IES Research
Research
IES researchers provide entrepreneurial solutions to social problems. Click the links below to explore our scholarly output, learn about ongoing projects, and to read white papers produced by our researchers.
Scholarly Output
Ongoing Projects
White Papers
Scholarly Output
2021
Journal Articles
Murhy, J., Devereaux, A., Goodman, N. P., Koppl, R. (2021) Expert Failure and Pandemics: On Adapting to Life with Pandemics Cosmos + Taxis (In Press)
In a pandemic, citizens and policy makers must rely on expert opinion. What are the institutional arrangements that allow for the best advice to come forward? Using the framework established by Koppl (2018) on expert failure, we analyze the COVID-19 pandemic to see where missteps in expertise occurred and suggest institutional arrangements to improve expert advice in future pandemics.
Moss, T. W., Dahik Loor, A. C., Diaz Parada, F., (2021). Partnerships as an enabler of resourcefulness in generating sustainable outcomes. Journal of Business Venturing (In Press)
Resourcefulness research has provided many insights into how entrepreneurs do more with less, yet these studies are focused primarily on resourceful behaviors undertaken by singular actors. However, partnerships may also behave resourcefully to positively influence venture growth and sustainable outcomes. Through a qualitative study of 11 small enterprises in business partnerships with a common resource-rich partner in Mexico, we show how such partnerships yield uniquely resourceful behaviors. Our analysis also reveals that such partnership-based behaviors require distinct capacity building for resourcefulness. We thus extend theory by creating a process model in which resourcefulness mediates the relationship between nonmarket logics/informal governance and sustainable outcomes.
2020
Journal Articles
Lucas, D. S., C. J. Boudreaux. 2020. “National regulation, state-level policy, and local job creation in the United States: A multilevel perspective.” Research Policy 49(5): 103952.
The relationship between national regulation and job creation remains highly debated. The “public choice” perspective holds that regulation hinders job creation through compliance costs and regulatory capture. Meanwhile, the “public interest” view suggests that regulation can facilitate employment growth by promoting innovation and fair competition. We offer a contingency perspective, i.e., that national regulation’s effects vary across heterogeneous state political institutions. Drawing on the political science theory of market-preserving federalism, we argue that state-level economic freedom moderates the effects of national regulation on local net job creation. Using U.S. data, we find support for this moderating hypothesis. National regulation destroys jobs on net in states with low economic freedom. However, national regulation has no effect in states with high economic freedom; this effect holds for tax freedom and labor market freedom. The moderation is concentrated among mature firms rather than young firms, and in metro counties rather than non-metro counties; furthermore, it is robust across multiple regulatory measures and instrumental variables approaches. Our work reveals that state political institutions have an under-appreciated influence on the costs of national regulation, demonstrating the interdependence of policies for local economic development.
Kautonen, T., A. Fredriksson, M. Minniti, A. Moro. 2020. Trust-based banking and SMEs’ access to credit. Journal of Business Venturing Insights 14
Access to credit is crucial for SMEs’ survival. However, due to the opaqueness of publicly available information on SMEs, banks face information asymmetry that can cause them to ration credit. In this case, trust has been shown to facilitate credit access by bridging the information gap. We contribute to the literature on trust-based banking by using new data to add robustness to extant results, and by discussing two important and still overlooked venues requiring further research. Using two waves of original survey data on 160 Finnish SMEs, our results support findings from prior studies by showing a robust positive relationship between trust and credit access (measured one year apart). We also find support for the hitherto assumed but not explicitly tested substitutability of trust and formal information: trust matters but only when formal information for assessing the SME’s creditworthiness is insufficient. We then identify a future research agenda by highlighting that we do not yet know how banks use qualitative factors such as trust to make lending decisions, nor whether the common implicit assumption of symmetric trust between borrower and lender is realistic. Finally, we discuss how these overlooked areas of research have important theoretical and practical applications.
Cazzolla Gatti, R., Koppl, R., Fath, B., Kauffman, S., Hordijk, W., Ulanowicz, R. 2020. On the emergence of ecological and economic niches. Journal of Bioeconomics, 22(2): 99-127.
The origin of economic niches, conceived as potential markets, has been mostly neglected in economic theory. Ecological niches emerge as new species evolve and fit into a web of interactions, and the more species come into existence, the more (exponentially or power-law distributed) ecological niches emerge. In parallel fashion, economic niches emerge with new goods, and niche formation in economics is also exponentially or power-law distributed. In economics and ecology alike, auto- catalytic processes drive the system to greater and greater diversity. Novelty begets novelty in a positive feedback loop. An autocatalytic set of self-enabling transactions feedback upon one another in combinatoric fashion to generate progressive diversity. While these combinatorial dynamics cannot be prestated, the model explains the “hockeystick of economic growth”—a pattern of prolonged stasis followed by a sudden takeoff, such as occurred during the Industrial Revolution or the Cambrian explosion in ecology. Several implications derive from our niche emergence model, including the idea that the evolutionary process of technological change is not something we do; rather, it happens to us.
McKelvie, A., Wiklund, J., McMullen, J.S., Palubinskas, A.P. 2020. A Dynamic Model of Entrepreneurial Opportunity: Integrating Kirzner’s and Mises’s Approaches to Entrepreneurial Action Quarterly Journal of Austrian Economics23(3-4):499–541
We highlight the important role that time plays in conceptualizations of opportunity in entrepreneurship research. Through two longitudinal case studies, we introduce a more dynamic understanding of opportunities than portrayed by current theorizing, which tends to emphasize “opportunity discovery.” By adopting a dynamic temporal perspective, we integrate Kirzner’s and Mises’s approaches to entrepreneurial action to generate novel insights about how entrepreneurs view opportunities as initial opportunity beliefs, how these beliefs change over time, and how these changes help inform scholarly research of opportunities. We argue that taking the role of time into consideration opens up new questions related to opportunity and the dynamics of its development.
Conference Proceedings
George, K., D. Lucas, M. Minniti. 2020. Adversity, Resilience and Refugees’ Venturing Frontiers of Entrepreneurship Research.
The scholarship on resilience has emphasized the disruptive power of adversity. Adversity, in turn, is a multifaceted problem whose alternative realizations elicit different responses. Yet, extant studies tend to view adversity unidimensionally. We explore how complementary dimensions of adversity affect resiliency outcomes. Specifically, we investigate refugee entrepreneurs’ resilience and their ability to integrate. Refugees face adversity due to both, the forced nature of their migration, and because of their foreignness in the host country. Because of the value of venturing as an expression of resilience, we focus specifically on the performance of refugees’ ventures. We argue that the inability to return to their homelands creates incentives for refugees to integrate in the host community. Our results suggest that, while forced migration contributes to refugees’ initial underperformance relative to other immigrants, this additional dimension of adversity also helps them overcome it through deeper integration.
Diaz, F., M. Minniti. 2020. Legitimate Ink: Licensing and Entry in the Tattooing Industry. In Best Papers Proceedings of the Eightieth Annual Meeting of the Academy of Management, G. Atinc Ed. Online ISSN: 2151-6561.
Legitimacy, the extent to which an entity is appropriate for its social context, is essential to entrepreneurs because it facilitates the acquisition of resources, ultimately increasing the chances for survival. While management scholars have outlined the strategies entrepreneurs employ to legitimize their ventures, we know less about the effects alternative legitimacy strategies may have on entrepreneurial action. In this paper, we study the effect of licensing requirements on entry, and how this effect may be contingent on the availability of alternative forms of legitimacy. Specifically, we argue that the introduction of licensing requirements will be positively associate with entry, when introduced in industries with low cognitive legitimacy, but negatively associate with entry, when introduced in industries with high cognitive legitimacy.
Other Scholarly Publications
Koppl, R. 2020. Letter to the Editor: Do Court-Assessed Fees Induce Laboratory Contingency Bias in Crime Laboratories?, Journal of Forensic Sciences, 65(5): 1793-1794.
In at least 25 states in the United States today, state law mandates (with modest qualifications for Idaho and Virginia) that, upon conviction for certain crimes, courts assess fees to defendants and that at least a portion of such fees be returned to the relevant crime laboratories. Research on observer effects raises the concern that such fees may induce bias in crime laboratory analyses.
2019
Journal Articles
Yu, W., M. Minniti, R. Nason. 2019. Underperformance Duration and Innovative Search: Evidence from the High-Tech Manufacturing Industry. Strategic Management Journal 40(5): 836-861
Behavioral theory examines how the intensity of underperformance influences firms’ strategic decisions; yet, it largely fails to consider the effect of underperformance duration. Drawing on behavioral theory and organizational learning, we argue that the length of time that a firm has been underperforming contributes to shaping firms’ innovative search patterns. We test our theory merging COMPUSTAT and NBER patent data for 1,610 high-tech manufacturing companies between 1986 and 2006. Our results largely support our predicted curvilinear relation- ships. We find that innovative search magnitude and scope each first decreases and then increases with underperformance duration. In addition, we find marginal evidence that innovative search depth first increases and then decreases with underperformance duration. The statistical and practical significance of the results is also discussed.
Minniti, M., M. Andersson, P. Braunerhjelm, F. Delmar, A. Rickne, K. Thorburn, K. Wennberg, M. Stenkula. 2019. “Boyan Jovanovic: Recipient of the 2019 Global Award for Entrepreneurship Research.” Small Business Economics Journal
The 2019 Global Award for Entrepreneurship Research has been awarded to professor Boyan Jovanovic at New York University in the US. Boyan Jovanovic has developed pioneering research that advances our understanding of the competitive dynamics between incumbent firms and new entrants, entrepreneurial learning and selection processes, and the importance of entrepreneurship for the economy. Key perspectives in his research are that the entrepreneur is a bearer of risk who makes employment choices based on the comparative ad- vantage of his or her skills, and that entrepreneurial firms are vehicles of technological change and knowledge diffusion that influence industry dynamics and, in turn, economic growth.
Lucas, D. S. 2019. “The political economy of the collaborative innovation bloc.” The Review of Austrian Economics 32(4): 331-338.
In this issue, Elert and Henrekson offer an important and promising framework through which Austrian scholars to contribute to the study of entrepreneurship and innovation. I suggest a way to build upon their framework: incorporating insights from public choice. While Elert and Henrekson downplay self-interest in their institutional analysis, public choice offers important insights about the formation of public policies that affect innovation activity. Without this, a gap exists among the identification of institutional bottlenecks that hinder collaboration in the innovation bloc and the subsequent alleviation of those bottlenecks. Infusing public choice assumptions into the Collaborative Innovation Bloc framework reveals several promising areas for future research.
Koppl, R. 2019. Strategic Choice in Linear Sequential Unmasking. Science & Justice 59(2): 166-171.
This study uses descriptive decision theory to evaluate crime lab protocols. By way of illustrative application, it asks whether confidence attributions would help to make linear sequential unmasking an improvement on sequential unmasking. The study is innovative because it puts forensic scientists into the model of forensic science. We need to be sure proposed protocols, procedures, and practices will have their intended effects. We cannot be sure of such effects, however, without including in our analysis a model of how the proposed process would be applied by forensic scientists who share the universal human tendency to respond to incentives.
Book Chapters
Lucas, D. S. “Non-market Competition as a Discovery Procedure.” 2019. In Entrepreneurship and the Market Process, Eds. John, Arielle and Diana Thomas: 97–119.
Virtually all of the seminal theoretical contributions of the Austrian school deal with the functioning of the market process. Curiously, however, a significant strand of modern Austrian research has taken a “nonmarket turn”—dealing with social interaction beyond the scope of market institutions. This chapter synthesizes recent work in the Austrian tradition on nonmarket entrepreneurship, reviewing the vibrant and varied applications of market process insights to nonmarket issues. I conceptualize nonmarket entrepreneurs as change agents whose actions alter the institutional environment at different levels of the institutional hierarchy. The result is a rough sketch of a framework for nonmarket action as a competitive discovery procedure. From here, I raise conceptual challenges and opportunities for future research.
Conference Proceedings
Lucas, D. S. C. J. Boudreaux. 2019. Regulation, Economic Freedom, and Entrepreneurial Job Creation: A Multilevel Governance Approach, Frontiers of Entrepreneurship Research Proceedings.
While scholars debate the impact of regulation on entrepreneurial activity, few studies explore heterogeneity in this relationship. Drawing on the political science theory of market-preserving federalism, we develop a theory of hierarchical institutional interdependence, in which the effects of higher-level (national) institutions for entrepreneurial outcomes are contingent on lower-level (regional) institutions. Specifically, we hypothesize that national regulatory burden has a negative effect on local net job creation, but that this effect is moderated (reduced) by regional economic freedom. Using U.S. data, we find support for our moderating hypothesis. Digging deeper, we find that this moderation accrues strictly to older firms; regulation harms young firm job creation, and economic freedom does not attenuate this relationship.
Best Paper Award on the Topic of Public Policy
Other Scholarly Publications
Koppl, R. 2019. “Letter to the Editor: Reply to Biedermann and Gittelson,” Roger Koppl, Science & Justice, 59(4): 467-469.
I reply to a criticism of my article “Strategic Choice in Linear Sequential Unmasking.”
Koppl, R. 2019. Response Paper in Symposium on Roger Koppl’s Expert Failure”) Cosmos + Taxis 7(1-2): 73-84.
This paper responds to a symposium in Cosmos + Taxis on my 2018 book, Expert Failure. I believe that the problem of experts deserves our urgent attention. We need a true and proper theory of experts, some way to put that theory to the test, and a way to translate tested theory into action. I am bold enough to think I have made progress on those fronts.
Koppl, R. 2019. Leland Bennett Yeager: 1924–2018. Independent Review, 23(3): 435-442.
In Memoriam
2018
Book
Koppl, R. Expert Failure, Cambridge University Press, 2018.
The humble idea that experts are ordinary human beings leads to surprising conclusions about how to get the best possible expert advice. All too often, experts have monopoly power because of licensing restrictions or because they are government bureaucrats protected from both competition and the consequences of their decisions. This book argues that, in the market for expert opinion, we need real competition in which rival experts may have different opinions and new experts are free to enter. But the idea of breaking up expert monopolies has far-reaching implications for public administration, forensic science, research science, economics, America’s military-industrial complex, and all domains of expert knowledge. Roger Koppl develops a theory of experts and expert failure, and he uses a wide range of examples – from forensic science to fashion – to explain the applications of his theory, including state regulation of economic activity.
Journal Articles
Shelton, L., M. Minniti. 2018. “Enhancing Product Market Access: Minority Entrepreneurship, Status Leveraging, and Preferential Procurement Programs.” Small Business Economics Journal 50(3): 481-498.
Access to product markets is a key barrier faced by minority entrepreneurs. Preferential procurement programs, which include government set-asides and commercial supplier diversity initiatives, are intended to aid these entrepreneurs in overcoming this barrier. Although the first programs resulted in minimal improvements due to design flaws and poor oversight, some recent initiatives have been redesigned to address these inadequacies. Using a qualitative approach, we examine the impact of these programs on product market access and present a conceptual model of their effect on the opportunity identification, evaluation, and exploitation of Black and Hispanic entrepreneurs. Our analysis suggests that preferential procurement pro- grams may expand product market access by improving the information available to entrepreneurs and by altering the incentives of key resource providers. As a result, these programs may actually enable some minority entrepreneurs to achieve rapid expansion (high-growth entrepreneurs) and others to overcome personal limitations and establish viable enterprises (lower growth entrepreneurs) by leveraging their minority status.
Lucas, D. S., C. S. Fuller, E. E. Piano, C. J. Coyne. 2018. “Visions of Entrepreneurship Policy.” Journal of Entrepreneurship and Public Policy, 7(4): 336¬–356.
The purpose of this paper is to present and compare alternative theoretical frameworks for understanding entrepreneurship policy: targeted interventions to increase venture creation and/or performance. The authors contrast the Standard view of the state as a coherent entity willing and able to rectify market failures with an Individualistic view that treats policymakers as self-interested individuals with limited knowledge. The authors draw on the perspective of “politics as exchange” to provide a taxonomy of assumptions about knowledge and incentives of both entrepreneurship policymakers and market participants. The authors position extant literature in relation to this taxonomy, and assess the implications of alternative assumptions. The rationale for entrepreneurship policy intervention is strong under the Standard view but becomes considerably more tenuous in the Individualistic view. The authors raise several conceptual challenges to the Standard view, highlighting inconsistencies between this view and the fundamental elements of the entrepreneurial market process such as uncertainty, dispersed knowledge and self-interest. Entrepreneurship policy research is often applied; hence, the theoretical rationale for intervention can be overlooked. The authors make the implicit assumptions of these rationales explicit, showing how the adoption of “realistic” assumptions offers a robust toolkit to evaluate entrepreneurship policy. While the authors agree with entrepreneurship policy interventionists that an “entrepreneurial society” is conducive to economic development, this framework suggests that targeted efforts to promote entrepreneurship may be inconsistent with that goal. The Individualistic view draws on the rich traditions of public choice and the entrepreneurial market process to highlight the intended and unintended consequences of entrepreneurship policy.
Conference Proceedings
Palubinskas, A., M. Minniti. 2018 “A Structural Approach to the Influence of Regulation on Technological Innovation.” Frontiers of Entrepreneurship Research.
Innovation is often seen as a key component to firm growth. To date, scholars have studied the structure of innovation, the diffusion of innovation, and how regulations influence innovation. Specifically, works on how regulations influence innovation have suggested that regulations can stimulate innovation and lead firms to gain a competitive advantage. Due to the black box treatment of innovation, extant literature has neglected to investigate how regulations influence the type of innovation and, in particular, how regulations that target the structure of innovation influence its distribution between radical and incremental innovation within an emerging industry. We fill this gap in the theory and contribute to the literatures on innovation and industry emergence by developing a framework for understanding how regulations influence the emergence of innovation beyond simply stimulating or slowing its development.
Other Scholarly Publications
Koppl, R. 2018. “Comment on Laudan,” Seton Hall Law Review, 48(4): 1255-1263.
This paper argues against the view of philosopher Larry Laudan that “serial felons” should be held at trial to a lower standard of proof than the current “beyond a reasonable doubt.” He argues that they should be held the lower standard “clear and convincing evidence.” I show that this standard has an undesirable implication. It implies that if the prior probability of guilt is even moderately high, juries may be advised to return a guilty verdict even when the evidence other than prior convictions is on net exculpatory. Very loosely put, Laudan’s standard of proof for “serial felons” would induce juries to say, “The evidence suggests that you probably didn’t do this crime, except that you’ve been convicted of bad crimes before; we are therefore declaring you guilty.” I reject a standard of proof that may produce such a result.
Adams, N., Koppl, R., Krane, D., Thompson, W., Zabell, S. 2018. “Appropriate standards for verification and validation of probabilistic genotyping systems,” Journal of Forensic Sciences, 2018, 63(1): 339-340.
We layout appropriate standards for verification and validation of probabilistic genotyping systems, noting that such standards are frequently violated.
2017
Journal Articles
Kautonen, T., E. Kibler, M. Minniti. 2017. “Late-career transition and quality of life” Journal of Business Venturing 32(3): 318-333
Late-career transitions to entrepreneurship are discussed as a promising way to address some of the problematic implications of population aging. By extending employment choice theory to simultaneously account for career stage and for non-monetary rewards from entrepreneurship, we investigate how late-career transitions from organizational employment to entrepreneur- ship influence the returns from the monetary (income) and non-monetary (quality of life) components of an individual’s utility. Using data from the English Longitudinal Study of Ageing, our empirical analysis shows that for late-career individuals, starting a business is positively associated with change in quality of life and negatively associated with change in income.
Arend, R., M. Levesque, M. Minniti. 2017. “Managing new technology using malleable profit functions” IEEE Transactions on Engineering Management64(2): 120-133
Technological innovation drives economic growth, and the pioneering activity of scientists and engineers produce technological innovation. We provide a mathematical model of pioneering strategic choice by adopting a perspective familiar to micro-economics but less common in the engineering management literature. Instead of focusing on the specific features of a pioneer’s technology, we focus on the malleability of the profit equation involved. By considering the arguments of the profit function (i.e., entry and variable costs and potential market demand) as strategic levers, we derive propositions that identify the ranges of actions (lever-pulling) available to managers to protect (and even increase) entrepreneurial rents in a simple yet robust partial equilibrium case. For each lever, we show that there are several value ranges (intervals), and that the pioneer’s incentives vary across these intervals. In addition, for each lever, we identify the existence of non-trivial profit discontinuities that change the pioneer’s incentives in surprising ways and lead to counterintuitive strategic choices. Lastly, we show that for some range of each lever’s values, welfare-improving transfer payments are possible and, therefore, pioneers and policy-makers both have an incentive to bargain. As in the case of patents, these transfers encourage the introduction of new technologies.
Koppl, R. 2017. Rules vs. discretion under computability constraints. Review of Behavioral Economics, 4(1): 1-31.
I describe a class of models for monetary policy in which rationality is bounded by the requirement of algorithmic computability. Essentially, I add a computability constraint to the canonical model of Barro and Gordon (1983b). Discretionary policy increases uncertainty for the public and makes it difficult for the policymaker to anticipate the public’s reactions to policy. With discretionary policy and computability-constrained agents the public and the policymaker are unable to outguess one another, and there is no rational procedure that ensures the convergence of expectations. When the policymaker follows a rule, however, expectations converge and uncertainty is reduced for both the public and the policymaker.
Devins, C., Felin, T., Kauffman, S., Koppl, R. 2017. The Law and Big Data. Cornell Journal of Law & Public Policy, 27: 357-413.
In this Article we critically examine the use of Big Data in the legal system. Although Big Data strives to be objective, law and data have multiple possible meanings and uses and thus require theory and interpretation in order to be applied. Further, the meanings and uses of law and data are indefinite and continually evolving in ways that cannot be captured or predicted by Big Data. The use of Big Data will likely generate unintended consequences in the legal system. Large-scale use of Big Data will create distortions that adversely influence legal decision-making, causing irrational herding behaviors in the law. The centralized nature of the collection and application of Big Data also poses serious threats to legal evolution and democratic accountability. Furthermore, its focus on behavioral optimization necessarily restricts and even eliminates the local variation and heterogeneity that makes the legal system adaptive. In all, though Big Data has legitimate uses, this Article cautions against using Big Data to replace independent legal judgment.
Book Chapters
Minniti, M. 2017 “Female entrepreneurship, role models, and network externalities in middle-income countries”. In The Routledge Companion to Global Female Entrepreneurship, C. Henry, K. Lewis, & T. Nelson Eds. Routledge Publishing. pp.221-240.
In recent years, women around the world have made substantial progress in health, education, and participation in the labor force. Women have made significant progress also in the context of new business creation where they are participating in startup activities in increasing numbers. Yet, in spite of very positive signs with respect to entrepreneurial intentions and gestation activities, comparatively fewer women-led enterprises make it to the mature stage. Within this context, a sizable amount of literature has pointed out the relationship between the presence of appropriate social capital and the emergence of female entrepreneurship. As a result of women’s tendency to exhibit limited mobility, and human beings’ heavy reliance on social cues, I argue that the emergence of social capital conducive to women’s participation in entrepreneurship (in all its forms) rests on the presence of strong role models. The effect of role models may be thought of as a network externality. A network externality exists when the action of a person influences (positively or negatively) the actions of others. Because of network externalities, the perceived returns to any particular action increase with respect to adoption. In other words, the more people have already performed an action, the lower the opportunity costs (both tangible and intangible) become for any additional person who decides to repeat it. Thus, the participation of women in entrepreneurship is a grass- roots phenomenon in which women themselves create a “culture” of their own influence and position in society to be embraced and followed by other women.
Koppl, R. 2017. “Shocked Disbelief,” in Doria, Francesco Antonio (ed.), The Limits of Mathematical Modelling in the Social Sciences: The Significance of Gödel’s Incompleteness Phenomenon, World Scientific.
The Gödel–Turing phenomenon of undecidability is subversive of power and authority. It has, therefore, been effectively excluded from mainstream economics. But if we take the self-referential logic of Gödel and Turing seriously, the expert is put back on a plane of equality with the nonexpert. The implications of Gödel–Turing in social science, in other words, are democratic and antihierarchical. The deeply democratic message of this paper, however, is hostile to the interests of experts and thus unlikely to find a place in mainstream economics in the foreseeable future.
2016
Journal Articles
Minniti, M. 2016. “The foundational contribution to entrepreneurship research of William J. Baumol” Strategic Entrepreneurship Journal 10(2): 214-228
William J. Baumol has made an impressive number of important contributions to our understanding of entrepreneurship. This article presents an interview in which Baumol discusses the role and importance of innovation in the economy, as well as his views on methodological and pedagogical issues. In addition to summarizing briefly Baumol’s classic argument on productive, unproductive, and destructive entrepreneurship, the article highlights some areas of his work that are less known among entrepreneurship scholars. In particular, the article discusses Baumol’s work on economic growth and his theory of contestable markets. Both topics offer fruitful research venues for those interested in the relationship between strategic entrepreneurship, market entry, and innovation.
Cowling, M., W. Liu, M. Minniti, and N. Zhang. 2016. “UK credit and discouragement during the GFC.” Small Business Economics Journal
The availability of credit to entrepreneurs with good investment opportunities is an important facilitator of economic growth. Under normal economic conditions most entrepreneurs who requested loans receive them. In a global financial crisis, popular opinion is that banks are severely restricting lending to smaller businesses. This assumes that low levels of investment are caused by supply-side restrictions in the credit market. Little is said about potential changes in the demand for credit and how it is influenced by entrepreneurs’ perceptions about supply-side restrictions. One particularly interesting, and under-researched, group of small businesses are those who have potentially good investment opportunities, but are discouraged from applying for external funding as they fear rejection. In this study, we question whether these entrepreneurs were correct in their assumptions. We find that levels of discouragement are quite low in general at 2.7% of the total smaller business population. Further analysis implies that 55.6% of discouraged borrowers would have got loans had they applied.
Devins, C., Koppl, R., Kauffman, S., Felin, T. 2016. Still Against Design: A Response to Steven Calabresi, Sanford Levinson and Vernon Smith. Arizona State Law Journal, 2016, 48(1): 241-248.
We respond to comments by Vernon Smith, Sanford Levinson, and Sanford G. Calabresi on our 2015 article “Against Design.”
Book Chapters
Koppl, R., Krane, D. 2016. “Economic Incentives and Other Barriers to Blinding in Forensic Science,” in Robertson, Christopher T. and Aaron S. Kesselheim (eds.) Blinding as a Solution to Bias: Strengthening Biomedical Science, Forensic Science, and Law, Academic Press.
We address the problem of bias in forensic science. The almost universal strategy among would-be reformers is to employ hierarchical measures to minimize bias. Great emphasis should be given to distributive (non-hierarchical) measures and to measures meant to leverage bias, rather than minimizing it.
Minniti, M., E, Amoros, J.P. Couyoumdjian, O. Cristi. 2016 “The Bottom Up Power of Informal Entrepreneurship” In Entrepreneurship and the Shadow Economy, A. Sauka, C. Williams and F. Schneider Eds., Edgar Elgar Press. pp.9-29
The informal sector is usually perceived as a negative feature of an economy since greater informality tends to translate into lower productivity. Nevertheless, informality may be the rational answer to contextual constraints. Thus, given the entrepreneurial nature of the informal sector, we argue that, in an environment with weak institutions, participation in informal activity may be beneficial at both the individual and aggregate levels. Using country level data we provide evidence of a positive relationship between informal entrepreneurial activity and economic development. Our results suggest that, in countries with weak institutions, informal entrepreneurship is a viable and constructive substitute for the formal sector and is conducive to improvements in living standards.
Ongoing Projects
Community Entrepreneurship
Problems such as pollution, homelessness, and public safety are too complicated for any one person or organization to solve. We often assume such complex problems can only be handled by governments, especially national governments. Yet, individuals and organizations of various types often cooperate creatively to address these problems at the local level. By developing networks, many different entrepreneurial organizations become locally engaged and improve collective well-being. The top-down solutions governments often employ can be helpful, but their effectiveness depends significantly on local conditions. Alternatively, or as a complement, civic organizations such as police departments, volunteer fire departments, and schools can address problems locally. When there are more civic organizations focused on the same goal in a community, each organization can specialize and focus on a smaller part of the problem. The overall diversity of civic organizations in a community matters because the actions taken by different civic organizations have important interactive effects. IES research shows multiplicity in engaged civic organizations makes government funding more effective by enabling communities to craft solutions tailor-made for their specific needs.
Evolution of Technology
Technological change brings us new and better things. However, it also creates disruption and uncertainty for both entrepreneurial startups and established businesses. Yet, some technological changes may be manageable. We think of technology as the latest in modern devices. Fast computers, and smart cars. But the stone tools of our pre-human ancestors were the high-tech devices of their day. Today’s technology is far from those first crude tools. And yet the process of technological evolution is the same. From the earliest beginnings, technology has changed by bringing together existing tools or actions to make something new. Combining a hand axe and wood club gives you a powerful new weapon: the stone axe. Combining a glider and a gasoline engine gives you the first airplane. Technological change is manageable and even somewhat predictable when the elements being combined are mostly unchanged and the rules of combination are stable. But when the elements are rapidly changing or the rules of combination are volatile and changing, the future is more radically uncertain. Modern businesses need to learn how to negotiate this unplanned order. IES research helps both entrepreneurial startups and established businesses to learn which industries have a greater tendency to process rapid unpredictable change and which industries are more regular and predictable.
Forensic Science Reforms
Flawed forensics may be contributing to at least 20,000 false felony convictions per year in the US alone. This means that in at least 20,000 situations, innocent people are convicted while those who committed a crime go free. Reform is needed. IES research identifies structural factors that may be contributing to forensic science errors. These include the widespread practice of funding crime labs, in part, per conviction. This method of funding gives crime labs an incentive to produce incriminating evidence even when the defendant is innocent. Most reform advocates call for centralized, top-down measures. The entrepreneurial point of view suggests that such command-and-control measures will not make forensic science more reliable. Stricter rules and better oversight have limited value. We need structural changes that include a substantive defense right to expertise, forensics vouchers for indigent defendants, redundant testing and ending inappropriate funding methods. Rather than trying to control and direct forensic scientists from the top down, we should create systems that align incentives with the truth. IES research shows that forensic science systems that better conform to the structural logic of the adversarial system in criminal justice would be more reliable, and a better guard against false convictions.
Healthcare Decision-Making
Community responses to crisis usually involve a variety of organizational forms, including non-profit, for profit, public, formal, and informal. The complex multilayered connections among them can prevent effective control from any unified center such as a state governor’s office. The decision-making configuration among organizations influences who responds, what responses are possible, and how they can be executed. IES research investigates how alternative decision-making configurations influence a community’s resilience to crises. For example, IES research shows that counties with more autonomy in public health get better COVID-19 outcomes (on average) than counties more dependent on state-level decision-making. As decision autonomy increases, public health orders are executed more quickly. Communities are able to react rapidly and flexibly to new information about the virus, as well as their specific needs. These results have significant practical and policy implications for better protecting the community. IES research shows state and county governments how to structure decision-making authority for better crisis outcomes, including better COVID-19 outcomes.
Homelessness
Homelessness is a persistent social challenge throughout the world. In the United States alone, millions of people endure homelessness each year. IES research investigates the effectiveness of alternative practices and housing programs encouraged at both the federal and local level. By doing so, IES research highlights the potential for regulation and public policies to either hinder or enable effective organizational responses to homelessness. IES research has also shown the value and importance of entrepreneurial responses to the homelessness crisis. A central theme of this research is the potential for nonprofits that serve the homeless to implement innovative solutions to reduce homelessness. Because homelessness varies considerably across communities and individuals, entrepreneurial responses can be effectively tailored to local conditions and are responsive to changing client needs. Emergent, “bottom-up” solutions to homelessness are driven by community stakeholders and guided by clear performance criteria. IES research highlights the long-term potential for entrepreneurial innovation to democratize housing markets and provide dignified affordable housing to persons in need.
Licensing in Low-Tech Industries
Recent years have seen a substantial increase in licensing requirements in low-tech service industries such as household moving, construction, auto repair, and body art. These restrictions are meant to protect consumers. But the potentially high costs of licensing may lead to higher prices. Importantly, they may also drive some entrepreneurs into the informal sector, where they sell the same service without a license. More businesses operating outside the formal economy can damage consumers, especially those in disadvantaged communities, especially in low-tech service industries, where enforcing compliance is particularly difficult. IES research shows that licensing can encourage business creation in new and emerging industries because licensing provides legitimacy and helps entrepreneurs acquire the resources they need to create their businesses. However, licensing loses much of its value when new sources of legitimacy become available, such as certification from trade associations and organizations such as Yelp.com that share consumer-provided information online. IES research points to the need to reconsider licensing in well-established low-tech industries and to explore alternative ways to protect consumers such as self-organized consumer groups and consumer protection organizations.
Refugee Entrepreneurship
Every year millions of refugees are forced to flee their countries due to conflicts and human rights violations. Even after leaving their country, they continue to experience extreme hardships in refugee camps as they await permanent resettlement, sometimes for decades. Since 1975, more than three million refugees have permanently resettled in the USA. Often facing scarce employment prospects, many of them turn to entrepreneurship. IES research shows that, lacking the option of emigrating back to their homeland, refugees tend to develop a long-term perspective and have strong incentives to integrate into the host society, often addressing needs and business niches overlooked by the host population. They also form strong ties with their new communities and embed themselves in local economies. Over time, this deep integration helps them gain access to resources, knowledge, and support that are particularly relevant for new ventures. IES research suggests that refugees, particularly refugee entrepreneurs, are contributing members of American society, and that policymakers should recognize these contributions and take them into serious consideration when making future decisions on refugee admissions.
Regulation of Technological Innovation
Our ability to innovate determines our living standards. Innovation, in turn, is influenced by its regulatory environment. Regulations determine the size and positioning of a bicycle’s handlebar, the maximum weight of a drone, even the maximum amount of ink in a pen. Regulations are usually thought of as altering the quantity and speed of innovation via patenting and R&D. In reality, their effects are substantially more nuanced and extend not only to the quantity but also to the type of innovation. Regulatory boundaries placed on a technology can shape the distribution of innovation within an industry, a firm’s decision to explore new opportunities or exploit existing opportunities, as well as a firm’s decision to enter or exit a regulated market segment. IES research can help guide the political strategy of entrepreneurial startups and established businesses seeking to enter emerging industries by revealing how regulations alter the course of technological change. Regulations can mitigate or enhance the disruptive effects of a new technology and the evolution of some market segments. These effects are present in all industries, but they are more impactful and pervasive in emerging industries. IES research shows how ill-designed regulations may impede radical innovation and how well-designed and more permissive regulation promotes radical innovation and technological progress.
Theory of Experts
Experts are everywhere. In our private lives we rely on experts like car mechanics, financial advisors, and lawyers. Governments rely on experts such as epidemiologists, economists, and social workers. We need experts because different people know different things. Each of us knows a lot about a few things and little or nothing about most things. But experts are people with all the quirks and foibles of non-experts. They are not infallible, and they may even sometimes put their own interests ahead of the interest of their clients or the general public. Expert failure is a problem. The problem is to know when to trust the experts and which experts to trust. IES research shows what conditions make expert failure more likely and what conditions make it less likely. Monopoly experts have the exclusive right to offer advice, which can lead to expert failure. Competition among experts tends to improve the clarity and overall quality of expert advice. When experts choose for us, they may choose badly. Restricting experts to a merely advisory function tends to improve the prudence and overall quality of their advice. IES researchshows individuals, businesses, and governments how to structure the provision of expert advice to get better, more prudent, and more reliable advice from experts.
Wildfire Management
Wildfires are a major problem and climate change is making it worse. The problem affects many parts of the world, including the United States, Australia, and much of Europe. But governments should not manage wildfires the same way everywhere. They should tap into local knowledge to craft more effective policies. IES research studies how citizens, local organizations, and governments can work together to address the growing threat of wildfires. Using the case of California, IES research identifies how various members of local communities, both individuals and organizations, can self-organize to complement state and federal actions against wildfire. Residents and local organizations are an important part of the solution to wildfire problems. They are particularly effective in preventing, as opposed to extinguishing, large-scale wildfires. The most successful communities collaborate with governments by sharing their local knowledge of specific physical and social challenges the community faces. Such collaborations help communities to protect themselves. Landowners should first talk about fire risks to develop powerful networks of collaboration. For example, residents can educate their neighbors about evacuation routes if their top concern is safety. Or, residents can undertake projects that reduce the risk of fires spreading through the community. When residents communicate what they are doing, public agencies can then better direct their efforts. IES research is building better ways to manage wildfires and other complex natural disasters.
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