It was a filthy job, but Reynolds, Jackson, Acs, and several other Birch devotees validated his original job-generation findings in their own special ways. Collectively, they discovered that small companies were innovative, flexible, and resilient job-making machines and that the constant ebb and flow of new companies was a necessary (but hardly sufficient) condition for regional growth.
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The Players
Entrepreneurship research is still in its infancy, and it embraces a hodgepodge of activities. "We're studying material at the crossroads of economic life and social life," says Reynolds. "Real people start companies, and that act can only partly be explained by economics. That's why it's so interesting." But that's also what makes it so difficult.
Fortunately, these scholars are equipped for the challenge. "Researchers who don't have a more traditional economics background come to this field with very different sets of tools," explains Bill Bygrave, director of Babson College's Center for Entrepreneurial Studies. "Most doctoral programs in business give students hammers. We come with chisels and saws and other tools, not just hammers."
And they're not afraid to use them.
The Dynamic Capitalist
Bruce A. Kirchhoff, 57, professor of entrepreneurship at New Jersey Institute of Technology's School of Industrial Management, E-mail: kirchhoff@njit.edu Fax: 201-596-3074
Fields of study: Business; chemical engineering
Areas of expertise: Entrepreneurial economics; start-up survival rates
Selected works: "Assessing Firm Failure Fictions" ( Journal of Private Enterprise, 1993); "Creative Destruction Among Industrial Firms in the United States" ( Economics of Small Firms, Kluwer Academic, 1990)
Discovery: Joseph Schumpeter was right: start-ups are the vitamins that keep our economy healthy. More than half of young companies survive through year eight, when growth kicks into high gear.
Kirchhoff's book Entrepreneurship and Dynamic Capitalism (Praeger, 1994) explains how entrepreneurs, by marketing inventions and creating wealth, invigorate the economy. Kirchhoff argues for a new brand of economics that embraces the pioneering contributions of the Bill Gateses of the world. Today the only models that policy makers trust are firmly anchored in general-equilibrium theory, which captures linear balances among factors of production. But they can't begin to grasp the changes of dynamic capitalism -- the new technologies, for instance -- that come out of the blue and knock the economy off its axis. If you're not one of the 350-plus people who have purchased Kirchhoff's book and you're dying to know how to benchmark entrepreneurial activity, he suggests you "pick up a book on chaos theory."
The Data Dispenser
Bruce D. Phillips, 48, director of the Office of Economic Research, the SBA Office of Advocacy, in Washington, D.C. Fax: 202-205-7064
Field of study: Economics
Areas of expertise: Data sources for small-business research; business dynamics, such as start-ups and failures
Selected works: "The Influence of Industry and Location on Small Firm Failure Rates" (Babson Entrepreneurship Conference, 1993); "Small Business in the Year 2005" (Office of Economic Research, SBA, 1995)
Discovery: Start-ups survive years longer if they spawn jobs, and when they eventually close shop, most do so willingly.
Many people assume that when a neighborhood business disappears, it must have flopped. Not so, argues Phillips, who wagers that 85% to 90% of all business closures are entirely voluntary. "In most cases, we see them rechanneling their resources from, say, a Chinese-food restaurant to one that sells seafood." That's hardly a textbook failure, a venture lost to creditors. So who will survive into the next millennium? Most likely, it'll be the proud owners of four dry cleaners or four office-product stores. "It's the single pizza place, the single anything, that's rapidly disappearing," Phillips says. "It's much harder to sustain that single location. There are far too many Boston Chickens and Starbucks."
The Publisher
Zoltan J. Acs, 48, visiting professor of business and public policy at the University of Maryland's College of Business and Management, in College Park, Md.; cofounder of Small Business Economics, a bimonthly journal that defines the role entrepreneurship plays in the global economy, E-mail: zacs@bmgtmail.umd.edu, Fax: 301-405-7635
Field of study: Economics
Areas of expertise: Innovation; business dynamics; flexibility
Selected work: Innovation and Small Firms (MIT Press, 1990), with David B. Audretsch
Discovery: In industries dominated by large companies, it's the small players that do most of the innovating.
"I was looking at mini steel mills in the Midwest," Acs says of his work in late 1978. "There shouldn't have been any activity. The economy was sour. That's why I was looking at organizational differences, uses of new technology, and union activity." Well, not only did Acs find upstarts in a dying industry, he also found that they were remarkably innovative in the ways they organized and applied new technology.
Acs plans to take the basic principles of small-business economics (innovation, flexibility, and so on) and determine which ones have the greatest impact on competitiveness.
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The Human Microprocessor
John E. Jackson, 52, professor of business administration at the University of Michigan's Institute for Social Research, in Ann Arbor, Mich. E-mail: john.e.jackson@um.cc.umich.edu. Fax: 313-764-3522
