The search for likely policies to unleash productive entrepreneurship

Citation

Campbell, N. (2012), "The search for likely policies to unleash productive entrepreneurship", Journal of Entrepreneurship and Public Policy, Vol. 1 No. 2. https://doi.org/10.1108/jepp.2012.52701baa.001

The search for likely policies to unleash productive entrepreneurship

Article Type: Editorial From: Journal of Entrepreneurship and Public Policy, Volume 1, Issue 2.

(1) Introductory comments

Welcome, everyone, to the second issue of the first volume of the Journal of Entrepreneurship & Public Policy (JEPP). Reaching this point has been a whirlwind of hard work, good luck, and good intentions all around. I wish to thank all concerned for the wonderful reception given to JEPP, Volume 1 Issue 1. I hope you find this issue to be as useful and interesting. Also, I wish to thank in print my publisher, Valerie Robillard, for everything she has done to make JEPP get up and fly. As Emerald's publisher of new titles, Valerie will soon be taken from us at JEPP, moving on to help other would-be editors get their journals started. With Valerie, JEPP had an impressive launch like the Apollo 11 moon shot (perhaps the reader will forgive me for being thrilled by my own journal). I am convinced that without Valerie JEPP would have had an impressive launch like a train wreck.

Working with new friends and new partners, JEPP has established strong relationships with outstanding research and pedagogical organizations and programs. The first such organization is the United States Association for Small Business and Entrepreneurship (USASBE), the USA’ affiliate of the International Council for Small Business. All of us at JEPP look forward to a long, productive, and mutually beneficial friendship with USASBE, especially as we work together to develop the Public Policy Special Interest Group, USASBE's newest. The second program is the Stewart Satter Program for social entrepreneurship, in the Berkley Center for Entrepreneurial Studies at New York University Stern School of Business, under the directorship of Prof. Jill R. Kickul. In this issue, I am proud to publish “Social enterprise as a means to reduce public sector deficits,” by Jim Kucher. With Dr Kickul's assistance, I selected this paper as the best paper in entrepreneurship and public policy from the Eighth Annual Social Entrepreneurship Conference at NYU-Stern. I am confident that readers will find this paper as engaging as I found it. Readers should look forward to special issues originating from USASBE and from the Stewart Satter Program for Social Entrepreneurship in 2013. Building such bridges and developing JEPP as a broadly appealing vehicle for researchers to reach wide, diverse audiences is one of my main points of emphasis as editor. When I type the introduction to Volume 2 Issue 1, I hope to announce a relationship with one or more other leading organizations that will open lines of communication to different fields of entrepreneurship research.

At the time of this writing, late March 2012, the news media is dominated by stories of slow, uncertain economic recovery in the USA and Asia; stories questioning whether the Euro Zone is again in a recession, and stories openly speculating about a “hard landing” in China. In combating the crisis of 2008, governments and central banks around the globe engaged in heroically sized fiscal and monetary interventions in their economies. These interventions necessarily fed the massive expansion of the globe's sovereign debt and the raw material for a massive expansion in the globe's money supplies. In turn, these have stoked fear of a wave of global inflation and sovereign debt crises, similar to Greece's recent misfortune. These outcomes seem increasingly likely unless global economic growth and factor productivity growth resume quickly. For many people, reading such news stories are sources of substantial and prolonged anxiety.

However, such news stories also highlight JEPP's timeliness and the potential contribution JEPP can make. If the fundamental issue facing nations is the lack of economic growth, we know one proven solution to the problem. I believe we can restart economic growth by unleashing entrepreneurs to do exactly what they do: see opportunities, take risks, innovate, leverage resources, and launch ventures. Unleash entrepreneurs and watch economies grow. I selected the phrase “unleash entrepreneurs” very deliberately. The entrepreneurship that expands economies occurs within legal, political, and social frameworks; the “institutions” of a society and economy. These institutions often take concrete form as public policies, regulations, and court rulings. Furthermore, not all entrepreneurship will lead to economic growth. Depending on the relative rewards to productive and unproductive entrepreneurship, entrepreneurial effort will flow from one into the other. Entrepreneurs calculate the relative rewards to productive and unproductive entrepreneurship by analyzing the public policies, regulations, and court rulings of their society. Accordingly, there will be a vector of institutional changes that will allow entrepreneurs to help economies outgrow the looming public straitjacket. JEPP's aims and scope place it precisely at the locus of entrepreneurship and institutions. JEPP's contributors have useful, timely, and significant things to say about policies and entrepreneurship. More specifically, JEPP's contributors will be able to speak to the policies that can promote productive and discourage unproductive entrepreneurship within the framework of what is likely to happen, given pervasive political entrepreneurship and policy entrepreneurship, rather than within a framework of idealized entrepreneurial policy that is unlikely to be adopted.

(2) Contents of the second issue

With “Tackling entrepreneurship in the informal economy: evaluating the policy options,” Colin Williams bridges the gap between our simple knowledge that many entrepreneurs conduct some or all of their transactions informally, and a discussion of what can and should be done about informal entrepreneurs by analyzing the various policy options. Williams evaluates the policy options of doing nothing, eradication, de-regulation, and facilitating formalization. He concludes that only facilitating the formalization of informal entrepreneurship is a viable policy approach. Williams goes on to discuss how formalization might be achieved.

Drawing from Schumpeter's argument that entrepreneurial entry serves to transform and revitalize industries, and thereby enhance their competitiveness, in “Creative destruction and productivity: entrepreneurship by type, sector and sequence,” Pontus Braunerhjelm investigates whether the entry of new firms influences productivity among incumbent firms, and the extent to which altered productivity can be attributed to sector and time-specific effects. Braunerhjelm employs a unique dataset that allows him to estimate a firm-level production function that permits the separation of new ventures from the re-organization of existing ventures. He models the productivity of incumbent firms as a function of firm attributes and regional entrepreneurship activity. There are positive productivity effects of entrepreneurship on incumbent firms, although the effect varies over time. There is an immediate negative influence on productivity, followed by a positive effect several years after the initial entry.

Jim Kucher's paper, “Social enterprise as a means to reduce public sector deficits,” won an award for the best paper in entrepreneurship and public policy at the Eighth Annual Social Entrepreneurship Conference at NYU-Stern. Kucher studies charitable organizations and their use of tax exemptions. Public revenue shortfalls have caused state and local governments to search for additional revenues to make up for budget deficits, prompting public review of these exemptions. Reducing or eliminating these tax breaks without a thoughtful plan for transition poses significant risk to the social benefit programs currently being delivered by the traditional non-profit sector. Potentially filling this gap is a relatively new type of social-mission organization known as social enterprises. Unlike charities that obtain their operating income from grants and donations, social enterprises use commercial business activities to fund a social benefit. Kucher argues that social enterprises or some other new structure may allow for a reasonable compromise that eases the strain on public budgets without destroying the social support system that the non-profit community provides.

In “James Buchanan on inheritance: a critique,” Walter E. Block makes the case for liberty and free enterprise against the case for inheritance taxation made by Nobel laureate James Buchanan, himself widely known as a champion of capitalism and free markets. One motivation for numerous entrepreneurs is to leave a bequest upon demise, so that one's heirs and loved ones may share in the fruits of one's entrepreneurial activities. Thus, taxes on inheritances, let alone those approaching the 100 percent level, must be detrimental to many entrepreneurial activities.

Wei Yusuf, in “Why do nascent entrepreneurs use external assistance programs?,” studies support factors influencing the entrepreneur's use of external assistance programs and explains why some entrepreneurs obtain support from these programs while others do not. Using data from the Panel Study of Entrepreneurial Dynamics I and logistic regression, Yusuf finds that outside assistance programs are a support option of last resort that entrepreneurs utilize only when the start-up team and personal network are incapable of providing support. Entrepreneurs who are more likely to use assistance programs tend to be: more educated and experienced; rely extensively on the start-up team; have a less experienced start-up team, and have larger personal networks. Yusuf's research fills the gap in existing research on entrepreneurial assistance programs by studying both entrepreneurs who do and do not obtain support, thus addressing a selection bias problem.

In “A (partial) review of entrepreneurship literature across disciplines,” David Mitchell and I try our hands at a non-meta-analytic review of several literatures related to entrepreneurship. We do this with some humility. The entrepreneurship literature is vast and can be found in every discipline where humans and their behavior are the object of analysis. Because the entrepreneurship literature is so large and widespread, we review only a small, deliberately chosen sample of the literature. To our knowledge, no one has previously written a unified review of market entrepreneurship, political entrepreneurship, and public choice. We hope to stimulate researchers’ interest by acquainting them with some aspects of the entrepreneurship literature they may not have known previously.

Noel Campbell