Keywords
Citation
Karami, A. (2009), "Prescriptive Entrepreneurship", International Journal of Entrepreneurial Behavior & Research, Vol. 15 No. 6, pp. 619-621. https://doi.org/10.1108/13552550910995461
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited
Prescriptive Entrepreneurship by Professor James O. Fiet reports on the only known programme of research intended to be used by aspiring entrepreneurs to improve their odds of success. It is based on rigorously tested findings derived largely from informational economics, but also from the author's field interviews, original theorizing and testing. The book presupposes that the ideas used to found a venture matter because of their inherent comparative advantages, or disadvantages, and also because entrepreneurs differ in their preparation to discover and exploit them.
Consider the careers of two aspiring entrepreneurs, both attempting to discover existing, but previously unknown, information that can be exploited profitability. One of them repeatedly profits from multiple discoveries whereas the other is forced to live on subsistence wages. However, the comparison could be even starker – the comparison could be between average entrepreneurs who typically fail within five years and repeatedly successful entrepreneurs who have launched multiple ventures without a failure. What is it that the latter do that accounts for their success? After interviewing 13 repeatedly successful entrepreneurs, the author observed that all of them used constrained systematic search to target their searching. Constrained systematic search is different from what others refer to as deliberate search. As the author points out, deliberate search could be efforts conducted merely by determined entrepreneurs; whereas, constrained systematic search is based on someone's specific knowledge of people, places, timing, special circumstances and technology. Ideas based on specific knowledge are potential sources of wealth creation because they cannot be inexpensively discovered and exploited by others, due to their ephemeral nature, which allows for the creation of monopolies in time and space.
Reviewing the book reveals that the author does not simply develop a model to explicate his approach to constrained systematic searching; rather he tests it among three diverse sets of subjects, MBA students, the working poor, and technically trained employees. Although there were differences in the settings of these experiments, and in the subjects, the author shows that the treatment effect across all three groups was greater than the individual differences in the subjects and in the experiments, including any possible biases that could have been introduced by the experimenter. The average improvement in the number of wealth creating ideas identified by the subjects was ten times the number found by the subjects in the control groups, which utilized alertness‐based, random scanning. The practical implication of these experiments is that entrepreneurship educators can emulate and introduce into their classes the same exercises that he used to train his subjects. By extension, educators should be able to see with their own students a ten‐fold increase in the number of wealth generating ideas that they identify, compared to conventional alertness approaches.
One could ask, how will educators know if their students have discovered a wealth generating idea, based on a sustainable competitive advantage, whether they use Professor Fiet's approach or someone else's? Well, he has also thought about and tested an approach to answer this question. It is based on a formulation that he refers to as the FVRI framework. The VRI components, which stand for value, rarity and inimitability are derived from the resource‐based view of the firm and are useful for evaluating the sustainability of a competitive advantage. However, in the beginning, entrepreneurs are not immediately organized to exploit an idea. Thus, he introduces the idea of fit, the first “F” factor in the framework. In fact, based on the possession of prior specific knowledge, it is the most important factor in the framework. If someone did not already possess specific knowledge and thus were not already fit, he or she would not be qualified to evaluate the subsequent idea attributes.
The most complex part of using this framework is being able to operationalize it. Operationalization is really a measurement issue, which he addressed using a series of assessment scales and by developing a theory‐based algorithm to combine and evaluate the scaled results. He tested the approach using 31 business plans and three raters for each plan. He protected the assessments from bias by concealing the known outcomes of the plans from those doing the ratings. Although he acknowledges that the tests could benefit from some refinements, the raters were still able to classify all 31 business plans according to their wealth generating capacity. Not only does he argue that constrained systematic search improve someone's odds of discovering a venture idea with wealth generating potential, but he shows that it also leads to founding more new ventures than alertness. He speculates that this superior founding rate is due to already possessing the specific knowledge necessary. In fact, there are likely some economies of scope between the specific knowledge needed to both discover a venture idea and then using it to found a venture.
The author acknowledges that although constrained systematic search can be used to discover wealth generating ideas and to found more ventures, it does not completely remove the prospects that a venture could still fail. It is very effective in improving a venture's potential, but not in addressing the potential for losses. To address possible losses, the author introduces the notion of forgiving business models, which are ones with a high upside potential, but with little possibility of losing money. Entrepreneurs can use forgiving business models to identify conditions that mitigate risk. Two such conditions are high market interaction costs and few outside options for resource providers. Under these two conditions, resource providers will view their dealings with entrepreneurs as offering the most lucrative option compared to other known options that they have for advancing their business prospects. The most noteworthy aspect of Fiet's approach is that it can be taught to students, as has been done at his and other universities. Clearly, there is a need for approaches to improve how scholars teach entrepreneurship to aspiring entrepreneurs. This book offers one such approach.
This book is not intended for a general audience. Rather it is better suited for scholars who are willing to try to understand its technical arguments and who may as a result also have an interest in using it in their entrepreneurship courses to improve the performance of their students as aspiring entrepreneurs. An additional potential use by scholars would be to consider the prescriptive theories, which it advances for further research and theorizing. Another possible audience for the book is doctoral students. Finally, the book has been used to teach motivated undergraduate students, but this is not the primary audience for which it was intended.
The strength of this book is its uniqueness. It reports on the only known program of prescriptive, entrepreneurship research. It provides guidelines for how to increase a venture's wealth generating capacity through constrained systematic search. It also guides scholars and entrepreneurs in how to develop ventures that possess forgiving business models, which protect entrepreneurs against downside losses. It also links constrained systematic search to success in founding new ventures in a way that is superior to random scanning based alertness approaches. Before committing entrepreneurs to launch a venture, it provides them with tools to evaluate the wealth generating potential of their venture ideas. Finally, for those who doubt the empirical promise of constrained systematic search, it reports on the experimental validation of the promised results using multiple experimental trails, which segregate the fixed treatment effect from all uncontrolled, random effects; the result being that the single treatment effect is many times stronger than the total of all other possible random effects that could have biased the reported results. In summary, no other known program of research to date has offered the prescriptive promise of the one reported in this book, nor has it offered the empirical promise of multiple trials validation.
The primary limitations of this book are that it reports on work that is primarily the product of its author. It would have been preferable if it could have been linked more expansively to the work of others. Another limitation is that the work is relatively early in its life cycle. Surely, future research will offer refinements and extensions that are presently unknown. Nevertheless, in comparison to the anecdotal recommendations originating from the extant descriptive research of entrepreneurship, it is reassuring to read the recommendations of this book, which are based on experimental testing.
The book consists of nine chapters, one of which is an argument for the need for more prescriptive research and another, which summarizes the findings of the remaining seven chapters. The research chapters are technically written and based on the latest relevant theory. The book is concisely written and requires focused efforts to follows its arguments. The book is 296 pages and priced at $130.00 US, which is in line with the pricing of other specialized treatments of this kind.