Posts Tagged social capital
For the last several years politicians have tagged the economic idea of Made in America as a protectionist philosophy. The truth is manufacturing at home and exporting to countries overseas improves the American economy. Net exports (over imports) is what the economy needs to grow. Although importing can produce cheaper goods and services, quality problems and service has declined as a result. For example, lead in toys and brake problems in automobiles have resulted in recalls. Foreign manufacturers have stolen American intellectual property. The list goes on.
One small business has defied the protectionist name calling and built a successful business producing digital radiology equipment. Radlink, Inc. is a California-based company with 22 employees manufacturing its product in the United States and selling to China, Latin America, and the Middle East (“Small and medium…,” 2011).
Radlink calls on Dr. Peter J. Julien, the director of thoracic imagining at Cedars-Sinai Medical Center in Los Angeles to provide expertise in reading x-rays and transmitting the results using the company’s state-of-the-art equipment. Thomas T. Hacking, Radlink’s chairman and chief executive officer, explained how Radlink’s digital equipment saves “time, money, and space,” (p. 772) while providing high-quality digital images needed for surgical accuracy (“Small and medium…,” 2011).
Small business is the engine for domestic manufacturing and Radlink sets an excellent example for other companies wanting to reclaim the Made in America economic virtue. Do you want your company to help lead the United States back to economic prosperity? Do you want to learn more?
Small and medium business technology alliance; SMBTA highlights an American small business success story. (2011). Investment Weekly News, 772. Retrieved from http://search.proquest.com/docview/908910659?accountid=35812
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Before the financial meltdown of 2008, small firms in the United States in 2007 comprised 99.7 percent of all employer firms. These firms employed slightly more than half of all private industry workers, and paid 44 percent of private business payroll. Small firms produced 64 percent of net new jobs for 15 years before this time. Small firms created over half the private nonfarm gross domestic product, and hired better than 40 percent of high-tech jobs for scientists, engineers, and computer programmers. Further, small businesses made up 97.3 percent of all exporters producing 30.2 percent of known export values in 2007. Small businesses accounted for 52 percent of home-based businesses and 2 percent of franchises (Kolbe, 2007; Yallapragada & Bhuiyan, 2011).
A growing part of entrepreneurship comes from social entrepreneurship. Shockley and Frank (2010) distinguished social entrepreneurship from commercial entrepreneurship as consisting of a community orientation that forgoes private incentive for public benefit. Shockley and Frank connect the economic entrepreneurship theories of Joseph Schumpeter and Israel Kirzner to Western literature, namely Virgil’s Aeneid. The three main parts of Virgil’s (2006) Aeneid deal with using the mind to discover, developing a duty to community interests, and believing in the fate of the actor to avoid uncertainty or “unknown probabilities” (Knight, 1921; Shockley & Frank, 2010, p. 777).
Social entrepreneurship fills societal needs not met by commercial entrepreneurship and stresses discovery, community, and the fate to overcome unknown conditions. Commercial entrepreneurship is not exclusive of social responsibility, but in modern society has focused on the interests of enlarging profits for the benefit of capitalist investors. This motive is not to say entrepreneurs have no interest in societal interests as surely some entrepreneurs champion such issues before profits, but many companies put profits first after a founder finds a successful model. Social entrepreneurs can discover solutions to societal needs in either or both the public or private domain.
Schumpeter (1934/2002) argued new combinations affect the flow of capital and causes temporary disequilibrium aiding in economic development. Schumpeter (1994) put “creative destruction” at the center of entrepreneurship. Schumpeter explained how “creative destruction” leads to the demise of the entrepreneur and a temporary socialistic state to deal with new unmet needs because the entrepreneur becomes a capitalist and ceases to work as an entrepreneur. Shockley and Frank (2010) referred to Schumpeter’s works as foundational and timeless finding these same ideas in Virgil’s Aeneid.
Similarly, Kirzner (1973) put “entrepreneurial discovery” (p. 39) at the center of entrepreneurial theory. Kirzner argued the entrepreneur’s role is to stay alert to unnoticed opportunities and relies on unpredictable behavior akin to the fate in Virgil’s Aeneid. Both Schumpeter and Kirzner distinguish the entrepreneur from the capitalist because the entrepreneur risks no investment in discovery(Shockley & Frank, 2010).
The point of this literature is that both the role of the entrepreneur and capitalist are necessary in a market economy. Today, the role of the entrepreneur has succumbed to the capitalist and caused discovery to slow for the sake of promoting the profit motives of the capitalist, but the capitalist cannot grow without discovery. Capitalists choose not to meet societal needs. The temporary state to overcome the problem rests in Schumpeter’s notion of “creative destruction” where socialism takes over until the entrepreneur can return to the flow of the equilibrium process (Schumpeter,1994).
I see little effort today to recognize the entrepreneur’s role to resolve this problem despite the significant contributions entrepreneurs made before the financial meltdown of 2008. Some people have played down the role of restoring equilibrium and have extended the problem by suspending a capitalistic economy indefinitely. I see social entrepreneurship as a step to restoring discovery needed to return the flow to the equilibrium process.
I would like to hear your thoughts about how to restore capitalism by re-emphasizing entrepreneurship’s role and ending the state of “creative destruction” in which the United States economy currently resides. Learn more.
Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago, IL: The University of Chicago Press.
Knight, F. H. (1921). Risk, uncertainty, and profit (2002 Reprint ed.). Washington, DC: Beard Books.
Kolbe, K. (2007). How important are small businesses to the United States’ economy. Office of Advocacy, Funded Research, United States Department of Commerce, Bureau of the Census and International Trade Administration.
Schumpeter, J. A. (1934/2002). The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. New Brunswick, New Jersey: Transaction Publishers.
Schumpeter, J. A. (1994). Capitalism, socialism, and democracy (5th ed.). London and New York: Routledge.
Shockley, G. E., & Frank, P. M. (2010). Virgil’s Aeneas as the quintessential social entrepreneur: Juxtaposing selections from epic poetry and entrepreneurship theory to teach social entrepreneurship. Journal of Small Business and Entrepreneurship, 23, 769-784. doi: 2281649991; 58798731; 54851; JSBE; INNNJSBE0000605310
Virgil. (2006). Selections from Virgil’s Aeneid. In S. Lombardo (Ed.), The Essential Aeneid. Indianapolis, Ind. & Cambridge, UK: Hackett Publishing Co., Inc.
Yallapragada, R. R., & Bhuiyan, M. (2011). Small business entrepreneurships In The United States. Journal of Applied Business Research, 27(6), 117-122. doi: 2519801721; 65758121; 12637; JRH; INODJRH0007536491
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Entrepreneurs have the unique ability to connect with consumers and find out what they need. Big companies usually brand their products and use already proven models to produce profitable lines of business. These companies do little to connect with the consumers they aim to serve once they find a working model, but the entrepreneur is in a unique position to see what works for consumers and what does not. The entrepreneur continually reaches out to consumers to note changes and find ways to serve them (Rae, 2004).
Bruder (2010) offered several accounts of entrepreneurs who wanted to reach out to consumers and develop their stories to personalize their products and show consumers why they benefit them. Bruder explained such accounts humanize the products to customers and show them why their products will solve their problems. Big companies often overlook the human touch and personal connection with consumers. Rae (2005) developed a model showing entrepreneurs learn their businesses from contact with consumers through personal and social connections, recognizing opportunities from cultural exchanges, and engaging with consumers. Entrepreneurs have more intricate relations with consumers and can better address their needs by learning and gaining experience from such dealings.
Thilmany and Loughlin (2010) suggested entrepreneurs should never stop learning and finding ways to improve their products. Experience with consumers helps the entrepreneur understand flaws in the competition and shows commitment to solving problems consumers face with existing products. Conversely, big businesses work their model until it matures and starts to falter before exploring flaws giving the entrepreneur an edge because of the closeness to the consumer.
Rae (2004) explained savvy entrepreneurs should spend more time working on the business than in the business. Opportunities come from learning what works and what does not. Working on the business spreads and minimizes risk, attracts and retains employees, and improves developing innovations. Working on the business helps build customer relations, develop managers and teams, and develop new markets.
Do you as a small business owner go where others fear to tread? Please let us know your thoughts, or if you want help I encourage you to contact us now to learn more.
Bruder, J. (2010). Turning business owners into stars of their own stories, New York Times, pp. B.8-B.8. Retrieved from http://search.proquest.com/docview/757765326?accountid=35812http://linksource.ebsco.com/linking.aspx?genre=article&issn=03624331&volume=&issue=&date=2010-10-14&spage=B.8&title=New+York+Times&atitle=Turning+Business+Owners+Into+Stars+of+Their+Own+Stories%3A+%5BBusiness%2FFinancial+Desk%5D&au=Bruder%2C+Jessica&isbn=&jtitle=New+York+Times&btitle=
Rae, D. (2004). Practical theories from entrepreneurs’ stories: Discursive approaches to entrepreneurial learning. Journal of Small Business and Enterprise Development, 11(2), 195-202. doi: 10.1108/14626000410537137
Rae, D. (2005). Entrepreneurial learning: A narrative-based conceptual model. Journal of Small Business and Enterprise Development, 12(3), 323-335. doi: 10.1108/14626000510612259
Thilmany, J., & Loughlin, S. (2010). Taking care of business: Entrepreneurs share their success stories. Biomedical Instrumentation & Technology, 44(6), 472-473. doi: 2229159061; 56859991; 68217; BMIT; 21142509; INODBMIT0006941046
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I have expressed the view previously the next great wave of entrepreneurship will come from social entrepreneurs. I found evidence the rise of social entrepreneurship is on the horizon in an article I found in this week’s Bloomberg Businessweek. The article is about a firm headed by Chamath Palihapitiya called Social+Capital Fund. Palihapitiya is a former Facebook executive, who left about a year ago to launch the new venture capital firm (Bennett, 2012).
Palihapitiya believes properly placed venture capital can solve the world’s biggest problems left from gaps caused by the shrinking scientific ambitions of government, foundations, and other global organizations (Bennett, 2012). Politicians demonize government handling of social problems leaving social entrepreneurs as the suitable outlet for dealing with these problems. Universities have dwindling funds devoted to research and can no longer deal with social problems. Bennett explained how Kauffman Foundation, an independent organization, has failed to produce results in dealing with issues it funded over the last 20 years. Palihapitiya believes private equity or as he puts it “purpose-driven money” is the answer to solving such problems (Bennett, 2012).
Social+Capital has amassed an army of technologists and entrepreneurs to find and build products aligned with solving problems in the health care, education, and the financial services industry. These people include Reid Hoffman (LinkedIn), Sean Parker (Napster and Facebook), Kevin Rose (Digg), and Joe Hewitt (Mozilla and Facebook). Several companies funded by Social+Capital have already started to deal with social problems in these industries. The idea is for these companies to make money while solving societal problems. Palihapitiya’s idea is to find brilliant people of the Steve Jobs variety and invest in them to develop solutions to societal problems (Bennett, 2012).
Palihapitiya admitted inequities in the global economic system precipitated his idea to find brilliant leaders to solve societal problems by making money (Bennett, 2012). Between 1987 and 1997 nonprofit organizations grew to 1.2 million or by 31% (The new nonprofit almanac & desk reference., 2002; Noruzi, Westover, & Rahimi, 2010). These numbers show a growing need exists for social entrepreneurs to solve societal problems. Palihapitiya has started his firm to fund innovation solutions and allow entrepreneurs to make money, while solving such problems.
Social entrepreneurs will play a major role in the global economy. Innovative solutions from social entrepreneurs will create great value by addressing societal needs. I encourage prospective entrepreneurs to start now to take advantage of this opportunity. We can help you get started and I encourage you to learn more.
Bennett, D. (2012, July 30 – August 5). The league of extraordinarily rich gentlemen. Bloomberg Businessweek, 54-56.
The new nonprofit almanac & desk reference. (2002). San Francisco: Jossey-Bass.
Noruzi, M. R., Westover, J. H., & Rahimi, G. R. (2010). An exploration of social entrepreneurship in the entrepreneurship era. Asian Social Science, 6(6), 3-10. doi: 2233824571; 56997641; 137930; SSCS; INNNSSCS0000567695
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“Content makes poor men rich; discontent makes rich men poor” (Franklin, n. d.).
Ben Franklin is America’s true founder and first entrepreneur and his story can teach us many lessons. Franklin exemplified the supreme risk taker because he signed the Declaration of Independence with 55 other men who risked their lives to forge America’s future. Franklin educated himself by reading and had a reputation as a contrarian, humorist, and adventurer. Franklin used his will to build a successful business and a nation the world would envy (Otto, 2011).
Although Franklin started his life in poverty, he died in great wealth and had a passion for his Christian religion and a movement called the Great Awakening. This movement believed in the welfare of the people and had a contempt for cruelty and corruption. Because of his religious beliefs, Franklin thought politicians should serve the country without pay (Otto, 2011). Franklin also stressed the importance of creditors supporting inexperienced entrepreneurs to foster representation and build a national culture. Franklin believed in public projects benefiting the nation and appealed to working-class people (Baker, 2000; Mulford, 1999).
In 1729 after working for his brother James for a few years, at age 17, Franklin bought the Pennsylvania Gazette. Franklin began publishing the Poor Richard’s Almanac in 1932, which became the most popular publication in America. Apart from his publishing career, Franklin founded the first proprietary library as part of the Academy of Pennsylvania, which later transformed itself into the University of Pennsylvania. Franklin also helped develop the postal system and became the first postmaster. Beside this accomplishment, Franklin invented bifocal eye glasses, mapped the Gulf Stream off the East Coast, and provided evidence lightning is electricity by inventing the lightening rod (Otto, 2011).
Besides his inventive prowess, Franklin served in the Continental Congress and became the oldest member to sign the Constitution. Only six people signed both the Declaration of Independence and the Constitution, and Franklin is one of these people. Franklin had an instrumental hand in uniting the founding fathers to sign the Constitution despite some who did not fully support it (Otto, 2011). Entrepreneurs unite people with a common vision and Franklin personified this role.
Ben Franklin saw the greatest vision through in the history of this country and deserves credit for his remarkable accomplishments. Because of his vision, the United States became a great country and a haven for people to gain and respect individual liberty, freedom of expression, and have a government representative of the people (Otto, 2011). Now is a good time to reflect on the vision of America’s founder. Franklin united the country through his vision and entrepreneurs should have a special place in America because of it. Yet, today entrepreneurs do not have the same esteem despite their role in creating economic growth and jobs.
I want to hear your thoughts on what this country can do to regain Franklin’s vision and return entrepreneurs to the prominence they deserve. Post your comments here.
Baker, J. J. (2000). Benjamin Franklin’s autobiography and the credibility of personality. Early American Literature, 35(3), 274-293. doi: 64935335; 1281372; 14371; PEAL
Franklin, B. (n. d.). Greatest Benjamin Franklin Quotes. Great Quotes – Powerful Minds. Retrieved from http://www.great-quotes-powerful-minds.com/benjamin-franklin-quotes.html
Mulford, C. (1999). Figuring Benjamin Franklin in American cultural memory. The New England Quarterly, 72(3), 415-443. doi: 45962354; 1065448; 29070; NEQUA7; PNEQ; 04514915; 99454974
Otto, L. (2011). Benjamin Franklin: America’s original entrepreneur. Leadership & Organizational Management Journal, 2011(4), 132-149. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=ent&AN=73204254&site=ehost-live
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One reason I enjoy entrepreneurship is because I like to think for myself. I found early in my career that working for someone else limits the opportunity to think for yourself. Often people go to work for a company and the company controls their thinking to align with key executives.
I come from a family in which a good argument is a part of home life. Whenever my family would get together, a heated debate always happened. Family members and friends constantly challenged one another. Nothing bothers me more than when others believe they have to impose their will and think for someone else.
For example, recently I came across an article about how a Texas school board wanted to change text books to erase certain parts of history to support its conservative views. I find this appalling because I believe people are smart enough to make their own interpretations about history. What gives any group the right to stack the deck against any other group? Is this what a free society is all about?
Entrepreneurship is an outlet that allows me to express my views from my interpretation about conditions in the world. Entrepreneurship allows me to interpret people’s needs and gaps in the market otherwise not exposed by conventional wisdom. Entrepreneurship allows me to follow my own direction and follow opportunities I see. My success or failure depends on the direction I take not on what someone else tells me I should take. Following my own path, allows me to express my creativity and “think outside the box.” Entrepreneurship demands I hold myself accountable because no one else is to blame.
Imagine a world without entrepreneurship where everyone thinks the same. In my view, without entrepreneurship, the world is a boring place lacking innovation and exciting new pathways. Such an environment destroys small business, displaces workers, and eventually results in no new growth. No one exists to represent social interests of consumers and society at large. Society distributes the wealth only to the elite and everyone else becomes their servant. Freedom of speech disappears and only the wealthy have a voice.
Does this environment sound like a society you would want to live in? I am interested in hearing what you think. How do you view the ability to think for yourself?
I don’t know about you, but I value the ability to think more than almost anything. I can’t imagine what it would be like to lose this freedom. Do you want to learn more?
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Today I watched a video presentation by Steve Blank and the UCLA Anderson School of Management on different entrepreneurship types. Blank had many good ideas I agreed with about entrepreneurship. For example, Blank said when a founder finds a model that works, investors act quickly to take over and replace the founders because founding entrepreneurs’ role is to create value by finding new models. Investors look to manage successful models by recruiting corporate planners to maximize profits for owners and managers in these newfound wealth creating enterprises. Blank also claimed social entrepreneurship has no value because it creates no new wealth (LeanStartupCircleLA, 2011, October 16).
I take exception to this shortsighted view because I believe all enterprises should take some social responsibility. Further, sometimes, I believe social issues belong in social enterprises rather in commercial ones because social enterprises better serve consumers’ social needs and commercial businesses place more value on serving themselves. What is wrong with just earning a decent living instead of channeling all wealth to the elite? Can social entrepreneurs gain more value from satisfying more than their personal wealth and by serving society’s needs? If government fails to address social issues who should?
Different worldviews on social entrepreneurship.
Various worldviews exist about social entrepreneurship. One view comes from the protectors of social entrepreneurship, who believe in the effectiveness of social organizations. Another view comes from the doubters, who demand empirical proof of social entrepreneurs effectiveness (Pärenson, 2011).
Trexler (2008) reasoned both people and business enterprises have hybrid needs consisting of both social and commercial parts. Trexler rationalized business managers encode the thinking burdensome laws in, “the DNA of our for-profit corporate entities, yet business leaders persist in reducing corporate identity to the material enrichment of its executives and shareholders” (p. 80).
Bull, Ridley-Duff, Foster, and Seanor (2010) argued the current social setting directs itself toward self-interest and eroding moral values. Bull et al. claimed social entrepreneurship has great value to look beyond existing missions and values and maximize ethical virtues.
Defining social entrepreneurship.
Pärenson (2011) found some scholars define social entrepreneurship as any action helping solve social issues, while others see social entrepreneurship only when it serves both a social cause and fulfills a commercial need. Pärenson found other definitions about social entrepreneurship strictly about nonprofit corporations, but most definitions view social entrepreneurship mainly focusing on social needs and less on commercial concerns.
Alvord, Brown, and Letts (2004) defined social entrepreneurship as providing sustainable solutions to great social problems using economic, political, and social means by applying market-based skills to the nonprofit area. Noruzi, Westover, and Rahimi (2010) defined the social entrepreneur as a person, group, or alliance seeking sustainable solutions through break-through changes and ideas in how business, governments, and nonprofit organizations should do business.
Who decides where an enterprise fits?
Should government, commercial enterprise, or society decide the best place to deal with social issues? Should corporate profit making behaviors eclipse social values? Traditionally, governments decided because people of the world organized governments to represent their interests, but with global markets companies aim to tear down the walls of governments. Who then deals with social issues?
Soros (1998) argued autocratic governments find it easier to amass capital, but their power causes corruption and ignores the glue holding the shared values of society together. Soros explained the weaknesses of global capitalism emanating from uneven benefit distribution, unstable financial systems, threats to competition by monopolies and oligopolies, the unclear and confusing role of governments, and the lack of social unity. Without government is the social landscape falling to autocratic interests of big companies? What say should people have about their values?
When does “creative destruction” begin and creativity die?
Without the voice of consumers represented by government the place to deal with social issues best comes from entrepreneurs close to the customer. If monopolies and oligopolies make it difficult for entrepreneurs so they cannot compete who is responsible for creating new and improved products and services to fill the gaps needed by consumers?
Pichler (2010) explained entrepreneurs act as the villain to market economies by averting market tendencies in accord with what Elliot (1983) viewed as Schumpeter’s theory of creating new combinations. Without such new combinations economic conditions become static and fail to foster conditions ripe for creativity. Entrepreneurship drives creativity and when crowded out by monopolies and oligopolies exposes the economic conditions leading to “creative destruction.”
Society needs entrepreneurs to drive creativity and fill gaps exposed by monopolies and oligopolies that fail to consider social needs. Monopolies and oligopolies foster preserving the wealth of the elite with little consideration for social needs. Without entrepreneurship creativity dies and leaves a hole in market for needs direly needed by consumers.
Global markets and unfilled social gaps in the market.
Where do issues like education, healthcare, housing, and alternative energy fall in global markets? Are these not social issues? Should the private companies strictly deal with such issues or should society deal with these issues as social issues. Are such issues best dealt with by government or nonprofit organizations? Does one size fit all?
I do not believe all these issues rightfully belong with private companies because they are beyond the control of the consumer who needs some help. For example, should everyone who wants an education have the opportunity to get one or should education depend solely on those who can afford to pay for a good education?
I would also argue putting such issues in the private companies makes the cost rise and reduces the efficiency of the market in delivering such services to members of the public. Although private enterprises like to espouse their efficiency, sometimes markets become less efficient with the profit incentive. Costs rise because merchants involved add their markups on top of all the ingredients in the product or service causing costs to spiral. In government and nonprofit enterprises companies put less focus raising prices and more focus on buying efficiently. Molina-Martinez and Martinez-Fernandex (2010) and Zhang and Fung (2006) argued social entrepreneurs contribute to improved economic performance, and Granovetter (1992) made the case that social entrepreneurs outperform nonsocial entrepreneurs.
Should society distribute social services to the highest bidder or do all people have a right to certain basic services? Who decides where best to deal with basic social needs? Do the people have a say in a global market that has torn down the walls of government or have we digressed to “the survival of the fittest?”
Deregulation and its effect on social needs.
Loss of government funding from deregulation places more demands for meeting social needs on entrepreneurs (Gliedt & Parker, 2007). Entrepreneurs need better conditions to deal with emerging social needs, but monopolies and oligopolies with notable political influence detract from making conditions more favorable for social entrepreneurs. Social enterprises now face dwindling support from donations and public funds (Craig, Taylor, & Parkes, 2004).
Without government playing a role, social entrepreneurs have a responsibility to deal with social needs, but need improved conditions to do so. Foster (2010) argued for a mixed economy because markets are not perfect and the inability of big companies to deal with certain issues. Foster called for needed government policies to deal with promoting entrepreneurship. These policies include a commitment to education and training, public guarantees of financing for entrepreneurs, public support for research and development in emerging industries, and regulatory changes promoting entrepreneurship through networking. How can conditions improve to provide better conditions for social entrepreneurs without government intervention?
Examples of some of the unmet needs.
Alternative energy, housing, healthcare, and education offer examples of issues social entrepreneurs can play a part in. Green energy focuses on environment problems besides solely profit-making ambitions, but threaten conventional energy source providers with competition (Gliedt & Parker, 2007). Does threatening conventional energy source providers offer enough reason not to develop energy alternatives? What happens when shortages exist in conventional sources? Should society just accept paying more? How does society deal with environmental issues like global warming?
Society can apply the same thinking to housing, healthcare, and education. Are these not at least in some part social issues needing solutions encompassing more than profit-making? Do social entrepreneurs have value in solving these problems?
We would like to hear more from you about what you think? Please leave a comment or let us know if you would like to learn more.
Alvord, S. H., Brown, L. D., & Letts, C. W. (2004). Social entrepreneurship and societal transformation: An exploratory study. Journal of Applied Behavioral Science, 40(3), 260-282. doi: 10.1177/0021886304266847
Bull, M., Ridley-Duff, R., Foster, D., & Seanor, P. (2010). Conceptualising ethical capital in social enterprise. Social Enterprise Journal, 6(3), 250-264. doi: 10.1108/17508611011088832
Craig, G., Taylor, M., & Parkes, T. (2004). Protest or partnership? The voluntary and community sectors in the policy process. Social Policy & Administration, 38(3), 221-239. doi: 10.1111/j.1467-9515.2004.00387.x
Elliott, J. E. (1983). Schumpeter and the theory of capitalist economic development. Journal of Economic Behaviour and Organisation, 4(4), 277-308. doi: 10.1016/0167-2681(83)90012-4
Foster, J. (2010). Productivity, creative destruction and innovation policy: Some implications from the Australian experience. [Article]. Innovation: Management, Policy & Practice, 12(3), 355-368. doi: 10.5172/impp.12.3.355
Gliedt, T., & Parker, P. (2007). Green community entrepreneurship: creative destruction in the social economy. International Journal of Social Economics, 34(8), 538-553. doi: 10.1108/03068290710763053
Granovetter, M. S. (1992). Problems of explanation in economic sociology. In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 29-56). Boston, MA: Harvard Business School Press.
LeanStartupCircleLA (Producer). (2011, October 16). Steve Blank on customer development: The second decade. Retrieved from http://www.youtube.com/watch?v=6t0t-CXPpyM
Molina-Morales, F. X., & Martínez-Fernández, M. T. (2010). Social networks: Effects of social capital on firm innovation. Journal of Small Business Management, 48(2), 258-279. doi: 10.2307/2393553
Noruzi, M. R., Westover, J. H., & Rahimi, G. R. (2010). An Exploration of Social Entrepreneurship in the Entrepreneurship Era. Asian Social Science, 6(6), 3-10.
Pärenson, T. (2011). The criteria for a solid impact evaluation in social entrepreneurship. Society and Business Review, 6(1), 39-48. doi: 10.1108/17465681111105823
Pichler, J. H. (2010). Innovation and creative destruction: At the centennial of Schumpeter’s theory and Its dialectics. Nase Gospodarstvo/Our Economy, 56(5-6), 52-58. doi: http://www.ng-epf.si
Soros, G. (1998). Toward a global open society. The Atlantic Online, 281(1), 20-32. Retrieved from http://www.theatlantic.com/past/docs/issues/98jan/opensoc.htm
Trexler, J. (2008). Social Entrepreneurship as an Algorithm: Is Social Enterprise Sustainable? Emergence : Complexity and Organization, 10(3), 65-85. doi: 10.1207/s15327000em0101_2
Zhang, Q., & Hung-Gay, F. (2006). China’s social capital and financial performance of private enterprises. Journal of Small Business and Enterprise Development, 13(2), 198-207. doi: 10.1108/14626000610665908
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In this election year the country has seen the political parties jockeying for votes of small business, but whether either party represents the needs of small business is questionable. Ide (2009) showed that small businesses account for 99.7% of businesses in the United States and 50.7% of employees in 2004.
Although small business should have significant political power, the parties are lukewarm about supporting important interests of small business. Each party encourages some of the interests of small business, but neither party makes a strong case for small business. As Young (2008) suggested, policymakers since the New Deal have taken the strategy to fragment small business interests.
Each party has a script it follows to divide and conquer small business, but what if small business unites? Small business by the sheer numbers should have a more powerful influence on policymakers than big business.
Baumol, Litan, and Schramm (2007) listed several political issues benefiting small businesses. Bankruptcy protects tops the list because the cost of failing is too high. Big business benefits by Chapter 11 reorganizations. Although Chapter 11 is affordable for big business, this provision of the bankruptcy law is costly for entrepreneurs. The stigma attached to bankruptcy penalizes small business, but rewards big business. The notion big businesses can clean up their act, but entrepreneurs have little value to the economy is a bad idea. Why can big businesses make mistakes, but not entrepreneurs?
The next item on the list is access to finance. Joseph Schumpeter (1911) explained the importance of banks in making financing available to small business to spur innovation and drive economic growth. The role of financial markets is to channel savings to investors wanting to earn higher returns. Banks today are not lending and policy makers have done little to help small business find the funds they need. Lending to innovators drives economic growth and job creation. Large companies have access to capital through the capital markets. Why not lend to small business?
Baumol et al. (2007) argued small businesses need rewards for engaging in productive entrepreneurship that innovates and finds ways to make and deliver products better than those existing. For example, small businesses should find it easier to protect intellectual property and pay lower taxes. Small business should have an equal ability to enforce contracts as big businesses enjoy. Unfortunately, existing law favors big business and the cost of protection is too heavy for small business.
Another item on the list is antimonopoly regulation. The policymakers in recent years have ignored antitrust laws and made it easy for big business to crowd out small business. Savino (2009) explained how Supreme Court Chief Justice Louis Brandeis championed efficiency in business by enforcing antitrust legislation in the late 1920s and 1930s. Capitalism relies on equal opportunity for small business to compete.
A final item on the list is to support innovations resulting from inventions coming out of university research and development efforts. Making patent protection easier would benefit these efforts and federal funding can help, but policymakers are overzealous about austerity measures (Baumol et al., 2007).
Unlike others willing to accept current conditions for small business, I believe the time has come for small businesses to come together and foster a small business agenda. I want to see the United States return to the prominence it once achieved as the hub of small business creation.
Please leave a comment on what you think is important for small business. I am interested in knowing your thoughts. What should be part of small businesses political agenda?
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Baumol, W. J., Litan, R. E., & Schramm, C. J. (2007). Good capitalism, bad capitalism and economics of growth and prosperity. New Haven, Conn. and London: Yale University Press.
Ide, T. (2009). How to rectify unfair trade practices and to establish appropriate supply chains and better business culture under the global market economy. Pacific Economic Review, 14(5), 612-621. doi: 10.1111/j.1468-0106.2009.00475.x
Savino, D. (2009). Louis D. Brandeis and his role promoting scientific management as a progressive movement. Journal of Management History, 15(1), 38-49. doi: 10.1108/17511340910921772
Schumpeter, J. A. (1911). Theory of economic development. Cambridge, MA: Harvard University Press.
Young, M. (2008). The political roots of small business identity. Polity, 40(4), 436. doi: 10.1057/pol.2008.20
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My business as a consultant and mentor for small business differs from traditional models because of my focus on educating and training entrepreneurs otherwise without the means to run a business. I put enjoying the entrepreneurial experience first ahead of profits. Businesses grow by starting small and proving competencies as a business person. Paula Marguilies wrote about a similar story. The story is about Linda Rothenberg’s High Impact Endeavor, and I encourage you to read the article. I aim to develop a comparable program here in the United States or anywhere for disadvantaged entrepreneurs.
Entrepreneurs need role models before capital. APG Academy of Entrepreneurship provides opportunities to disadvantaged entrepreneurs by reaching out to successful entrepreneurs allowing the disadvantage entrepreneur to learn how to run a successful business. Disadvantaged entrepreneurs need not fear failure, but work with experienced and highly educated professional entrepreneurs.
Disadvantaged entrepreneurs without help have every right to fear failure. Studies show higher educational levels and experience improves the chances of success (Blanchflower, 2004). Disadvantaged entrepreneurs are closer to emerging social issues and can make a difference in our economy. Most coaches and mentors work only where they see an obvious opportunity, but miss many because they are not attuned to the needs of more disadvantaged populations.
I encourage disadvantaged populations to follow their dreams and use us as a resource. We do not have the bias of the traditional consultants and coaches. We jump in the trenches right with you. Want to learn more?
Please leave a comment if you have a dream you want to pursue, but are afraid you do not have the education and experience to successful follow your dream. Where do you see unfulfilled needs?
Blanchflower, D. G. (2004). Self-Employment: More may not be better. (10286). National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w10286.
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One of the hardest challenges for a small business is finding the right employees, but I believe finding the right employees runs a little deeper than just locating them. People are people and no one is perfect. I believe finding the right employees includes developing and molding them into the employees you want to represent your business.
I remember a situation from early in my career. I had an employee who I liked very much as a person, but ran into some hard times and got involved with the wrong people in her personal life. I found it sad that someone had taken advantage of her and that she let it affect her work performance. At the time, I saw few alternatives aside from letting her go. I did not relish this task and today I might not go quite as far as letting her go if I had it to do over again. This woman took losing her job personally at first, but with time realized her experience losing her job helped her become strong and overcome her personal problems.
About a year later, this woman came back to me and I rehired her. She quickly became one of my best employees and thanked me for having the courage to deal with her as I did. Still, I am not convinced I did the right thing. The quality she showed me is her genuineness about overcoming her situation and wanting to do well in her job.
The danger I ran in to letting this employee go is finding and replacing her with someone else who could perform the job at least as well as she did. Although I believe much good competition exists in the job market, there is something to be said for a person’s role in developing people. People you develop are more in tune with your goals and expectations than someone from the outside who you have had no hand in developing. How many times do you hire what you believe is an extremely talented person only to see that person leave for a better offer elsewhere?
The moral of the story is I believe developing employees by giving second chances is far better than looking for superior skills. I value people first and value them as my most important asset. Do you want employees to align with the goals for your business or do you prefer hiring strictly on the basis of the best talent? How important is it to find people who can align with the vision you have for them and your company? Please let me know your thoughts by responding to this post. Please visit us by clicking here.
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