Does Entrepreneurship Education Lead to More Start-ups?

NO, according to a new study from the Kauffman Foundation (did you expect someone else to publish an entrepreneurship study? — yes, there is a monopoly in entrepreneurship research, but that is a discussion for another day).

The Venture Capital Blog at the WSJ highlights the research by Dane Stanler and Paul Kedrosky. They find that recessions, taxes, venture capital levels, and entrepreneurship education do little to affect new firm foundation. In fact, they found that during the period 1977-2005, start-up levels remained nearly constant (fluctuating between 3-6% a year). Here is a snippet from the WSJ:

Even entrepreneurship education and venture capital don’t seem to have a noticeable effect on start-up creation. The late 1970s to early 2000s “experienced a veritable explosion in efforts to promote and increase new-firm formation,” the authors write, pointing out that more than 2,000 universities offered entrepreneurship courses in 2005 compared with 200 in the late 1970s. At the same time, the amount of capital raised by venture firms rose to $100 billion in 2000 from $424 million in 1978, all the while the levels of start-up formation remained flat.

Awhile back we posted on the SBA study by Chad Moutray that found entrepreneurs are not business majors. This led to a paper by yours truly asking if all the money spent on entrepreneurship education was wasteful?

More questions: Are new firms the correct variable to measure? Are all start-ups equal? What about job creation? Is that really what we are after here? Or living standards and incomes? Lots more questions to be investigated surround entrepreneurship education and new venture creation. What are your thoughts on these studies?

About these ads

2 responses to “Does Entrepreneurship Education Lead to More Start-ups?

  1. The study is too general and not an accurate measure of impact of either education or VC investment.

  2. I agree that we need to step back and determine the appropriate metrics for “success” in entrepreneurship education.

    First, it matters significantly how we define “entrepreneurship.” The Kauffman Foundation appears to define entrepreneurship as startup/venture creation. (http://www.kauffman.org/uploadedFiles/KFStratPlan0509_081904.pdf) The Coleman Foundation provides a similar definition — business ownership with significant elements of risk, control and reward (http://www.colemanfoundation.org/entrepreneurship.html). On the other hand, the Kern Family Foundation focuses on a broader “entrepreneurial mindset,” encompassing societal values, business acumen and customer awareness in addition to the actual knowledge of the industry. (http://www.kffdn.org/default.asp?L1=InnovationPrograms&L2=KEEN)

    I introduce these other definitions as a precursor to a different question: if a student with an entrepreneurial education moves on to find “traditional” employment, but is able to lead that company in an entrepreneurial direction and improve its efficiency, contributions to the community and the like, is that not another measure of success? Is the point to create X number of new ventures, or is to create a better quality of living and an innovative mindset so that graduates of entrepreneurial programs can make higher-level contributions to industry and society on a faster track? Is the point to create X number of business owners, or to create graduates who do more than just follow “the way it’s always been done” in their industry?

    If X number of ventures is the metric, then what comes next is asking about sustainability — how many years are each of those ventures in existence? If the number is low, would that indicate failure?

    Lots of open questions. An exciting field and great times to be asking the questions, but I think it’s much too soon to declare that entrepreneurship education funding has been a waste.

    Karen Evans, JD
    Lawrence Technological University
    (Disclosure: I am a Coleman Fellow, and my institution has received funding from the Kern Family Foundation)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s