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Collective Entrepreneurship – Introduction

Monday 14 July 2014

This post has two purposes. First, it begins a series of written posts to describe a research program that I and several colleagues have embarked upon in the past 18 months. Collective entrepreneurship, as I define it, includes both entrepreneurial teams — a typical unit of analysis in the field — and joint entrepreneurial ventures whose members are firms. Subsequent posts will describe particular studies of entrepreneurial collectives. This post is conceptual. The second purpose is to test a writing method that permits me to move between writing projects with limited friction. This method is described in an earlier post.

I must highlight two sources of inspiration for the post below. The first is a comprehensive review of literature by Molly Burress and Michael L. Cook, which is in the reference list. Cook holds the Robert D. Partridge Chair in Cooperative Leadership at the University of Missouri. He is recognized internationally for his research and education programs on cooperatives. Burress served as a program director for Cook at the time the literature review was completed. Suffice it to say that their joint effort in completing the review is gratefully acknowledged. The second inspiration is Martin Ruef’s 2010 book, The Entrepreneurial Group (Princeton University Press). His model of the what binds members of entrepreneurial teams to each other is a powerful tool for analysis.

The term collective entrepreneurship appears only recently in the literatures of economics, management, and entrepreneurship. In a review of the literature, Burress and Cook (2009) note 240 publications that invoke this term since 1964, with more than half the references occurring since 2000. They develop a taxonomy of the motivations for the juxtaposition of collective with entrepreneurship ranging from theoretical development through public policy and political action. Burress and Cook define the scope of the collective as a significant axis in the taxonomy. The scope of the collective action ranges from “intra-organizational efficiency” to “inter-organizational goals” to “economic growth and development” through “socio-political change”. That is, the narrowest scope is the entrepreneurial team or venture and the largest is the social movement. Entrepreneurial joint ventures and public-private partnerships are exemplars of scope interior to the axis.

In the work we are doing in the McQuinn Center for Entrepreneurial Leadership, we take a similar view of the primacy of organizational scope, though we are less interested in those collective actions where the benefits are not appropriable by the members of the collective. In all entrepreneurial ventures, social and public benefits may exist but as a phenomenon to be studied, they are more à propos to social movements research. We recognize, on the other hand, that social movements provide opportunities for entrepreneurs to act, perhaps as a collective, and to appropriate entrepreneurial rents (Weber, Heinze, & DeSoucey, 2008).

Let us consider three forms of collective entrepreneurship and the explicit boundaries they engender. The first is the entrepreneurial team that collectively founds and manages an organization. Reich (1987) correctly notes that the preponderance of entrepreneurial ventures are not founded by the iconic “lone inventor”; most new ventures represent the combined efforts of a number of individuals – though their particular levels of investment may vary. This view is elaborated by Ruef (2010), who begins his treatise on group entrepreneurship with Toqueville’s vision of an associative culture in America and describes the phenomenon of collective action among “co-founders, employees, investors, advisors, or unpaid helpers” (p. 13) to create new firms. Ruef develops a model of the relational demography of group adhesion to the shared venture that is built upon four key elements: structure (roles and contracts), strong ties (networks and trust), homophily (shared characteristics), and identity (shared subjective beliefs and goals). We find this model to be a useful point of departure for collective ventures, within and between firms.

The second common instantiation of collective entrepreneurship is the cooperative form of organization. Most of the examples of this type of organization arise in the agricultural sector, where cooperatives have more than a century of importance to the American and European economies. Agricultural cooperatives have been institutionalized as a form of collective action to counteract market power in the markets into which farmers sell and from which they purchase inputs (Knapp 1969, 1977; Nourse 1942). The traditional cooperative had farms as members of the collective enterprise, with one membership/voting share for each farm. Note that this is a different form of collective than the entrepreneurial team, as the members are themselves individual firms.

Some recent research into cooperatives as entrepreneurial collectives raise the question of whether such organizations can act “entrepreneurially” in the face of changing market conditions (Bijman and Doorneweert 2008, Cook & Plunkett 2006, van Dijk 1999, Nilsson 1999). One interesting conceptual issue raised in these papers is whether entrepreneurial activity (innovation, new products, new markets, etc.) occurs at the level of the collective as an organizational strategy or at the level of the individual member-farmer. This is a particular instance of the broader question of whether actions can be taken by groups or only by members of the group – the central tenet of methodological individualism.

Both the entrepreneurial team literature and the entrepreneurial cooperative literatures require the establishment of a firm as the “envelope” around the collective action. The entrepreneurial firm discussed by Ruef has a social identity, as well as legal status. The same holds for the agricultural cooperative, which under various statutes in the United States, is organized as a corporation. The “membrane” around the collective action is an organizational form.

The third form of collective entrepreneurship in the literature considers collective action without this membrane, and overlaps with Burress and Cook’s category of “economic growth and development”. We might call this networked entrepreneurship. Networked entrepreneurship, as we see it, follows closely the model proposed by Johannisson and colleagues in describing a geographically delimited, networked community of entrepreneurs that jointly enact their business environment in common (Johannisson and Dalhstrand 2008; Johannisson, Ramirez-Pasillas and Karlsson 2002). These networks include research parks and industrial clusters. The members of this collective form are typically firms or strategic business units rather than individuals.

The motivations to form, and to participate in, collective entrepreneurship ventures are typically modeled as rational actor theory. One joins the collective only in the expectation of payoffs superior to individual action. This point is central to the foundational literature on collective action (Olson 1971, Ostrom, 1990). The rational actor will not engage in collective action without sufficient appropriable gains. Altruism is generally insufficient to maintain the collective; the members of the collective will actively bargain over sharing of the costs and benefits of the incipient collective action. Olson (1971) opens his treatise as follows.

“The idea that groups tend to act in support of their group interests is supposed to follow logically from this widely accepted premise of rational, self-interested behavior. In other words, if the members of some group have a common interest or object, and if they would all be better off if that objective were achieved, it has been thought to follow logically that the individuals in that group would, if they were rational an self-interested, act to achieve that objective… [U]nless the number of individuals is quite small, or unless there is coercion or some other special device [italics added] to make individuals act in their common interest, rational, self- interested individuals will not act to achieve their common or group interests”. (pp. 5-6)

To what degree are the mechanisms proposed in Ruef’s (2010) relational demography – homophily, shared identity, strong network ties, and structure and roles — the special devices that hold members in collective entrepreneurial ventures? In particular, we are interested in whether these mechanisms of Ruef’s group (intra-organizational team) relational demography can serve the same function when the members of the collective are firms. One must take care here to be certain that the substance of the four proposed mechanisms is not altered significantly when applying the model to firms (themselves collectives) rather than individuals. We believe that Ruef’s model of relational demography is uncontroversial when applied to teams. We need to justify the application of the mechanisms to collectives of firms.

REFERENCES

Bijman, J., & Doorneweert, B. 2008. Entrepreneurship, collective entrepreneurship and the producer-owned firm. XIIth Congress of the European Association of Agricultural Economics, Ghent, Belgium, August 26-29.

Burress, M. & Cook, M.L. 2009. A primer on collective entrepreneurship: A preliminary taxonomy. Working Paper AEWP 2009-4, University of Missouri.

Cook,M. L. & Plunkett, B. 2006. Collective entrepreneurship: An emerging phenomenon in producer-owned organizations. Journal of Agricultural and Applied Economics,  38: 421- 428.

Knapp, J. G. 1969. The rise of American cooperative enterprise: 1620-1920. Danville, IL: Interstate Publishers.

Knapp, Joseph G. 1977. The advance of American cooperative enterprise: 1920-1945. Danville, IL: Interstate Publishers.

Johannisson, B. & Lindholm Dahlstrand, A. (eds) 2008. Bridging the Functional and Territorial Rationales in Regional Entrepreneurship and Development. Örebro, Sweden.

Johannisson, B., Ramirez-Pasillas, M. & Karlsson. G. 2002. Institutional embeddedness of inter-firm networks: A leverage for business creation. Entrepreneurship and Regional Development 14(4): 297–315.

Nilsson, J. 1999. Co-operative organizational models as reflections of the environment. Finnish Journal of Business and Economics, 48:449-470.

Nourse, E.G. 1942. The place of the cooperative in our national economy. Washington, DC: American Institute of Cooperation.

Olson, M. 1971. The Logic of Collective Action: Public Goods and the Theory of Groups. Harvard University Press.

Ostrom, E. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.

Reich, R. 1987. Entrepreneurship reconsidered: The team as hero. Harvard Business Review, 65: 77-83.

Ruef, M. 2010. The entrepreneurial group: social identity, relations, and collective action. Princeton University Press.

Steyaert, C. & Katz, J. 2004. Reclaiming the space of entrepreneurship in society: geographical, discursive and social dimensions. Entrepreneurship & Regional Development 16(3): 179–196.

van Dijk, G. 1999. Evolution of business structure and entrepreneurship of cooperatives  in the horti- and agribusiness. Finnish Journal of Business and Economics, 48:471-483.

Weber, K., Heinze, K.L., & DeSoucey, M. 2008. Forage for thought: Mobilizing codes in the movement for grass-fed meat and dairy products. Administrative Science Quarterly, 53:529-567.

 

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