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How entrepreneurship can bring people off benefits

The lack of a real economic recovery and austerity since the 2008 financial crisis con- tinues to make life   difficult

for ordinary people. It’s part of the reason that public attitudes toward benefit recipients is increasingly intolerant. And this hardening of the public mood is, in turn, spurred on by an increasingly hysterical, ben- efits-bashing and divisive tabloid press.
This is illustrated in much of the reaction to a recent Channel 5 doc- umentary series, “The Great British Benefits Handout”. The TV series conducts a social experiment on the long-term unemployed. It gives families a cash lump sum of £26,000

the equivalent of a year’s worth of benefits in one go – in return  for them permanently “signing off” the benefits system. They are then free to spend the money how they please, but the idea behind the show is that it gives them an opportunity to transform their lives, with most choosing to invest the money in business  ventures.

The result, without exception, has been positive. Specifically, an immediate short-term escape from the poverty trap for all the families featured, into a long-term strategy of entrepreneurship and small business

ownership.

The series shows families with no prior business experience set up and successfully run small firms. One family, for example, set up a secondhand goods business, Tidy and Sons, with their £26,000. The founders said it hadn’t “been easy setting up our own business”. And it certainly isn’t an easy option – four in ten new businesses will fail within five years.

But setting up these businesses with the money, plus the budgeting support and help of the show’s finan- cial adviser Lee Healey, lifted them out of the poverty trap. We see the successful party planning business (with exotic animals); the market stall owner now understanding prof- it and costs, and subsequently mak- ing a good living wage; the burger van business; and the tanning salon. All progressing their new ventures, all ambitious and hard working – determined to make a success for themselves and their families.

 

Beyond  the sensationalism

Yet the programme attracted criti- cism. It was called exploitative “pov- erty porn” and the enterprising par- ticipants attracted a special type of negative rhetoric from the tabloids. They were demonised and mocked in headlines: “DISGuST as unem- ployed blow £26K on BOTOX and LOBSTeR”   and   “SHe’S  BLOWn

IT  Mum  splashes  out  £6,000 on meals, clothes and perfume”.

Ah yes, the feckless and waste- ful poor, with their untidy houses, nicotine habits and wrinkled, unde- serving faces – that’s how benefits recipients in the uK are   generally portrayed. Interestingly, many of the headlines also focused on the fami- ly status of the female participants

  • adding a further moral element to their criticism: “Single mother-of- three”, “nan-of-12”, “Benefits moth- er-of-four splashes out”.

However,  look  past  the sensationalist headlines, and a different story emerges: the market traders and service providers using the money to set up new businesses for themselves. The £6,000 “blown on rubbish” was partly used to clear that most insidious and corrosive block to escaping the poverty trap: debt.

The £26,000 “on botox” was in reality just over £1,000 for a woman who had experienced an exception- ally hard life. This (to her)  gave her a new-found confidence in her looks. necessary perhaps for getting out onto a market stall and selling your goods directly to a passing public. Plus, she hadn’t spent almost the entire £26,000 “in just THRee MOnTHS”, as the headline shouted. The small print of the article showed that not only was £8,000 left, much of the money remained in £6,500 invested in stock for her new start- up.

 

An important economic role

The contrast between reaction to The Great British Benefits Hand Out and more obviously entrepreneur- ial programmes like The Apprentice and Dragons’ Den couldn’t be more pronounced. The participants here are not categorised as entrepreneurs receiving an investment or grant with which to start a business. And in the real world – without the help of this social experiment and the expertise  of  Healey  –  it wouldn’t happen.

Conventional ways of raising the capital to start a business – gov- ernment grants, loans, crowdfund- ing, venture capitalists and business angels, are generally not an option for these small businesses. Yet these

are the lifeblood of the economy. The tanning salons, party planners, hairdressers and removal vans – they aren’t high tech, they aren’t likely to internationalise and grow, but the economy depends on these small hardworking, bread-and-butter businesses.

unfortunately, the collective view of what is considered entre- preneurship is largely shaped by the Steve jobs and Richard Bransons of the world. But more government schemes should support small-scale would-be entrepreneurs – also hav- ing a massive long-term impact on the lives of benefit recipients. In the main, people want to work, and they want to live good and productive lives, when given half a chance.

These would-be entrepreneurs do not deserve to be vilified, judged and mocked by an outraged public as feckless spongers. On the con- trary, they deserve our admiration, support – and most importantly,  a collective and social kindness towards people who are just doing their best.

Academy of Management Review in which he reviewed what has been achieved over the past decade. Shane agreed that there were problems with definition, measure- ment and validity. He also suggest- ed that there has been too much emphasis by academics on the psy- chology of the entrepreneur and the role of the individual.

Too much attention has been given to the process of new venture creation and insufficient attention to the management of the venture once launched. He cautioned that there was no“optimal”approach to how an entrepreneurial business might oper- ate. There simply was insufficient empirical evidence to support this. Textbooks proposing best practice models of entrepreneurship should, he claimed, be treated with caution.

So,  who  has  been  leading the

 

Too much attention has been given to the process of new venture creation and insufficient attention to the man- agement of the venture once launched

 

field?

A study published this year in Research Policy by Hans Landstrom, Gouya Haririchi and Fredrik Astrom comprises a comprehensive survey of the development of the academic field of entrepreneurship and who have been the leaders of the disci- pline.

This paper suggests that the dis- cipline of entrepreneurship is “rath- er changeable” and remains closely linked to the more mature domains of economics and management. While many of its key theoreticians have come from outside the domain, it has progressively cultivated its own cohort of“insiders”. Despite this the entrepreneurship area remains highly dependent on “fairly old the- oretical frameworks imported from mainstream  disciplines”.

As shown in the following dia- gram, the leading authors in the field of entrepreneurship are pre- dominately Americans and most come from the leading universities. Harvard Business School is one of these as is new York university and Stanford university. A review of 135 publications that were deemed   to

 

represent the “core” works of the entrepreneurship discipline, found that American academics comprised around 85% of the authors. By com- parison european scholars consti- tuted only 15.2% and Asian scholars only 0.2%.

Another interesting set of find- ings from this study are the resumes of the leading academic researchers in the entrepreneurship field. A total of 14 individuals were profiled, all were men. Only two had any past experience working within business or industry. In both cases these indi- viduals had around 20 years of “real world” employment experience before taking up their academic appointments. Another had some experience working as a consultant and another within the area of gov- ernment policy. The average age of these leading entrepreneurship aca- demics was 29 years when they com- pleted their PhD’s and commenced their academic careers.

In concluding this paper, they addressed the question “what consti- tutes a core work in entrepreneurship research?” The authors noted that scholars are often regarded as

“great” not because their theo- ries are true, but because their work is interesting, or challenging to the status quo. They noted that a large proportion of the core works found in entrepreneurship are “interesting” for their ability to challenge conven- tional wisdom.

They also suggested that despite its weaknesses the field of entrepre- neurship has begun to mature and develop its own body of theories generated from “insiders” emerg- ing from within the discipline. Yet they suggest that entrepreneurship remains “surprisingly disconnected from the neighbouring field of inno- vation studies”.

 

So, what practical value is it to anyone in the real world?

What then is the practical value of all this investment into entrepre- neurship studies by academics, their universities, their students and the tax payers who provide much of their research funding to the real world of business?

To address this question, we can refer to a paper published in the Academy of Management Review as far back as 1982 by Ken Thomas and Walter Tymon. They provided five critical tests of relevancy in research studies for management and the organisational sciences: i) descriptive relevance; ii) goal rele- vance; iii) operational validity; iv) non-obviousness; and v) timeliness.

Descriptive relevance refers to the accuracy of the research findings to capture the phenomena encoun- tered by the business practitioner within their organisational setting. This means that research into entre- preneurs and small businesses needs to collect reliable data that is drawn from the real-world experiences of these business people. Data collected from experiments undertaken with university students enrolled in entre- preneurship courses are a common example of this. Such data collection

 

offers the researcher a controlled environment and a more accessible sample. However, it may have dubi- ous external validity to organisation- al settings.

Goal relevance refers to the abil- ity of the research to align  with  the objectives or outcomes that the end-user practitioner is seeking to achieve. It is common for academics to pursue areas of research interest that are of theoretical or intellectual interest to them, but that have little direct benefit or relevance to small business managers, government poli- cy makers or other potential“end-us- er” communities.
This “town-versus-gown” dichot- omy is a commonly raised issue when academics seek to engage with business or government organisa- tions that hope to get benefit from university-based research. A major problem is that “applied” research is generally perceived within aca- demic circles to be of a lower order of priority and less likely to secure tenure and promotion than  theoretical work.

Operational validity is concerned with the ability of the practitioner to implement action from the research findings by manipulating the inde- pendent variables and influencing the dependent variable. This links back to the issue of “applied” versus “theoretical”  research.

Many academic journals now ask authors to outline manageri-  al and policy implications of their research.Yet although there are some papers that provide clear and poten- tially implementable findings, many do not. Too often the findings are inconclusive, or the research design is not able to provide end-user man- agers with a well-considered road map for improving their business or policy goals.

Perhaps the most effective mech- anism for delivery of this is the textbook or practitioner handbook. However, these types of publica- tion typically garner little academic kudos for their authors.

non-obviousness  refers  to the extent to which the findings from the research provides information that is more informative than the common-sense theory already use by the practitioner.

In reading many recently pub- lished papers from leading small business and entrepreneurship jour- nals I have been struck by the ten- dency for many studies to produce findings that are little more than common sense.

Timeliness is whether the find- ings are published in a manner that allows the practitioner to use it to deal with real world problems when they need it.

Here lies a significant problem due to the current situation facing academic publishing. Academics are recognised and rewarded primarily through publishing in well-regarded peer-reviewed journals. The pres- sure on journal editors and their volunteer peer reviewers has result- ed in significant delays in getting work published. It is now common for journals within the management area to take about 2.5 years to pub- lish a paper.

It would be incorrect to say that academic research into entrepreneur- ship is of no value to real world entrepreneurs and those who would seek to support them.

However, the rapid growth of entrepreneurship as an academic pursuit over the past three decades has not significantly reduced the level of ignorance that Professor Gibb identified over a decade ago. As a field of study there remains much to be done to better under- stand how small business works and what might be done to assist these important but generally neglected organisations.

As noted by some of the leading scholars in the field, too much atten- tion has been given to the entrepre- neur as an individual and not enough to how entrepreneurship applies to teams.

Far too much attention has also been given to entrepreneurial oppor- tunity recognition and new venture creation, with insufficient attention to the process of managing small firms and the nexus between entre- preneurship and innovation.

There is a need to recalibrate the field of entrepreneurship as an aca- demic pursuit and refocus attention on undertaking research that makes a difference.

If entrepreneurship is the driver of job and wealth creation, produc- tivity growth and innovation then research into this area should be worth the investment. Yet we need to encourage academic research in the field to meet the five tests of rel- evancy in assessing whether we are getting an appropriate value for such investment. Further commentary on this can be found at “The Innovator Blog”.

 

The author, Tim Mazzarol, is Winthrop Professor, Entrepreneurship, Innovation, Marketing and Strategy , University of Western Australia