed during the start-up process. There are, of course, a wide range of solutions developed for these challenges. New solutions for acquiring financing are constantly being invented – internet based crowdsourcing being one of the more recent.”
Happy to have a chat with me, after a few technical issues, we managed to get our conversation going.
Oliver*: Hi Paul and thank you for your time. My first question is: in your book you argue that entrepreneurship is a social experience. What do you think about alternative finance tools as those seem to amplify this aspect?
Paul D. Reynolds: By a “social experience,” the focus was on the immediate social networks of the nascent enterprise… roommates, spouses, family, significant others, colleagues… and so on.
Social media fundraising over the web is an entirely different matter—there is not an ongoing social relationship with those that send in funds over the internet. As a charitable contribution, it may work. But it is a risky way to get equity investments, as the legal status and relationship to the venture of those that make such an ”investment” is very ambiguous, at least in the States.
A start-up team would need to be careful on how they manage such fundraising.
Oliver*: What do you think is the role universities can play nowadays in helping entrepreneurship thrive?
Paul D. Reynolds: Thrive is an ambiguous term. Business creation involves several stages, entering the start-up process, reaching initial profitability, and growth as an established business.
What the best universities can do is (1) provide training to help students learn the basics of business creation and (2) through their role in R&D provide new information that may be successfully commercialized.
The role of research universities in creating new knowledge is important. There is a considerable amount written on how technology transfer operates. Coursework that will facilitate efficient business creation can be very useful in helping potential entrepreneurs identify and commercialize new ventures.
Since more than half of start-ups never reach initial profitability, this should include guidance on when to abandon a venture. How to ensure that new firms grow, post initial profits, in a responsible fashion is another topic where there is considerable attention.
The major contribution of university-based training in business creation is that it prepares students, most of whom get jobs after graduation, to move forward with business creation when they identify a promising opportunity in their work career.
Oliver*: How do you think business creation would be affected by recent trends like climate change, impact investing, and purpose trends? Do you think younger generations will embark more on the entrepreneurial journey?
Paul D. Reynolds: Over 90% of business creation is an ongoing process of replacing existing businesses with new firms that are doing a slightly improved version of the same thing.
A newly trained plumber replaces one that retires, etc. the proportion of new firms that represent a dramatic change from the past or involvement with new issues, like climate change, are a tiny proportion of the total.
New sources of energy and a focus on new social problems get a lot of media attention, but it is a small proportion of the total activity. There will be new business opportunities as new technology emerges and new social problems are recognized and this will lead to some business creation, but the changes for the total population of business creation will be incremental.
Oliver*: The last one on income inequality and business creation. We live in what has been defined as the “Rottweiler Society”. Do you think entrepreneurship could play a role in wealth redistribution?
Paul D. Reynolds: From the beginning time, the major challenge to the established economic order has been business creation. Once an economic order is established, the economic elites often work with the political elites to maintain their excessive share of economic rewards.
This often occurs by establishing monopolies or discouraging business creation (think North Korea). If successful, the result is economic stagnation, as new technologies and products are not introduced into the economy.
The challenge for political leaders is to ensure that a vigorous entrepreneurial sector is present and that a “circulation of economic elites” can occur with a minimum social cost.
P.S. The eBook version of Business Creation, Ten Factors for Entrepreneurial Success is priced from £22/$31 from Google Play, ebooks.com and other eBook vendors, while in print the book can be ordered from the Edward Elgar Publishing website. Disclaimer: I am not taking anything out of it. Enjoy the reading.