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12 Entrepreneurship: A Field
of Dreams?
a b
Olav Sorenson & Toby E. Stuart
a
Rotman School of Management , University of
Toronto
b
Harvard Business School
Published online: 01 Apr 2009.

To cite this article: Olav Sorenson & Toby E. Stuart (2008) 12 Entrepreneurship:
A Field of Dreams?, The Academy of Management Annals, 2:1, 517-543, DOI:
10.1080/19416520802211669

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The Academy of Management Annals
Vol. 2, No. 1, 2008, 517–543

12
Entrepreneurship:
A Field of Dreams?
Downloaded by [Northeastern University] at 15:59 06 October 2014

OLAV SORENSON*
Rotman School of Management, University of Toronto

TOBY E. STUART
Harvard Business School

Academy
10.1080/19416520802211669
RAMA_A_321333.sgm
1941-6520
Original
Taylor
2102008
olav.sorenson@rotman.utoronto.ca
OlavSorensen
00000August
and
& Article
Francis
of(print)/1941-6067
Francis
Management
2008 Annals
(online)

Abstract
This paper has two objectives. We begin by contrasting two potential paths for
future research in entrepreneurship. One is the establishment of an indepen-
dent field of research with a clear jurisdiction, a common theoretical canon, and
autonomy from related fields. The second is a phenomena-based approach, in
which scholars congregate around common interests in empirical phenomena
but approach them with distinct disciplinary lenses. After discussing these
alternatives and lobbying for the phenomena-based approach, we then review
some of the recent, discipline-based research in economic and organizational
sociology relevant to entrepreneurship, and identify significant gaps in that
literature.

*Corresponding author. Email: olav.sorenson@rotman.utoronto.ca

ISSN 1941-6520 print/ISSN 1941-6067 online


© 2008 Academy of Management
DOI: 10.1080/19416520802211669
http://www.informaworld.com

517
518 • The Academy of Management Annals

I. Introduction

Scholarly interest in entrepreneurship is burgeoning. According to the ISI


Web of Science, the number of articles published with the term “entrepreneur/
ship” in the title, abstract, or keywords each year tripled from roughly 50 in
1990 to more than 150 in 2000. Since then, activity has only accelerated; the
annual count of articles doubled again between 2000 and 2005, and authors
published more than 370 academic papers on entrepreneurship in 2006 alone.
This upward trend reflects a number of factors. One is an increasing recog-
nition that small, young firms account for a large share of employment and for
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economic growth, and thus that a better understanding of entrepreneurial


processes informs variables as wide ranging as individuals’ prospects for pros-
perity to country differences in growth rates and per capita income. Many even
believe that the spread of entrepreneurial dynamism from the West to under-
developed and transitional economies offers a potential palliative for their eco-
nomic and political ills. Another factor is an influx of resources into the study
of entrepreneurship. The many, recent initial public offerings and spectacu-
larly valued acquisitions of young companies have spurred interest among stu-
dents in entrepreneurial careers, thereby fueling demand for richer curricular
offerings in the subject. Given the dynamics of academic fundraising, these
events have also contributed to the creation of many endowed professorships
and research centers for entrepreneurship.1 Policy concerns, student demand
for content, and a rush of resources into the area have highlighted the need for
a research base to deepen our understanding of the antecedents, processes and
consequences of entrepreneurship.
Our review pursues two ends with a common theme: looking forward. The
first and more controversial of our pursuits is to offer our opinion on the pre-
ferred path for the evolution of research on entrepreneurship. The second and
less divisive portion of our paper surveys recent entrepreneurship-related
studies in our area, organizational and economic sociology, and highlights
promising topics for future research.
In considering how the academe might best accommodate the increasing
interest in entrepreneurship, two possibilities come to mind. On one hand,
research on entrepreneurship might develop within existing disciplinary
boundaries. On the other hand, it could become its own distinct field of study.
Indeed, several influential scholars have lobbied prominently for this latter
possibility, arguing that the heavy reliance on theory from other disciplines
undermines the legitimacy of entrepreneurship research (Busenitz et al., 2003;
Shane & Venkataraman, 2000), that some entrepreneurship-related phenom-
ena are so unique that existing theories can only partially illuminate them
(Zahra, 2005), and that the enactment of a jurisdictional boundary around the
field would preclude the further fragmentation of entrepreneurship research
into an incoherent jumble (Shane & Venkataraman, 2000).
Entrepreneurship: A Field of Dreams? • 519

Our first objective is to refute these claims. For reasons we articulate in


section II, we neither place high odds on the prospects of success for the study
of entrepreneurship as a field, nor do we believe that those interested in the
subject should seek such an outcome. In contrast to the increasingly prevalent
view within the community of self-identified entrepreneurship scholars, we
believe that this area of research will witness the greatest progress if interest in
a related set of phenomena rather than a common theoretical cannon forms
the basis for scholarly interaction. Instead of attempting to establish an inde-
pendent field, we see the creation of a multi-disciplinary “invisible college” of
discipline-based scholars with an interest in entrepreneurship as a better path
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along which to push forward our understanding of the subject.


As an example of the promise of that approach, in section III, we then
review recent research in several subfields of organizational sociology that
have already contributed to our understanding of entrepreneurship-related
phenomena. Our review touches on social networks, organizational ecology,
institutional theory, the emerging issue of identity formation and organiza-
tional form at the intersection of institutional and ecological theories, and
career-based perspectives on entrepreneurial events. In the course of our sur-
vey, we highlight open questions from a disciplinary perspective. Because this
literature has been reviewed before, we focus on current research, much of
which has not been reviewed in detail elsewhere.2 In no way, shape or form is
our review comprehensive; even within economic and organizational sociol-
ogy, it provides but a partial list of theoretical lenses, and other disciplines
have much to add to the conversation.
II. Field versus Phenomena
We see two options for research on entrepreneurship. One is to rally behind
those calling for a declaration of independence as a field. Zahra (2005), for
example, argues:
We cannot be a scholarly field without having our own legitimate theo-
ries that define and explain distinctive phenomena in ways that theories
from other disciplines cannot possibly articulate … If we agree with this
proposition, then we must revisit the call for interdisciplinary research
in entrepreneurship. (p. 257)
The second alternative is for a loose federation of discipline-based scholars
bound together by common interests in entrepreneurship-related phenomena
to bring synergistic expertise to inherently multidisciplinary phenomena. In
reality, both of these avenues have been followed simultaneously. The open
question is: Which one holds the greatest promise for the future?
II.A. Field
It would be difficult to deny that the movement to develop entrepreneurship
as an independent field has gained steam. Consider, for instance, that between
520 • The Academy of Management Annals

2002 and 2006, membership in the Entrepreneurship Division of the Academy


of Management grew by 64% to more than 2000 (versus 32% for the Academy
as a whole). Bibliometric evidence paints a similar picture. According to
ISI’s Web of Science, one of the recent calls for independence of the field,
Shane and Venkataraman’s (2000) essay in the Academy of Management
Review, “The promise of entrepreneurship as a field of research”, has already
garnered more than 250 citations. Remarkably, this paper has received nearly
twice the number of citations of the next most cited article published that
year in the Academy of Management Review or the Academy of Management
Journal.
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But should scholars flock to this cause? Let us discuss (and begin to refute)
the arguments for independence. One rationale for organizing scholarly activ-
ity according to a subject of study is that the pertinent phenomena merit
greater attention than they have attracted from members of the relevant disci-
plines. Here, the so-called “area studies” departments come to mind as
examples. Many universities have founded departments to focus on topics
such as African-American studies, Latino studies, and Women’s studies.
These departments are typically staffed with researchers drawn from across
the humanities and social sciences with loosely related research interests. In
part, these departments fulfill teaching needs, but more importantly they pro-
vide havens for scholars researching disadvantaged groups. Given the history
of discrimination against these groups, one can easily imagine that some
members of the home disciplines of the scholars congregating in area studies
departments might denigrate research on these subjects as second rate.
Though a relatively common form of organization, these departments do not
develop common theoretical cannons. Instead, they simply serve as (perhaps
temporary) sanctuaries for scholars studying socially disadvantaged groups.
Unlike area studies, however, entrepreneurship research per se does not
appear to suffer from discrimination. Among the achievements of those argu-
ing for the establishment of entrepreneurship as a dedicated field has been the
uncovering of many important facts and empirical puzzles that have attracted
a great deal of popular and scholarly attention, (ironically) securing entrepre-
neurship’s legitimacy as a subject of study. Though we agree that many of the
questions related to the founding and growth of new firms warrant additional
research attention, mainstream scholars in economics, psychology and sociol-
ogy do not appear in any way averse to entrepreneurship as a context for their
investigations. Indeed, relevant research regularly appears in the flagship jour-
nals of these fields. Particularly in economics and sociology, as well as the
business school departments, a cadre of each discipline’s most distinguished
scholars has exhibited strong interest in phenomena related to entrepreneur-
ship—for example, Will Baumol and Art Stinchombe in economics and soci-
ology respectively. In the absence of such discrimination, this first rationale
for an independent field is unpersuasive.
Entrepreneurship: A Field of Dreams? • 521

Shane and Venkataraman (2000) propose a second potential rationale. In


their call for an independent field, they argue that no single perspective can
explain all (or even most) of the variance in entrepreneurial processes. They
rightly contend that personality differences and cognitive biases are useful for
understanding some behaviors. Incentives and the scarcity of resources account
for others. Social relationships and institutional structures provide theoretical
and empirical purchase on yet additional entrepreneurial activities. Because of
the complexity of entrepreneurship-related phenomena, researchers could
explain more if they considered all of these factors. Shane and Venkataraman
therefore argue for the desirability of a common theoretical canon synthesizing
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these diverse factors—and perhaps others unique to the entrepreneurial


context—to speed our understanding of the phenomena.
At one level, their logic is difficult to dispute. In the study of any complex
phenomenon, the more relevant factors one considers, the more accurate the
predictions and descriptions. In quantitative terms, the more that one puts into
the model, the more (unadjusted) variance it will explain. But of course, this
truth neither implies that all complex phenomena merit their own scholarly
fields, nor that all fields should strive to expand their borders. The relevant
question is: When would researchers benefit from being organized into a field
that spans different sorts of social mechanisms, and when should they organize
around a narrower set of theoretical mechanisms with some underlying simi-
larities? With respect to teaching, practice and consulting, one can easily see the
importance of a broad purview. Students interested in starting their own firms
would ideally understand all of the factors that come into play, much as those
interested in business more generally benefit from exposure to accounting, eco-
nomics, finance, marketing, organizational behavior and strategy. That educa-
tional mission has justified the grouping of academics specializing in these
loosely related topics into business schools, but within these schools scholars in
different fields typically remain distinct in their departments, journals, profes-
sional associations and conferences. Whether entrepreneurship should form
an independent field is therefore akin to the question: When should schools
organize scholars by subject of study rather than by theoretical perspective?
One issue in particular seems important to answering this question: Are
the disparate theoretical mechanisms that explain a phenomenon additive, or
do they interact in important ways? For example, in the context of entrepre-
neurship, might particular cognitive biases come into play only within certain
social situations? If such interdependencies exist then researchers specializing
in either the psychology of decision-making or the structural context of social
action might miss crucial relationships that those focusing on the phenomena
could find. The recent emergence of bioinformatics departments, for example,
stems from the belief that advancement in certain areas of the life sciences
will require combinations of knowledge and skills from biology, genetics,
mathematics, computer science, and statistics. Although we do not know
522 • The Academy of Management Annals

of any compelling examples of such interactions in entrepreneurship, we


concede the possibility that their absence in the literature reflects not their
non-existence, but rather the obstacles to uncovering them given the current
organization of research on the subject.
Even if such interactions exist, however, an independent field may not best
promote their elucidation. The notion that dedicated entrepreneurship
researchers would discover these relationships hinges on the assumption that
scholars trained in the field would have sufficient depth in the multiple, com-
ponent disciplines to find fertile areas for exploring interactions at their
boundaries. However, the broader the field—and the more true to the under-
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lying phenomena—the lower the likelihood that scholars trained in it would


develop depth of expertise in its many discipline bases. Becoming an expert in
even a single discipline typically requires years of study and training. The
prospects of producing scholars fluent in multiple, loosely related, literatures
with mastery of many distinct methodologies seem dim. Even in areas such as
bioinformatics where cross-discipline synergies have been pursued, it has
often been by teams of specialists, each bringing a separate set of skills and
base of knowledge to the table.

II.B. Phenomena
Against the potential benefits of reorganizing entrepreneurship studies into a
focused field, we see several additional, serious shortcomings. First, the isola-
tion of scholars researching some settings (e.g., mature organizations) from
those examining others (e.g., startup companies) may hinder the advance-
ment of knowledge. Theory building often begins with induction; the scientist
identifies an apparent pattern by observation. Scientists move from discovery
of patterns in the data to the development of propositions or hypotheses to
theory testing. The accumulation of knowledge and understanding comes
from elaborating theories more consistent with empirical observation and
discarding those less consistent with it (Lakatos, 1978). In turn, the ability to
discriminate among competing theories rises with the number and indepen-
dence of the settings in which one can test them.
The isolation of one group of settings, such as those pertaining to entrepre-
neurship, from the broader research community therefore has at least two
costs. On one hand, since those researching entrepreneurship would have
fewer settings in which to examine their propositions—and fewer still inde-
pendent from the observations generating those insights—they would be less
able to adjudicate between alternative explanations than otherwise might be
the case. But the broader disciplines also have something to lose here. To the
extent that entrepreneurship has unique contextual elements, it could offer a
valuable laboratory for examining general theories developed in other contexts
and it could provide inspiration for theoretical innovations. In our review of
the literature below, we discuss both directions of influence.
Entrepreneurship: A Field of Dreams? • 523

The organization of entrepreneurship into a “field” might also slow


progress for institutional reasons. Following much research in the sociology of
science, Pfeffer (1993) argues that the high level of theoretical and method-
ological fragmentation in organization theory has hampered progress in the
field. Pfeffer notes that everything from the ability to apply objective criteria to
grant application and journal publication decisions, to the influence of the
field’s members within schools and universities, to the rate and cumulative-
ness of scientific advancement, all depend on the degree of consensus within
the field. Pfeffer therefore concludes that a higher degree of contention within
organization theory, or any other field, retards progress.
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Compared with organization theory, however, entrepreneurship has an


even broader theoretic purview. Zahra (2005), for example, notes that the vast
majority of the papers published in the dedicated entrepreneurship journals
he analyzed give citations to—and hence presumably draw on—articles in
strategy, sociology, economics, and psychology. If organization theory, which
probably considers a narrower range of theories than entrepreneurship and
relies on a more circumscribed set of social sciences, has struggled for so many
years to achieve anything that resembles a paradigm, what prospect has the
emerging and more heterogeneous corpus of research on entrepreneurship?
The creation of distinct entrepreneurship departments might even impede
the careers of scholars studying the subject. Consider the current organiza-
tional structure of business schools (admittedly, these structures are both
evolving and endogenous to the organization of scholarship). A quick survey
of the top-10 US business schools identified in the latest Business Week rank-
ings reveals that entrepreneurship departments exist at only two: Harvard
Business School and, in a more ambiguous case because it operates at the
sub-group level, the Entrepreneurship Group within the Management
Department at Wharton. In all other cases, centers administer the entrepre-
neurship curriculum, staffing their courses with faculty members from the
traditional business school departments (or with adjunct faculty). Where will
those in the area find jobs? Who will write their promotion letters? Until
entrepreneurship can obtain free-standing departments that operate on par
with the existing units at the top-rated business schools, it may be a chal-
lenge for scholars who identify themselves solely with the field—as opposed
to, say, an economist with an interest in entrepreneurship—to acquire the
internal and external support necessary to receive offers and earn tenure at
many universities.3
Of course, one might presume that entrepreneurship departments have
emerged and thrived at less prominent institutions and believe it merely a
matter of time until the elite business schools mimic such models. Indeed,
fields of research as diverse as the sociology of professions and the evolution
of technology find that significant challenges to the status quo typically emerge
in the periphery of a social system. Without doubt, a few institutions, such as
524 • The Academy of Management Annals

Babson, that fall outside the most highly ranked national business schools have
independent departments and faculties that have made major contributions to
research in the area. However, an examination of the websites of the 25 schools
ranked between 25th and 50th in 2008 by US News & World Report suggests
that, at most, three of them maintain entrepreneurship departments. If
anything, investments in the study of entrepreneurship appear most concen-
trated among the elite institutions. According to the Kauffman Foundation’s
survey of endowed professorships in entrepreneurship, for example, Harvard,
Wharton, and Stanford lead other schools in terms of having the greatest
number of chairs devoted to the subject.
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As a final argument against a free-standing field of research in entrepre-


neurship, the establishment of boundaries around an independent field
would force its own undesirable compromises. At the heart of the issue is the
breadth of the field. A partial list of topics considered in scholarly research on
entrepreneurship includes: the macroeconomic, geographic, and cultural
sources of entrepreneurial opportunities; the process of identifying opportu-
nities; the psychological, social, educational, economic and family attributes
that influence individuals’ propensities to engage in entrepreneurship; the
underpinnings of creativity and innovation; the transition to self employ-
ment; the process of mobilizing resources to build and grow a new organiza-
tion; the myriad factors that influence either the conduct, performance, or
more general evolution of early-stage ventures; and the many dimensions of
corporate venturing.
Every organization had to start somewhere; the established, large organiza-
tions of today are merely the entrepreneurial ventures of an earlier era. Where
can one draw the line between entrepreneurial activity and non-entrepreneur-
ial activity? Does it end after the first year of an organization’s existence? Or,
perhaps it ends when a company sells it shares on the public markets? More-
over, every domain within the business school comes into play. Would-be
entrepreneurs must obtain financing and hire personnel, which means they
concern themselves with capital structures and human resource management.
For those that actually begin operations, they must worry about accounting,
supply chains, the management of staff, positioning relative to rivals, and
long-term strategies. Given that all firms at some point fall within the purview
of entrepreneurship and that all of the business school subjects have some-
thing to say on the matter, one could reasonably argue that the study of entre-
preneurship does not differ in range (at least not by much) from the scope of
the general business school.4
Defending the declaration of intellectual independence therefore requires a
significantly circumscribed jurisdictional claim. Perhaps recognizing this
issue, many of the proposed definitions of entrepreneurship appear intended
to narrow the scope of the field. Consider Bygrave (1993, pp. 257–258), who
characterizes an entrepreneurial event as being:
Entrepreneurship: A Field of Dreams? • 525

initiated by an act of human volition… at the level of the individual or


firm,… a change in state… a discontinuity… a holistic process… a
dynamic process,… involves numerous antecedent variables… it is
extremely sensitive to initial conditions,… and it is unique.

Or, Shane and Venkataraman (2000, p. 220), who follow Kirzner in asserting
that:

Entrepreneurial opportunities differ from the larger set of all opportu-


nities for profit, particularly opportunities to enhance the efficiency of
existing goods, services, raw materials, and organizing methods, because
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the former require the discovery of new means–ends relationships,


whereas the latter involve optimization within existing means–ends
frameworks. (Emphasis in original)

Indeed, the litany of definitions proffered and the community’s repeated (and,
it seems to us, increasingly self-conscious) efforts to forward definitions of the
field are probably more reflective of the breadth of the subject matter than of
the oft-claimed culprit for such ambiguity—the youth of the area.
Though we cannot say whether any of these offer tenable definitions for a
field of research, upon dissection, they would limit the field to a sufficiently
slender set of conditions and activities so as to disqualify on semantics the rel-
evancy of most research that we consider to fall squarely within the domain of
entrepreneurship. For instance, Shane and Venkataraman’s (2000) emphasis
on the novelty of the entrepreneurial act in terms of means–ends relationships
would presumably exclude all but a small (maybe even miniscule) fraction of
the many millions of firms founded in the USA each year and, we imagine, an
even larger proportion of businesses founded outside of it. A tenable definition
of entrepreneurship therefore imposes a stark tradeoff: we can pigeon-hole
the field to a restricted range of questions that a unified, but correspondingly
narrow, theoretical perspective may address, or we can acknowledge the
inherent complexity of the phenomena and approach it through the lenses of
a correspondingly diverse set of scholarly perspectives.
Before concluding this section, we hasten to add that as a purely philosoph-
ical matter, we sympathize with the members of the community of entrepre-
neurship researchers in seeing the appeal of a distinct, largely freestanding,
field of research and a self-identifying community of scholars. As a practical
matter, however, we consider it unlikely that such a field will truly succeed. In
addition, we underscore that it is not that we believe that entrepreneurial phe-
nomena have received the research attention that their socioeconomic impor-
tance merits. They have not. Research centers and grants, however, offer
alternatives to the formation of a field for stimulating research. The Kauffman
Foundation, for example, has used grants successfully to encourage established
scholars from a variety of disciplines to engage entrepreneurial phenomena.
526 • The Academy of Management Annals

Moreover, we also emphasize that we do not believe that interdisciplinary


research has no value. It does. Each of the disciplines relevant to entrepreneur-
ship brings its own unique theoretical lens to the table. They also vary in their
methodological expertise. We therefore see ample room for cross-pollination.
The most successful studies along these lines, however, will likely come
through collaborations between scholars, each with deep training in their
respective disciplines.

III. Sociological Perspectives on Entrepreneurship


As an example of the promise of a disciplinary approach, we now turn to a
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review of recent research on economic and organizational sociology relevant


to entrepreneurial settings. We have chosen to organize the literature accord-
ing to social mechanisms, rather than the phenomena to which these mecha-
nisms apply. Entrepreneurial problems, after all, represent but one setting in
which general social mechanisms operate, and sometimes multiple entrepre-
neurial issues have at their core a single social problem.5
In reviewing the literature, we focus on mechanisms that have been pro-
posed as partial solutions to three broad classes of problems: the localization
of information, the presence of fundamental uncertainty, and the misalign-
ment of incentives between transacting parties. All of these represent classes of
“market failure” that frequently confront nascent entrepreneurs. To name a
few examples: the identification of opportunities—indeed, the very existence
of opportunities—and the mobilization of resources necessary to exploit them
often depend on individual differences in access to information; individuals
interested in starting, financing or joining new ventures confront uncertainty
about the quality of the opportunity or the firm, market conditions, and more
generally, future prospects; and misalignments of interests frequently arise
between investors and the entrepreneurs they support.
Although all three of these problems appear in multiple manifestations in
entrepreneurial settings, they also reflect general problems with broad appli-
cation. The localization of information, for instance, influences the function-
ing of all markets, as well as the evolution of social networks, investing
patterns and returns, and many other outcomes. Individuals face fundamental
uncertainty in many aspects of their daily lives, from religion to choosing
friends and spouses to trading favors. Misalignments of incentives, mean-
while, can arise in almost any economic transaction and, indeed, in social rela-
tions not directly related to the market. Because these issues pervade so many
dimensions of social and economic life, scholars in a number of disciplines
have invested a great deal of scholarly effort in understanding them. The com-
monality of these problems across the entrepreneurship domain and a wide
array of other social and economic contexts is precisely why a disciplinary
approach can best contribute to the advancement of entrepreneurship
research. In fact, the insights gained into the nature and consequences of these
Entrepreneurship: A Field of Dreams? • 527

problems in other contexts have already shown great relevance for under-
standing entrepreneurship.

III.A. Localization of Information


Information might remain localized, or private, for many reasons. Often, it is
private for the simple fact that no one has bothered to write it down. Codifica-
tion, or the articulation of information or knowledge in written words,
requires time and effort and so does not always occur. In other instances, as in
the case of tacit knowledge, those with the information may not even be
conscious of all they know (Polanyi, 1958). The chess expert, the musical
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virtuoso and the homerun hitter, for example, possess exceptional skills yet
cannot completely explain how they deliver their outstanding performances.
Other kinds of knowledge involve such complex interactions that they elude
codification. And, of course, in the entrepreneurial domain, much useful
information remains private because it originated from acts of individual
insight, creativity, or innovation. When people foresee that the knowledge
they have discovered or created potentially has economic value, they often try
to preserve its confidentiality.
Even when information is openly available, such as in a book or on a web-
site, it still might not receive attention far and wide. On one hand, the diffi-
culty of searching through vast archives can frustrate potential users of the
information. On the other hand, even when they can locate appropriate infor-
mation, they might question its veracity. Does it come from a reputable
source? Might the author have incentives for misleading readers? Witness the
recent press surrounding conflicts of interest in equity and credit analysts’
reports and ratings, and the partisan editing of Wikipedia entries. In these
cases as well, information travels slowly from its source—questions of its
reliability add friction to its flow.
Regardless of the reason why information has remained private, by defini-
tion, access to private information is restricted. Insofar as private information
does circulate, it moves through relationships. In Podolny’s (2001) memorable
language, relationships serve as the “pipes” for the transmission of private,
market-related information. Consequently, those close to the origin of the
information (in terms of the number of social connections between them and
the source) become aware of it before the general public. Or, as Marsden
(1983) put it, the flipside of the benefits of social connections for some is that
the network necessarily “restricts access” for others.
This localization of information has several consequences. One is that the
bits of data necessary to perceive an entrepreneurial opportunity may reside in
disparate locations within a community. Since only someone with access to
these socially distant domains could detect the opportunity, it may remain open
for a long time before being (if ever) exploited. Another consequence appears
in the economic geography of entrepreneurship. Traditional explanations for
528 • The Academy of Management Annals

the co-location of similar firms into geographic clusters have relied on the idea
that these firms share a need for some valuable resource (e.g., a natural
resource, such as coal, or specialized service providers, such as intellectual
property law firms or industry-knowledgeable headhunters and consultants)
and therefore jointly benefit from their proximity to one another (Sorenson &
Baum, 2003). But the localization of important information could also produce
geographic concentration. In industries that rely on specialized human and
social capital, only those with connections within the industry can create (or
discover) and exploit profitable opportunities. Because relationships them-
selves generally remain concentrated within regions, however, such connec-
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tions are primarily available to individuals living in the same regions as—and
very often working for—incumbent firms in the industry. Geographic concen-
tration therefore might arise and persist, and perhaps even become more
pronounced, even if firms do not benefit from locating near to their rivals—in
other words, even if positive agglomeration economies do not exist (Sorenson,
2005; Sorenson & Audia, 2000; Stuart & Sorenson, 2003b).
Sociologists have primarily investigated two mechanisms through which
social systems shape the diffusion of information. First, individuals can span
social boundaries by maintaining relationships with others on both sides of a
border. To the extent that these connections provide paths for the movement
of private information, they allow it to diffuse and recombine. In other cases,
individuals themselves carry the information as they move through social
space, leaving one firm to join another or emigrating from one region to
another. These two mechanisms are closely related, but in one the “links”
transmit information across locations, while in the other the information
moves with the “nodes” themselves.
The idea that so-called bridging ties reaching into otherwise unconnected
communities provide advantages to the individuals sitting at the nexus of those
connections has been central to research on boundary spanning, brokerage
and structural holes (Burt, 1992; Granovetter, 1973). In fact, this idea has
appeared in multiple streams of sociological research. For instance, in his clas-
sic text on human ecology, Amos Hawley (1950) observes that cities at the
crossroads of major transportation routes offer ripe environments for the
recombination of diverse streams of knowledge. To the extent that diverse
information travels along these transportation routes and that the information
has complementarities, those at the nexus of major passageways should have
early opportunities to reap the rewards of combining these otherwise disjoint
sets of synergistic knowledge. In a corporate setting, Burt’s (2004) study of
employees’ ideas within a large firm finds that senior management perceives
greater value in the ideas of those who talk with more diverse contacts. How-
ever, Burt’s work provokes an interesting question: Do individuals with diverse
networks actually generate better ideas, or are they merely advantaged in hear-
ing others’ good ideas or at anticipating what appeals to senior management?
Entrepreneurship: A Field of Dreams? • 529

Whether individuals with diverse networks arrive at good ideas themselves


or select them from the ones they hear may not matter for the immediate out-
come, but it is of clear sociological and practical interest. Evidence has been
accumulating that individuals and organizations profit from positions of
network diversity, but understanding the social mechanisms that generate
performance benefits remains an important issue for future research.
Given these findings, one might expect that individuals in boundary span-
ning positions would also better perceive opportunities for founding new
organizations. Consistent with this hypothesis, Renzulli, Aldrich and Moody
(2000) observe that nascent entrepreneurs with highly diverse social relations
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start businesses at higher rates than those with more homogenous contacts.
However, the absence of information on the performance of the ventures in
Renzulli et al. (2000) prevents us from determining the wisdom of these entry
decisions. Once again, ample opportunities exist for further research. Future
studies could usefully examine: what drives founding team composition, how
these choices vary as a function of the nature of the business or the opportu-
nity, and how founding team choices influence the early performance and
growth trajectories of new firms?
In other cases, researchers focus not on the patterns of connections across
actors but on the movement of individuals between firms and regions.
Saxenian (1994), for instance, calls attention to the importance of the move-
ment of engineers across firms in Silicon Valley both to the maintenance of
inter-firm social connections and to the recombination of knowledge to gen-
erate new ideas (for more systematic evidence, see Almeida & Kogut, 1999). In
part, Saxenian attributes the phenomenal economic success of Silicon Valley
to the high rate of mobility of technologists across firms and the role of these
connections in the rapid diffusion of information. But this apparent relation-
ship might simply reflect the ease with which individuals can leave their
employers rather than the value of mobility per se to entrepreneurship (Stuart
& Sorenson, 2003a). We need far more research into how new ventures recruit
their early employees, whether these individuals maintain connections to their
prior colleagues, and when these connections might prove most valuable.
If there are two primary social mechanisms for the diffusion of private infor-
mation—one involving transmission over a portfolio of contacts and the other
through the actual mobility of actors—it is likely that these mechanisms differ
in their implications for the spread of private information. Much as Hansen
(1999) argues that different configurations of relations facilitate different forms
of knowledge exchange within organizations, the nature of the knowledge
being transferred across firms may determine which of these mechanisms oper-
ates. As in Hansen (1999), the first mechanism, spanning ties across clusters of
relations, likely has more relevance to situations that require the transmittal of
“thin” information, in the sense that one could convey it quickly and would
not worry about trusting the recipient. Meanwhile, the second mechanism,
530 • The Academy of Management Annals

actor mobility, probably proves more important to the movement of “thick”


information, such as complex or tacit knowledge. As of yet, however, little
research has considered either of these processes.6
Although not yet applied to entrepreneurial contexts, a complementary
literature considers the macroscopic structure of networks and how their
topological properties shape network behavior. By and large, the principal
architects of this literature are not trained as sociologists, but rather as math-
ematicians and physicists.7 Most influential has been Watts and Strogatz’s
(1998) characterization of so-called small world networks—those in which the
vast majority of connections are clustering and a much smaller set bridge
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across clusters, thereby serving vital roles in the dissemination of information


(or other things) across clusters. Watts, Dodds and Newman (2002) hint at
how one might apply this idea to entrepreneurship. Similar to the observa-
tions of Scott Feld (1981), Watts and his colleagues note that relationships
form in the context of socio-demographically similar groups, such as churches
and voluntary associations. By using such information, they demonstrate
that actors can effectively search a network even if they do not have a map of
its topology. Natural entrepreneurs may intuitively understand this fact and
use it to identify opportunities and secure resources, but there is no concrete
evidence of this effect. How differences in individuals’ network search strate-
gies relate to entrepreneurial behavior is another area of potentially fruitful
research.
Though research in other settings suggests a number of important ways in
which social structure might influence who can become an entrepreneur and
which regions might spawn the most startups, relatively little research has
actually examined these processes in entrepreneurial contexts. To name just a
few of the topics suggested here, future research might usefully consider
whether diverse relations improve opportunity recognition or resource mobi-
lization (or influence some other process), whether mobility influences rates
of firm founding, and under which conditions each of these processes proves
most important as a stimulus of entrepreneurship. Those interested in building
on Duncan Watts’ work, moreover, might examine whether the topological
properties of regions influence aggregate rates of entry and growth.

III.B. Uncertainty Reduction


A second class of problems that many sociological theories address involves
potential methods for handling fundamental uncertainty. Though uncertainty
is prevalent in business and other social situations, it is pervasive in entrepre-
neurial settings. Entrepreneurs are often uncertain about the true nature of the
opportunities they wish to pursue—including such fundamental issues as
whether the market can really bear an additional entrant and whether entry
would yield a sustainable profit stream. At the same time, in many instances,
the existence of uncertainty about the true value of an entrepreneurial
Entrepreneurship: A Field of Dreams? • 531

opportunity is itself a pre-condition for the very existence of the opportunity.


Potential investors and would-be early employees of inchoate ventures mean-
while question whether the nascent entrepreneurs that approach them really
have the skills required to execute their business plans and whether they
honestly disclose relevant information about themselves and their incipient
organizations.
As with the localization of information, uncertainty has multiple conse-
quences. For starters, it too produces a sort of market failure, in the sense that
many of the people (and their ideas) capable of building high potential firms
fail to surmount the doubts of critical resource providers (perhaps including
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themselves) and therefore never open new organizations. But uncertainty also
has consequences for those that do establish new ventures and for incumbent
firms—and anything with a major effect on incumbents in turn inevitably
shapes the opportunity structure for startups. Hannan and Freeman (1984)
argued that investors, employees and other stakeholders favor organizations
that possess reliable and accountable systems. Though these characteristics
themselves do not necessarily appeal to organizations’ constituents, they
produce firms that behave consistently and in a manner that conforms to
expectations. The same features that engender reliability and accountability,
however, also produce inertia—a tendency to persist in the same strategies
and courses of action even in the face of environmental changes that would
appear to warrant changes in firm behavior. One can then begin to see the
complex and surprising consequences of uncertainty for entrepreneurial
behaviors. If uncertainty underlies established-firm inertia, it must then indi-
rectly serve as a source of opportunity for yet-to-be-founded firms; because
any impediment that precludes established organizations from recasting
themselves to pursue new opportunities provides openings for entrepreneurs.
Social mechanisms for dealing with uncertainty vary both in the sources of
uncertainty they address and in the levels at which they operate. At a more
micro-level (at least in the extant literature) is the notion of an endorsement.
Endorsements can play an important role when young firms, investors, poten-
tial employees, customers or suppliers have (often mutual) questions about
the quality of the partners with whom they might interact. In such situations,
actors with credibility both in the information they provide and in their ability
to assess the quality of potential partners can resolve this uncertainty when
others observe their choices. Parties in such advantaged positions can include
both public and private institutions. Baum and Oliver (1991), for example,
study how institutional affiliations affect the performance of day care centers
in Toronto. Parents have substantial concerns about the quality of day care,
but they cannot easily determine which providers offer high quality service.
Consistent with the idea that endorsements help to reduce uncertainty, Baum
and Oliver (1991) find that day care centers survive longer either when they
receive a contract from the city (an implicit endorsement by the state) or when
532 • The Academy of Management Annals

they operate on location at some large company to serve its employees (an
endorsement by the organization). Presumably, these large institutions care
about securing high quality service providers and have far more resources at
their disposal to evaluate agencies than the typical parent.
Stuart, Hoang and Hybels (1999) similarly investigate the role of endorse-
ments among private biotechnology companies. Young firms in this industry
with either alliances or investments from highly regarded pharmaceutical
companies both undergo public stock offerings at earlier ages and receive
higher valuations when they go public. Since pharmaceutical companies have
a great deal of expertise in the science and the markets of these young firms,
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others view them as able evaluators of the prospects of these businesses. The
endorsement effects that Stuart and his coauthors find prove largest when they
come in the form of equity investments, as one would expect given that these
investments not only suggest greater certainty on the part of the endorser
but also align the incentives of these actors with those of the biotechnology
company.8
Even when the “endorsers” do not have great stature, however, they may
still provide useful signals when enough of them converge on the same
choices. Despite the uncertainty, each actor often possesses some unique
information regarding the true quality of potential partners. Third parties
then might rationally prefer to transact with those that others have chosen,
on the assumption that these other choices reflect this private information.
Consistent with this logic, in the days before restaurant guides, a common
approach to selecting a place to eat in an unfamiliar location was to dine at the
location with the largest crowd. Gould (2002) verifies this reasoning in a for-
mal model, demonstrating that higher quality actors should receive more rela-
tionships from others; in the language of network analysis, they should occupy
central positions. More intriguing is that Gould’s model also reveals that this
centrality can confer a level of perceived quality in excess of an actor’s true
quality. Actors therefore pursue high status partners because of their beliefs
that status signals intrinsic quality, and actors in high status positions reap
rewards from this attention (Podolny, 2005).9
Endorsements can also take a more passive form, as when the (in this case,
implicit) endorser has not judged the current venture but shares some past
affiliation with the actors associated with the endeavor. Burton, Sørenson and
Beckman (2002), for example, study how the prior employment experiences of
company founders influence their ability to attract outside funding. They
report that those from companies with a history of employing people that
went on to become successful entrepreneurs more commonly receive venture
capital funding for their ventures. Though their prior employers did not
necessarily sanction these startups, these past affiliations nonetheless serve as
signals for would-be investors trying to sift the high potential entrepreneurs
from the chaff. Higgins and Gulati (2003) further find that these entrepreneurs
Entrepreneurship: A Field of Dreams? • 533

also attract higher prestige underwriters when the time comes for them to go
public. Prior affiliations with well-regarded organizations therefore appear to
provide ongoing advantages.
Though endorsements provide a means of mitigating the problems of
uncertainty surrounding the choice of particular partners, uncertainly also
plagues entire classes of activities. One hundred years ago, the idea of a busi-
ness that broadcasts radio signals for a profit would have seemed like grist for
a science fiction novel. Thirty years ago it would have been difficult to con-
vince either investors or customers of the viability of a commercial bank with-
out a physical location. Today, essentially everyone owns a radio, and although
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online banking is still gaining acceptance among customers, investors and


consumers alike recognize it as a viable form of business. But not all businesses
become well-understood categories. Some, such as the fledging group of CD-
ROM publishers known for a short period in the 1990s as the “multimedia
industry”, never quite reach acceptance and the proto-industry simply disap-
pears or becomes part of an inchoate commercial space (as in this case, as part
of a broad category that includes nearly any product with audio and/or video).
In other cases, such as “disk arrays”, the products or services become absorbed
as a subset of the offerings of firms belonging to other industries (McKendrick
& Carroll, 2001).
When people have a general understanding of what a business is and
does—sometimes referred to as being “taken-for-granted”—organizational
ecologists refer to that kind (or “form”) of organization as having legitimacy.
When an industry achieves such status, it attracts resources. Investors con-
sider it a reasonable place to deploy capital; employees view it as a potentially
lucrative place to build their careers; and customers understand the benefits of
the products or services offered to them. As a result, entrepreneurial entry
tends to rise and the difficulty of doing business tends to fall with legitimacy.
Consistent with this expectation, dozens of studies across a wide range of
industries have found that entry rates rise and failure rates decline with the
density, or number, of firms in the industry—a measure that ecologists believe
proxies for the level of legitimacy a population has achieved (for a review of
this literature, see Carroll and Hannan, 2000).
Firms also appear to profit on an individual basis when they can claim
membership in a legitimate form. Inconsistency with the expectations of crit-
ical audiences, conversely, comes at a price. Zuckerman’s (1999) research, for
example, demonstrates that equity analysts assign lower evaluations to compa-
nies that own and operate atypical portfolios of businesses. He argues that
equity analysts, as do all of us, think in terms of socially defined categories.
When firms construct portfolios of businesses that fail to match analysts’ con-
ceptions of reasonable combinations of activities, they fall outside of existing
categories and suffer from an (il)legitimacy penalty. Similarly, Hsu (2006) finds
that critics and consumers give lower ratings to movies when they span genres
534 • The Academy of Management Annals

rather than falling neatly within a single category. She nevertheless offers a
somewhat different account for this effect, attributing it to the “principle of
allocation”; in essence, a producer cannot please everyone, so the broader the
range of audiences the producer attempts to engage, the less likely the product
appeals to any particular group. Ongoing research finds similar effects in
whether eBay sellers specialize in a product category or cross boundaries (Hsu,
Koçak & Hannan, 2007), and in whether wine producers use a single method
of production or mix them (Negro, Hannan, & Rao, 2007). The evidence there-
fore is mounting that conformance to socially accepted categories enhances
organizational performance.
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Though the general idea that organizations could benefit from the legiti-
macy of their activities has been around since the earliest formulations of
organization ecology (Hannan & Freeman, 1977), only recently has that com-
munity begun to think deeply about the process of legitimation, in particular
why some proto-forms become “populations” (i.e. recognizable industries)
while others do not. Hannan, Pólos and Carroll (2007) build on an established
literature on the cognitive basis of categorization to argue that legitimate
forms emerge when a group of organizations shares a large set of features
internally and when one or more of those features clearly distinguishes it from
other kinds of organizations. Imagine a Venn diagram created with a can of
spray paint. When the dots representing the organizations cluster tightly and
do not overlap with other dots, then audiences (investors, employees, con-
sumers, etc.) perceive the organizations within a cluster as an archetype. At
this point, key audiences accord the members of the set the status of a form.
Though these ideas have yet to receive much empirical attention—either in
entrepreneurial settings or elsewhere—they appear broadly consistent with
Ruef’s (2000) findings in his study of the emergence of organizational forms in
the medical sector.
Cognitive perspectives offer one approach to understanding better the
sources of industry-level legitimacy, but other approaches have also been sug-
gested. Drawing on the literature on social movements, for example, Rao,
Monin and Durand (2003) portray the diffusion of nouvelle cuisine within
French elite restaurants as being driven by an “identity movement” in which
the efforts of the pioneers of this new cuisine use cognitive framing techniques
to overcome the entrenched identity of classical cuisine. Similarly, Carroll and
Swaminathan (2000) describe the emergence of microbrewers as a social
movement formed in reaction to the consolidation of mass breweries in the
USA. Stuart and Ding (2006) meanwhile extend the concept of endorsement
to the level of a class of activity. Studying academic life scientists, they argue
that before entrepreneurship became a legitimate activity among faculty
members, only prominent scientists at prestigious universities could attract
the resources to found new firms. However, the movement of these admired
members of the scientific community into commercial science conferred
Entrepreneurship: A Field of Dreams? • 535

legitimacy on the activity, thereby opening commercial opportunities for less


prominent individuals. As these studies suggest, researchers have only begun
to explore the ways in which entrepreneurial activities and industries become
legitimate and whether and how entrepreneurs can influence these processes
to their own advantage.
Above the level of the population or the industry, one can even conceptu-
alize uncertainty that exists at the level of the state or society. For many busi-
nesses, the overall state of the economy matters to their expectations of
success. Also, though we tend to forget such issues in Western economies,
transactions in general depend on an infrastructure that ensures certain rules
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of play—the sanctity of property rights, the inappropriateness of force and vio-


lence as tools for rent extraction, and even the value of money. In the absence
of such assurances, the prospect of starting a new company is fraught with
even greater risk. Little research in sociology addresses these issues; they offer
near virgin territory for future research. One recent study, however, does come
to mind. Paruchuri and Ingram (2007) use the September 11 attacks on the
World Trade Center to assess whether terrorism discourages entrepreneur-
ship, presumably because potential founders became less optimistic about the
prospects for the economy. Consistent with such a thesis, they find a decline
in entry rates in New York, particularly in communities close to Manhattan.
The entry rate nevertheless rebounded quickly, recovering completely in less
than six months after 9/11.
Understanding social solutions to the problems associated with uncertainty
has motivated a larger portion of the existing sociological research on entre-
preneurial settings than has the localization of information, but there are still
many opportunities for research in the former area. Perhaps the most fertile
ground for additional work is in understanding better the sources of industry-
and firm-level (and possibly even individual-level) legitimacy. Determining
whether and how cognitive processes interact with social contexts to produce
shared conceptions of economic activity will require new research designs and
both qualitative and quantitative analyses. Similarly, more research is required
to determine whether endorsements and social movements represent general
legitimating processes or explanations for a limited range of settings. Also, to
engage in the policy debates over how to promote economic development out-
side the West, we will need more research on how sociological factors operat-
ing at the community and societal levels provide an institutional infrastructure
within which entrepreneurship can more easily occur.

III.C. Incentive Misalignment


The final problem that we discuss is that of incentive misalignment. Many
instances of potential incentive misalignment exist, but one area in which the
problem clearly arises in entrepreneurial contexts concerns the external
financing of new ventures. As a case of a general problem that has been
536 • The Academy of Management Annals

discussed since Berle and Means (1932) wrote about the separation of owner-
ship and control in the corporation, investors worry that entrepreneurs (and
managers more generally) might misuse funds if they receive private benefits
from doing so. Even when entrepreneurs hold substantial ownership positions
in their ventures, they routinely have incentives that act at cross-purposes
with those of the outside investors in the venture. For example, one might
imagine that an entrepreneur would want to pay himself a large salary. But
more subtle options also exist. The entrepreneur, for instance, may hope to
build resources, relationships, or skills that might pay off in a future venture,
even if they do not in this one. In fact, it is generally believed that pervasive
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opportunities to misappropriate resources deter investors from participating


in entrepreneurial opportunities and therefore lead to market failure.
Of course, much has been written in economics about how contracts can be
written to ameliorate incentive incompatibilities, but at least since Macauley’s
(1963) classic account of the social nature of business transactions, the sociol-
ogy literature has also explored ways in which social structure substitutes for
legal controls. One mechanism pertains to the (social structurally variable) abil-
ity of actors to monitor counterparties to a contractual relationship. A key issue
identified in the literature is the extent of social closure in the relationships that
embed a pair (or larger group) of transacting parties (Coleman, 1990). Closure
refers to situations in which an actor’s contacts also have social connections to
each other. Such clustering facilitates the monitoring of contracts because the
mutual acquaintances of a transacting dyad can provide proxy eyes and ears
for the contract holders. The reliability of third-party-based social monitoring
is thought to increase with the cohesiveness of a group of actors. This general
dynamic may account for many entrepreneurship-related behaviors, ranging
from the seemingly-liberal lending practices often seen in communities of
immigrants that share common ethnicity (Portes & Sensenbrenner, 1993) to
the ability of the Maghribi traders to conduct business with far-flung agents
(Greif, 1993). In the latter case, since transactions took place primarily within
the Maghribi, traders could rely on others in the community for information
about whether a given agent acted honorably. Moreover, because malfeasant
conduct could result in excommunication from the group, these tight-knit
communities also amplify the potential cost to an actor of failing to honor their
agreements.
Another social mechanism stems from an interaction between the social
and the psychological. Familiarity appears to generate a bias in people in favor
of those they know. Individuals perceive familiar alters as more competent
and more trustworthy. In an interesting experiment, Kollock (1994) randomly
assigned undergraduates to negotiate and then trade with another partner in
one period. In the second period, he then allowed his subjects to choose their
trading partners. Despite the very limited prior interaction—subjects had but
a single, randomly assigned negotiating round—students still preferred to
Entrepreneurship: A Field of Dreams? • 537

trade with the same partners and even accepted less favorable prices from
their past partners than from “strangers”. Interestingly, these effects proved
even stronger when Kollock had students trade goods of uncertain quality (i.e.
an experimental condition allowing greater latitude for opportunistic behav-
ior). Even minimal prior contact produces a preference toward the familiar in
the lab.
These dynamics also appear to play out in the field. Sorenson and
Waguespack (2006), for example, studied the relationships between film pro-
duction companies and distributors. Not only do distributors exhibit a strong
tendency to contract with the same teams of talent, but when partnering with
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familiar parties, they also advertise their films more heavily and schedule their
releases on the best dates, even though their contracts do not require them to
do so. As with Kollock’s undergraduates, distributors appear positively predis-
posed toward those with whom they have prior interactions. These invest-
ments moreover have an interesting, unexpected effect: Films from their prior
partners perform better at the box office, possibly leading distributors to
believe that they made the right choices. But this effect depends entirely on the
investments of the distributors; once one accounts properly for the effects
of advertising and release dates, it becomes clear that distributors would do
better to spread their resources more broadly.
One could easily imagine that similar dynamics might underlie the resource
mobilization process. Prior connections, and the biased evaluations that they
promote, may allow entrepreneurs to attract capital from friends and family
and to recruit prior colleagues as early employees at relatively low cost. Though
biased assessments of the quality and trustworthiness of the entrepreneur may
predicate these exchanges, they nonetheless may solve market failures associ-
ated with the misalignment of incentives (and with uncertainty). Research into
these dynamics holds high promise, but it has yet to be applied to entrepre-
neurial settings.
Finally, social relations can also influence the enforcement of contracts. In
particular, the possibility of losing future trades with the same partner or with
others may deter actors from reneging on their agreements. However, the
strength of the disincentive to behave opportunistically depends on the posi-
tions of transacting partners. Using an analytical model, Raub and Weesie
(1990) demonstrate that connections among individuals matter greatly to the
efficiency of an actor’s reputation as a check on malfeasant behavior in
exchange relations. Assuming that social connections provide the channels
through which information about an actor’s past behavior moves through a
community (i.e. assuming that those with prior experience with an actor, and
their associates, know the integrity of an actor), the overall topology of the net-
work and the positions of actors within it determine the speed and severity of
the punishment for reneging on agreements. Robinson and Stuart (2007)
investigate these dynamics in a study of alliances in the biotechnology industry.
538 • The Academy of Management Annals

They find that the use of equity in alliance agreements declines among more
similar and more central partners. More similar partners more frequently share
contacts, allowing the enforcement of the agreement to substitute for the align-
ment of incentives. Also, because more central actors have more to lose from
being excluded from future transactions (because their reputations and posi-
tions are of greater value) and because their extensive social reach creates the
capacity for them to sanction others by spreading negative information
through the community, central actors are least likely both to behave oppor-
tunistically and to become a victim of a partner’s untrustworthy conduct.
Future research may consider whether these processes also play out at the level
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of the individual.
Another important domain for future research on incentive misalign-
ment—indeed, for work on the problems of uncertainty reduction and the
transmission of private information as well—is the role that online interaction
may play in fostering and shaping entrepreneurial activity. Despite enormous
advances in communication technologies in the last century, much scholarly
research suggests that geographically bounded, face-to-face interaction
remains vital to the development of the social structures that influence
exchange (cf. Sorenson & Audia, 2000; Sorenson & Stuart, 2001). The past few
years have nevertheless witnessed an explosion in memberships on social net-
working sites, a rapid advancement in collaborative technologies (“web2.0”), a
proliferation of electronic communication in developing economies, and con-
tinued evolution in open source innovation communities. It is conceivable
that these developments may require us to revisit our understandings of
how social structure influences many of the fundamental information and
incentive problems in entrepreneurial processes. For instance, if online rela-
tionships become conduits for private or socially important information, the
volume of information exchanged, the shape and inclusiveness of “social” net-
works, the role of ascribed characteristics (e.g., gender, race) in structuring
interaction, the processes by which individuals rise to positions of status and
influence, and indeed every other social structural dynamic, may change.
Whether one is interested in how entrepreneurial activity depends on the
exchange of private information, the passing of referrals, the extent of trust
and level of reciprocity in relationships, the endorsements of prominent
actors, the diffusion of ideas, the formation of founding teams, and so forth,
the question of how these new forms of interaction may complement, substi-
tute, or somehow alter the functions of physical-world social connections
looms very large.

IV. Conclusion
Entrepreneurship-related activities represent a vitally important set of
phenomena. Not only are they relevant to the growth of economies in general,
but also they can have major effects on the career trajectories, wealth and
Entrepreneurship: A Field of Dreams? • 539

personal satisfaction of individuals. Their study is therefore crucial to a


better understanding of a variety of topics, ranging from economic growth
to social stratification. Understanding these processes is also essential in
shaping the dialog about the content and desirability of policies to promote
entrepreneurship.
As we hope the second section of this article has illustrated, a disciplinary
perspective helps to illuminate the plethora of intriguing and unanswered
questions available for researchers to pursue. Although we have focused on
questions available for organizational and economic sociologists interested in
entrepreneurship, we suspect that adopting an alternate disciplinary lens—for
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example, economics—would lead to a similarly long list of open questions. At


the present time, the balance between the unknown and the known on entre-
preneurial topics tips much further toward unexplored questions than con-
vincingly demonstrated answers. We have every confidence that this will
prove to be an important and dynamic area of research for years to come.
As we draw to a close, we concede that the momentum that has gathered
behind the creation of an independent field of research in entrepreneurship
will not likely dissipate any time soon. In addition, we have no expectation or
desire to see entrepreneurship departments close. We nonetheless believe that
the academy should approach with caution this growing chorus of siren calls
for an independent field. Although the erection of sharper boundaries around
the field might focus attention on the subject, ultimately we believe that such
a development would slow progress in our understanding of the phenomena.
Economists, psychologists and sociologists already have large toolboxes filled
with theories for explaining a wide range of behaviors and methods for the
collection and analysis of diverse data. Isolation from these cognate disciplines
poses a far greater risk of reinvention than it does a promise of discovery.

Acknowledgements
We thank Howard Aldrich for provocative discussions about the issues in
Section II of this paper, and Art Brief and Jim Walsh for their detailed comments.

Endnotes
1. According to data available from the Kauffman Foundation, the number of
endowed chairs in entrepreneurship more than doubled from 1999 to 2003, to a
total of 563. More strikingly, the number outside the USA has grown from 4 in
1991 to 158 in 2003.
2. Thornton (1999) discusses social and institutional factors that influence the
“demand” for entrepreneurs. Hoang and Antoncic (2003) summarize studies on
social networks and entrepreneurship, and Caroll and Khessina (2005) review the
implications of the organizational ecology literature to firm founding. Stuart and
Sorenson (2007) meanwhile build off of existing studies to outline an agenda for
future research on entrepreneurship and social networks.
540 • The Academy of Management Annals

3. Of course, our logic is admittedly circular; if the field could attain coherence and
independence, its scholars could more easily establish independent departments.
4. Of course, some issues, such as the mobilization of resources to build an organi-
zation, differ greatly from those of large or established firms, but the breadth of
issues is similar in extent.
5. We do not suggest that settings do not matter. Contextual elements, of course,
influence how social problems manifest, and scholars must familiarize themselves
with the settings they study. In most examples of good applied disciplinary
research in the social sciences, the investigators have far more than passing famil-
iarity with the empirical contexts in which they test (and sometimes develop)
their ideas.
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6. We should note that distinguishing between these mechanisms is not straightfor-


ward. In many cases, researchers use “dual-mode” data to identify networks. In
dual-mode data, links come from common membership in the same organization
or attendance at the same event (cf. Sorenson and Stuart, in press). Because the
researcher implicitly infers that all within-group ties exist and that all out-of-
group ties do not, boundary spanning can only arise in dual mode data through
the movement of individuals across organizations or events. We therefore see
ample room for additional empirical research to improve our understanding of
differences in the kinds of information exchanged in boundary spanning ties
versus through mobility events.
7. In fact, the recent arrival of mathematicians, physicists, chemists, biologists, and
economists to the study of networks offers a compelling example of how disci-
pline-based researchers interested in common phenomena—the emergence and
consequences of social (and other types) of networks—provides a powerful
approach to the exploration of phenomena. The entry of theorists from these
disciplines has accelerated progress in our understanding of network-based
processes. In the new science of social networks, we see a natural analogy to our
hopes of the ideal path for research on entrepreneurship.
8. Recognizing the value of such endorsements, actors should willingly pay for
them. Consistent with this proposition, Hsu (2004) finds that entrepreneurs
accept less favorable financing terms from high status venture capital firms.
9. A parallel finding exists in the physics literature on networks, under the moniker
“preferential attachment” (Barabási & Albert, 1999). Though not necessarily
socially driven, preferential attachment occurs when new arrivals to the network
connect to existing members at rates correlated with the existing degree distribu-
tions of those nodes. In other words, the rich get richer; nodes that already
possess a high number of connections attract a proportionately high share of the
new ties.

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