The Rise of Entrepreneurial Policy

Luke Sykora, Stanford University October 30, 2019

“How many of you think that, during the Arab Spring revolution in Tunisia, the amount of state funding to entrepreneurs decreased?” Carnegie Mellon assistant professor Daniel Armanios asked a group of management researchers gathered at Stanford for this year’s West Coast Research Symposium. Most of the hands in the room shot up.

The two-day WCRS conference, held at Stanford in mid-September, brought together more than 90 of the world’s leading management researchers, so of course they knew they were being set up. The working paper Armanios subsequently presented (co-authored by Amr Adly when Adly was at the University of Cairo) confirmed those suspicions: In both Tunisia and Egypt, their research suggests, state-owned banks actually increased their funding efforts to entrepreneurs during the revolutions. The revolutions also appeared to impact the types of firms that received funding.

If further validated, this research might inform how small-scale entrepreneurs navigate revolutions. But it might also speak to more than just business strategy. The research could inform NGOs and UN agencies, for example, as they struggle to preserve flows of essential goods like food, medicine and fuel when a revolution is toppling an autocratic regime.

This paper, and others presented at the two-day conference, are prime examples of how the field of management studies is exploring areas where policy, firm strategy and geography intersect, says Riitta Katila, a professor in Stanford’s Department of Management Science and Engineering and faculty co-director of research at the Stanford Technology Ventures Program who hosted the WCRS conference.

“While there has been significant research interest in how firms innovate and compete, including by impacting public policy, this ‘entrepreneurial policy’ research looks at how regulatory regimes and institutional and social norms both enable entrepreneurial activities and set boundaries on those activities, particularly in new or rapidly shifting markets,” Katila observes.

Management is Contextual

At the heart of this emerging arm of management studies is the idea that strategy is always context-dependent. And often, firms and markets respond to environmental realities in unexpected ways.

Governments, especially, need to be aware of how shifting technologies and competitive activities impact their interventions in the market, and how spillover from well-intentioned regulations, incentives and de-regulations might be driving unintended or unexpected consequences. At the WCRS conference, a working paper by Lauren Lanahan (University of Oregon), Amol M. Joshi (Oregon State) and Evan Johnson (UNC-Chapel Hill) embraced the question of incentives by looking at how the US federal government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs impact job creation.

Governments, especially, need to be aware of how shifting technologies and competitive activities impact their interventions in the market.

A working paper by Cheng Gao (University of Michigan) and Rory McDonald (Harvard Business School), meanwhile, focused on regulation, exploring how the emerging personal genomics industry anticipated, responded to and worked with the FDA as the industry grew. The authors observed that, while some firms tried to either influence regulators or simply avoid scrutiny, others pushed regulatory boundaries in order to force the FDA to clarify its position, and as a result even ended up collaborating with the FDA to build a framework for regulating personal genomics.

Emerging Questions for Entrepreneurs (and Those Who Study Them)

Research on entrepreneurial policy continues to expand as scholars engage with an increasing array of global contexts and new problems posed by the sheer speed of digital innovation and software-driven businesses.

In the United States and Europe, questions related to antitrust regulation are coming to the fore as a place where firm strategy and policymaking meet. “Companies like Uber grew by breaking norms, and only later negotiated with regulators,” Katila observes. So how does regulation function in a software-driven economy where speedy startups can often outpace regulators? And how do patterns of competition and innovation change when the Big Five — Facebook, Apple, Amazon, Netflix and Google — are so firmly entrenched that they seem to acquire all potential competitors before being meaningfully challenged? Would antitrust regulation aimed at Big Tech help or harm innovation and the economy at large?

“Questions like these used to belong to the realms of political science and economics, but management science can provide a new perspective,” says Katila. “The conversations about the thought-provoking working papers presented at the WCRS conference will further expand the discipline in ways that speak to the complexity of technology entrepreneurship in today’s society. PhD students from around the globe were also able to attend these sessions, and I’m excited to see how these interactions will inspire new research questions and innovative empirical approaches in the coming years.”

Visit the STVP Research page to learn more about the STVP PhD program, which focuses on the study of entrepreneurship and innovation within technology-based companies.