The Entrepreneurship Dynamic: Origins of Entrepreneurship and the Evolution of Industries - Book Review

Claudia Bird Schoonhoven and Elaine Romanelli, eds. Stanford, CA: Stanford University Press, 2001. 451 pp. $55.00, cloth; $29.95, paper.

The Entrepreneurship Dynamic comprises twelve original chapters, plus introduction and summary chapters by the editors. The book's mission is principally to encourage the development of macro-level entrepreneurship research that is grounded in modern sociology. For organization theorists, it provides a welcome alternative to the overwhelming tendency in the entrepreneurship literature to focus principally on why individual entrepreneurs and organizations succeed or fail.

As is often the case with edited volumes, the individual chapters in this book point in quite different directions, and no single, overarching theme unites them, although each chapter shares a conception of entrepreneurship as a collective process that transcends the individual entrepreneur. The types of issues the authors address include how organizing models are selected, how collective beliefs and institutions supporting entrepreneurship emerge, how niches and new forms are created and sustained, and why rates of founding differ from one time and place to another. This book blazes new trails in thinking about entrepreneurship at a macro level, showing scholars a dozen ways to theorize about and study phenomena that cut across individual founding acts and actors.

As the authors point out in a cogent summary aimed at identifying promising areas for future research, three ideas recur in many of the papers published here. One is the notion that entrepreneurship should be studied as a local process, bounded by the resources and shared cognitions of bounded geographic regions. Another is that the shared mental models of entrepreneurs who share some local identity is an important level of analysis--struggles over meaning, identity, and reputation are as important as struggles over financial or physical assets. A third is that entrepreneurs are deeply affected by the collective strategies that institutional actors pursue. The editors suggest that the core problem of entrepreneurship is how interactions and collective actions create market spaces, not how individual entrepreneurs identify opportunities and organize to exploit them. For example, M. Diane Burton's chapter, based on a panel study of Silicon Valley firms, focuses attention on how founders choose employment models, linking strategy and management team demography to the likelihood that a firm will adopt a model that is atypical for its industry. She finds that innovative models tend to be adopted by more experienced executive teams, not those with scant organizational backgrounds. In a similar vein, Mark Suchman, Daniel Steward, and Clifford Westfall describe the emergence and diffusion of organizing models within Silicon Valley, showing how local institutions--specifically, law firms--mediate the flow of cultural mental maps, organizing models, and legitimating accounts that entrepreneurs must develop and convey to others.

The emergence and development of new organizational forms, as opposed to new organizations, is the subject of two other chapters. Anand Swaminathan and James Wade develop twelve propositions meant to apply social movement theory to the problem of how new organizational forms emerge and survive, a collective resource mobilization problem shared by all companies adopting the form. These authors emphasize in particular the importance of constructing a distinctive identity by building linkages to other organizational forms without being subsumed by them. Hayagreeva Rao also examines how new forms are legitimated, examining the impact of certification contests (such as automobile races) that visibly demonstrate the viability of a form. Rao shows empirically that such contests affect rates of commencing production but not rates of incorporating companies, suggesting that "founding" needs to be parsed more finely into subprocesses that are affected differently by evolving environments.

Why do some newly pioneered opportunity spaces support vibrant, growing populations while others become dead ends? Howard Aldrich and Ted Baker focus on how the initial members of a nascent population build a knowledge base, organize collectively to build reputations, and establish standards. They suggest that the answer depends on a set of learning and legitimating strategies that apply within populations, between populations, and within communities. Violina Rindova and Charles Fombrun analyze how entrepreneurs create niches within an existing industry, pointing out that many entrepreneurs don't discover empty market spaces but, instead, restructure existing identities to create new opportunities. They empirically describe how specialty coffee emerged as a niche in the United States, thanks to the emergence of new kinds of claims about value, leadership, and expertise in a "mature" coffee industry.

Two other chapters address the question of why large numbers of organizations arise at certain times and places. Elaine Romanelli and Claudia Bird Schoonhoven set forth ten propositions explaining how local factors influence the emergence of many new firms in a region within a short period of time. They focus on such factors as the density, diversity, growth, and strategy of existing organizations and populations in the region. Johann Murmann and Michael Tushman use a rich description of the formative years of the synthetic dye industry to explain why many more firms emerged in Germany than elsewhere. They concentrate on how different components and subsystems of an overarching technology can exist at different stages of development in different countries, arguing that the emergence of dominant designs in different subsystems closes off some entrepreneurial opportunities while creating others.

Other authors describe how social structure influences collective entrepreneurial behavior. Annalee Saxenian relates how associations of engineers and entrepreneurs formed in Silicon Valley among two immigrant ethnic groups: Chinese and South Asians. Her tale focuses attention on the ways in which these associations have helped immigrant entrepreneurs establish connections and credibility, influencing the rates of founding, growth, and survival of the companies they start. Ari Ginsberg, Erik Larsen and Alessandro Lomi investigate how geographical clusters can emerge without central planning, using a cellular automata simulation. They suggest that clusters of cooperating firms and non-cooperating firms can emerge and coexist, given an initial critical mass of cooperators, but find that altering the payoff function and establishing agencies of collective order can dramatically affect the equilibrium that emerges.

Finally, two chapters focus on collective ideas as their unit of analysis. Anne Miner, Dale Eesley, Michael DeVaughn, and Thekla Rura-Polley interviewed 35 experts from seven countries involved in university technology transfer, uncovering a widely shared ideology that any university can stimulate the formation of new ventures that create jobs locally. They argue that the pursuit of such a widely shared cognitive routine can still generate structural variation, because different local conditions will lead to unanticipated consequences among a group of universities that share the same ideology. Eric Abrahamson and Gregory Fairchild ask how "idea entrepreneurs" introduce new ideas in content-generating industries. Examining the growth and decline of articles written about quality circles, they show that a small set of gurus and outlets develop ideas that flow to managers and then are picked up by consultants and educators. They suggest that new ideas change the composition of the community that propagates them, in turn changing the nature of the ideas themselves.

By focusing on entrepreneurship as the product of collective action and interaction, this book encourages scholars to address units of analysis, types of phenomena, and modes of theorizing that link this area of study firmly to mainstream organization theory. This book's focus on how market spaces are created and sustained distinguishes it from other works devoted to entrepreneurship. Those who are looking for new approaches and research directions will find The Entrepreneurship Dynamic a rich and variegated source of ideas. Readers who expect a cogent, shared vision of entrepreneurship that underpins each chapter may be disappointed--one subtext of this book is clearly that entrepreneurship remains a coat of many colors. Those who are principally interested in large-scale, rigorous quantitative analysis will also find only one or two of the chapters in the book interesting. The Entrepreneurship Dynamic will appeal to those more concerned with stimulus than synopsis; the editors position it as an "invocation to research" in an area of study that is ripe for new ideas and new lines of study.

Philip Anderson

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