Tuesday, September 29, 2015

Reading :: The Culture of Entrepreneurship

The Culture of Entrepreneurship
Edited by Brigitte Berger

This collection is the product of a 1990 conference by the same name, supported by the Institute for the Study of Economic Culture. It "explores the cultural dimensions of modern entrepreneurship" through contributions by "economists, anthropologists, sociologists, political scientists, and management experts" (p.1). Let's dip into two of these contributions.

In Ch.3, "The discovery and interpretation of profit opportunities: Culture and the Kirznerian entrepreneur," Don Lavoie argues that we need a theory of entrepreneurship that "should help us identify the conditions—economic, political, legal, and cultural—that enhance decentralized developmental processes" (p.33). Unfortunately, on the one hand, entrepreneurship is typically treated in terms of individual psychology, not culture (p.34); on the other hand, anthropologists understand culture, but have focused on "statics rather than dynamics" (p.35). "In other words, the study of the relationship between culture and entrepreneurship demands working with both meaning and economic change, whereas the way disciplinary divisions have evolved, few researchers are capable of handling both categories together" (p.35). Similarly, Lavoie argues, "economists have failed to leave room for meaning and have not done well with change either"—especially the radical change that is associated with entrepreneurship (p.35).

Lavoie argues that "culture has everything to do with" the entrepreneurship process; entrepreneurship "fundamentally consists in interpreting and influencing culture" (p.36). So: what are some of the main elements needed by a theory of entrepreneurship as a cultural process? Lavoie identifies two underdefined terms: "discovery" (that is, radical change; "genuine novelty and creativity") and "interpretation" (that is, finding opportunities via "a discerning of the intersubjective meaning of a qualitative situation") (p.36). In sum, "What is needed is a theory of entrepreneurial change that makes it intelligible without reducing it to a predetermined mechanism" (p.37).

The Austrian school (von Mises, Hayek), Lavoie argues, has come the closest to such a theory (p.37). And of these, Lavoie recommends Israel Kirzner most highly (p.37). Kirzner argued that it was a mistake to treat entrepreneurship like any other scarce resource; rather, he suggested that we should consider "entrepreneurial alertness," in which the entrepreneur has deployed a "choice framework" or "conditions in which the decentralized, entrepreneurial process can be expected to flourish" (p.40).

Yet, Lavoie argues, Kirzner still sees entrepreneurial alertness as raw discovery of what's already there; Lavoie argues instead that opportunities are interpreted (p.44). After discussing von Mises and Hayek, Lavoie proposes to build a theory of entrepreneurship instead on Gadamer.

In Chapter 10, "The rocky road: Entrepreneurship in the Soviet Union, 1986-1989," Walter D. Connor discusses the then-new market liberalization in the USSR. (As he notes at the end of the chapter, between the time he wrote it and the time the book was published, the USSR began the crisis that would lead to its collapse.) Connor notes that "the last time a high level of private enterprise was tolerated in the Soviet Union" had been during "Lenin's New Economic Policy (NEP) of 1921-1928" (p.198), which was ended by Stalin shortly after Lenin gave up the ghost. To the Soviets of the mid-80s, "the 'NEPmen' were exploiters and speculators who unjustly enriched themselves and were thus justly banned as the country embarked on the 'building of socialism' under Stalin" (p.198). The intervening years, especially under Brezhnev,
produced in most of the Soviet population a mind-set, which in two senses has complicated perestroika and the place of cooperative entrepreneurship within it. The first evokes a rather deep, if general, egalitarian reaction, intolerant of people within one's range of vision doing significantly better than oneself. The second reflects an incomprehension of the market, the dynamics of supply and demand, and how these will naturally—in the absence of state control or intervention—play out. (p.199)
When Gorbachev liberalized the economy, workers, who were disconnected from the market, did not understand entrepreneurship and saw it as utterly unfair. Why could someone who made bra fasteners make 100 rubles in a day, when a tractor driver with a broken tractor could only make 2-3 rubles a day? The tractor driver, Connor adds, was paid by the furrow, not for producing something demanded by others. But he expected recompense for the effort, not the usefulness of his products (p.199). This system encouraged both dependence and sloppy work (p.200). It also encouraged envy. One sociologist interviewed a woman who disapproved of her neighbor, who sold spring vegetables on the side; the woman said, "'I don't want to live like her; I want her to live like me'" (p.201).

According to Connor, "the Eastern Orthodox moral and ethical tradition," which did not emphasize individual conscience, also played its part. "Methodical work, well done, as its own reward—in a sense, the Protestant ethic—did not figure so prominently in this culture as in others farther west"; thus "few, under such a regime, could develop the internal controls that are so essential to the entrepreneur's organization of effort" (p.203).

In the final two pages, Connor notes the Soviet crisis, which would eventually lead to its collapse. "The people of the USSR ... are living in a period of uncertain transition" (p.209).

Although the other chapters are worthwhile, I found these two to be the most interesting. If you're interested in understanding entrepreneurship from a cultural perspective, take a look.

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