Entrepreneurial Potential & Potential Entrepreneurs: 25 Years On

Forthcoming: the new Journal of the International Council for Small Business (ICSB)

A chance encounter[i] at an ICSB led to a journal article[ii] has already topped 2700 citations and its basic notion has even greater influence: “Entrepreneurial Potential and Potential Entrepreneurs”. It may seem obvious now that key drivers of entrepreneurial thinking and behavior appear in both organizations and communities but in 1994 the field still wrestled with that. We also wrestled with whether to focus on the micro or the macro and, perhaps more important, how these interact. Develop entrepreneurial human capital or develop entrepreneurial social capital? Today we would say “mindset” or “ecosystem”, still, where should we focus? How does each influence the other? If so much work on mindsets and ecosystems is so disappointing (especially to practitioners and policymakers) maybe we have lost sight of this insight?

Potential entrepreneurs perceive that entrepreneurial activity is desirable, personally feasible, and that the surrounding environment is supportive. The simple proposition that the strength and types of entrepreneurial potential for any community, whether civic or organizational, is very much a function of its potential entrepreneurs was a turning point.  The quantity and quality of potential entrepreneurs not only matters but also tells us how we can help nurture healthy entrepreneurial activity. Entrepreneurship research had yet to embrace the theories and tools of social psychology but this article demonstrated that social psychology models like behavioral intentions offered immense potential to our field. We now had a robust, diverse tool kit that would help us to help grow entrepreneurs.

Here in 2020, this model continues to offer us exciting new possibilities and continues to provide useful insights into entrepreneurial ecosystems and the entrepreneurial mindset. In particular, this also gives us powerful insights into sound, predictive metrics for entrepreneurial activity. Nurturing entrepreneurial potential is easier said than done so shall we look at entrepreneurial potential through the lenses of mindset and ecosystem?

Entrepreneurial Potential and the Entrepreneurial Mindset

What makes a potential entrepreneur? The original article used entrepreneurial intentions, using Al Shapero’s model of the entrepreneurial event and building on what he observed as a starting point. For example, to make entrepreneurship perceived as feasible requires increasing individuals’ entrepreneurial self-efficacy and thus forces us to ask what learning experiences create that. More recently, we recognize the limitations of the intentions model but its limitations actually reinforce the importance of potential – intentions toward what exactly? Potential for what kinds of entrepreneurial activity?

Our field loves to speak of the entrepreneurial mindset but rarely defines it. Nonetheless, the deep cognitive structures that underlay how an expert entrepreneur thinks are quite real. The more we understand the different facets that comprise the mindset, the better we can devise ways to measure those facets and… change them. We can draw on deep, proven theory and evidence on how those structures evolve and devise learning experiences that nurture them[iii]. For example, deep experiential learning has long been a mainstay of entrepreneurship education even though few are expert at it. If a healthy entrepreneurial mindset is crucial to growing potential entrepreneurs then having the right educational tools deployed skillfully should generate greater entrepreneurial potential and thus entrepreneurial activity.

The current EU/OECD initiative, EEEPHEIC[iv] [“EPIC”] seeks to assess impact of entrepreneurial training. Its model assumes that we can assess potential entrepreneurs by mindset but also by critical knowledge, skills, and behaviors. That is, someone with high entrepreneurial potential likely also exhibits certain skills[v] and behaviors. We can test for this.

Entrepreneurial Potential and Ecosystems

Research on entrepreneurial ecosystems is remarkably devoid of theory despite its obvious importance. Practitioners such as the Ewing Marion Kauffman Foundation proposed a mantra of “Zero Barriers”, based on the assumption that we need to increase the entrepreneurial potential of all groups in society. However, removing barriers is not enough; we must also develop individuals’ potential. That will require additional and novel efforts to build a supportive ecosystem. For example, barriers are often intangible such as the cognitive infrastructure (what ecosystem conditions enable entrepreneurial thinking and skills) and the social infrastructure[vi].  The model is in full display with Kauffman’s current ESHIP initiative to promote ecosystem building[vii].

Entrepreneurial Potential: Ecosystems Plus Mindset?

Entrepreneurship is inevitably a complex adaptive system – in reality a system of systems[viii]. I am fond of the metaphor that entrepreneurial economies are far more like a rainforest[ix] than a carefully managed farm. How might we identify how a change in the ecosystem changes thinking and behavior? Feldman and Zoller (2015)[x] found, for example, that adding a superconnector to an ecosystem changes both direct and indirect networking behavior throughout the network. We also see signs of this thinking in the practitioner work to assess the health of entrepreneurial ecosystems[xi]. Finally, the Kauffman Foundation and others have proposed for the USA “America’s New Business Plan” whose key pillars embrace the notion that to build communities’ entrepreneurial potential, they must build up its potential entrepreneurs[xii].  Deborah Brazeal and I are thrilled to see this progress!

Metrics

What are the implications for measuring important entrepreneurial phenomena and, more important, their drivers? With all the myriad of definitions for ‘entrepreneurship’, having a theory-driven model (whether intentions, the GEM triad, or the mindset) really helps to limit and delimit what the evidence shows. As mentioned above, as the EPIC instrument measures changes in entrepreneurial potential on multiple facets each dictated by theory and prior evidence, it becomes more robust. It also enables us to better assess the assessment. (People are advertising assessment of ‘entrepreneurial mindset’ but lack the theory to be credible. The rise of “neurohype” has accelerated that but having at least an implicit model allows us to assess or predictive validity.)

The same is true of ecosystem assessments. What activities increase entrepreneurial potential? On what dimensions? For which populations? If ecosystems are complex dynamic systems, networks of networks, then it is easy to generate spurious correlations that can easily lead communities astray. An apparent “best practice” may not be; a genuine best practice may not be obvious. Ecosystem builders and policymakers need strong conceptual frameworks. Ultimately, that might be this article’s best contribution: Be clear about your constructs and measures, be clear about a strong conceptual framework.

Thanks again to ICSB for ‘birthing’ this article and more than any other organization, ICSB remains a reflection and champion of these basic insights. For example, ICSB is uniquely capable of driving great cross-national research on this topic. Deborah and I are working on a longer version of this and we welcome comments, ideas, and critiques. Will you join us?

Norris Krueger, PhD (with many thanks to Dr. Deborah Brazeal and to my other inspirations such as Dr. Gabi Kaffka of EPIC, Dr. Andy Penaluna and too many others.)

 

[i] I was struggling with the article but at ICSB, a presentation by my coauthor-to-be, Dr. Deborah Brazeal, offered a hint, driven home when Mike Scott from the University of Stirling stood up and ordered the two of us talk. With a special issue of ETP looming 8 days away, we obeyed Mike and the rest is history! 😉

[ii]   Krueger, N. F., & Brazeal, D. V. (1994). Entrepreneurial Potential and Potential Entrepreneurs. Entrepreneurship Theory and Practice, 18(3), 91–104. https://doi.org/10.1177/104225879401800307 [https://bit.ly/eppe94]

[iii] Krueger, N.F. (2007). What lies beneath? The experiential essence of entrepreneurial thinking. Entrepreneurship Theory and Practice31(1), 123-138 [http://bit.ly/b6aUYq] ; Krueger, N. F. (2015). Entrepreneurial Education in Practice. Part 1: The Entrepreneurial Mindset, Entrepreneurship360 Thematic Paper. [http://www.oecd.org/cfe/leed/Entrepreneurial-Education-Practice-pt1.pdf]; Penaluna, A. & Penaluna K. (2015). Entrepreneurial Education in Practice. Part 2: Building Motivations & Competencies, Entrepreneurship360 Thematic Paper [http://www.oecd.org/cfe/leed/Entrepreneurial-Education-Practice-pt2.pdf].

[iv] http://epic.ecorys.com

[v] https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/entrecomp-entrepreneurship-competence-framework

[vi] Krueger, N. F. (2000). The Cognitive Infrastructure of Opportunity Emergence, Entrepreneurship Theory and Practice24(3), 5-24.; Flora, C. B., & Flora, J. L. (1993). Entrepreneurial social infrastructure: A necessary ingredient, The Annals of the American Academy of Political and Social Science529(1), 48-58.

[vii] https://www.kauffman.org/ecosystem-playbook-draft-3

[viii] Brett, A; (2019) Admired Disorder: A Guide to Building Innovation Ecosystems: Complex Systems, Innovation, Entrepreneurship, And Economic Development.

[ix] Hwang, V. W., & Horowitt, G. (2012). The rainforest: The secret to building the next Silicon Valley.

[x] Feldman, M., & Zoller, T. D. (2012). Dealmakers in place: Social capital connections in regional entrepreneurial economies. Regional Studies46(1), 23-37.

[xi] For example, Startup Genome (www.startupgenome.com) and Startup Blink (www.startupblink.com)

[xii] https://www.kauffman.org/what-we-do/entrepreneurship/-/media/4d4a699029aa472b837a7c6a47c7a8e8.ashx

 

Norris Krueger

Dr. Norris Krueger manages to keep moving the needle in research, education and entrepreneurship with proven, recognized expertise in growing entrepreneurial thinkers and entrepreneurial communities. As a thought leader in entrepreneurial learning, his university programs earned 6 national & 2 global best practice recognition. Most-cited scholar in his specialty on entrepreneurial thinking, he’s had external fellowships with Max Planck Institute for Economics and and is now Senior Subject Matter Expert at OECD/EU for entrepreneurial learning and entrepreneurial ecosystems.

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