I submitted this to The San Antonio Express-News two weeks ago and it looks like it will not get printed.
Let's call entrepreneurs heroes. That may seem
strange, given that entrepreneurs start businesses with the aim of making a
profit. Who wants to say that profit making is heroic?
But recently, Jeffery S. McMullen, a professor of
management at Indiana University published an insightful article in the academic
journal Business Horizons titled "Are
we confounding heroism and individualism? Entrepreneurs may not be lone
rangers, but they are heroic nonetheless." (Full disclosure-he cites my
own published research).
McMullen says "any innovative act exhibits an
element of uncertainty and thus requires a corresponding degree of
courage" and that to not consider entrepreneurs heroes would "merely
neglect the courage and sacrifice required from individuals like Elon Musk, who
may not act alone, but nonetheless must act if entrepreneurship is to occur."
Yes, an entrepreneur gets help from many sources.
But a single person must take that first step in the face of uncertainty to try
something new.
McMullen also wants scholars and policy makers to
see entrepreneurs as heroes because otherwise "they are likely to
underestimate the costs entrepreneurs must incur not just to succeed, but also
to try at all."
You might think that the profit motive alone would
bring us enough entrepreneurship. But as an economist, I recognize that
although incentives matter, not all incentives are monetary.
In 1996, award winning educator Candace Allen and
Dwight Lee, economics professor at the University of Georgia, wrote a paper on this subject.
They said “Just as the society that doesn't venerate winners of races will
produce fewer champion runners than the society that does, the society that
does not honor entrepreneurial accomplishment will find fewer people of ability
engaged in wealth creation than the society that does.”
People want to know that their actions are valued
by their fellow citizens. Prospective entrepreneurs are no exception.
This is important because we may be seeing a
decline in entrepreneurship in the U. S.
Last year in The
Wall Street Journal, Marie-JoseƩ Kravis of Hudson Institute reported that the
net increase in business establishments was lower after the 2009 recession than
the 2001 recession (which, in turn, was lower than for the one in 1990).
Also, she said that "young firms... now
account for a smaller share of new hires, down from about 38% in the late 1990s
to roughly 33% today" and that "the per employee cost of federal
regulatory compliance was $10,585 for businesses with 19 or fewer employees,
compared with $7,755 for companies of 500 employees or more."
In 2015, the World Bank reported that US was
ranked only 46th in terms of how easy it is to start a company. Again, as
Jeffery S. McMullen says, we should not underestimate the costs entrepreneurs
face.
In the long-run, our economy needs
entrepreneurship. Relying only on very large companies makes us inflexible. For
example, Michael DeWilde, professor of philosophy at Grand Valley State
University, wrote a study comparing two Michigan cities, Flint and Grand
Rapids.
In 1950, Flint was doing much better than Grand
Rapids, with the largest employer being General Motors. But since 1970, Grand
Rapids grew while Flint shrank. De Wilde indicates that Grand Rapids fostered a
more diverse economy that led to innovation.
He even goes as far as to say "the importance
of entrepreneurship cannot be overstated for regional advantage." That is not the
whole story, as he also cites social capital and shared values.
But as America looks to the future, we will need
more entrepreneurs than ever to solve problems. Seeing them as heroes will
surely help.
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