The Entrepreneurial Process: Economic Growth, Men, Women, and Minorities. – Review – book review

Deborah H. Steeter

Paul D. Reynolds and Sammis B. White. Westport, CT: Quorum Books, 1997. 256 pp. $59.95.

The primary focus of The Entrepreneurial Process is on issues related to the formation of new firms and economic growth. Densely packed with statistical results, the book reports the findings of five separate surveys involving over 5,000 respondents. Although much of the analysis focuses on data gathered in Wisconsin, wherever possible the authors relate or compare the findings to those for the entire U.S. In general, it is a book that asks the right policy questions, explores reams of data with sound methodology, and provides excellent guidance for both researchers and policy makers in terms of thinking about issues related to economic growth and entrepreneurship. Because the authors provide a broad and integrated discussion of the early life of firms, the volume can serve as an important and widely used reference tool for those exploring smaller parts of the puzzle.

The book begins with a clear explanation of how the five surveys are interrelated and how they differ from each other. Included is excellent information on how to find and access the primary and other data sources. The use of such large amounts of data is both a benefit to the reader and also a source of complexity in the book, as it can be daunting to track which data source relates to each section of the analysis.

In chapter 2, the authors demonstrate convincingly that traditional economic theory is filled with inaccurate characterizations of entrepreneurship, a theme that serves as the unifying thread for the book as a whole. In particular, the authors strive to show how new and small firms are a common economic activity rather than a rare or unique occurrence and that start-ups generate both considerable employment and technological change. In addition, rather than being solo flights, most new firms are started by teams of owners who are not castoffs from the labor force, as drawn by some theorists but, rather, are mainstream players in the economy who are exploring new options. The data they present also show that start-up firms emerge in the economy through a series of phases and that the societal costs of failed start-ups are not trivial. The latter is an important point that often goes unexplored in the policy debate on entrepreneurship.

The next four chapters are devoted to exploring the stages of business birth as laid out in the authors’ conceptual framework: nascent, fledgling, and established. Much debate is included about how to measure the beginning and end of each of these stages. The authors use a series of activities to identify when firms move through each part of the process. In addition, they explore the characteristics of discouraged entrepreneurs, who give up during the nascent stage, and discontinued new firms, which fail to persist after birth. In the fledgling stage, special attention is paid to initial growth after birth and persistence in the postnatal period.

In chapter 7, an additional author, Nancy Carter, provides a very thoughtful and thorough analysis of gender issues that can affect the start-up phase of a company. The data show that men are twice as likely to be working to establish new businesses as women. In an effort to understand the underlying issues, the author identifies and documents twelve key differences in the ways that men and women establish and grow new ventures. For example, a fairly interesting finding is that women tend to seek lower levels of financial resources when starting firms. There is much food for thought for policy makers interested in ensuring that women have equal access to the entrepreneurial sector of the economy.

A discussion of the influence of ethnicity in chapter 8 seeks to identify key differences in the way that different ethnic groups approach the founding of firms. The analysis is weakened by issues of small sample size, but there are some interesting insights. Unfortunately, the implications of gender and ethnicity are not integrated into the final policy discussion in a satisfying way. For example, the authors conclude that ethnic minorities do not face barriers, “once their situation in terms of educational background, personal resources, duration of residence in an area, and extent of social networks are taken into account” (p. 216). In fact, such factors themselves pose formidable barriers and should be the focus of continued study and policy discussion.

Policy makers will like this book because it asks the right (difficult) questions, such as the following: Do new firms generate jobs? If so, which types of start-ups result in the most job formation? How do you determine if entrepreneurs view your area as a good place to start a business and does the perception affect individual decisions to start a company? What are the societal costs of discouraged entrepreneurs? and If policy makers choose to support business assistance efforts, what types of help are most efficient? At times, however, the book does not take the extra step to connect the data findings with the questions in terms of possible policy approaches. Policy makers may also like the many information nuggets found throughout book, including the following: (1) firms with more than one owner go from generating about 5.28 jobs in the first year to creating 8.14 jobs by the fourth year, (2) most new firms are started by people who are already working, and (3) for each dollar associated with a start-up t hat leads to a firm birth, there are another two dollars in start-ups that were abandoned.

Researchers will like this book because of the richness of its data sources and approaches, which could be transferred to other settings, such as demonstrating ways to measure job growth during the birth and deaths of firms, to inventory statewide business assistance programs, to develop indices to measure the entrepreneurial climate, to identify and track nascent entrepreneurs, to derive a list of activities of events that characterize start-up firms to try to discern sequencing and importance, to determine the motivation of entrepreneurs in starting a business (e.g., autonomy, wealth), and to use a variety of regression techniques and automatic interaction detection techniques to study the problem.

In addition, the book contains various discussions of the difficulties involved in quantitative analysis of start-up companies, including some suprisingly frank comments about the trials and tribulations of longitudinal survey work (e.g., at one point 23 respondents were lost due to poor bookkeeping from one survey period to the next). In places, the study is plagued with problems of small sample size, but the authors try wherever possible to seek independent corroboration from other sources. The conclusion of the book contains a plea for future research to be coordinated nationwide in order to produce data on a wide range of factors from large, representative samples.

Although the book is repetitive in places (due to multiple authors, perhaps), and the reader can be overwhelmed at times with the many ways the data is sliced and diced into various indices and patterns and categories, The Entrepreneurial Process remains an outstanding contribution to the field. It will serve to inform the heated policy debate on entrepreneurship as it relates to economic development and will be of much practical use to researchers seeking to explore the issue from the empirical side.

COPYRIGHT 2000 Cornell University, Johnson Graduate School

COPYRIGHT 2000 Gale Group

You May Also Like

The calculated and the avowed: techniques of discipline and struggles over identity in Big Six public accounting firms

The calculated and the avowed: techniques of discipline and struggles over identity in Big Six public accounting firms – Special Issue: Critical…

Handbook of Entrepreneurship

Handbook of Entrepreneurship – Review Shaker A. Zahra Donald L. Sexton and Hans Landstrom, eds. Oxford: Blackwell Business, 2000, 4…

Downscoping: How to Tame the Diversified Firm.

Downscoping: How to Tame the Diversified Firm. – book reviews William McKinley Taking a cue from Sutton and Staw (1995), it may be u…

Hospital survival in changing institutional environments

A multidimensional model of organizational legitimacy: hospital survival in changing institutional environments Martin Ruef Max Web…