Entrepreneurial thinking is described as one of the most relevant skills for the 21st-century workforce (Bacigalupo, Kampylis, Punie, & Brande, 2016). And for that reason it has become an integral criteria in many prescriptive regulations for (higher) education and in increasing numbers also explicitly and implicitly part of curricula (Saavedra & Opfer, 2012). As opposed to entrepreneurship, entrepreneurial thinking is not necessarily bound to entrepreneurs (to be); it is an essential skill for ‘strengthening human capital, employability and competitiveness’ (Bacigalupo et al., 2016).
This white paper has been originally published to the SSRN: Spruijt, Jan, Paradoxes of Entrepreneurial Thinking: Why Entrepreneurship Can Hardly Be Taught (May 17, 2017).
However, the definition of ‘entrepreneurial thinking’ – and the different skills and competences that are related with it – is not obvious. Entrepreneurship has seen a theoretical divide that has existed since the Schumpeter vs. Kirzner debate started. Whereas Schumpeter describes an entrepreneur as disequilibrative – destroying the pre-existing stage of the equilibrium ((Kirzner, 1999) – Kirzner chooses to describe the role of the entrepreneur as more equilibrative – entrepreneurs systematically displace disruptive conditions in order to create stabilized market conditions (Kirzner, 1999). These two extremes – and everything in between – have been topic of discussion ever since. In essence it is nowadays recognized as the difference between creativity (Schumpetarian) and alertness (Kirzner) – creation versus discovering.
From that perspective alertness is the discovery of hitherto overlooked current facts and the entrepreneur’s perception of the way in which those discoveries could shape the future market conditions (Kirzner, 1999) and creativity could best be described as the way entrepreneurs deal with radical uncertainty by building upon their qualities of boldness, innovativeness and creativity (Kirzner, 1999). In the Schumpetarian view, opportunities arise from the internal willingness to change the industry. The entrepreneur is an innovator and disturbs the economy (De Jong & Marsili, 2010; Schumpeter, 1934). In the Kirznerian view, opportunities are already existing and be discovered by opportunity-alert entrepreneurs. Research has shown that innovation is mostly linked to the Schumpetarian view: innovative companies are more likely to be started by Schumpetarian-type founders (Samuelsson & Davidsson, 2009), are more likely to be started by engineering students (Ilozor et al., 2006) and are more likely to be created by making new and unique combinations (S. A. Shane, 2003). In contrary, the Kirznerian view is more linked to an economic perspective: are entrepreneurs able to see where a good can be sold at a better price higher than that for which it can be bought (Busenitz, 1996).
When taking into account a wider definition of entrepreneurship, a more organizational perspective on the matter has described the same divide as causation versus effectuation. Whereas causation is more oriented at a managerial, Kirznerian, perspective on entrepreneurship, effectuation is oriented at a more experimenting, Schumpeterian, perspective on entrepreneurship (De Jong & Marsili, 2010). Many scholars have researched the impact of causation and effectuation on entrepreneurial outcomes. Generally, it can be concluded that entrepreneurship – in the meaning of creating new ventures – a right balance has to be found between the both extremes. Enterpreneurship is about finding the right mix between both causation and effectuation (Reymen et al., 2015). And a successful entrepreneur knows when to act causational and when to act effectuative. When to be creative, when to be managerial. They have researched the number of explicit decisions in new venture creation regarding both perspectives and created the following [figure].
Figure 1: Percentage of effectuation and causation dimensions (Reymen et al., 2015).
Another study has indeed proven that specifically within SMEs, entrepreneurs use both causation and effectuation at the same time (Berends, Jelinek, Reymen, & Stultiëns, 2014). Quantitative studies show that entrepreneurs use effectuation logic in their early stages, which increasingly turned towards causation over time. Qualitative analysis shows that entrepreneurs actually use both logic at the same time, in contrast to the way larger organizations deal with innovation (in a more structured way). Therefore, entrepreneurs should not learn from large corporations’ best cases on (innovation) management, but learn entrepreneurial thinking in a more Schumpeterian way.
That brings us to entrepreneurial thinking. Entrepreneurial thinking is described as having an entrepreneurial expert mindset (Krueger, 2007). The difference between entrepreneurship and entrepreneurial thinking lies in the fact that entrepreneurship is about actions and intentions and entrepreneurial thinking is about attitude and beliefs. This is best described by Krueger: “Behind entrepreneurial action are entrepreneurial intentions. Behind entrepreneurial intentions are known entrepreneurial attitudes. Behind entrepreneurial attitudes are deep cognitive structures. Behind deep cognitive structures are deep beliefs.” (Krueger, 2007).
Simple logic leads to the fact that entrepreneurial thinking is more common than entrepreneurship. Entrepreneurial thinking focuses on the deep beliefs that lead to behavior that is positively related to entrepreneurial outcome. Based on the same logic as mentioned above, entrepreneurial thinking is prone to both causational thinking and effectuation-based thinking (Krueger, 2007). From a more psychological perspective, the same difference is described as a growth mindset (effectuation) versus a fixed mindset (causation) (Dweck, 2012). Dweck argues that – and that is specifically relevant for early stage entrepreneurs – a gowth mindset makes them more likely to embrace challenges, learn from criticism and dealing with setbacks.
Corporate entrepreneurship, and intrapreneurship, are direct effects of entrepreneurial thinking applied to organizations, and then more specifically organizational culture. Questions that come to mind when talking about corporate entrepreneurship are: are there resources available to explore new ideas? Are managers prepared to allow experimentation? Does the organization encourage risk-taking? Do they tolerate mistakes? Is it easy to create autonomous team and projects? Critical elements for an entrepreneurial climate are both causational (goals, rewards) and effectuation-based (feedback, reinforcement, trust) and are built upon stimulating entrepreneurial thinking in the organization (Kuratko, Hornsby, Naffziger, & Montagno, 1993).
Corporate entrepreneurship has been widely studied because it is believed that it directly leads to innovation and an organization is not able to sustain competiveness over time without renewal or regeneration (Covin, Green, & Slevin, 2006; Damanpour & Gopalakrishnan, 2001; S. Shane, Venkataraman, & MacMillan, 1995; Venkataraman, 2014). Current research focuses mainly on the creation of internal processes, innovation adoption, governance, and the knowledge, skills and attitudes of individuals (A. Corbett, Covin, O’Connor, & Tucci, 2013).
Because of the above-sketched complexity that arouses out of the ambidextrous nature of entrepreneurship, teaching entrepreneurship has always been prone to different views and methods. Most literature however, indeed suggests that teaching entrepreneurship is about dealing with paradoxical situations, such as uncertainty. From an educational point of view it is therefore more obsolete to teach entrepreneurship through the determinants of entrepreneurship – in education often called the entrpreneurship competence. That term is in itself a very complex one and continuously under debate. Lans et al. (2008) have written an excellent paper on the discussion of what entrepreneurship competence actually. Generally, an entrepreneurship competence includes the knowledge, skills and attitude (Fiet, 2001). In education, two approaches are currently used: a more ‘bolt on’ approach, where the entrepreneurship competence is seen as a fixed way of thinking about entrepreneurial competencies, and more ‘interpretive/integrative’ approach, where the entrepreneurship competence rather is seen as a context-dependent set of skills and attitude (Lans et al., 2008). Especially the latter follows the direction of this paper. From that perspective personality traits are seen as conditions for entrepreneurship, but not as learnable. The ‘learned entrepreneurship competence’ is a competence not acquired at birth, but through education, training or experience (Bird, 1995; Lans et al., 2008). According to Bird (1995) there is no use in developing a model for entrepreneurship competencies without considering that these competencies should be learnable.
Can entrepreneurship be taught at all? There is a difference between teaching entrepreneurship and teaching about entrepreneurship. The entrepreneurship competence is about teaching entrepreneurship and if that’s possible at all has been part of many studies. Hindle (2007) argues that, depending on what we see as a result, it can be taught if we define the result as ‘the entrepreneurship exists’ after she ‘underwent a process of education that contributed to the nature of her current existential state.’
A recent publication of the European Commission has used this view on entrepreneurship competence to define a framework for education. Although one of many different views, it takes an interesting in approach in the fact that it tries to ‘bridge the world of education and work’. The framework defines three main competence areas: ‘ideas and opportunities’, ‘resources’ and ‘into action’ – and another fifteen competences (Bacigalupo et al., 2016). The framework however, has not been validated yet. A framework that has been validated is the FINCODA-framework. Although a bit more focused on innovation skills, it validated five key competences for innovation and entrepreneurship: creativity, critical thinking, initiative, teamwork and networking (Marin-Garcia et al., 2016).
Even when knowing which competences should be taught in order to increase entrepreneurial success in a complex and paradoxical-setting, one could wonder how to teach these competences, from a more didactical point of view. Neck et al. (2014) argue that the ‘effective doing of entrepreneurship requires a set of practices and these practices are firmly grounded in theory’. They call this actionable theory learning, as depicted in the following matrix (A. C. Corbett & Katz, 2012; Neck & Greene, 2011):
The authors argue that are five different practices of educating entrepreneurship:
- Practice of play: ‘the skill of play frees the imagination, opens up our minds to a wealth of opportunities and possibilities, and helps us to be more innovative as entrepreneurs’ (Neck, Neck, & Murray, 2017). Play includes the used of simulation games that challenge to think like an entrepreneur.
- Practice of Experimentation: ‘the skill of play is best described as acting in order to learn – trying to something, learning from the attempt and building that learning into the next iteration’ (Neck et al., 2017).
- Practice of Empathy: can be taught using creative research methods.
- Practice of Creativity: can be taught using creative techniques and methods such as design thinking (Neck et al., 2017)
- Practice of Reflection: can taught by using different ways of reflection in class, such as narrative reflection, emotional reflection, analytics reflection and critical reflection. Although its benefits have been supported widely, reflection is not brought into practice at all (Neck et al., 2017).
Many educational programs follow the golden rule of first defining competences and its body of knowledge, skills and attitudes which then lead to curriculum, teaching and learning objectives that can be assessed, examined and form the foundation for learning material (Biggs, 1996; Brown, 1995). These objectives are an essential part of education. They are more specific than competencies, but less specific than (grading) criteria. Although the latter are widely covered in literature (Bacigalupo et al., 2016), specific objectives that take into account the ambidextrous nature of entrepreneurship are not. While it could be relatively easy to formulate learning objectives for the five competences of the FINCODA model – something like ‘Upon successful completion of this course the student is able to understand and paradoxical nature of dealing with taking initiative in the context of entrepreneurship in order to prepare him/her for effective decision-making as an entrepreneur.’ – these learning objectives are to broad and don’t take into account the actual body of knowledge and skills needed as an entrepreneur. A true set of learning objectives for dealing with ambidextrous entrepreneurship is not yet out there and it is the purpose of this paper to create one.
The fact that the most relevant competence for entrepreneurship – which is, as was argued before, ambiguity, or to say more specifically learning how to deal with or to tolerate ambiguity – has not been integrated in the present-day competency frameworks is not so strange. Teaching ambiguity is widely recognized as one of the most difficult competences for a teacher himself (Chang, Yang, Martin, Chi, & Tsai-Lin, 2016). It is however, as the subtitle of this article suggested, never as satisfying as you want it to be. Dealing with ambiguity, causation and effectuation, is like trying to solve an unsolvable equation. Or as Ludwig van Mises wrote:
“entrepreneurs defy any rules and systematization. [Entrepreneurship] can be neither taught nor learned.” (Klein & Bullock, 2006; Lewin, 2011; Von Mises, 1949)
More recent literature however suggest that it can be learnt, but it still cannot be taught:
“Some business professors dream of finding a grand algorithm that will allow them to guide entrepreneurial decisions and to judge in advance which decisions are good and which bad. [This has been revealed to be] a form of magical thinking. We need entrepreneurs to make their decisions for themselves precisely because it is impossible for us to make those decisions for them.” (Koppl, 2008; Lewin, 2011)
The paradoxes depicted below are merely a single-minded and largely invalidated solution to the unsolvable equation.
Paradoxes of Entrepreneurial Thinking
Based on conclusions from the literature study above, I will now propose a set of teaching objectives that are constructed in such a way that they deal with the dilemma that arose in the Kirznerian and Schumpetarian literature on entrepreneurship and following the line of practices as proposed by Neck at al (Neck et al., 2014).
#1: The Uncertainty Paradox
This paradox was framed by Peter Lewin (Lewin, 2011) in a refreshing article named Entrepreneurial Paradoxes as followed: “entrepreneurial opportunities are complicated by uncertainty but would not exist without uncertainty.”
#2: The Strategic Paradox
This specific paradox is closely related to the before-mentioned literature on organizational ambidexterity, which deals with the difficulty of exploration and exploitation: for a long-term sustainable business model an entrepreneur would need to focus on exploration but that his company would not be able to sustain itself without a short-term exploitative strategy. This is also referred to as the choice between pivoting or persevering (Ries, 2011).
#3: The Opportunity Paradox
This is a complicated paradox, but basically it described the fundamental way entrepreneurs see and recognize opportunities. On the one hand, opportunities may exist and be discovered – as was depicted earlier in the article – but on the other hand it could be claimed that opportunities are created and exploited. This paradox is questionable however, because one could wonder if an opportunity created by a specific entrepreneur was not actually an existing opportunity missed by anyone else (Lewin, 2011).
#4: The Experience Paradox
This one is rather simple to understand: an entrepreneur never could have enough experience to always make wise decisions in hindsight. The paradox causes, for instance, also the not-invented-here syndrome. An entrepreneur would rather base its decisions on prior experience which does not completely reflect the current situation.
#5: The Momentum Paradox
When confronted with a more complex decision, often arises the dilemma if I do it now, will it be too soon for the market, or if I wait will it be too late for my business? Choosing the right time for the right decision is often paradoxical, because an entrepreneur will be too early, if no one else was too early, will be right on time when somebody was too early and will be too late if everyone else was earlier.
#6: The Generalization Paradox
Crazy enough, there is more literature suggesting that an entrepreneur is characterized by the fact that his personality traits are unique to anyone else, thus making a general set of competences, skills or behaviourial actions impossible to depict. Or as Lewin says it: “The elements of the category “entrepreneur” are all unique individuals whose characteristics (almost) defy generalization.” (Lewin, 2011). An entrepreneur should therefore always wonder if he should learn from the best practices of other entrepreneurs, or that he should learn from other entrepreneurs in a way that purposely does not want to copy their best practices.
#7: The Decision-making Paradox
The simple restriction of limited time, limited budget forms the backbone of almost each decision made in business. With limited budget in mind, would it be wise to spread your money over a longer time (a lower burn rate) or over more different strategic directions (exploration) – but then does limited time not ask for quicker spendings?
#8: The Impact Paradox
Sharp (2010) has found that there is strong paradox in (entrepreneurial) leadership when it comes to innovation at the personal level of the entrepreneur. He depicts that only 99% of all leaders are unable to demonstrate both humility and will at the same time, thus creating a paradox (Collins, 2001; Sharp, 2010). In a way this could be related to the much more discussed paradox: social impact versus economic impact. Most entrepreneurs have to struggle continuously between trying to create social impact with their business or trying to have economic impact with their business.
#9: The Risk-taking Paradox
Risk is one of the most-researched elements of entrepreneurship. Many scholars come to the conclusion that entrepreneurs actually don’t take a lot of risk; risk a merely the smart use of statistics and therefore the term calculated risk is often used. But statistics often counteract with each other and in practice each entrepreneur will ask himself over and over: is this worth taking the risk or not?
#10: The Knowledge Paradox
An entrepreneur does not have time, nor does he have the intention, of knowing all information that he may use for taking effective decisions for his enterprise. This so-called ‘knowledge gap’ is prevalent in day-to-day actions and entrepreneur finds himself choosing between learning and doing.
#11: The Trust Paradox
As an entrepreneur won’t be able to know everything himself, the knowledge paradox, he finds himself relying on others information. This raises the question: can he trust the information he gets? The trust paradox is mostly visible when dealing with outsiders, collaborators, clients, suppliers, et cetera and is of great difficulty for entrepreneurs.
Conclusions and Discussion
While effort has been put in discussing the phenomenon of teaching entrepreneurship from different perspectives, I do not even try to claim that this research is close to complete. There is a wide range of research available which both – and arguably with evidence – claim that entrepreneurship could be taught or could not be taught. This discussion adds to the on-going debate around nature versus nurture. This white paper is nothing more than my two cents on teaching entrepreneurship and bringing up the topic of paradoxes in entrepreneurial. To my opinion entrepreneurship as much as entrepreneurial thinking cannot be taught, but we can teach tolerance to ambiguity and therewith a self-reflectivity needed to autodidact entrepreneurial thinking. In order teach tolerance for ambiguity, lecturers need to cope with the above-mentioned paradoxes themselves rather than trying to translate them into teaching material. This makes learning entrepreneurial more tacit than explicit. But we already knew that, didn’t we?
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