Handbook of research on entrepreneurship and creativity 9781781004432, 9781781004425, 1781004439

This Handbook focuses on the interdependent relationship between entrepreneurship and creativity. This relationship is a

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Table of contents :
Cover......Page 1
Copyright......Page 2
Contents......Page 3
Figures......Page 5
Tables......Page 6
Contributors......Page 8
1. Introduction: on the relationship between entrepreneurship and creativity......Page 21
PART I The role of creativity for entrepreneurial activities......Page 39
2. Managing entrepreneurship for innovation: a psychological analysis......Page 41
3. Creativity as an integral element of social capital and its role in economic performance......Page 80
4. Entrepreneuring as organisation-creation......Page 117
5. Knowledge creation in entrepreneurial teams......Page 142
6. Entrepreneurship and creative professions—a micro-level analysis......Page 165
PART II The local/regional environment’s impact on entrepreneurship and creativity......Page 195
7. Entrepreneurship in creative industries: the paradox between individual professionalization and dependence on social contexts and professional scenes......Page 197
8. The creative environment as stimulator for entrepreneurial opportunities......Page 229
9. Places, publishers and personal ties: the relational qualities of urban environments for book publishers......Page 270
10. From 18th century chemistry to the 21st century creative class: a sociological perspective on policies intended to promote local economic development based on innovation......Page 295
11. Rhetoric and effects of the creative city policy: evidence and reflections from Milan and beyond......Page 316
12. The contribution of university–industry–government interactions to creative entrepreneurship and economic development......Page 343
13. The role of education in enterprising creativity......Page 380
Index......Page 419
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Handbook of Research on Entrepreneurship and Creativity

Edited by

Rolf Sternberg Leibniz Universität Hannover, Germany

Gerhard Krauss Université de Rennes 2, France

Edward Elgar

Cheltenham, UK • Northampton, MA, USA

© Rolf Sternberg and Gerhard Krauss 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2013957772 This book is available electronically in the ElgarOnline.com Business Subject Collection, E-ISBN 978 1 78100 443 2

ISBN 978 1 78100 442 5 (cased)


Typeset by Servis Filmsetting Ltd, Stockport, Cheshire Printed and bound in Great Britain by T.J. International Ltd, Padstow

Contents vii viii x

List of figures List of tables List of contributors   1 Introduction: on the relationship between entrepreneurship and creativity Gerhard Krauss and Rolf Sternberg


PART I The role of creativity for entrepreneurial activities   2 Managing entrepreneurship for innovation: a psychological analysis David Cropley and Arthur Cropley


  3 Creativity as an integral element of social capital and its role in economic performance Hans Westlund, Martin Andersson and Charlie Karlsson


  4 Entrepreneuring as organisation-­creation Daniel Hjorth   5 Knowledge creation in entrepreneurial teams Haïfa Naffakhi-­Charfeddine   6 Entrepreneurship and creative professions—a micro-­level analysis Michael Fritsch and Alina Sorgner

97 122


PART II The local/regional environment’s impact on entrepreneurship and creativity   7 Entrepreneurship in creative industries: the paradox between individual professionalization and dependence on social contexts and professional scenes Bastian Lange



vi   Handbook of research on entrepreneurship and creativity   8 The creative environment as stimulator for entrepreneurial opportunities Michael Stuetzer


  9 Places, publishers and personal ties: the relational qualities of urban environments for book publishers Barbara Heebels, Irina van Aalst and Oedzge Atzema


PART III Government policies to support both entrepreneurship and creative economic development 10 From 18th century chemistry to the 21st century creative class: a sociological perspective on policies intended to promote local economic development based on innovation Michel Grossetti 11 Rhetoric and effects of the creative city policy: evidence and reflections from Milan and beyond Marianna d’Ovidio and Davide Ponzini 12 The contribution of university–industry–government interactions to creative entrepreneurship and economic development Henry Etzkowitz




13 The role of education in enterprising creativity Andy Penaluna, Kathryn Penaluna and Ivan Diego




Figures   2.1 The kind and focus of innovation   2.2 The innovation process   2.3 An expanded phase model of the innovation process   2.4 The psychological model mapped on to a business model   3.1 Spatial levels, degree of homogeneity, horizontal and vertical links between actors and levels, and examples of commonly used terms for social capital at different levels   6.1 Cultural creativity, invention, innovation, entrepreneurship and regional growth   6.2 Distribution of paid employees and self-­employed in the creative class   8.1 Regional distribution of people perceiving founding opportunities 2002–2006, 2008–2009 (percentage of the population)   8.2 Interaction between the regional share of the creative class and the regional start-­up rate on the likelihood of individual opportunity perception 11.1 Milan 2012, view of the construction site of the Porta Nuova development in the Garibaldi-­Repubblica area 11.2 Milan 2012, view of Corso Como and of the construction site of the Porta Nuova development 11.3 Milan 2012, view of Viale della Liberazione and of the construction site of the Porta Nuova development 12.1 The statist triple helix model 12.2 The laissez-faire triple helix model 12.3 The triple helix model of overlapping spheres 12.4 Second academic revolution 13.1 Connectivity of distant semantic relations 13.2 Bilateral multi-­solution finding model 13.3 A design-­based enterprise assessment model 13.4 Students interrogate the scenario to discover problems and issues 13.5 The design-­based evaluation matrix


28 29 44 48 64 151 156 228 235 312 314 316 327 328 329 337 370 373 386 387 388


2.1 Characteristics of innovation models 2.2 The hierarchical organisation of solutions 2.3 The psychological paradoxes of creativity 2.4 The psychological dimensions of creativity and the phases of creativity 3.1 Social capital of organizations broken down into different component parts 3.2 The traditional activity of the three types of organizations and the activities expected by modern innovation policies 6.1 Overview of professions in the creative class and non-­creative professions 6.2 Mean differences between self-­employed and paid employees 6.3 The role of the regional share of the creative class and respondent’s affiliation with the creative class for individual self-­employment 6.4 Determinants of self-­employment in the creative class 6A.1 Definition of the subgroups of the creative class 6A.2 Descriptive statistics 6A.3 Correlation matrix 8.1 Overview of the number of interviews of the GEM in Western Germany (2002–2006, 2008–2009) 8.2 Individual-­level variables – GEM waves 2002–2006, 2008–2009 for Western Germany 8.3 Regional-­level variables – 2001–2005, 2007–2008, Western German districts 8.4 Correlation matrix 8.5 List of Western German planning regions with the 15 highest and lowest opportunity perception rates (in % of the regional population), 2002–2006, 2008–2009 8.6 Effect of regional characteristics on individual opportunity perception 8.7 Robustness checks 8.8 Predicted probabilities for opportunity perception 9.1 Three types of personal networks and the characteristics of their ties viii

24 32 41 49 69 70 151 157 158 161 170 171 172 220 221 223 227 229 232 237 241 254

Tables  ­ix 9.2 The role of different network types in publishers’ personal ties with authors, press, booksellers and fellow publishers 12.1 Expansion of university missions

263 338

Contributors Martin Andersson is full professor of Innovation Studies at CIRLCE at Lund University, and is currently one of the centre’s deputy directors and coordinator of the research platform on Economics of Innovation. He also holds a position as professor of Industrial Economics at the School of Management at the Blekinge Institute of Technology, and earned his PhD in Economics from the Jönköping International Business School. He has been visiting researcher at the International Development Group at MIT in Boston, and worked for several years as research coordinator of CESIS at the Royal Institute of Technology in Stockholm before taking up his current position at Lund University. His research focuses in a broad sense on the interplay between innovation, entrepreneurship and geography, and also attempts to account for non-­linear relations and dynamics in models and empirical applications. Martin has published over 40 journal articles and book chapters, was ­co-­winner of the 2012 Young Entrepreneurship Researcher award in Sweden and was in 2011 elected as a ‘research leader of the future’ by the  Swedish research council FORMAS. He recently co-­edited a major book on Innovation and Growth, as part of a long-­term project on Innovation financed by the Swedish Governmental Agency for Innovation Systems. He is an associate editor of the journal Annals of  Regional Science. Oedzge Atzema is full professor in Economic Geography at Utrecht University in the Netherlands. He has worked at this university since 1986 and became professor in 2002. Before this, he worked at Radboud University in Nijmegen, where he earned his PhD in 1992 with a thesis on residential suburbanization. In addition, Oedzge is a lecturer at Amsterdam School of Real Estate. His main research interests are in business geography, urban labour markets and regional economics. He participates in the Utrecht research group on Evolutionary Economic Geography. He is author of books and articles about theories in Economic Geography, spatial development of industries and the influence of technology on regional labour markets. The main focus of his research activities is applied research. He is director of the Expertise Centre for Urban Dynamics and Sustainability at Utrecht University, which focuses on the development of new evolutionary-­inspired concepts for economic development in regions as well as in inner cities. x

Contributors  ­xi Arthur Cropley graduated in Arts and later Education from the University of Adelaide. He served in the Australian Army for five years, mostly as a part-­time soldier. After seven years as a school teacher in Australia, England and Canada he obtained his PhD in Educational Psychology at the University of Alberta in 1965. He spent almost his entire active career at the Universities of Regina (10 years) and Hamburg (20 years). He was visiting professor at the University of Latvia for 12 years. Professor Cropley is the author of 27 books on creativity, lifelong learning, psychology of migration and research methodology, and these have appeared in a dozen languages, including Hungarian, Latvian, Korean and Chinese. In addition, he has published about 150 papers and chapters in books. He has obtained more than a million Euros in research grants from various bodies. He has given lectures in a dozen countries, and in addition to his mother tongue (English), he speaks fluent German, rusty French, basic Latvian and beginner’s Italian. His current research focus is on creativity and innovation in engineering and organizations. He translated the Latvian national epic Lāčplēsis (Bearslayer) into English heroic verse. Professor Cropley was awarded the Creativity Award of the World Council for Gifted and Talented Children in 1997, and in April 2004 received an honorary doctorate from the University of Latvia. He was elected 2004 visiting fellow by the British Psychological Society, and delivered the 24th Vernon-­Wall Memorial Lecture. In 2008 he was admitted as an Officer of the Order of the Three Stars by the President of Latvia. He delivered the 2009 Torrance Memorial Lecture at the University of Georgia, Athens, Georgia. David Cropley is the deputy director of the Defence and Systems Institute and associate professor of Engineering Innovation at the University of South Australia, in Adelaide. Associate Professor Cropley joined the South Australian Institute of Technology in 1990, in the School of Electronic Engineering. Following the establishment of the University of South Australia in 1991, he completed a PhD in Measurement Systems Engineering in 1997 and a Graduate Certificate in Higher Education in 2002. From 2003 until 2007 Associate Professor Cropley was director of the Systems Engineering and Evaluation Centre (SEEC) at the University of South Australia, leading a team of engineers specializing in research and education in the field of complex defence systems. In 2007, SEEC was transformed into the larger Defence and Systems Institute, where Associate Professor Cropley is now deputy director and associate professor of Engineering Innovation. Cropley has taught a variety of courses on engineering, and creativity and innovation, and has facilitated creative problem-­solving workshops for various organizations, including BAE

xii   Handbook of research on entrepreneurship and creativity Systems and the Defence Science and Technology Organization (Australia). His research interests lie in the measurement of creativity and innovation in engineering processes and organizations, the role of creativity and innovation in terrorism and crime, and the nexus of creative problem-­solving and engineering. Associate Professor Cropley is co-­author of Creativity and Crime: A Psychological Analysis (2013) and Fostering Creativity: A Diagnostic Approach for Higher Education and Organisations (2009). He is co-­editor of The Dark Side of Creativity (2010). Ivan Diego is currently a full teacher trainer at Valnalon, a government agency commissioned to develop the regional strategy on enterprise education in Asturias (Spain). He has been involved in the design of different enterprise education teaching materials, teacher training, impact evaluation and transfer of know-­how. Diego earned his degree in the Department of Biology at the University of Oviedo in 1998. His main research interests are critical theory of entrepreneurship and enterprise education in particular, with a special focus on the politics associated with it and issues related to processes of transfer, appropriation and reactions to prevailing discourse among the teaching community and society as a whole. On a more pedagogical level, he is interested in post-­mechanistic approaches to pedagogy based in complexity and self-­organizational systems. Since 2011, Diego has been the coordinator of the EC-­funded project ADEPTT (Acknowledging and Developing Entrepreneurial Practice in Teacher Training). Marianna d’Ovidio is an urban sociologist based at the Department of Sociology and Social Research of Università Milano – Bicocca. She obtained her PhD in 2004 in European Urban and Local Studies at the University of Milano – Bicocca, with a thesis focused on the fashion industry in Milan and London. She is a lecturer at Politecnico di Milano, where she teaches Urban Sociology. She is a member of the PhD board of URBEUR – Urban and Local Studies, at the Doctoral School in Comparative and International Studies in Social Sciences of the University of Milan – Bicocca and member of the Laboratorio di Politiche Social – Politecnico di Milano. Marianna has worked for many years as research associate both at the University of Milano – Bicocca and at the Politecnico di Milano, being engaged in many research teams, dealing with issues related to urban: local development and cultural economy, social innovation, poverty, and social exclusion and mobility. She has been a member of many international research teams founded by the EU, such as Katarsis and Social Polis on social innovations and ACRE on the creative and knowledge economy of metropolitan regions in Europe.

Contributors  ­xiii Among her recent publications are contributions to books including Brand-­Building: The Creative City. A Critical Look at Current Concepts and Practices (Firenze University Press, 2010) and Making Competitive Cities (Wiley-­Blackwell, 2010). Henry Etzkowitz is senior researcher at the H-­STAR Institute, Stanford University and visiting professor at the School of Management, Birkbeck College, London University and Edinburgh University Business School, UK. Etzkowitz is a scholar of Innovation Studies and was the originator of the ‘entrepreneurial university’ and ‘triple helix’ concepts that link university with industry and government at national and regional levels. As president of the Triple Helix Association, he is at the centre of an international network of several hundred scholars and practitioners of university–industry–government relations. Etzkowitz is also the co-­founder of the Triple Helix International Conference Series, which has produced a series of books, special journal issues and policy analyses since it started in Amsterdam in 1996. Prior to Stanford, Etzkowitz held the chair in Management of Innovation, Creativity and Enterprise at Newcastle University Business School, UK and served as visiting professor in the Department of Technology and Society, School of Engineering and Applied Sciences, Stony Brook University, USA. He has developed several innovative concepts for university–industry–government linkages together with colleagues in the Triple Helix Research Group at Newcastle University Business School. Etzkowitz is the author of Triple Helix: University, Industry Government Innovation in Action (2008), MIT and the Rise of Entrepreneurial Science (2002) and co-­author of Athena Unbound: The Advancement of Women in Science and Technology (2000), Public Venture Capital (2000), and Universities and the Commercialization of Knowledge: New Dimensions for the 21st Century (in press). Recently he co-­edited The Capitalization of Knowledge: A Triple Helix of University–Industry–Government (Edward Elgar, 2010) (with Riccardo Viale). He publishes regularly in Research Policy, Science and Public Policy, R&D Management, European Planning Studies and Minerva. Michael Fritsch is currently full professor of Economics and chair of Business Dynamics, Innovation and Economic Change at the Friedrich ­Schiller University of Jena. He is also research professor at the German Institute for Economic Research (DIW Berlin), the Halle Institute for Economic Research and at the Max Planck Institute for Economics, Jena. Michael Fritsch has received his degrees in Economics (Diplom Volkswirt, PhD, Habilitation) from the Technical University of Berlin. From 1992– 2006, he was a professor of economics and chair of Economic Policy, at the Technical University Bergakademie Freiberg.

xiv   Handbook of research on entrepreneurship and creativity The main objective of Professor Fritsch’s recent research is to better understand the effects that market dynamics and innovation processes have on economic welfare and to discover how policy can be designed to stimulate growth. The current research in the field of entrepreneurship is focused on the development of self-­employment over time, entrepreneurial careers and the effects of new businesses on economic development, with a special focus on innovative start-­ups. Since a number of the regional influences on entrepreneurship and on innovation activities tend to be rather persistent, he has recently started to investigate the determinants and the effects of such long-­term influences, which could be viewed as regional ‘cultures’. Professor Fritsch is author of numerous books and more than 200 articles in scholarly journals and edited volumes. He is also the editor of a number of books and Special Issues. He is associate editor of Small Business Economics: An Entrepreneurship Journal and is Member of the Editorial Board of several scholarly journals. Michel Grossetti is director of research at the CNRS in the area of Sociology. He studied Mathematics and Sociology at the University of Toulouse. He is currently director of the accredited ‘excellence laboratory’ ‘Structuring of Social Worlds’. Michel Grossetti has conducted research into social networks, innovation, spatial dynamics, social science methodology and sociological theory. He showed that old research policies can impact current economic activity. He also argued that it is necessary to decouple historical constitutions of clusters from their current way of functioning, as distinct historical paths can lead to similar current clusters. He also advocates the explanation of geographical proximity effects by the embeddedness of economic transactions into partly local social networks. Participating in a European research project, he demonstrated that geographical mobility of ‘creative’ workers is weak and does not fit with the theory of attraction of these workers by ‘soft factors’. In Geography of Science, his work on bibliometric data showed that there is a worldwide current trend towards geographic de-­concentration of scientific activity. He has published or directed eight books, including Sociologie de l’imprévisible dynamiques de l’activité et des formes sociales (2004) and (with Claire Bidart and Alain Degenne) La vie en réseau (2011). He has also written 58 articles in peer-­reviewed journals, including the Revue Française de Sociologie (French Review of Sociology), Les Cahiers Internationaux de Sociologie (The International Journal of Sociology), les Actes de la recherche en sciences sociales (Social Science Research Proceedings), Sociétés Contemporaines (Contemporary Society), Social Networks, European Planning Studies, Built Environment, la Revue d’économie régionale et

Contributors  ­xv urbaine (the Journal of Urban and Regional Economics) and les Annales de la Recherche Urbaine (the Urban Research Journal). Barbara Heebels works as a post-­doctorate researcher in Urban and Economic Geography. She is concerned with the role of place, personal networks and skills in various thematic fields, ranging from cultural entrepreneurship to camera surveillance. Heebels has mastered a range of quantitative and qualitative research methods, with a specialization in semi-­structured interviewing and participant observation. She currently works at the Economic Geography and Planning Department of the University of Amsterdam (the Netherlands). From March 2007 until September 2013, she was affiliated to the Economic and Urban Geography Departments of Utrecht University (the Netherlands). Heebels earned her PhD in September 2012 for her research on the meaning of urban place for book publishers and their personal networks. During her PhD she also participated in the boards of the URU (Urban and Regional Research Centre, Utrecht) and NETHUR (Netherlands Graduate School of Urban and Regional Research) as PhD representative and presented at international conferences in geography and economics. The empirical chapters of her dissertation have been published in peer-­reviewed academic journals, including the Journal of Economic Geography and Geoforum. As a post-­ doctorate at Utrecht University, Heebels participated in the NWO (Dutch Scientific Council) project ‘Surveillance in Urban Nightscapes’. In this project team, she focused on the role of camera-­observants and how their skills and social and technological environment influence the way they watch. This will result in two academic articles in peer-­reviewed journals. In her current position, she further develops the role of place, networks and skills in new research proposals. Daniel Hjorth is full professor of entrepreneurship and organization at the Department of Management, Politics and Philosophy, Copenhagen Business School (CBS), Denmark; associate professor at Linnéus University; and associate professor at Malmö University College (both Sweden). He served as research director for the Management and Entrepreneurship Research Group 2006–2013, and programme director for the Social Science Master in Organizational Innovation and Entrepreneurship (2009–2013). From 2013 he is academic director for the Entrepreneurship Platform at CBS. Hjorth is author or editor of eight internationally published volumes, contributor to numerous books, and publishes frequently in mainly organization studies and entrepreneurship studies journals. His latest books include The Politics and Aesthetics of Entrepreneurship (Edward Elgar, 2009), edited with Chris Steyaert, the Handbook on Organisational Entrepreneurship (Edward Elgar) and ­(co-­editing) the forthcoming (2014)

xvi   Handbook of research on entrepreneurship and creativity Oxford University Press Handbook of Process Philosophy and Organisation Studies. Hjorth serves on the editorial boards of several journals, including Organisation Studies (senior editor), Organisation, International Small Business Journal, and Entrepreneurship and Regional Development. His research interests include the organizational conditions for creativity, innovation and entrepreneurship, ­philosophy and management; and process thinking. Charlie Karlsson is professor of the Economics of Technological Change at Jönköping International Business School (JIBS), Jönköping, Sweden; guest professor of Economics at University West, Trollhättan, Sweden; professor of Industrial Economics and Organization at Blekinge Technical University, Karlskrona, Sweden; H.C. Anderson guest professor at the University of Southern Denmark, Sönderborg, Denmark; research professor, Institute for Economic Research, Halle (Saale), Germany; and associate professor (‘docent’) in Regional Planning at the Royal Institute of Technology, Stockholm, Sweden. Charlie Karlsson has been president of the European Regional Science Association since January 1st 2009 and December 31st 2013. In his research, he has focused on infrastructure economics, urban economics, the economics of innovation and technological change, regional economics, industrial clusters including media clusters, spatial industrial dynamics, entrepreneurship and small business economics, international trade, and the economics of R&D and higher education. He has published articles in Papers in Regional Science, Entrepreneurship and Regional Development, Regional Studies, Environment and Planning A, Growth and Change, The Annals of Regional Science, Annales D’Économie et de Statistique, Italian Journal of Regional Science, Industry and Innovation, Research Policy and Small Business Economics. He has contributed chapters in a large number of edited books, and served as editor for more than 20 books published by Springer, Edward Elgar, Routledge, Cambridge University Press and Oxford University Press, and for a number of special issues of international scientific journals. Charlie Karlsson also has long experience as an independent consultant. Gerhard Krauss is currently an associate professor in Sociology at the Université de Rennes 2 (since 2005), Department of Economic and Social Administration, Faculty of Social Sciences. He is a member of the research laboratory ESO-­Rennes, ‘Spaces and Societies’ (UMR CNRS 6590), composed of geographers, spatial planners, sociologists, economists and other social scientists. He was an associate professor in Sociology at the University of Lille 1 and member of the research laboratory CLERSÉ (2003–2005); a visiting scholar at the Centre for the Sociology of Innovation at the École des Mines in Paris (2002–2003) and at the

Contributors  ­xvii University of California Los Angeles (2001–2002); an assistant professor in Sociology at the University of Stuttgart (1999–2001); a researcher at the Centre for Technology Assessment in Baden-­Württemberg, Stuttgart (1995–1999); an assistant professor in Political Sciences at the University of Jena (1993–1995); and a researcher at the Max Planck Institute for the Study of Societies, Cologne (1990–1993). Gerhard Krauss earned his PhD in Social Sciences at the University of Konstanz in 1994, a postgraduate diploma in Sociology at the École des Hautes Études en Sciences Sociales, Paris, in 1989, and an M.A. in Sociology and Political Sciences at the University of Konstanz in 1988, following his studies at the universities of Tübingen, Konstanz and Grenoble (Institute of Political Studies). Specializing in economic and organizational sociology, he has worked on regional innovation systems, knowledge-­based start-­ups, the failure of knowledge-­based start-­ups and, more recently, on the social embedding of new museums of modern and contemporary art in the context of territorial development policies. He has published articles in European Planning Studies, Innovations, Revue Française de Socio-­Économie, Journal of Technology Transfer, Small Business Economics and Revue d’Économie Régionale et Urbaine, and contributed with chapters to a large number of edited books. Bastian Lange, Dr. Phil., is an urban and economic geographer specializing in the creative industries, questions of governance and regional development. Lange studied Geography, Ethnology and Urban Development in Marburg and Edmonton and obtained his doctorate at the Johann-­ Wolfgang Goethe University, Frankfurt am Main, at the Institute for Geography in 2006. He was guest professor at Humboldt University in Berlin between 2011 and 2012 and has been a fellow of the Georg Simmel Centre for Metropolitan Research at Humboldt University since 2005. In addition he spearheads the research and strategic consultancy office Multiplicities-­Berlin. He is particularly interested in socioeconomic transformation processes within the creative knowledge age, refining them into a useable form for the fields of politics, business and creative scenes. Bastian Lange is the author or co-­author of five anthologies, one monograph, more than 25 peer-­reviewed international journal articles and 20 book chapters. He is a board member of the International Journal of Culture and Creative Industries. Recent publications include an anthology (co-­ editor with Hans-­Joachim Bürkner and Elke Schüler) entitled Akustisches Kapital. Wertschöpfung in der Musikwirtschaft (Transcript, 2013). Haïfa Naffakhi-­Charfeddine is currently an assistant professor in Man­ agement Sciences at the University of Caen-­Basse Normandie, France. She was a lecturer at the University of Nancy (2004–2008) and an ­assistant ­360

xviii   Handbook of research on entrepreneurship and creativity lecturer at the University of Carthage, Tunisia (2008–2009). Naffakhi earned her PhD at the IAE of Nancy, University of Nancy 2 in 2008. Her main research interests are in the dynamics of entrepreneurial teams, role of human capital diversity in decision-­making processes, new venture creation and, more recently, the knowledge creation process within entrepreneurial teams, importance of networking in entrepreneurship and collective leadership. Naffakhi-­Charfeddine is the author of four book chapters, two peer-­reviewed journal articles and 15 communications for conferences and workshops. Since 2012, she has been moderator of a group that she co-­founded on entrepreneurial teams’ researches at the ‘Entrepreneurship Academy’ (Académie de l’Entrepreneuriat). She was for three years an active member of the project Leaders Club of Lorraine (Club des Dirigeants Lorraine) in collaboration with the Higher Institute of Labour (Institut Supérieur des Métiers) (2005–2008). She was a team monitor in the SIFE programme, a project in collaboration with the Young Leaders Centre (Centre des Jeunes Dirigeants) of Tunis (2011–2012). Naffakhi-­Charfeddine belongs to the Advisory Committee of the French Revue de l’Entrepreneuriat. Andy Penaluna holds a personal chair in Creative Entrepreneurship at the University of Wales, Trinity St David’s and is a regular contributor to the international enterprise education agenda. He chaired the Entrepreneurial Learning Special Interest Group for the UK’s Higher Education Academy from 2008 to 2011 and in 2010 to 2011 he was elected to chair Enterprise Educators UK, a body representing 100 Higher Education Institutions. He retains a directorship of the organization, with a remit for internationalization and policy engagement. Andy Penaluna received a personal mention in the 2012 UK’s government’s Higher Education White Paper Students at the Heart of the System and was on the Advisory Board of Sir Tim Wilson’s University–Business Review, a policy document that provided recommendations for both government and the university sector. He is an invited expert at the United Nation’s Conference for Trade and Development and a range of the European Commission’s deliberations on Educating Future Teachers for Entrepreneurship. He also chaired the UK’s Quality Assurance Agency’s Graduate Enterprise and Entrepreneurship Group, which developed national educator guidance for quality assurance in all UK universities. With the support of the Welsh government and the Welsh Enterprise Educators Network, he helped to lead the UK’s first accredited teacher training qualification for Enterprise Education, which is validated as part of a post-­graduate qualification. The European Commission-­funded ‘Acknowledging and Developing Entrepreneurial Practice in Teacher

Contributors  ­xix Training’ drew considerably on this initiative. Andy Penaluna also holds a distinguished visiting professorship at the American University in Cairo, is a visiting professor at the University of Leeds and a business fellow at the Royal College of Art. He chairs the Institute for Small Business and Entrepreneurship Annual Conference’s Creative Industries track and is a regular contributor on review and editorial boards for a range of journals. Kathryn Penaluna, a former bank executive, is the enterprise manager at the University of Wales, Trinity St Davids (formerly Swansea Metropolitan University) and heads their Centre for Creative Entrepreneurship. Her role includes helping graduate businesses to grow and develop, for which she has an enviable track record. Swansea Met’s graduate business survival rate was consistently ranked amongst the top ten in the UK, despite being a very small institution of around 6000 students. Kathryn helped to run the UK Higher Education Academy’s Entrepreneurial Learning Special Interest Group and has contributed to educational developments within the Academy’s Business Management Accountancy and Finance Subject Centre. She has also worked with Welsh government as an Enterprise Champion. Her MBA focused on education in the creative industries, opening up new avenues for exploration, and led to working with the UK Intellectual Property Office to develop new teaching strategies that help students to develop a better understanding of the creative process, including enhanced awareness of evaluating and protecting new perceived opportunities. Intellectual Property forms an integral part of Kathryn Penaluna’s research, as she focuses on the nexus of business and creativity within enterprise education. Her approaches are driven by experiences of working within both business school and art and design departments, where teaching and learning strategies are considerably different. Now an advocate of a ‘design thinking’ stance, she has developed the approaches and introduced them into all faculties, including the Business School. She attributes the success of her business start-­ups to creativity-­led thinking for opportunity, which utilizes ‘curiosity-­based learning’ to identify new problems prior to problem solution. Having received nominations for best conference papers that reflect on her own learning in these domains, she now regularly publishes on topics that challenge conventional business education and its pedagogical approaches. Davide Ponzini received his PhD (2006) in Urban Planning from Politecnico di Milano, where he is currently assistant professor of Urban Planning. His research activity focuses on planning theory, urban and cultural policy,

xx   Handbook of research on entrepreneurship and creativity heritage preservation, contemporary architecture and the urban environment. He is a member of the International Academy of Architecture. In 2004 he was research affiliate at Yale University, in 2006 international fellow in Urban Studies at Johns Hopkins University, in 2008 visiting scholar at Columbia University, and in 2010 visiting researcher at Sciences Po, Paris. He has been recipient of several scholarships and research grants, issued by Universities, Foundations and Public Institutions (Compagnia di San Paolo, Agnelli Foundation and UniCredit Private Banking, European Cultural Foundation and Riksbankens Jubileumsfond). His research work has been published in international scientific journals (Urban Studies, Environment and Planning C: Government and Policy, Cities, European Planning Studies, Planning Theory and Practice and others) and in edited books (among others Cultural Quarters and Urban Transformation, 2009; Spatial Planning and Urban Development: Critical Perspectives, 2010; and Starchitecture: Scenes, Actors and Spectacles in Contemporary Cities, 2011). It has been presented in international congresses, invited lectures and seminars. Alina Sorgner is research associate and lecturer at the chair of Business Dynamics, Innovation and Economic Change at the Friedrich ­Schiller University of Jena and research fellow at the German Institute for Economic Research in Berlin, Germany. She received a Diploma in Mathematical Methods in Economics from the Moscow State Institute of Electronics and Mathematics (Technical University), Russia, and was awarded a Dr. Rer. Pol. from the Department of Economics and Business Administration at the Friedrich Schiller University of Jena in 2013. Before her doctoral studies, she worked as a specialist in the Corporate Finance Department in a large investment company in Russia. Her main research interests focus on new business formation processes, in particular development of entrepreneurial careers over time, returns from entrepreneurship and employment in entrepreneurial firms, as well as the role of creativity and non-­cognitive skills in entrepreneurship. She worked in diverse interdisciplinary projects at the Friedrich Schiller University of Jena and the German Institute for Economic Research in Berlin that dealt with new business formation and labour markets in East and West German growth regimes, the development of self-­employment in Germany over time and its distinguishing characteristics, and governmental support of start-­ups by the unemployed. She has published several articles in essay collections and in peer-­reviewed scholarly journals. Rolf Sternberg is currently a full professor in Economic Geography at the Leibniz Universität Hannover, Germany. He was a professor in Regional Geography at the Technical University of Munich (1995–1996) and a full

Contributors  ­xxi professor (chair) of Economic and Social Geography with the Faculty of Economics and Social Science at the University of Cologne (1996–2005). Sternberg earned his PhD at the Department of Geography at the Leibniz Universität Hannover in 1987. His main research interests are in the spatial consequences of government policies, impacts of networks between innovative actors on regional development, new firm formation process and effects, regional-­sectoral clusters and their economic impacts and, more recently, the spatial implications of the presence of the creative class. Sternberg is the author or co-­author of six books; two edited collections; 58 peer-­reviewed journal articles and book chapters; and over one hundred presentations to professional and policy audiences (www. wigeo.uni-­hannover.de). Since 1998 he has been the leader of the German team of the Global Entrepreneurship Monitor (GEM) and a member of the GEM Research Committee. With Joachim Wagner he has implemented the Regional Entrepreneurship Monitor, designed to compare 10 selected German regions. With Udo Brixy he initiated the German Panel on Nascent Entrepreneurs in 2006. Professor Sternberg belongs to the Editorial Board and Advisory Committee of various scientific journals and book series, including Annals of the Japan Association of Economic Geographers, FGF Entrepreneurship-­Research Monographien, Wirtschaftsgeographie and Zeitschrift für Wirtschaftsgeographie. He has been an associate editor of Small Business Economics since 2009. Michael Stuetzer is currently a post-­doctoral researcher at the Ilmenau University of Technology, Germany. He was a PhD student at the Graduate College ‘The Economics of Innovative Change’ in Jena, Germany (2007– 2011). Afterwards he joined the Australian Centre for Entrepreneurship Research in Brisbane, Australia (2011–2012), as a project manager for the Australian team of the Global Entrepreneurship Monitor and the Comprehensive Australian Study of Entrepreneurial Emergence. His main research interests are in the origins and effects of human capital, the founding process of new firms, entrepreneurial teams and the spatial dimension of entrepreneurial activity. Stuetzer is the author of nine peer-­reviewed journal articles and several book chapters. Irina van Aalst is assistant professor of Urban Geography, Department of Human Geography and Planning at Utrecht University in the Netherlands. She holds a PhD from Utrecht University, having previously worked as senior researcher at the Institute for Housing and Mobility Studies at Delft University of Technology. Her research can be positioned at the intersection of urban, cultural and economic geography. She has published on urban dynamics and culture, public spaces, creative industries, surveillance and nightlife, and she has supervised PhD students with projects on art in

xxii   Handbook of research on entrepreneurship and creativity public space, the Dutch publishing sector and dynamics in urban nightlife districts. In 2009 she received a four-­year grant (Nederlandse Organisatie voor Wetenschappelijk Onderzoek; NWO) for a research project on ‘Surveillance in Urban Nightscapes’. The research concentrates on public spaces in nighttime entertainment districts and examines the socio-­spatial effects of surveillance in these urban districts (www.stadsnachtwacht. nl). She teaches Bachelor and Master courses within Human and Urban Geography and supervises students at Master’s level. Hans Westlund is professor in regional planning and Head of department of urban planning and environment at the KTH Royal Institute of Technology, Stockholm and professor in entrepreneurship of Jönköping International Business School, Jönköping, Sweden. He is also affiliated to the Institute for Developmental and Strategic Analysis in Ljubljana, Slovenia. Westlund was president of the Western Regional Science Association 2013/14 and has been a board member of the Association since 2005. He is, together with Professor Yi Liu, Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China, founder of the Sino-­Swedish Centre for Urban–Rural Transformation Development. Together with Professor Kiyoshi Kobayashi of Kyoto University, Japan, he is founder of the Swedish–Japanese Workshop on Social Capital and Rural Development. Westlund was chairman of the Local Organizing Committee for the European Regional Science Association’s (ERSA’s) 50th Anniversary Congress 2010 in Jönköping, Sweden and has been a member of ERSA’s European Organization Committee since 2006. Westlund holds a PhD in Economic History from the University of Umeå, Sweden. He has been visiting professor of the Centre for International Research of the Japanese Economy of Tokyo University, and of Kyoto University, Japan. He has published some 30 articles in international peer-­reviewed journals and more than 40 book chapters in international book anthologies. He is Member of four editorial boards. He has published a number of books in international publishing houses, for example Social Capital and Rural Development in the Knowledge Society (Edward Elgar, 2013, with K. Kobayashi), Innovation in Socio-­cultural Context (2013, with F. Adam), Social Capital in the Knowledge Economy (2006) and Regional Development in Russia (Edward Elgar, 2000, with A. Granberg and F. Snickars).

1.  Introduction: on the relationship between entrepreneurship and creativity Gerhard Krauss and Rolf Sternberg

1.1 CREATIVITY AND ENTREPRENEURSHIP – TWO EMERGENT TOPICS IN SEVERAL RESEARCH FIELDS AND PUBLIC POLICY ARENAS Creativity and entrepreneurship seem to be central concepts for understanding the driving forces in 21st-­century capitalist economies and societies. In the knowledge-­intensive domains of the economy, these phenomena are closely intertwined and interdependent, making it sometimes difficult to distinguish clearly between the two. The economic views on the relationship between both phenomena offer one perspective (see the edited volume of Book and Phillips 2013 for another). There are several examples of proof of the increased relevance of creativity in economic development and related government policies. Perhaps the most popular is connected with Florida’s concept of the creative class (Florida 2005a, b), followed by related concepts such as the creative city, creative regions or creative economy, with enormous popularity not so much among researchers (there are in fact some very critical views of Florida’s idea: see Peck 2005 and Krätke 2010), but more particularly among practitioners in the field of local economic development policies, city planning and the like. There is also much empirical evidence of an increasing relevance of entrepreneurship. If, in line with the argumentation of Sternberg and Wennekers (2005), entrepreneurship is understood as a combination of some elements of behavioral entrepreneurship with some aspects of the dynamic perspective of occupational entrepreneurship, then new venture creation is the hallmark of entrepreneurship. In that sense entrepreneurship has become an important field of research that now goes far beyond the traditional focus on the individual entrepreneur and includes contextual impacts of and reasons for entrepreneurial activities and entrepreneurial attitudes. But entrepreneurship has also made enormous gains in the field of public policy. Examples include the attempts of national, regional and local policymakers to support start-­ups with publicly funded infrastructure like business incubators in almost every country worldwide 1

2   Handbook of research on entrepreneurship and creativity (which were unheard of before 1980s). Entrepreneurial spirit also seemed to become the solution of many to previous problems in other fields: The “entrepreneurial university” (Etzkowitz 2004, one of the contributors to our edited volume) is another example of the increasing relevance of the idea of entrepreneurship coming from entrepreneurship research. Various schools of thinking and theorizing creativity and entrepreneurship, and contrasting contributions from various scientific and disciplinary fields coexist. Some of them will be brought together in this handbook of research on entrepreneurship and creativity. Entrepreneurship has progressively become a dense and pluridisciplinary research field, gaining particular dynamism since the controversies in the 1980s about the trait approach. At that time, the latter dominated theoretical debate in entrepreneurship research (Gartner 1988, 1989; Carland et al. 1988). In practice, it showed important diversity in its use by different scholars and theoretical schools (Chell 2008). Subsequently, the psychological perspective was completed by other alternative and competing approaches, contributing to an increasing internal differentiation and institutionalization of the growing field. A recent bibliometric study shows that entrepreneurship research developed steadily during the 1990s, starting from quite a low level compared with the state of this academic discipline today, and expanding especially during the first decade of the 21st century (Meyer et al. 2013). Entrepreneurship research developed very well in Anglo-­Saxon countries, where between 2003 and 2009 more than 70 percent of the publications inventoried by Meyer et al. (2013) were concentrated, while large non-­Anglo-­Saxon countries, such as France, Italy, Spain and China, were on an equal level with smaller countries such as Belgium, the Netherlands and Finland (ibid., p. 4). Meyer et al. (2013) identified five major “clusters” of entrepreneurship research: “cognitive aspects of entrepreneurship”, “demographic and personality determinants of entrepreneurship”, “theoretical perspectives on entrepreneurship”, “entrepreneurial and innovation finance” and “eclectic approaches on entrepreneurship” (ibid., pp. 6–9). The last of these categories, which accounts for the highest number of documents (30 percent of the sample), is itself quite heterogeneous, but this is true also of other clusters, such as “theoretical perspectives on entrepreneurship” (18 percent of the sample). In these two clusters, we can find, among others, those scholars developing a regional perspective on entrepreneurship. Basically, the term “entrepreneurship” still reflects the influences of pioneering economists, starting with Joseph Schumpeter, who focused on the innovative capacities of the entrepreneur to reverse market equilibrium through creative destruction. The entrepreneur’s creative destruction meant a new arrangement of existing elements (such as technology) on the

Introduction  ­3 market in order to realize innovations. Other scholars later contributed to the further development of the concept. For example, Kirzner stressed the role of incremental innovations and of alertness to the discovery of new opportunities by the entrepreneur— opportunities which competitors do not see or perceive early enough in order to become first-­movers (Kirzner 1997). Then later developments in the 20th and 21st centuries led to a strong differentiation of the academic field of entrepreneurship which we have outlined only briefly in broad terms above. It can be noted that early on, in the work of Schumpeter, the idea of “creativity” is associated with the entrepreneur in the concept of “creative destruction.” However, with the growth and internal differentiation of the field, research on creativity tended to generate its own, separate theoretical corpus of work for which the contribution of psychological research was essential. Creativity research developed as a domain not limited to the sole economic creativity (entrepreneurship). Furthermore, the large number of issues associated with entrepreneurship that could be studied favored progressively a rather broad research orientation, integrating new disciplines, finally leading to a relativizing of the centrality of research on creativity for entrepreneurship scholars. The origins of entrepreneurship as an academic subject can be found in the United States, where the Babson College founded its entrepreneurship research conference (BCERC) in 1981. Acs and Audretsch (2010) recalled that, before then, the literature on entrepreneurship was mostly fragmented (ibid., p. 1), the best research being published in disciplinary journals (devoted to the fields of economics, sociology, management, financial economics and other disciplines, such as economic geography, strategy, psychology, etc.). Since the late 1980s and during the 1990s, the various works then became increasingly better assembled thanks to the expansion of non-­disciplinary literature and thanks to the emergence of journals specific to entrepreneurship (ibid., p. 2). However, “entrepreneurship scholars had not completely developed the theoretical latticework to support substantial cross-­disciplinary contribution until the final years of the 20th century” (ibid.). During the following decade a trend towards refocusing entrepreneurship research emerged (ibid.). In line with this evolution, Acs and Audretsch gave a definition and identified the core topics of entrepreneurship that are useful to recall for our purpose of clarifying the relationship between entrepreneurship and creativity. According to them, “entrepreneurship embraces all business that are [sic] new and dynamic, regardless of size or line of business, while excluding businesses that are neither new nor dynamic, as well as, all non-­business organizations” (ibid.). Furthermore, the core topics they indicate “are the entrepreneurial process, the nature of entrepreneurial opportunity and the process

4   Handbook of research on entrepreneurship and creativity of its exploitation, the emergence of new ventures, as well as the interaction between entrepreneurship and organizations” (ibid.). Accordingly, the major areas of entrepreneurship that they considered were “opportunity” (ibid., p. 6; are entrepreneurial opportunities an objective fact or are they socially constructed?), “the emergence of new ventures” (ibid., p. 8; how do firms emerge, form as new organizations, and what importance does high-­ impact entrepreneurship have, contributing to significant innovation, new employment, economic change and productivity?), “the market context” (ibid., p. 9; with a focus on information and market processes, risk and uncertainty, innovation and technological change), “the social context” (ibid., p. 12; with a focus on a social psychological and/or sociological perspective, such as entrepreneurial cognition, organizational populations and communities, personal and situational factors), “the global context” (ibid., p. 14; debates linked to the global knowledge economy), and finally “the entrepreneurial society” (ibid., p. 15; implications of entrepreneurial action for economic growth, role of public policy). The increasing weight of entrepreneurship research is reflected also by its diffusion among disciplines that traditionally were unrelated to the topic. This is the case, for example, with economic and organizational sociology, studying the role of social networks and communities for firm foundation (Granovetter 1995; Aldrich 2005; Aldrich and Ruef 2006; Grossetti and Barthe 2008; Krauss 2009), a development that started in the 1990s and showed particular dynamism during the first decade of the 21st century. In contrast, the concept of creativity covers a larger scope than the type of creativity required for sole entrepreneurship (creativity in economic terms). Creativity may be defined as “the ability to make or otherwise bring into existence something new, whether a new solution to a problem, a new method or device, or a new artistic object of form” (Encyclopædia Britannica Online1). Human creativity does not occur in a vacuum, but is subject to framing conditions, for example the state of development of society, technology, culture and, more specifically, of the professional and/or peer community concerned. Creativity has to develop with existing structures. These enable action and at the same time are continuously transformed by creative activity aimed at change. This is the way artists work; for example, their creativity being linked to their social positions within the artistic field (Bourdieu 1993). Creativity in this case means being able to break with the status quo while benefiting from the existing structures. This particular social role has important psychological and cognitive consequences for the individuals concerned. Accordingly, psychologists have much insisted on cognitive processes and capacities (Ward 2004), in particular “divergent thinking” and its central role for creativity (Sternberg 2006, p. 87). Robert Sternberg himself and his colleagues devel-

Introduction  ­5 oped a confluence approach according to which creativity is not based on an individual factor but on the convergence of several resources (intellectual skills, knowledge, thinking styles, personality, motivation and environment; ibid., pp. 88–90). Creativity implies decision-­making; that is the decision and ability to take over “ideas that are unknown or out of favor, but that have growth potential” (ibid., p. 87f). However, creative individuals typically meet with resistance, since they risk disturbing established orders and interests in society. This resistance is a typical feature of creativity. Its absence may indicate a low level, or even the non-­existence, of creativity: “people typically want others to love their ideas, but immediate universal applause for an idea often indicates that it is not particularly creative” (ibid., p. 90). The role of creativity for economic development finally has been increasingly recognized since the end of the 20th century. The interrelationships between culture, technological and social innovation, and economic growth became a central topic in the debates on policy-­making, also stimulating academic research (Flew and Cunningham 2010). In this context, particular attention had been paid to sectors traditionally perceived as “creative”, globally all being more or less linked to “culture.” The use of the term “creative industries” by the British Department of Culture, Media and Sport (DCMS) since the end of the 1990s (DCMS 1998, 2001) was essentially inspired by a reinterpretation of the role cultural activities could play in the future development of the knowledge economy in the 21st century. It was based on the assumption that cultural creativity would play a central role in postindustrial economies (KEA 2009) and that cultural activities might have positive external effects on other economic sectors. The externalities generated by the activities of a museum on the local economy (Johnson 2003, pp. 316, 319) are an example that may illustrate this phenomenon. This raises the general question of if, and how, cultural activity and creativity may affect economic creativity (see also Falck et al. 2011). Research on the foundation of new museums, such as the Guggenheim Museum in Bilbao (Plaza and Haarich 2013) or the Centre Pompidou in Metz (Krauss 2013), provides some evidence that cultural facilities do indeed have the potential to stimulate the formation of new innovation networks and to influence (and modify) economic behavior positively in the local and regional context. In terms of macroeconomic effects, it is acknowledged that the “creative” sectors of the economy and the stronger links between artistic/cultural, scientific, technological and economic creativity will play a central role in future economic growth (UNCTAD 2010). Numerous products and services today are at the interface of these different kinds of creativity, often linking modern technology (such as ICT), high-­level artistic and cultural

6   Handbook of research on entrepreneurship and creativity content (cultural taste, design, story-­telling, filmmaking, communication, etc.) and economic creativity. So far, during the past decade, the creative economy has grown significantly faster than the rest of the economy, which is also reflected in the important growth of international trade in the products and services of creative industries (international trade in “creative” goods and services grew on average 14 percent annually between 2000 and 2008; ibid., p. 23). This gives a first idea about the great potential such combinations of creativity can have for economic development. From a regional economist’s perspective, the concept of the “creative class” (Florida 2002, 2005a, b) follows a similar idea, using a broad definition of creativity and of the category of creative people. Creative individuals are not equally distributed throughout a country, but tend to concentrate in urban agglomerations and in culturally valued places, which underpins the spatial dimension of creativity. However, they are also assumed to be spatially mobile, being able to move to the places they find the most attractive. According to Florida, their presence in a place is the starting point and can therefore be seen as a major variable explaining the dynamism of urban spaces and metropolitan areas, not only in mere economic terms, but also with regard to cultural and social standards. The creative class comprises different creative professions embracing people employed in knowledge-­intensive industries and services (high-­tech, cultural and creative industries, consultancy, legal and financial services, business management, etc.). Its super-­creative core is composed of scientists, engineers, computer engineers, university professors, artists, designers, architects and writers. The particularity of Florida’s approach consists of a rather broad understanding of creativity and the creative class, while insisting on the role of creative professionals for regional development. According to Florida, creative people are mobile and move to regions and places where entry barriers are low and tolerance is high, implying that creative people precede jobs and companies; that is, knowledge-­based companies follow creative people and not the other way round. Florida’s arguments, which were first published more than ten years ago, were quite well received in public debate and among policymakers, but provoked a strong debate in research about the novelty and empirical foundation of the proposed interpretation, as well as its consequences for urban planning (Glaeser 2005; Peck 2005). This showed early on a fundamental need for further research regarding the basic concepts and the supposed causal relationships of this approach. It is quite obvious from these brief introductory remarks that both fields, entrepreneurship and creativity, have a strong (and increasing) relevance for government policies. Entrepreneurship support policies, particularly in the form of public subsidies or assistance for start-­ups and/or their

Introduction  ­7 founders, have become very popular in almost every country and on almost every continent in the last two decades. The largest research consortium dealing with entrepreneurial activities and attitudes worldwide, the Global Entrepreneurship Monitor (GEM), has an explicitly policy-­oriented goal; that is, to guide policymakers in formulating effective and targeted policies and programs to stimulate and support the efforts of entrepreneurs (see also gemconsortium.org). While academic, empirically based assessments of the impact of such entrepreneurship support policies are still relatively rare (see Colombo et al. 2013 for a recent and methodologically ambitious attempt), there are no signs that these activities will be reduced in the near future. Governments’ entrepreneurship support policies are still popular, now at all spatial levels: the European Union supports new firms and entrepreneurs (see Sternberg 2012a for an empirical assessment as well as Storey and Tether 1998) at the supranational level, several countries do so (see Verheul et al. 2002 for an overview), as do many (subnational) regional governments (see, for example, the efforts of each of the 16 German federal states), and finally at the local level each larger and medium-­sized city tries to support start-­ups with various instruments, with business incubators or innovation centers the most popular instruments. As for creativity and creative industries/economies/class and the like, the relationship to government policies is even stronger. Florida’s concept explicitly addresses policymakers that should—according to Florida— support the local music scene rather than investing in new pedestrian zones or real estate in the suburbs. As early as the 1990s in many Western countries the creative industry and the creative economy began presenting themselves as the avant-gardes of the post-­Fordistic economies and they were and still are heavily subsidized by public government (see Howkins 2001 and the Creative Industries Mapping Document published by the UK DCMS 2001). Very often this process is related to an increase in the relevance of cultural economies (and in some cases even considered as synonymous with creative economies); that is, an “aestheticization” of the economy takes place, as Reckwitz (2013) describes that process that led to the creative economy as the currently dominating mantra of local/regional economic development policy (Sternberg 2012b). In recent years government programs have increasingly tried to connect both target groups of economic development policies, creative industries/ creative people on the one hand and new firms/entrepreneurs on the other, within the same programs. Based on one of Florida’s assumptions, that members of the creative class are more prone to start a firm than the rest of the population, facilities like business incubators specifically dedicated to founders in creative industries (e.g., media, fashion, design) are developed and often located in an area of a city that has the attributes

8   Handbook of research on entrepreneurship and creativity s­ upposedly appreciated by founders and by creative people. The responsible policymakers may have increasingly recognized the strong relationship between both phenomena, entrepreneurship and creativity. This does not mean, however, that the target groups are always happy about the government policy attempts to support them: see, for example, on the one hand the reluctance of several (real or potential) founders of start-­ups to accept assistance from public support programs (see Brixy et al. 2013) and, on the other, the resistance of some bohemians as part of the creative class to government policies to support them (and ‘their’ part of the city), for example the Gängeviertel area of Hamburg (cf. www.buback.de/nion), particularly when there is a threat of gentrification and endogenous creative people are to be addressed.

1.2  ORGANIZATION OF PARTS AND CHAPTERS This handbook of research on entrepreneurship and creativity will respond to the need to set in order the various research on entrepreneurship and creativity, focusing on the interrelationships between both topics and domains, with a particular sensibility for spatial and government policy issues. It brings together contributions to three major domains, representing the state of current research and outlining future perspectives. More specifically, these are (1) the role of creativity for entrepreneurial activities; (2) the impact of the local and regional environment on entrepreneurship and creativity; and (3) the role that government policies may play in favor of entrepreneurship (economic creativity) and creative economic development. A particular characteristic of this handbook is the emphasis on the spatial implications of creativity and the consequences for government policies aimed at economic development linked to the idea of creativity. These are domains where further research is needed, especially empirical investigations, but also theoretical modeling. The book is organized according to a multidisciplinary idea of the relationship between entrepreneurship and creativity. This means that, among others, psychologists, economists, economic geographers and sociologists belong to the 23 contributors of the 13 chapters of our volume, recognizing the need to treat these topics from an interdisciplinary perspective. Starting with the editors and authors of this introduction, two disciplines come together: economic/organizational sociology and economic geography. The main structure of the Handbook of Research on Entrepreneurship and Creativity consists of three parts. We start with Part I that focuses on the role of creativity for entrepreneurial activities and includes five chapters written by specialists from engineering science, developmental

Introduction  ­9 and educational psychology, regional planning and economic geography, economics, management philosophy and organizational theory, as well as from management science. It answers fundamental questions, which makes it possible to investigate in greater depth the central concept of creativity, as well as its role in entrepreneurial activity. Those questions are: “How can we understand the psychological paradoxes of creativity?”, “What role does social capital play in creativity and economic development?”, “How can we conceptualize entrepreneurial creativity in the form of organization creation (‘entrepreneuring’)?”, “What are the particularities of knowledge creation in entrepreneurial teams?” and “Are creative people more entrepreneurial than non-­creative people and what are the determinants of their self-­employment?” From a psychological perspective David and Arthur Cropley develop a model of the interaction between innovation and entrepreneurship that considers six fundamental psychological paradoxes of creativity. Their model is based upon a taxonomy of five dimensions of novelty production (including process, motivation, personal properties, feelings and press) and five phases of production (preparation, activation, generation, illumination and verification). The authors argue that management behavior needs to be adapted to the needs of the particular phase currently in operation, as (partially contradictory) aspects of the psychological constellation (entrepreneurship), which facilitates innovation, really can coexist because they are important in different phases of the innovation process. The chapter by Hans Westlund, Martin Andersson and Charlie Karlsson stresses the importance of creativity as an integral element of social capital. They point out that creativity brings change to existing norms, values and networks of a society’s existing social capital, but that it also influences economically relevant aspects like culture, knowledge, communication, leisure, production and consumption. Having analyzed the close relations between creativity, entrepreneurship and innovation, the authors conclude that entrepreneurship and creativity are quite high up on the policy agenda worldwide, but creativity and social capital are not. While problems with materializing the related theoretical concepts in policy action are probably one of the main reasons, this chapter’s central conclusion is more than plausible: “there is a great potential in integrating research on social capital and creativity with the research on innovation and entrepreneurship. This potential is not only scientific but indeed also policy relevant!” In chapter 4 Daniel Hjorth develops a processual conceptualization of a form of entrepreneurship that he calls “entrepreneuring” or organization creation. Surprisingly enough, the issue of organization creation still suffers from a lack of attention in entrepreneurship research. According to Hjorth this has to do with a lack of dialog between the fields of

10   Handbook of research on entrepreneurship and creativity e­ ntrepreneurship research and organizational studies, for example when it comes to a definition of organizations with the help of organization theory terms. Based upon Say’s (1880) perspective of an entrepreneur as a coordinating, planning and communicating organizer, Hjorth builds upon the central concepts of assemblage, desire and the virtual, and is then able to describe entrepreneuring as a particular form of creation. Entrepreneuring is understood as the narratively performed fiction that intensifies the desire for and investment in a particular virtuality to become actualized and thereby assembles and extends the productive capacity of an assemblage. Finally, Hjorth impressively explains how important literature is for the development of the process conceptualization of entrepreneuring as organization creation. Chapter 5, written by Haïfa Naffakhi-Charfeddine, sheds light on the process of knowledge creation within entrepreneurial teams. In her exploratory chapter the author first describes the knowledge management process during the early phases of venture creation. Based on this literature review she discusses the increasing relevance of the knowledge creation process within entrepreneurial teams given the empirically well-­proven fact that start-­ups with a team of founders become, first, more and more frequent, and, secondly, that these team start-­ups are on average more successful than solo entrepreneurs. Leadership and conflict-­solving skills are key factors during the knowledge-­creating process within entrepreneurial teams. The author proposes a four-­step process of knowledge creation within entrepreneurial teams, including an early phase of learning about the other team members’ business ideas followed by a phase of creating a “tacit language and shared understanding”, then the exchange of and negotiations about diverging opinions based upon different perspectives and experiences, and finally the integration phase. The author stresses that team creativity is the result of divergent thinking in groups as reflected in ideational fluency, and that the more intensive the exchange between team members, the larger the increase in creativity. During the entrepreneurial process, each team member contributes to a collective and tacit knowledge that may be interpreted as an important asset of the young venture. That asset, as a kind of organizational memory, is mainly the result of learning by doing and of decision-­making. This memory also consists of explicit collective knowledge codified in the explicit and implicit culture of the organization. In the final chapter of Part I Michael Fritsch and Alina Sorgner refer to Florida’s concept of the “creative class” in their attempt to analyze the extent and the determinants of self-­employment in creative professions at the individual level. Based upon micro-­level data from the German Socio-­Economic Panel (7,918 individuals with 850 self-­employed persons)

Introduction  ­11 they show that creativity and entrepreneurship coincide not only within regions, due to the fact that regional culture may stimulate the creativity of an individual living in that very region, but also within individuals. After reviewing three main theoretical concepts theorizing entrepreneurial creativity (the cognitive, personality and developmental approaches), the authors provide empirical evidence for the hypothesis that creativity and entrepreneurship are not completely different phenomena but that they are likely to coexist within the same people. Consequently attributes of places and regions may have an influence in the regional level of entrepreneurship. The presence of (many) members of the “creative class” is one of these attributes. The resulting creativity spillover can partially be explained by the function of creative people as role models. Another finding of this study is that the “creative class” is anything but a homogeneous group when their entrepreneurial attitudes and activities are analyzed: the creative core, creative professionals and non-­creative professionals differ significantly with regard to regional and individual characteristics related to a person’s proclivity to be self-­employed. Part II of the handbook then focuses on the influences of the local and regional environment on entrepreneurship and creativity, assembling contributions primarily from urban and economic geographers, and economists, some of whom also include references to sociological work and reflections. The questions explored concern the emergence of new forms of entrepreneurship in creative industries, characterized by the perplexing constellation of individual and collective dynamics, and their connection (individual professionalization vs. social embededdness in creative “scenes”), the link between the creative regional environment and the emergence of opportunities (in particular, individual opportunity perception) and, finally, the impact of the urban environment in the form of its networks and relational and emotive qualities on cultural entrepreneurship (e.g. book publishers). The first of these chapters is ideally connected with the last chapter of the previous part. Bastian Lange analyzes entrepreneurship in creative industries in two specific (and not typical) German cities which were significantly transformed post-­reunification: Berlin and Leipzig. His key question is how entrepreneurs in such industries develop strategies to cope with the paradox between individual professionalization and dependence on social contexts and professional scenes. Using a sociological perspective Lange develops the argument that the conceptualization of the term “scene,” a very important term for the chapter, is very helpful in order to explain the logic of the actions of cultural entrepreneurs caught in paradoxical circumstances. Using two existing databases on Berlin’s and Leipzig’s creative industries, the author shows that the understanding of

12   Handbook of research on entrepreneurship and creativity the concept “scene” is applicable to the context of entrepreneurial action. “Scene” should be viewed as a social spatial, structural category. These scenes are formed around organizational and professional elites and they are not homogeneous networks. As in both Berlin and Leipzig (as in many other cities in Germany) the creative industries have become an important target group of local economic development policies (see Sternberg 2012), at least one of the findings of this chapter is policy-­relevant: informal networks (between cultural entrepreneurs) based upon collocation practices can be analyzed for their space-­structuring effects. Michael Stuetzer, in the second contribution of Part II, investigates whether the presence of the creative class as defined by Richard Florida is associated with three constructs at the regional level: objective opportunity/condition, opportunity perception and subjective business ideas. In his quantitative analysis he applies multi-­level techniques and logit regressions and stresses a hitherto underresearched topic: the geography of individual opportunity perception. The author combines data at the regional and individual levels (from GEM Germany). These rich data sources allow him to show for the planning regions in Western Germany that the regional creative environment, as indicated by the regional share of employment in the creative class, correlates positively with the individual perception of entrepreneurial opportunity. Regional bridging social capital—­approximated by the regional start-­up rate (as the best network contacts for aspiring entrepreneurs are other entrepreneurs)—has a positive direct effect on individual entrepreneurial opportunity perception. However, Stuetzer also finds a positive moderating effect of social capital on the relationship between the creative environment and the individuals’ entrepreneurial opportunity perception. In the last chapter of Part II Barbara Heebels, Irina van Aalst and Oedzge Atzema analyze in a case study how actors in a particular creative industry in a specific country use personal networks and urban places to deal with the tensions between culture and commerce in a globalized world. Based on 21 qualitative interviews with owners and/or directors of Dutch trade book publishing houses, the authors intend to contribute to the debate on the role of urban place for cultural production—and they do so explicitly from a relational perspective. Since the 17th century, Amsterdam has been the primary urban center for book publishers in the Netherlands. As book publishing is still a people business, personal networks between publishers and authors and geographical proximity are important for both actors. As the authors show, however, the publisher’s role has recently changed to that of a dynamic cultural mediator whose main aim is to strategically develop and maintain strong and weak ties to authors, journalists and booksellers. The role of place—conceptualized with the four dimensions

Introduction  ­13 of place as location, as locale, as a social construct and sense of place—has changed as well: it should be considered a process interdependent with social networks. As professionalization in publishing has led to an increase in business-­oriented ties and trust-­oriented personal contacts, the specific localities of publishers are constructed in a strategic way. Consequently the relational and emotive aspects of place have become more important while sheer geographical proximity has lost some of its relevance as a quality of the urban environment. The final part of the book is dedicated to government policies (including education policies in favor of universities) to support entrepreneurship and creative industries. In this part, scholars from sociology (economic sociology, urban sociology, sociology of science and innovation), urban planning (planning theory, urban and cultural policy, heritage preservation, strategic use of iconic architecture), art and design, business education, and entrepreneurship and enterprise education, meet together, reviewing policy approaches in favor of entrepreneurial activity, creativity and creativity-­based economic growth. The questions they examine deal with the practical implications of the theoretical approaches for government policies. In the first chapter Michel Grossetti provides a review of government policies to promote innovation-­based economic development. Starting with government support of the chemical industry in the late 18th century in Languedoc/France and ending with the current era of attracting creative industries inspired by Florida’s idea, the author develops an essay with a very personal perspective based on the individual’s own and others’ empirical research in France and other European countries. Starting with an overview of social networks and clusters in the French innovation system Grossetti is rather skeptical concerning government policies to attract mobile members of the creative class. His main argument is that soft location factors such as amenities and others in reality do not belong to the important determinants of the spatial mobility of highly skilled, creative people in Europe. The second chapter of Part III is explicitly dedicated to creative city policies. Marianna d’Ovidio and Davide Ponzini provide an extensive review and discussion of government policies and private initiatives under the banner of supporting the “creative city.” The authors choose Milan and the fashion industry as a case study, as Milan is located in the richest region of the country, has in modern times always been the main economic engine of Italy, and serves both as a symbol of the technological and economic progress of the nation and as a centre of cultural and intellectual life. Their analysis results in a rather pessimistic assessment of creative city policies. According to the authors such policies are often an attractive

14   Handbook of research on entrepreneurship and creativity rhetoric for conventional economic and cultural policies or, even worse, a means for vesting real estate and business interests. There is no doubt that cultural and creative industries have increased their role in the economy of post-­Fordist cities and that they have attracted considerable attention from scholars and urban policymakers since the early 2000s in particular. Since that era, the new urban economy may be defined as a cognitive cultural economy. Cities, more than any other type of place, make the relationship between production (of design or innovation, for example) and the local context more explicit. In the current (however, already slightly declining) era of “entrepreneurial urbanism,” with its dynamic combination of material (physical environment such as buildings) and non-­material factors (cultural atmosphere, creativity and others), related creative city policies had a great communicative impact, and were considered by many policymakers a panacea for almost every segment of urban life, including the renewal of stigmatized cities or neighborhoods. The authors criticize the growth-­ centered vision that instrumentalized creative production and cultural consumption. Consequently they suggest (re)evaluating the related urban policies with strong reference to the specific local conditions and analyzing who benefits from these policies—and who does not. The final two chapters of the book deal with education’s role in the relationship between entrepreneurship and creativity. First, the entrepreneurial university is analyzed to ascertain whose evolution has important practical implications for government policies incentivizing entrepreneurship and economic creativity. As Henry Etzkowitz makes clear in his contribution, modern-­day academics are both targets and actors of the diffusion of entrepreneurship in society, becoming increasingly involved, for example, in technology transfer, firm foundation and regional economic development. The main message of his well-­known triple-­helix model is not that universities become firms or governments become businesses. Rather, as each assumes some of the capabilities of the other, each institution maintains its primary role and distinct identity. Each institutional sphere is thus more likely to become a creative source of innovation and to support the emergence of creativity that arises in other spirals. The triple-­helix model comprises three basic elements when it comes to government, university and industry: a more prominent role for the university in innovation; a movement towards collaborative relationships among the three major institutional spheres in which innovation policy is increasingly an outcome of interaction rather than a prescription from government; and, in addition to fulfilling their traditional functions, each institutional sphere also “takes the role of the other.” For Etzkowitz the emergence of university–industry–government relations—a tri-­institutional model of society—is the great transformation of the late 20th and early 21st centu-

Introduction  ­15 ries, and, according to him, it has a great potential for emerging economies as well. Last but not least, the perspective is enlarged by approaching the ­creativity–entrepreneurship couple in a larger field beyond academia: Andy Penaluna, Kathryn Penaluna and Ivan Diego provide a profound analysis of education in enterprising creativity. This chapter aims to locate creativity within entrepreneurship education. The focus is on the need for creative thoughts in any educational context that claims to teach how to create or to develop enterprises. Based on an intensive literature review from several fields, the authors compare the related empirical evidence with that of pedagogic approaches from creative industries. This chapter develops answers to questions such as whether or not entrepreneurial creativity can be taught and how appropriate assessments (in teaching) are for creativity. Insights from research in cognitive neurology (and neuroscience in particular) play an important role in this chapter. Specifying brain processes that enable, enhance and develop creativity needs to be better understood in order to let teachers and students profit from more creativity in enterprise education.

NOTE 1. Source: http://global.britannica.com/EBchecked/topic/142249/creativity (accessed 26 June 2013).

REFERENCES Acs, Z.J. and D.B. Audretsch (2010), “Introduction to the 2nd Edition of the Handbook of Entrepreneurship Research”, in Z.J. Acs and D.B. Audretsch (eds.), Handbook of Entrepreneurship Research: An Interdisciplinary Survey and Introduction, New York, Dordrecht, Heidelberg and London: Springer, pp. 1–19. Aldrich, H.E. (2005), “Entrepreneurship”, in N. Smelser and R. Swedberg (eds.), Handbook of Economic Sociology, Princeton, NJ: Princeton University Press, pp. 451–478. Aldrich, H.E. and M. Ruef (2006), Organizations Evolving, 2nd Edition, London: Sage Publications. Book, L. and D.P. Phillips (eds.) (2013), Creativity and Entrepreneurship: Changing Currents in Education and Public Life, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Bourdieu, P. (1993), The Field of Cultural Production, Columbia: Columbia University Press. Brixy, U., R. Sternberg and H. Stüber (2013), “Why Some Nascent Entrepreneurs Do Not Seek Professional Assistance”, Applied Economics Letters, 20 (2), 157–161. Carland, J.W., F. Hoy and J.A. Carland (1988), “‘Who is an Entrepreneur?’ Is a Question Worth Asking”, American Journal of Small Business, 12 (4), Spring, 33–39. Chell, E. (2008), The Entrepreneurial Personality: A Social Construction, 2nd Edition, Hove (East Sussex) and New York: Routledge.

16   Handbook of research on entrepreneurship and creativity Colombo, M.G., S. Giannangeli and L. Grilliy (2013), “Public Subsidies and the Employment Growth of High-­tech Start-­ups: Assessing the Impact of Selective and Automatic Support Schemes”, Industrial and Corporate Change, 22 (5), 1273–1314. DCMS (1998), Creative Industries Mapping Document 1998, London: UK Department of Culture, Media and Sport. DCMS (2001), Creative Industries Mapping Document 2001, London: UK Department of Culture, Media and Sport. Etzkowitz, H.A. (2004), “The Evolution of the Entrepreneurial University”, International Journal of Technology and Globalisation, 1, 64–77. Falck, O., M. Fritsch and S. Heblich (2011), “The Phantom of the Opera: Cultural Amenities, Human Capital and Regional Economic Growth”, Labour Economics, 18, 755–766. Flew, T. and S. Cunningham (2010), “Creative Industries After the First Decade of Debate”, The Information Society, 26, 1–11. Florida, R. (2002), The Rise of the Creative Class: And How It’s Transforming Work, Leisure and Everyday Life, New York: Basic Books. Florida, R. (2005a), Cities and Creative Class, New York and London: Routledge. Florida, R. (2005b), The Flight of the Creative Class: The New Global Competition for Talent, New York: Harper Business. Gartner, W.B. (1988), “‘Who Is an Entrepreneur?’ Is the Wrong Question”, American Journal of Small Business, 12 (4), Spring, 10–32. Gartner, W.B. (1989), “Some Suggestions for Research on Entrepreneurial Traits and Characteristics”, Entrepreneurship Theory and Practice, 14 (1), 27–37. Glaeser, E.L. (2005), “Review of Richard Florida’s The Rise of the Creative Class”, Regional Science and Urban Economics, 35 (5), 593–596. Granovetter, M. (1995), “The Economic Sociology of Firms and Entrepreneurs”, in A.  Portes (ed.), The Economic Sociology of Immigration, New York: Russell Sage Foundation, pp. 128–165. Grossetti, M. and J.-­F. Barthe (2008), “Dynamique des réseaux interpersonnels et des organisations dans les creations d’entreprises”, revue française de sociologie, 49 (3), 585–612. Howkins, J. (2001), The Creative Economy: How People Make Money from Ideas, London: Penguin. Johnson, p.S. (2003), “Museums”, in R. towse (ed.), A Handbook of Cultural Economics, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 315–320. KEA (2009), The Impact of Culture on Creativity, Bruxelles: KEA European Affairs. Kirzner, I.M. (1997), “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach”, Journal of Economic Literature, 35, 60–85. Krätke, S. (2010), “‘Creative Cities’ and the Rise of the Dealer Class: A Critique of Richard Florida’s Approach to Urban Theory”, International Journal of Urban and Regional Research, 34 (4), 835–853. Krauss, G. (2009), “Les jeunes entreprises pionnières face à l’incertitude: la construction sociale de l’échec”, revue française de socio-­économie, 3, 169–186. Krauss, G. (2013), “The Creation of a Second Centre Pompidou in Metz: Social Embedding of a New Regional Cultural Facility and Formation of a Strategic Action Field”, European Planning Studies, DOI: 10.1080/09654313.2013.817542. Meyer, M., D. Libaers, B. Thijs, K. Grant, W. Glänzel and K. Debackere (2013), Origin and Emergence of Entrepreneurship as a Research Field, Leuven: KU Leuven, Faculty of Economics and Business, Department of Managerial Economics, Strategy and Innovation. MSI_1305 (online: https://lirias.kuleuven.be/bitstream/123456789/397032/1/MSI_1305.pdf; accessed 5 July 2013). Peck, J. (2005), “Struggling with the ‘Creative Class’”, International Journal of Urban and Regional Research, 29, 740–770. Plaza, B. and S. Haarich (2013), “The Guggenheim Museum Bilbao: Between Regional Embedded­ness and Global Networking”, European Planning Studies, DOI: 10.1080/ 09654313.2013.817543. Reckwitz, A. (2013), Die Erfindung der Kreativität, Berlin: Suhrkamp.

Introduction  ­17 Say, J.-­B. (1880), A Treatise on Political Economy, or the Production, Distribution, and Consumption of Wealth, translated from the Fourth Edition of the French, by C.R. Prinsep, Kitchener, Canada: Batoche Books. Sternberg, R.J. (2006), “The Nature of Creativity”, Creativity Research Journal, 18 (1), 87–98. Sternberg, R. (2012a), “Do EU Regional Policies Favour Regional Entrepreneurship? Empirical Evidence from Spain and Germany”, European Planning Studies, 20 (4), 583–607. Sternberg, R. (2012b), “Learning from the Past? Why ‘Creative Industries’ Can Hardly Be Created by Local/Regional Government Policies”, Die Erde, 143 (4), 293–317. Sternberg, R. and S. Wennekers (2005), “Determinants and Effects of New Business Creation Using Global Entrepreneurship Monitor Data”, Small Business Economics, 24 (3), 193–203. Storey, D.J. and B.S. Tether (1998), “Public Policy Measures to Support New Technology-­ Based Firms in the European Union”, Research Policy, 26, 1037–1057. UNCTAD (2010), Creative Economy Report 2010 – Creative Economy: A Feasible Development Option, Geneva: UNCTAD. Verheul, I., S. Wennekers, D.B. Audretsch and R. Thurik (2002), “An Eclectic Theory of Entrepreneurship: Policies, Institutions and Culture”, in D.B. Audretsch, R. Thurik, I. Verheul and S. Wennekers (eds.), Entrepreneurship – Determinants and Policy in a European–U.S. Comparison, Boston et al.: Kluwer Academic Publisher, pp. 11–82. Ward, T.B. (2004), “Cognition, Creativity, and Entrepreneurship”, Journal of Business Venturing, 19, 173–188.

PART I The role of creativity for entrepreneurial activities

2.  Managing entrepreneurship for innovation: a psychological analysis David Cropley and Arthur Cropley

2.1 MANAGING ENTREPRENEURSHIP FOR INNOVATION: A PSYCHOLOGICAL TAXONOMY The relationship between entrepreneurship and innovation seems simple enough: innovation is a process involving generating and implementing effective new ideas, and entrepreneurship is a psychological property of people which makes them capable to a greater or lesser degree of contributing to this process, what Matthews (2007, p. 9) called a ‘propensity’; it is a psychological constellation embracing both ‘cold’ properties like knowledge and skills, and also ‘hot’ properties such as motivation and feelings. However, the relationship turns out to be far more complex than it seems at first glance, and involves numerous mutually contradictory states of affairs which are, nonetheless, both true – paradoxes as they are called in the literature (e.g. Miron-­Spektor et al. 2011). For instance, some properties of entrepreneurial people that are favourable for innovation are also unfavourable for it (e.g. lack of concern about conventional ways of doing things), as absurd as this may seem. The problem dealt with in this chapter is that of how to make sense of such paradoxes and how to manage the process of innovation in an appropriate, optimal way. The chapter turns to psychological research on creativity for insights into finding an answer.

2.2  INNOVATION What is meant by ‘innovation’ in a general sense is fairly clear: Bledow et al. (2009a, p. 305), for example, defined it as ‘the development and intentional introduction of new and useful ideas by individuals, teams, and organisations’. At a more global, and institutional, level, OECD guidelines (OECD 2005, p. 46) define it as ‘the implementation of a new or significantly improved product (good or service), process, new marketing method or a new organisational method in business practices, workplace organisation or external relations’. This definition will be expanded later in the chapter, but serves as a working definition for the next few paragraphs. 21

22   Handbook of research on entrepreneurship and creativity 2.2.1  The Need for Innovation Awareness of the need for organisations to innovate is by no means new, and this issue was already receiving attention 50 years ago. In the 1980s, Van de Ven (e.g. 1986) reported that managing innovation was the central concern of CEOs. Over the years, however, the call for innovation has reached dramatic proportions, with slogans implying ‘innovate or die’ appearing in the literature. This is not without empirical foundation. Traditional economic wisdom held that wealth depended essentially on the volume of resources that an individual or country controlled. However, post-­Second World War Japan, for example, with few physical resources, demonstrated that a far more important factor in determining economic wealth, growth and productivity is how nations extract value from physical resources. In other words, the ability to generate and exploit products, processes, systems and services – that is, ­innovation – is the critical factor. The addition to the economic system of new knowledge and technology through the process of innovation is essential. It is implicit that the reverse is also true: without innovation, growth would stagnate and productivity decline. In fact, at the turn of the present century innovation was accounting for more than half of economic growth (Economist Technology Quarterly 2002, p. 13). As Hamel (1996, p. 69) put it in an amusing but dramatic and easily understandable way: ‘pursuing incremental improvement while rivals reinvent the industry is like fiddling while Rome burns’. Buzan (2007, p. vii) made the link between innovation and survival explicit when he stated that ‘right now any individual, company or country wishing to survive in the twenty-­first century must . . . innovate’. Our aim here is to make it easier to understand how to do this. 2.2.2  Economic Models of Innovation Research on innovation frequently focuses on economic factors and concepts. This section will review a number of economic or business models in order to demonstrate their limitations and the advantages of the model to be developed later in this chapter. Such approaches typically have their roots in Schumpeter’s (1942) Theory of Economic Development. Leifer et al. (2000), for example, described radical and incremental innovation in terms of their relative timelines: the trajectory they follow, where in the process the idea generation and opportunity recognition occur, the degree of formality and linearity of the process, the nature of the players in the process, the organisational structures that support the process, and the resources and competencies required. Higgins (1995) adopted a more extensive approach by examining characteristics of innovation across seven dimensions: skills, strategy, structure,

Managing entrepreneurship for innovation  ­23 systems, style, staff and shared values. Afuah (1998) linked new technological knowledge and new market knowledge to processes and people, leading to innovation. Christensen et al. (2004) reiterated the importance of resources (what a firm has), processes (how a firm does its work) and values (what a firm wants to do) in the Resources, Processes, Values (RPV) theory, and stressed that these define an organisation’s strengths and weaknesses in relation to the innovation process. Of course, organisational researchers have not been idle in recent years. Herzog (2011) reviewed a number of recent models of innovation in business and organisations, and Bledow et al. (2009a) drew attention to the role of factors such as a shared vision, innovative organisational culture, emphasis on exploration rather than exploitation, investment in R&D, team diversity, task related conflict and rewards. Rothwell (1994) and also Marinova and Phillimore (2003) examined the different classes of innovation models that have been used to explain the way that technological advances are brought into the marketplace. Table 2.1 summarises the key strengths and weaknesses of the model classes they outlined. These models of innovation have not remained merely theoretical, but have also given rise to a variety of diagnostic tools that examine the management of the innovation process within an organisation, including such factors as the physical environment in which innovation takes place, the structure of the organisation engaging in innovation and the traditions of the organisation. These tools frequently offer not only a description of the business innovation process, but also a prescriptive approach to the improvement of the process. Mathisen and Einarsen (2004) reviewed five relevant instruments: KEYS: Assessing the Climate for Creativity (Amabile et al. 1996); the Creative Climate Questionnaire (Ekvall 1996); the Situational Outlook Questionnaire (Isaksen et al. 1999); the Team Climate Inventory (Anderson and West 1998); and the Siegel Scale of Support for Innovation (Siegel and Kaemmerer 1978). These instruments offer insights into an organisation’s potential to innovate and permit ­remedial action to be taken in dimensions that are inhibiting innovation. However, both theoretical models and assessment instruments give greatest weight to the organisation itself, as against the psychological properties of individuals and psychological processes within individuals (i.e. factors tied more directly to entrepreneurship). Even where reference to psychological factors is made (for instance to motivation or thinking skills), these are looked at more from the point of view of the organisation (e.g. flexible institutional goals, open organisational climate, pattern of rewards provided by the organisation). A good example is to be seen in the outstanding contribution of Bledow et al. (2009a; see, for instance, their Table 2.1), which looks, among other

24   Handbook of research on entrepreneurship and creativity Table 2.1  Characteristics of innovation models Model class




Black box

R&D $ in 5 new  products out

No focus on the  innovation process itself


Technology-­push or  market-­pull drives innovation

R&D investment  and forward-­ looking management lead to innovation Success/failure  of innovation traced to rational, economic ‘push’ or ‘pull’ factors


‘Complex net of  communication paths, both intra-­ organisational and extra-­ organisational, linking together the various in-­house  functions and linking firm to the broader scientific and technological community and to the marketplace’ (Rothwell and Zegveld 1985, p. 50) Systems Small firms and  networks as a means to effective innovation. ‘Integration and parallel development’ (Rothwell 1994, p. 11) Evolutionary Biological analogy –  Darwinian evolution as a model for

‘Focus on the  variety of interactions necessary for the success of innovation’ (Marinova and Phillimore 2003, p. 51) Successful  innovation based on multiple factors

Unrealistic model  of innovation processes. ‘Technological incrementalism’ and neglect of R&D (Rothwell 1994) ‘still did not explain  what drives the engine of innovation and why some companies are better at doing it than others’ (Marinova and Phillimore 2003, p. 47)

Shows how small  companies can play a role in the process of innovation

The same qualities  which make networks of small companies a strength can also be their weakness

Innovation is  driven not merely by rational

The model is  based on continuous, unpredictable

Managing entrepreneurship for innovation  ­25 Table 2.1  (continued) Model class




 innovation in companies

 factors. Stresses the role of the business environment in determining successful innovation

‘Innovation stems  from a creative combination of generic knowledge and specific competencies’ and ‘territorial organisation’ is a critical component (Bramanti and Raati 1997, p. 5)


 change and adaptation Lack of predictive  power Model does not  explain ‘revolutionary’ change The interaction Looks at cognitive  of small, flexible  aspects (knowledge) organisations but does not take and geographical account of non-­ location as cognitive factors a driver of (e.g. motivation) innovation. ‘Innovation clusters’ (Marinova and Phillimore 2003, p. 47)

Source:  Marinova and Phillimore 2003

things, at the ‘tensions’ of innovation. These are examined in terms of the individual, the team and the organisational levels, and are analysed in relation to their function as antecedents to innovation or as innovation processes and outcomes. Although it is true that these authors refer to the individual and to personal properties that are frequently discussed in psychological research (e.g. divergent vs. convergent thinking or openness to experience), in their table variables of this kind share the limelight with the team and the organisation, and are discussed only in a rather general way. Business-­oriented descriptive frameworks for studying innovation and associated tools are thus of limited value for establishing a framework for analysing the interrelationship among innovation and entrepreneurship for one or more of the following reasons: ●

they do not adequately address the individual psychological factors that foster or inhibit innovation among the actors in the process; ● they do not adequately address the environmental factors that impact on these psychological factors;

26   Handbook of research on entrepreneurship and creativity ●

they do not adequately explain the role of the individual in the detailed steps involved in the innovation process; ● they do not adequately address the manner in which the importance of certain psychological factors changes during the innovation process. The examination in the following paragraphs of innovation and entrepreneurship which acknowledges the existence of paradoxes reveals the need for a more differentiated model than the business approaches just outlined. The following sections will emphasise the need for such an approach and begin to outline its contours. 2.2.3  The Paradoxes of Innovation As Bledow et al. pointed out (2009a, p. 306), a ‘pervasive theme in research on organizational innovation is that innovation is characterized by tensions . . . paradoxes . . . contradictions . . . [and] dilemmas’. These generate apparently ‘conflicting demands’ and call for what seem to be ‘conflicting activities’. Lewis et al. (2002) referred to ‘tensions’ and Benner and Tushman (2003) to ‘dilemmas’. Haner (2005) gave a good example of a paradox: research on groups and innovation has shown that innovation requires ‘simultaneous agreement and disagreement’ (p. 291) among the members of the group – consensus and yet absence of consensus. Looking at the individual, Hulsheger et al. (2009) gave another example: the need both to do things your own way and yet also rigorously implement other people’s ideas. Smith and Lewis (2011) gave several examples of the innovation paradox in the dialectical form that will be adopted later in this chapter: collaboration versus control, individual versus collective orientation, flexibility versus efficiency, cooperative versus competitive approach to work, centralised versus decentralised decision making, communication versus rhetoric, search versus refinement. Maital and Seshadri (2007, p. 27) summed up the paradox as ‘the need for free, unfettered [thinking] together with the need for focused, systematic discipline – and the overriding imperative to make these two qualities . . . co-­exist’. Thus the problem arises of how to make sense of these tensions, paradoxes, contradictions and dilemmas. Presenting a model of innovation and entrepreneurship that helps to do this is the core task of this chapter. 2.2.4  Incremental vs. Disruptive Innovation An important consideration in this context is the distinction originally made by Christensen (1997) between ‘incremental’ innovation and ‘disrup-

Managing entrepreneurship for innovation  ­27 tive’ innovation, insofar as this sheds light on the role of entrepreneurship in innovation. Leifer et al. (2000) referred to ‘radical’ innovation, while Luecke and Katz (2003) also differentiated between two forms of innovation: ‘incremental’ and ‘radical’. As Miron-­Spektor et al. (2011, p. 740) put it: ‘Innovation can vary from an incremental extension of current organisational capabilities to a radical one.’ In addition to being referred to as ‘radical’ or ‘disruptive’, the latter kind of innovation is also called ‘breakthrough’ (e.g. Mascitelli 2000) or ‘discontinuous’ (e.g. Veryzer 1998). The crucial point is that whereas incremental innovation is ‘sustaining’ (e.g. Light 1998) or ‘evolving’ (e.g. Veryzer 1998), in that it involves further developing, polishing or expanding of already existing forms or technologies, radical or disruptive innovation involves a decisive, probably sudden and non-­linear departure from what already exists. Cropley (2006) and Cropley and Cropley (2005) pointed out that highly effective sustaining innovation is possible by means of conventional thinking with minimal application of the psychological constellation referred to in this chapter as ‘entrepreneurship’, so that our chief interest in this chapter is in disruptive, radical, breakthrough innovation, although we do not deny the value of incremental or sustaining innovation. Mumford et al. (2012, p. 5) made an additional distinction in describing innovation. They described both the kind of innovation (radical versus incremental) and the subject, or focus, of innovation (product versus process). Figure 2.1 illustrates the distinctions. Importantly, these different forms of innovation, although by no means the only ones, have different consequences for the people involved and the organisation (Chandy and Tellis 2000). In other words, they impact on the relationship between innovation and entrepreneurship in different ways, and help to build a more differentiated framework for understanding this interaction. 2.2.5  A Two-­Stage Model of Innovation It is first necessary to work out a more differentiated conceptualisation of innovation. Miron-­Spektor et al. (2011, p. 741) made the distinction that is of central importance for this chapter in a straightforward way: ‘Innovation refers to the generation of new ideas and their implementation into new products, processes, and procedures that are designed to be useful’ (emphasis added). The term ‘value innovation’ (Kim and Mauborgne 2004; Dillon et al. 2005) helps us to understand the nature of this process even better: it focuses on innovation as a process through which organisations find novel and effective ways of serving their current customers and identifying new markets, thus linking innovation to what customers value.

28   Handbook of research on entrepreneurship and creativity


Compact discs replace cassette tapes for recorded music

Customer SelfService: shoppers scan and bag their own goods

New features on a Smartphone

Electronic lodgement replaces hard copy lodgement of employee leave forms




Figure 2.1  The kind and focus of innovation A crucial idea in this definition is that innovation goes beyond mere generation of new ideas and encompasses putting those new ideas into successful practice. In fact, Roberts (1988) explicitly described innovation as a two-­step process involving (a) the generation of novelty and (b) the practical implementation of the novelty. He labelled these steps (or ‘phases’ as we will later call them) Invention and Exploitation, and this distinction will be adhered to throughout the remainder of this chapter. Bledow et al. (2009a, p. 309) were somewhat more specific. They saw the complete process of innovation as involving relatively independent phases of idea generation, on the one hand, and idea implementation, on the other. The central point for the present chapter in these discussions is that innovation is a process and that this process has two broad components: the generation of effective novelty and the utilisation of this novelty. This division of the process already begins to reveal a major paradox: innovation requires generating novelty (Invention), to be sure, but it also involves fitting the novelty in with what already exists (Exploitation). As Bledow et al. (2009a, p. 309) pointed out, these are ‘two activities that should be separated’. Luecke and Katz (2003) characterised this two-­stage sequence of events in the dual process of Invention and Exploitation as shown in Figure 2.2.

Managing entrepreneurship for innovation  ­29 Idea Generation

Opportunity Recognition

Development Idea Evaluation Commercialisation Invention Exploitation

Source:  Luecke and Katz (2003)

Figure 2.2  The innovation process

2.3  ENTREPRENEURSHIP In a review of the nature of entrepreneurship Matthews (2007) pointed out that the term is frequently regarded as referring to a process. However, she showed that this process is actually defined in terms of properties of the ‘agents’ involved in it (such as their knowledge, their ability to extend knowledge, or their desire to develop something new and their willingness to take risks to do it, that is, their motivation). Thus entrepreneurship is not purely a process. Indeed, as is immediately apparent from Figure 2.2, the steps in the innovation process identified there as involving Invention (idea generation, idea evaluation, opportunity recognition) are not primarily organisational or management procedures but are psychological activities carried out by individual agents and heavily dependent upon the psychological properties of those individuals. These and similar states and processes within individual people (not within the organisation) define entrepreneurship as the term is understood here: for instance, skill in idea generation and willingness to generate ideas, possession of the knowledge necessary to spot opportunities, the knowledge, skills, motivation and self-­image needed to evaluate ideas, and similar psychological properties. Matthews (2007) suggested that this lack

30   Handbook of research on entrepreneurship and creativity of unanimity about the meaning of entrepreneurship could be resolved by distinguishing between entrepreneurship as a process of Invention and Exploitation and what she called (p. 9) ‘the propensity to entrepreneurship’ or ‘nascent entrepreneurship’ (emphasis added). In this chapter entrepreneurship is understood in the sense of a psychological propensity. Our goal is to study the link between the psychological properties defining entrepreneurship, such as those mentioned in the previous paragraph, and the requirements of the process of innovation, in order to solve the puzzle of the tensions, paradoxes, contradictions and dilemmas of innovation. As a foretaste of our analysis of psychological factors in entrepreneurship we can mention Miron-­Spektor et al.’s (2011) focus on ‘cognitive styles’ (p. 741) and ‘personality attributes’ (p. 742), especially conformity and attention to detail. This is a good start in comparison with studies of the human agents in innovation which have focused on demographic properties of people, such as educational level or kind, age or years of ­experience, as in the case of, for instance, Hulsheger et al. (2009). However, although essentially psychological in nature Miron-­Spektor et al.’s findings are mainly concerned with the effects of psychological factors on existing organisation procedures rather than a fundamental re-­conceptualisation of the process of innovation and its relationship to entrepreneurship. For instance, their analysis of cognitive styles is largely confined to the effects of such styles on the activities of groups engaged in attempts to work out innovations by applying a well-­known organisational approach (group innovation). Psychological research delivers a much more differentiated set of concepts, as we will show below. A focus on entrepreneurship conceptualised as the psychological propensity for innovation (such as knowledge and ideas, motivation, feelings, openness, and the like) pays much greater attention to the role of the human agents involved in innovation, the people who have the ideas or the knowledge, rather than to physical resources, management methods, work organisation, and the like, and is the approach adopted in this chapter.

2.4  CREATIVITY Psychological research on creativity offers a framework for achieving better understanding of how entrepreneurship interacts with production and implementation of effective novelty to produce successful innovation, and especially how to make sense of the contradictions involved in the paradoxes. Matthews (2007, p. 2) asked the core question for this section: ‘What is the relationship between creativity and entrepreneurship?’ The first step in establishing a link between the two is to explain what is meant

Managing entrepreneurship for innovation  ­31 by creativity. Basically, we use the now familiar definition summarised by Runco and Jaeger (2012, p. 92) as the ‘standard definition’: generation of useful novelty. Cropley and Cropley (2005) made this definition more concrete and specific in a way that is directly relevant to the problem being analysed in this chapter. They distinguished between ‘mere’ aesthetic or artistic creativity, in which novelty is the key factor, and functional creativity. The latter involves generation of novelty to be sure, but requires that the novelty effectively serve some practical purpose. A crass and oversimplified example would be seen in the distinction between painting a garage door in a pleasing rainbow of colours without attention to conventional taste and propriety, but without in any way improving the functionality of the door, vs. succeeding in building a usable bridge across a previously impassable river using novel design and construction techniques. Amabile and Tighe (1993, p. 9) summarised what is needed in functionally creative products: they must be ‘appropriate’, ‘correct’, ‘useful’ or ‘valuable’. We refer to such properties as involving ‘relevance and effectiveness’. Relevance and effectiveness are indispensable for solving a problem, and indeed problems can be solved in a ‘routine’ way through relevance and effectiveness alone. This is reminiscent of ‘incremental’, ‘sustaining’ or ‘evolving’ innovation. The creativity-­theory analogue to radical, disruptive, breakthrough or discontinuous innovation, on the other hand, involves the addition of novelty at a minimum, yielding a relevant and effective solution that does the job in a new way. These two criteria of a solution (relevance and effectiveness; novelty) are joint prerequisites for the lowest level of functional creativity, which we refer to as ‘originality’ (e.g. Cropley and Cropley 2005, 2009). However, a creative solution can go further by being ‘elegant’. At its simplest this means that good solutions look good. Grudin (1990) referred to ‘the grace of great things’. Such grace, or elegance as we call it, is often readily recognisable: as Maier and Rechtin (2000) put it, citing Wernher von Braun, ‘The eye is a good architect. Believe it!’ Elegance adds value to a relevant and effective solution that is already original, and this increases its creativity. In the business world, elegance may mean that a solution is clearly recognisable as offering what is needed, is accepted, applauded and adopted, while it may also mean that a particular solution defeats a rival solution, for instance in the marketplace. Finally, comes ‘genesis’: the property of a relevant and effective, novel and elegant solution that makes it transferable to different (quite possibly unanticipated) situations, opens up new ways of looking at known problems, or draws attention to the existence of previously unnoticed problems. In this way, a generic solution goes beyond a ‘merely’ elegant one and

32   Handbook of research on entrepreneurship and creativity Table 2.2  The hierarchical organisation of solutions Criterion Effectiveness Novelty Elegance Genesis

Kind of solution Routine





1 − − −

− 1 − −

1 1 − −

1 1 1 −

1 1 1 1

yields the highest level of functional creativity. This distinction between solutions that are novel and effective and those which are also elegant and generic is highly reminiscent of the distinction in innovation theory between Invention and Exploitation: generation of relevant and effective novelty corresponds to Invention, while generation of elegant and generic (as well as relevant and effective) novelty corresponds to Exploitation. The various levels of functional creativity are depicted in Table 2.2. The radical two-­stage conceptualisation of innovation previously outlined makes it plain that innovation involves on the one hand generation of novelty and on the other successful utilisation of this novelty, and, as has just been shown, this is precisely the case with functional creativity too. Thus it is apparent that there is an inherent link between innovation and creativity, especially functional creativity, since both are concerned with both generating and also applying novelty. This implies, in turn, that the psychological properties involved in entrepreneurship and those involved in creativity will be closely related. This overlap is emphasised by the fact that there is also an extensive discussion of the paradoxes of creativity, as will be shown below. Unsurprisingly, more detailed examination of the relationship between creativity and entrepreneurship makes it plain that the task is not straightforward. Writing from the perspective of organisational creativity, Mumford et al. (2012, p. 8) identified three sources which lead to this state of affairs: (a) ‘the known complexity of most aspects of the phenomenon we refer to as creativity and innovation’; (b) the fact that both are ‘multilevel phenomena’; and (c) both are ‘influenced by variables operating at the individual, group, organisational and environmental levels’. Lastly, these authors stated that the complexity involved in linking the two ‘arises from the fact that these variables are not well aligned’. This means, among other things, that the variables that influence creativity favourably at one level, for example the level of the entrepreneurship of the individual, may be at odds with those that influence creativity at the group or organisational levels. This gives rise to what we can think of, colloquially, as an optimisa-

Managing entrepreneurship for innovation  ­33 tion problem – it is difficult, and perhaps even impossible, to simultaneously optimise each separate variable. In discussing this issue, Mumford et al. (2012, pp. 8–9) emphasised an important idea: that the innovation process is characterised by a sequence of phases (see, for example, Mumford et al. 1991), each of which involves ‘core processing activities’. It is clear from their discussion that they were thinking particularly of psychological processes such as problem solving, that is, of processes involved in entrepreneurship. Even if the phase approach is reduced to the simplest form – Invention followed by Exploitation – the situation remains complex. This complexity is recognised by current organisational theory. West (2002, p. 356) originally envisaged the relationship as sequential. He also made a clear link between innovation and creativity: ‘Innovation then can be defined as encompassing both stages – the development of ideas – creativity; followed by their application’ (emphasis added). However, some writers do not see the phases as strictly sequential, but as sometimes alternating or even occurring simultaneously (Burgelman 2002; Benner and Tushman 2003). Haner (2005, p. 289) summarised the relevant literature as showing that the phases in generation of useful novelty are ‘iterative and non-­sequential’ and occur in a recurring ‘nonlinear cycle’. Writing from the point of view of organisational psychology, Gupta et al. (2006, p. 693) contrasted sequential or lock-­step generation of effective novelty in an organisation (which they called ‘punctuated equilibrium’) with non-­linear development (‘institutional ambidexterity’). The idea of phases is a key concept for understanding the relationship between creativity and entrepreneurship which we will return to shortly. Of particular importance is the fact that different aspects of the production of effective novelty – whether as part of a process of innovation or of creativity – require different thinking strategies, motives and skills. For instance, an aspect of entrepreneurship which fosters Invention may inhibit Exploitation – hence the optimisation problem mentioned above. Mumford et al. (2008) cited 13 different organisational variables that impact on the process, each of which may be further influenced by organisational settings. So, for example, at the individual level innovation is influenced by aspects of entrepreneurship such as expertise (Weisberg 2006), abilities (Plucker and Renzulli 1999) and motivation (Jaussi et al. 2007). At the group level it is influenced by phenomena such as group processes (Reiter-­Palmon et al. 2008), by climate perceptions (Hunter et al. 2007) and by leadership (Mumford et al. 2002; Amabile et al. 2004). Finally, at the organisational level it is influenced by phenomena such as organisational structuring (Damanpour 1991), organisational learning (Drazin et al. 1999) and strategy (Taggar et al. 2008).

34   Handbook of research on entrepreneurship and creativity The aim of this section was to show that innovation and functional creativity are closely related processes in that both involve generation and implementation of novelty. Indeed, for the purposes of this chapter innovation can be seen as, in a sense, a special case of functional creativity; generation and implementation of effective novelty within a highly defined set of organisational strictures such as the specific history, structure, goals, organisational culture and the like of a particular firm or a specific business environment. Innovation is affected by psychological properties of the people involved (i.e. entrepreneurship). Furthermore, interactions between processes of innovation and entrepreneurship are paradoxical in nature. Precisely the same is true of creativity: as will be shown in the following sections, the personal properties of the people involved are related to creative outputs in a paradoxical way. Psychological research on the paradoxes of creativity has already worked out many of the details of this paradoxical relationship, and the similarities among some aspects of innovation and creativity suggest that this psychological knowledge may well be transferable to the task of solving the problem of the paradoxes of innovation. 2.4.1  Psychological Dimensions of Creativity The first step in applying creativity research to the problem of the paradoxes of innovation involves specifying the psychological factors (analogous to entrepreneurship) which have been shown to be involved in creativity. Writing about the complex nature of creativity, Basadur and Hausdorf (1996) drew attention to the ‘many factors [that] contribute to its development and expression’. This has led to a range of theories and perspectives that have been concisely summarised by Kozbelt et al. (2010) and Kaufman (2009). Although differences in the definition of creativity remain, a broad consensus is that it involves ‘the interaction among aptitude, process, and environment by which an individual or group produces a perceptible product that is both novel and useful as defined within a social context’ (Plucker et al. 2004, p. 90). Mumford et al. (2012) added further insights into the nature of creativity, stating, for example (p. 4) that, ‘personality, motivation, and expertise’ are among the factors that influence it. A framework for understanding the range of factors that contribute to understanding the psychology of creativity can be traced back to the work of Rhodes (1961) and Barron (1969). It involves the 4Ps of creativity: Product (i.e. something usefully novel), Process (i.e. special forms of thinking that give rise to a useful novel product), Person (i.e. the special properties of the individual which support the process of generation of useful novelty such as willingness to take risks, openness for the new or the

Managing entrepreneurship for innovation  ­35 courage to go against the mainstream) and Press (i.e. the influence of the surrounding environment). It is apparent that the dimension of Person involves much the same content as entrepreneurship: the psychological properties of people involved in the innovation process (entrepreneurship) or in the process of creativity (Person) are very similar. In the present chapter we apply existing knowledge of Person within creativity theory to understanding entrepreneurship. In doing so, for the purposes of this chapter we will focus our attention on only two of the four Ps – Person and Press. After introducing those dimensions we will examine the paradoxes related to each P.  Person and creativity Eysenck (1997) speculated that creativity may have very little to do with cognitive processes at all, and may be the result of a special personality constellation. Indeed, most writers in the area agree that personality is at least involved in creativity, and various authors have published reviews of the personal characteristics that are of importance. Feist (2010) categorised personality influences as involving individual people’s habitual ways of processing information, behaviours and attitudes that concern their relationships with other people, their desire to persist in activities and be successful, and the influences of mental health on creative thought and behaviour. In an overview of research on mood and creativity, Kaufmann (2003) showed that mood is a precursor to creativity, accompanies it and results from it. ‘Generative’ feelings such as the ‘thrill of the chase’ when facing a challenge, the feeling of excited anticipation when generating novelty or the feeling of satisfaction after achieving an effectively novel product, but also ‘conserving’ feelings such as anxiety in the face of uncertainty, frustration when progress is impeded or disappointment when a product is not validated, play a role in generating effective novelty. Many studies have confirmed that motivation too plays an important role in creativity. To take a single example, Park and Jang (2005) investigated motivation for scientific creativity by interviewing both theoretical and applied physicists. They concluded that, in addition to feelings such as interest or curiosity, these scientists were also affected by what they called ‘cognitive motives’ – essentially deriving from their knowledge of their field. In particular, they identified (a) recognition of gaps in existing knowledge (incompleteness); (b) a drive to round out recently emerging novelty (development); and (c) identification of contradictions in accepted knowledge (conflict/discrepancy) as cognitive motives for creativity. They gave examples from statements by Albert Einstein that indicate he ­experienced all three of these motivating forces, but at different times.

36   Handbook of research on entrepreneurship and creativity  The creative Press MacKinnon (1978) described the purpose of research into the ‘creative situation’ as the identification of ‘characteristics of the life circumstances and of the social, cultural, and work milieu that facilitate or inhibit the appearance of creative thought and action’ (p. 52) (emphasis added). There are many examples of organisational research examining the impact of Press on innovation. Puccio and Cabra (2010) linked the two domains (innovation and creativity) by summarising a broad range of Press variables that are ‘believed to have a profound influence on employee creativity’ (p. 151). These range from national cultural factors such as traditions and values, through factors pertaining to the external environment, organisational cultural factors, organisational structures to climate and even physical space. Damanpour and Aravind (2011) described the impact of organisational structure on creativity, while Nohria and Gulati (1996) discussed the impact of resources. Leadership also appears to be an especially significant aspect of Press in the context of innovation, and has been studied by Agars et al. (2012) and Mumford et al. (2002). Indeed, several studies have found strong, positive correlations (in the order of 0.4) between leader performance and creative achievement in real-­world settings (Barnowe 1975; Tierney et al. 1999; Andrews and Farris 2006). Most recently, Robledo et al. (2012) have examined the relationship between creative leadership, people, work and projects. Thus what is referred to in creativity research as Press bears a close relationship to management in organisations. 2.4.2  The Paradoxes of Creativity As with the innovation paradoxes, creativity is beset with contradictory findings that require irreconcilable states to both be true. Almost from the beginning of the modern era research on creativity has yielded surprising findings that have led various writers to refer to it as involving ‘a bundle of paradoxes’ (e.g. Cropley 1997, p. 8). In the following paragraphs for the sake of completeness we will briefly discuss the paradoxes connected with Process and Product, but for the purposes of this chapter will concentrate on the Person and Press paradoxes.  The Process paradox In the area of Process, creativity came to be equated with divergent thinking (e.g. linking remote ideas, seeing implications, making unexpected connections, branching out) almost immediately after Guilford’s (1950) seminal paper. However, the early research of Hudson (1968) showed that people identified by psychological tests as having a marked preference for

Managing entrepreneurship for innovation  ­37 convergent thinking (e.g. following a strict line of logic, re-­applying the already known, working rapidly and accurately) nonetheless showed high creativity on some tasks. More recently, Facaoaru (1985) studied engineers, and showed that those regarded as most creative displayed both convergent and divergent thinking. Numerous modern writers (for a summary, see Cropley 2006) have also emphasised the importance of convergent thinking, whereas, intuitively, divergent thinking would be expected to be of paramount importance. In an extensive review, Ward and Kolomyts (2010) showed that creative idea production depends upon the interaction of a variety of cognitive factors, including not only associative thinking or combining of concepts and images (aspects of divergent thinking) but also convergent processes such as accurate representation and recall of information, or evaluation of candidate solutions and selection of the best (convergent thinking). Stated in terms of the model of innovation presented in Figure 2.2, divergent thinking seems to be more prominent in the phase of Invention, convergent thinking in the phase of Exploitation.  The Product paradox Although Eastern cultures such as those associated with Buddhism or Confucianism or First Nation cultures such as those in North America or Oceania may see creativity differently, in Western thinking it is more or less self-­evidently true that creative products must be novel. However, as Cropley and Cropley (2005) emphasised, novelty alone is not enough: a product must also be relevant and effective. A deviation from the customary that results from ignorance, blind nonconformity or unreasoning rebelliousness involves only pseudo-­creativity (Cattell and Butcher 1968). Novelty that is, in itself, sensible but impossible to put into practice involves only quasi-­creativity (Heinelt 1974). In psychological discussions, this means that novelty is a necessary but not sufficient precondition for creativity. Furthermore, as Csikszentmihalyi (1996) pointed out, relevance and effectiveness are decided by people who are knowledgeable about the field in question, so that creativity is largely in the eye of the beholder, and is not an inherent or intrinsic property of the product at all. In business, to be relevant and effective novelty must not only work (do what it is supposed to do), but it must also be understandable, usable and acceptable to other people – not so much experts in the field but more frequently consumers – or elegant and generic, as was explained in the earlier discussion of functional creativity. Christensen (1997) gave examples of highly effective (and often ultimately successful) novelty that led to disasters for otherwise successful and well-­run great firms, because it could not be fitted into the existing framework and customers rejected it. As Besemer

38   Handbook of research on entrepreneurship and creativity (2006, p. 171) put it in a down-­to-­earth way: ‘consumers don’t like too many surprises’. Thus products need to be simultaneously novel, original and even surprising, and yet routine (in the sense of reliable and effective).  The Person paradox Csikszentmihalyi (1996) referred to the importance in creativity of a ‘complex’ personality that combines contradictions, such as sensitivity occurring together with toughness, or high intelligence with naiveté. In a 30-­year longitudinal study, Helson (1999) argued that personality traits such as openness and flexibility, which intuitively seem favourable to creativity, can actually hinder it under certain circumstances. McMullan (1978) showed that creativity requires possession of a ‘paradoxical’ personality characterized by seven polarities: openness vs. drive to close incomplete gestalts; acceptance of unconscious material into consciousness vs. maintenance of a strong sense of reality; critical and destructive attitude vs. constructive problem solving; cool neutrality vs. passionate engagement; self-­centredness vs. altruism; self-­criticism and self-­doubt vs. self-­confidence; tension and concentration vs. relaxedness. As Kirton (1989) pointed out, both adaptation of what exists and production of something new (which he called innovation) can lead to useful novel products, so that both adaptive personal characteristics (such as a preference for dealing with the new by extending the already known) and also innovative characteristics (e.g. a preference for dealing with the new by generating something novel) are involved in creativity. In a comprehensive review, Batey and Furnham (2006) concluded that some of the Big Five components of personality may operate as facilitators of creativity in certain domains, but inhibit it in others. An example is the personality trait neuroticism (N), which is elevated in artistic populations, whereas creative managers and leaders tend to be emotionally stable. The personality dimension of conscientiousness (C) is another; they pointed out that it seems to contribute positively to scientific creativity but to detract from artistic creativity. Indeed, ‘the relation of creative abilities and dispositions to specific domains (e.g. art or science) is highly arguable’ (Batey and Furnham 2006, p. 360). Unsworth (2001) argued that there are four kinds of creativity, and her system can be used to demonstrate the paradoxical relationship of motivation and creativity. She distinguished between creativity where (a) the person is driven by external pressure to solve problems defined by other people (what she called ‘responsive’ creativity – this is the most clearly externally motivated creativity); (b) the person is motivated by external pressure to solve self-­discovered problems (‘expected’ creativity – a mixed kind of motivation); (c) the person is self-­motivated but the problem is

Managing entrepreneurship for innovation  ­39 defined externally (‘contributory’ creativity – a second pattern of mixed motivation); and, finally, (d) the person is self-­motivated to solve self-­ defined problems (‘proactive’ creativity – the most clearly internally motivated creativity). The crucial point for the present purpose is that all four of these constellations can lead to production and exploitation of effective novelty. A widely accepted position is that creativity is based on intrinsic motivation (Amabile 1996): the wish to carry out an activity for the sake of the activity, regardless of external reward. This position can be contrasted with working for external rewards such as praise, awards, pay raises, promotion and even avoidance of punishment (extrinsic motivation). More recently, however, researchers, including Amabile herself (e.g. Collins and Amabile 1999), have accepted that extrinsic motivation is not necessarily fatal to creativity. In fact, Kasof et al. (2007) reported that some psychological research shows that extrinsic motivation has a negative effect, some that it has a positive effect, and some that the effects are mixed. In a meta-­analytic overview, Eisenberger and Byron (2011) summarised research on intrinsic and extrinsic motivation and showed that both can foster creativity, depending on the kind of task (Product in our terms), the way the task is presented and the kind of performance (e.g. generation of a novel product vs. generation of a large number of products) that is rewarded (analogous to Press in our terms). There is further evidence that extrinsic motivation, if appropriately applied, can foster creativity. In his ‘triad’ model Necka (1986) distinguished five classes of creativity motive: instrumental motives, playful motives, intrinsic motives, control motives and expressive motives. In contrast to Amabile, he argued that creativity can, for instance, be a means to an end at one point – for example, a person might write a book in the hope of making money (instrumental or extrinsic motivation) – but in the course of writing the person might become aware of the feeling of having an important message that must be expressed, regardless of the consequences (expressive or intrinsic motivation). The idea of a dynamically changing structure of creativity motivation is supported by Gruber and Davis (1988) in their ‘evolving systems’ approach. Despite the widespread belief that positive mood is necessary for creativity and negative mood is fatal to it, Baas et al. (2008) showed in a meta-­ analysis that research indicates that there are at least three facets to the mood–creativity link: hedonic tone (positive vs. negative feelings), level of activation (activating vs. deactivating effect of mood) and effect on focus (promotion vs. prevention), or some combination of these. They also divided creative performance into idea generation (multiple ideas), insight (a single idea) and creative products (literary works, other artistic products,

40   Handbook of research on entrepreneurship and creativity designs, work performance, etc.). They showed that some moods affect certain aspects of creativity but not other aspects, and that some moods affect creativity more than others. Positive moods do lead to more creativity when the task is framed as enjoyable and intrinsically rewarding, but to less when the task is framed as serious and extrinsically rewarding and performance standards are emphasised. Thus a new dichotomy emerges: both generative feelings such as the thrill of the chase when facing a challenge, the feeling of excited anticipation when generating novelty or the feeling of satisfaction after achieving an effectively novel product, but also ‘conserving’ feelings such as anxiety in the face of uncertainty, frustration when progress is impeded or disappointment when a product is not validated, play a role in creativity.  The Press paradox In a research programme stretching over more than 30 years, and largely based on daily logs or diaries kept by managers, Amabile (e.g. 1996) showed that there was a complex interaction between Press (management pressure) and innovation. Where the task involved carrying out predefined steps, a high level of environmental demand facilitated performance. However, where the task involved exploring possibilities, a low level of demand was facilitative. Thus high managerial pressure is facilitative in some situations, but destructive in others (West 2002).  Overview Table 2.3 contains an overview of the paradoxes in the four psychological dimensions of creativity (Process; Person [personal properties, motivation, feelings]; Product; Press). For the sake of brevity, each paradox is presented as a single bipolar dimension (e.g. the Process paradox is represented as involving the dichotomy convergent vs. divergent thinking, the motivation aspect of the Person paradox as the dichotomy reactive vs. proactive motivation, etc.), that is, the paradoxes are presented in the dialectical way called for by Bledow et al. (2009a). The main characteristics of each pole are listed for illustrative purposes (e.g. at one pole of Process convergent thinking involves re-­applying the already known, being fast and accurate and being strictly logical, whereas at the other pole divergent thinking involves branching out, making unexpected links and seeing ­surprising implications). 2.4.3  The Phases of Creativity The question now is how the simultaneous importance of contradictory psychological processes and states can be accommodated within a single

Managing entrepreneurship for innovation  ­41 Table 2.3  The psychological paradoxes of creativity Psychological dimension

Poles of the paradox

Examples of characteristics


Convergent   thinking vs. divergent   thinking Reactive vs. proactive

Re-­applying the known, being fast and accurate,   being strictly logical Branching out, making unexpected links, seeing   surprising implications


Problem accepting: focusing on existing problems Driven by external pressure Problem finding: focusing on self-­identified   (unexpected) problems Driven by internal pressure Conforming, preferring the well considered,   relying on the tried and trusted Autonomous, open, high in self-­confidence, non-­   conforming, spontaneous Exposure to the unexpected triggers negative  affect, departure from the usual arouses discomfort Exposure to the unexpected triggers positive  affect, departure from the usual arouses excitement Effective, accurate, conventional Surprising, seminal, germinal

Personal characteristics

Adaptive vs. innovative


Conserving vs. generative


Routine vs. creative High demand Problems and nature of desired solution closely  defined by management, high pressure for vs. quick results, high demand for accuracy, low low demand tolerance of error or failure, rewards for being right, high status given to people who fit in well Problems and nature of solutions loosely defined,  low pressure for quick results, tolerance of ‘good’ errors, rewards for opening up perspectives, high status given to people who are ‘different’


taxonomic framework. We will argue below that the answer lies in dividing the process of generation of effective novelty into stages or phases. The idea of phases is well established in creativity research and has a long history. For example, in introspective studies in which they reflected upon their own creativity, among others Alexander Bain, Hermann Helmholtz

42   Handbook of research on entrepreneurship and creativity and Henri Poincaré identified and named stages (see Sawyer et al. 2003). Hadamard (1945), also reflecting on his own creativity in mathematics, identified four phases: preparation, incubation, illumination and precising. An early empirical investigation along these lines was that of Prindle (1906). He studied inventors, and concluded that every invention is the result of a series of small, compounding steps. The gain in one step creates a new jumping off point for the next step, and so on. In another early study with inventors who had successfully applied for patents, Rossman (1931) proposed a more formal phase model of invention involving seven phases: observation of a need or difficulty; analysis of the need; survey of all available information; formulation of all objectively possible solutions; critical analysis of these solutions for their advantages and disadvantages; the birth of new ideas; and experimentation to test out the most promising idea. The father of brainstorming, Osborn (1953), also argued for a seven-­step creativity process involving orientation (identifying the problem); preparation (gathering relevant data); analysis (breaking it all down into its constituent elements); ideation (collecting a large number of alternative solution possibilities); incubation (letting it all churn); synthesis (putting it all together); and evaluation (judging the value of the result). The classical phase model is that of Wallas (1926). We have introduced it out of chronological order here because it continues to be discussed and developed, and has become the seminal model in modern thinking. The Wallas model is more sophisticated than a small-­step, incremental approach. Of central importance for this discussion is that it sees the differences between phases in the production of a creative product as not simply quantitative (for instance, step-­by-­step increases in amount of knowledge), but as qualitative (involving different kinds of operation). Initially, Wallas, too, suggested that there were seven phases: encounter (a problem or challenge is identified); preparation (information is gathered); concentration (an effort is made to solve the problem); incubation (ideas churn in the person’s head); illumination (what seems to be a solution becomes apparent); verification (the individual checks out the apparent solution); and persuasion (the individual attempts to convince others that the product really does solve the problem). The crucial point for our purposes here is the link between phases and the paradoxes or contradictions referred to earlier. Such a link was hinted at by Torrance (1988), when he described creativity as a process involving seeing problems, formulating hypotheses about solutions, evaluating the hypotheses, revising them if necessary and communicating them to other people, thus not only seeming to suggest a sequence of steps but also focusing squarely on the processes involved in each step and conceptualising

Managing entrepreneurship for innovation  ­43 them in a more psychological way. Csikszentmihalyi (2006) made the link explicit when he concluded that the creative process may include distinct phases or different forms that draw on different psychological resources. Apparently, creative people are capable of moving backwards and forwards between the poles of each paradox. As Csikszentmihalyi (1996, p. 47) put it, they combine ‘tendencies of thought and action that in most people are segregated’. Martindale (1989, p. 228) referred to ‘oscillation’, Koberg and Bagnall (1991, p. 38) to ‘alternating psycho-­behavioural waves’ and Bledow et al. (2009b, p. 365) to ‘dynamic shifting’. Nowadays, in modern discussions of creativity, the Wallas (1926) model is usually reduced to four phases: preparation, incubation, illumination and verification. This may well be appropriate for the first part of the broader innovation process (Invention) too, since this also centres on production of effective novelty. However, innovation, as we have seen, goes beyond invention and encompasses its implementation (Exploitation). In our view therefore, a model of creativity that is capable of also being applied to the innovation process requires seven phases: those associated with generating novelty and those associated with establishing its relevance and effectiveness (see Cropley and Cropley 2008, 2012). Thus, for the purposes of establishing a framework for the relationship between creativity and entrepreneurship, a creativity model more akin to Wallas’s original is appropriate. A refinement of Wallas’s (1926) model is to divide his first phase into two parts. These are labelled Preparation (in the sense that familiarity with a field is developed – it is impossible to generate effective novelty in a field about which you know nothing, except perhaps through a blind guess and lucky fluke) and Activation (dissatisfaction with the status quo; problem awareness emerges). These can then be followed by the remaining three phases of the modern, truncated conceptualisation of Wallas’s model – Incubation (which we call Generation), Illumination and Verification. Wallas initially described a subsequent, but largely forgotten, phase he called persuasion. We have previously (Cropley and Cropley 2008, 2012) revived recognition of this, but divided it into two phases: Communication, which involves passing on information about the novelty to potential users in a convincing way, and Validation, which involves the potential users passing their reaction back to the generator of novelty and, ultimately, accepting or rejecting it. Communication involves elements of both provision of information, and persuasion; Validation involves the conferring of the accolade of acceptance of the novel product by consumers. Thus these two phases of creativity are most closely related to Exploitation in ­innovation theory. The extended phase model is depicted in Figure 2.3.

44   Handbook of research on entrepreneurship and creativity PHASE



General & specialist knowledge accumulated


Data are collected, problem awareness develops



A range of candidate solutions is developed


One or more promising, novel solutions emerge


Analysis of options leads to a single solution for development


The product is revealed to knowledgeable others


The product is launched in the marketplace

Figure 2.3  An expanded phase model of the innovation process 2.4.4  What Happens in the Phases? The rationale for the various phases needs some explanation, and this is provided in the following paragraphs. We start with Activation, despite the fact that it is the second phase in our taxonomy, because it is the first phase

Managing entrepreneurship for innovation  ­45 in which novelty (in the form of perceived need for something different) plays an indispensable role.  Activation Brown (1989) reviewed the extensive modern discussion of the importance for creativity of becoming aware of problems (i.e. what we call Activation), starting with Guilford’s (1950) emphasis on sensitivity to problems. Einstein (see Miller 1992) described how his recognition that existing theories of thermodynamics were inadequate motivated him to develop the special theory of relativity and then the general theory. He continued to be dissatisfied with his own theory, and worked on it for much of the rest of his life. Edison was never satisfied with his invention of the incandescent light bulb, and over the course of time took out more than 100 patents on improvements to it. Mumford and Moertl (2003) described a case study of innovation in management practice, and concluded that innovation was activated by ‘intense dissatisfaction’ (p. 262) with the status quo. It is this recognition that there is a problem and a resulting urge to do something about it that may be called Activation.  Preparation However, problem finding/recognition/awareness does not come from nowhere: you cannot see problems in, and be dissatisfied with, something that you do not know exists. In fact, the Canadian Intellectual Property Office reported (2007) that 90 per cent of new patents are improvements of existing knowledge. Cropley (2006) listed a number of creativity researchers who all give a prominent place to existing knowledge in creativity (e.g. Albert, Amabile, Campbell, Chi, Feldhusen, Gardner, Gruber, Mednick, Simonton, Wallas and Weisberg). As Louis Pasteur, one of the celebrated fathers of vaccination, put it in a frequently cited aphorism he uttered in a lecture in 1854 (Peterson 1954, p. 473): ‘Chance favours only the prepared mind’. The prepared mind possesses both general and specific knowledge. Simonton (2003) drew attention to contrasting views on the role that Preparation, in the form of education and training, plays in relation to creativity. He contrasted Csikszentmihalyi’s (1990, p. 195) findings that new ideas in creative individuals arise from a ‘large set of well-­developed skills and a rich body of domain knowledge’– in other words, a high degree of Preparation – with Weisberg’s (2003) findings suggesting that this relationship is moderated by factors such as motivation. Simonton (2003) further highlighted the fact that Preparation and its role in creativity may be influenced by the focus of the activity. There is evidence going far back into modern creativity research (see Hudson (1966), Schaefer and Anastasi

46   Handbook of research on entrepreneurship and creativity (1968) and Simonton (1984) for examples) that scientific creativity may benefit more from preparatory activities, such as education and training, compared with artistic creativity. Intuitively, organisational innovation is more closely aligned to scientific creativity. It should be borne in mind, however, that knowledge can be a two-­edged sword. Although this chapter has just argued that it is necessary for creativity, as Gardner (1993) pointed out, there may be tension between creativity and expertise: the pre-­existing knowledge of an expert can channel information processing into a narrow range of approaches – ­possibly without the person concerned being aware of this – and thus limit the novelty of what is produced via divergent thinking, or even block generation of novelty altogether. A recent review by Goncalo et al. (2010) looked at this interesting problem: although working successfully in an area over a long period of time (i.e. becoming an expert) can provide a knowledge base of both the subject matter and the organisation, it may also inhibit further creativity.  Communication and Validation Preparation and Activation occur at the front end of the process of innovation and are critical to establishing the foundation on which creativity takes place. Turning briefly to the other end of the process (the exploitation phases that characterise the full innovation process), Dasgupta (2004, p. 406) summarised the need for communication very aptly: ‘To be judged innovative, novelty must reach a sufficient state of maturity or completeness to be “manifested publicly”’. Of course, communication involves very different tools, skills and products in different fields such as physics and art, on the one hand, or business, on the other. In the case of business, communication involves marketing novelty. As Csikszentmihalyi (e.g. 1999) stated, novelty (in whatever form it is manifested) only achieves the status of being regarded as creative when it is judged by external authorities (such as customers) to involve effective surprise. In other words, not only is communication necessary but so is the approval of those to whom the novelty is communicated. To put it bluntly, an innovation such as a new process or product needs to be accepted by customers, regardless of any other virtues it has, before it can be regarded as successful. We call this final phase Validation. Communication and Validation can be seen as encompassing a two-­part process of ­persuasion: the creative individual draws the attention of the audience (such as a ­potential user) to the novelty that has been generated in a persuasive and convincing way (Communication) and the user awards it the seal of approval as appropriate, useful and acceptable (Validation) or, of course, not.

Managing entrepreneurship for innovation  ­47  Generation Wallas’s (1926) phase of incubation is problematic. It seems intuitively clear that creativity requires processing of information. However, in reviewing a number of relevant studies Howe et al. (2005) showed that many researchers deny that this involves ideas churning around with no apparent order or sequence until something good suddenly pops up, as a label like ‘incubation’ implies. Howe et al. emphasised the importance of heuristic processes such as set breaking or construction of neural networks. Indeed, this objection was raised very early in creativity research by, for instance, Vinacke (1953). Simonton (2007, p. 329) contrasted Darwinian or non-­monotonic processes (blind variation and selective retention leading to sudden jumps) with monotonic processes (step-­by-­step improvement based on, for instance, systematic and sequential application of expertise to a series of intermediate products, each of which is closer to the final product than the previous one). Thus we refer to this phase as ‘generation’ in order to avoid taking sides in the non-­monotonic vs. monotonic debate, since this issue is not vital for the present chapter.  Illumination and Verification The stages that follow generation are almost counter-­intuitive in the context of creativity. The close association of divergent thinking with creativity can mask the fact that an integral part of successful creativity is not only generating a large number of possible solutions, but also discarding those that will be unable to fit within the practical constraints of the problem and then analysing this subset in a more rigorous and systematic fashion until, ultimately, a single, optimal candidate is found. These ‘concept generation and selection processes’ are absolutely typical of the steps embodied in, for example, engineering design and can be depicted as ‘a succession of divergent and convergent steps’ (Dieter and Schmidt 2009, p. 244).

2.5 APPLYING THE PHASE/DIMENSIONS MODEL TO INNOVATION Drawing together the threads of business models of innovation, and the phase/dimensions model of the psychological dimensions of creativity, offers the promise of a diagnostically useful taxonomy of innovation. Figure 2.4 commences this drawing together by mapping the phases of generation of effective novelty as developed in the creativity theory just presented on to the Invention phase of a typical business model such as those presented in Table 2.1.

48   Handbook of research on entrepreneurship and creativity


Activation Person Press

Idea Generation



Opportunity Recognition


Idea Evaluation

Figure 2.4  The psychological model mapped on to a business model Table 2.4 takes this mapping further by showing which pole of each dichotomised dimension is favourable for Invention conceptualised in terms of the phases of creativity. For instance, the Process of convergent thinking is of key importance in the phase of Preparation, whereas divergent thinking is vital in the phase of Generation. Similarly, to take another example, generative feelings are necessary in the phase of Activation, whereas conserving feelings are needed in the phase of Verification. The table thus shows how it is possible for contradictory aspects of thinking, motivation, feelings, and the like to both be vital in this aspect of innovation: they are important at different points or stages of the process. It is possible to extend this application of the phase model to encompass the phases of Exploitation (Communication and Validation). The forms of cognition, motivation, feelings, personal properties and press factors required in


Convergent vs. divergent Reactive vs. proactive Adaptive vs. innovative Conserving vs. generative High demand vs. low demand




Conserving High







Divergent Proactive



















Note:  a.  The entries in this and the other cells of this table are not derived from empirical research, but are largely intuitive at this point.


Personal   properties Feelings


Phase Paradox


Table 2.4  The psychological dimensions of creativity and the phases of creativity

50   Handbook of research on entrepreneurship and creativity these two phases closely resemble the pattern for Verification, as would be expected, since all these phases involve settling on a single answer, ­presenting it convincingly and reacting effectively to feedback.

2.6 APPLYING THE MODEL TO ENTREPRENEURSHIP AND INNOVATION The facilitative poles of the psychological dimensions of production and implementation of effective novelty shown in Table 2.4 can now be applied to understanding the relationship of entrepreneurship to innovation. 2.6.1  Relationship to Earlier Models At the theoretical level, the framework presented here broadens and deepens the more traditional models of innovation summarised earlier. For instance, whereas the black box approach neglects the innovation process itself, the psychological phase approach emphasises this aspect. It is true that milieu models (see Table 2.1) also emphasise the importance of human players, especially their knowledge and competencies, but they pay little attention to non-­cognitive factors. Interactive and evolutionary models (see Table 2.1) go further by accepting that innovation is not driven merely by rational, calculating thought (cold cognition). They do this by taking account of the complex network of communications involved in innovation (interaction approach) or of the unpredictability of change (evolutionary models). The psychological phase approach extends the usefulness of such analyses by recognising the role of hot, non-­cognitive human factors such as motivation and feelings. In addition, it looks at apparently irrational elements of the process, such as the fact that the very qualities that are strengths in an organisation are sometimes simultaneously a weakness (as the systems approach has shown but for which it offers no explanation). 2.6.2  The Contribution of the Psychological Model The psychological taxonomy highlights the different, and often contradictory, factors that influence actors during the innovation process by focusing on (a) what the actors in the process do (Process) in each phase; (b) what they think and feel in each phase (Person); and (c) how the organisational environment impacts on them in each phase (Press). This analysis suggests that the single most important factors in innovation may be (a) the ability of entrepreneurs to switch between different styles of thinking

Managing entrepreneurship for innovation  ­51 and, as it were, personalities, as circumstances demand; and (b) the ability of organisational environments to provide different kinds of Press as the process of innovation unfolds. This framework also sheds further light on the nature of the optimisation problem described earlier. Table 2.4 suggests that it may be pointless trying to optimise the overall process of innovation. The paradoxes that exist across the different stages mean that there is no single, optimal solution to the problem of facilitating it. The answer lies in a more flexible and localised approach to optimisation. To do so, however, means that managers must understand not only what factors affect entrepreneurship, but also when they affect it, and tailor their management behaviour (Press) accordingly. 2.6.3  The Ideal Constellation A genuinely useful taxonomy would provide guidance on how the process of innovation can be optimised in organisations to yield the best possible outcomes. Table 2.4 offers a speculative overview of what the most favourable combination of process, personal properties, motivation, feelings and management press might be in each phase (Preparation, Activation, etc.). In other words, the framework offers guidelines for promoting entrepreneurship even though it is paradoxical. To take an example, we propose in the table that in the phase of Activation, the constellation of divergent thinking, proactive motivation, innovative personal properties and generative feelings, under low managerial pressure, would be ideal for promoting creativity, whereas in the phase of Verification, convergent thinking, a mixture of proactive and reactive motivation, adaptive personal properties and conserving feelings, and high management pressure, would be ideal. In other words, the constellation is different for different phases of the process, and in Table 2.4 we attempt to define the ideal constellation for each phase. The entries in the table are largely intuitive and speculative, since our purpose here was to establish a systematic way of looking at the problem of the paradoxes of innovation, not to offer a fully worked out catalogue of the ideal organisation. Further empirical work is needed to establish the authenticity of the ideal constellations proposed in Table 2.4 and the taxonomy can thus be seen as in part a jumping off point for a highly differentiated research programme. 2.6.4  Practical Application of the Taxonomy In addition to characterising the changing nature of entrepreneurship across phases of the innovation process, the ideal constellations depicted

52   Handbook of research on entrepreneurship and creativity in Table 2.4 also offer differentiated suggestions for managing the innovation process. For instance, managers who wish to promote innovation need to vary the amount and kind of pressure they exert (i.e. Press) according to the phase in the process of innovation which is currently active and the motives, personal properties and feelings of the people involved. On its own this is a platitude, but the idealised table suggests how to take account of these factors. For instance, a high level of pressure for rapid results is beneficial in early and late stages, but inhibitory in the middle phases. Managers should activate and support proactive motivation and generative feelings when they want to foster Activation and Generation, but facilitate reactive motivation and conserving feelings when Communication and Validation are of central importance. The model also provides a more person-­centred vocabulary for discussing what is actually happening at any stage of the innovation process. It is known, for instance (Rietzschel et al. 2010), that even problem-­solving groups which have successfully generated novel ideas not infrequently have difficulty picking the best ideas from among those they have just generated. Using the terminology presented here, the problem can now be described more specifically as involving difficulty in switching from Generation to Illumination and Verification or, turning to the processes involved, as difficulty in switching from divergent to convergent thinking. The possibility of saying more precisely what is going on, what is needed, what should be changed, and so on, would be a considerable help in improving management of innovation. At a more formal level, such discussions could be extended to form a more detailed and more explicitly differentiated diagnosis of an organisation. Drawing on the combination of models and concepts, the psychological taxonomy of innovation makes the following possible: ●

Mapping of the current activities of an organisation on to the sequence of phases required for innovation. ● Identification of the psychological dimensions that are favourable for innovation for any given phase. ● Diagnosis of an organisation’s strengths and weaknesses in the innovation process. ● Analysis and optimisation of activities to maximise the outcomes of each phase of innovation. The model also offers promise of application for assessing the relative strength/weakness of the various nodes in a particular organisation. An organisation might be good at identifying problems in existing circumstances, but poor at building up staff members’ willingness or ability to

Managing entrepreneurship for innovation  ­53 produce novel ideas for dealing with such problems. It is also possible to focus on phases: for instance, an organisation might be good at evaluating and communicating novel ideas to customers, but poor at promoting conditions leading to the generation of such ideas. Cropley and Cropley (2012) and Cropley et al. (2013) have begun the development and refinement of a formal instrument for conducting such a diagnosis (the Institutional Phase Assessment Instrument [IPAI]), although space ­limitations preclude a detailed presentation of this test here. Turning to individual actors, people with different patterns of innovation propensity may be highly effective in some phases but not in others. For example, a person with high tolerance for uncertainty might be highly effective in the phase of Generation but less effective in the phase of Verification. Thus it may be unreasonable to expect a single person to be good at everything involved in the Invention and Exploitation of effective novelty and simply to oscillate, alternate or shift, as was discussed earlier (e.g. Martindale 1989; Koberg and Bagnall 1991; Bledow et al. 2009b). Practical information on such issues would require answers to a number of questions such as: How does experience in one phase affect behaviour in a later one? When is the right time to switch into a new phase? How could an individual, a group or a manager recognise that it is time to switch? Special training may well be needed to learn to make this switch and this raises the question of what kind of training would be appropriate.

2.7  CLOSING REMARKS The problem posed at the beginning of the chapter was that of finding a model of innovation that would aid understanding of the paradoxes of innovation, and working out the implications of this model for managing innovation. Drawing on psychological research on creativity has provided some answers: apparently contradictory aspects of the psychological constellation (entrepreneurship) which facilitate innovation really can logically co-­exist because they are important in different phases of the innovation process; the importance of different, even contradictory, processes and personal properties in different phases means that management behaviour needs to be adapted to the needs of the particular phase currently in operation; it may be impossible for one person to operate effectively in all phases; a particular organisation’s innovation-­friendliness can be subjected to differential diagnosis (i.e. strengths and weaknesses identified). Nonetheless, some of the ideas presented in the chapter are intuitive rather than strictly empirically derived, so that the model developed here can also be regarded as a framework for research.

54   Handbook of research on entrepreneurship and creativity

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3.  Creativity as an integral element of social capital and its role in economic performance Hans Westlund, Martin Andersson and Charlie Karlsson

3.1  INTRODUCTION Creativity and social capital – do these two concepts have anything in common? Do they influence or counteract each other? In addition, how are they related to economic growth? These are some of the questions addressed in this chapter. As discussed in Section 3.2 of this chapter, social capital is normally defined in terms of social networks, and norms and values distributed in these networks. Regarding creativity there are innumerable definitions. Here are two that can be found at a website on the topic:1 ‘Creativity is any act, idea, or product that changes an existing domain or that transforms an existing domain into a new one . . . What counts is whether the novelty he or she produces is accepted for inclusion in the domain’ (Csikszentmihalyi 1996). ‘Creativity is nothing more than seeing and acting on new ­relationships, thereby bringing them to life’ (Anderson 1992, p. 41). It is noteworthy that both the above definitions of creativity express a relation to features of social capital. The first definition states that the novelty that creativity represents must be accepted; that is, if the act, idea or product does not bring any change in predominant values of a ‘domain’ or have the ability to change the domain to a new one, it is not a creative novelty. In the centre of the second definition is the concept of new relationships; that is, new links or networks between various factors that previously have not been connected. These new links or networks do not necessarily have to be social ones, but can be economic, technical, biological, and so on. However, social actors, that is, humans, bring the creative feature of such non-­social links and networks there.2 Interpreted in this way, creativity seems to be something that changes existing social values or (social and non-­social) networks or both, or that creates new social values and (social and non-­social) networks. In other words, creativity brings change of the existing norms, values and networks 60

Creativity as an integral element of social capital  ­61 of society’s existing social capitals. However, it is not only social capital that creativity influences and changes. Creativity changes culture, knowledge, communication, leisure – and production and consumption. Thus, creativity exerts a strong influence on all parts of society. In this chapter, we focus on the connections between creativity, social capital, and economic performance and growth. Our working hypothesis is that both creativity and social capital influence the economy, both each per se, but also through their influence on each other. We regard creativity as one of the sources of entrepreneurship and innovation (although creativity can also have ‘bad’ consequences if bad actors such as criminals perform it). Depending on the types of networks and the norms and values being distributed in them, social capital can promote entrepreneurship and innovation and thus economic growth, but social capital can have an inhibiting effect on entrepreneurship and innovation. Social capital can contribute to creativity by dynamic networks and/or values and attitudes that promote experimentation, but social capital can also counteract creativity by rigid networks and values that support the status quo. Efforts to defend the status quo might be creative in a sense, but the creativity that we focus on in this chapter, that with positive impact on economic growth, is only found in the social capitals that support growth and change. In Section 3.2, we start by analysing social capital and its forms, functions and role in economic development. Section 3.3 discusses creativity, its driving forces and expressions, in particular entrepreneurship and innovation. Section 3.4 treats social capital as an explanatory factor for creativity, while Section 3.5 discusses creativity as an element of social capital. The chapter ends with some conclusions in Section 3.6.

3.2 SOCIAL CAPITAL – FORMS, FUNCTIONS AND ROLE IN ECONOMIC DEVELOPMENT 3.2.1  The Forms and Functions of Social Capital As shown by, among others, Portes and Landolt (1996), the concept and features of social capital have a pre-­history dating back to Durkheim and other classical sociologists of the late 19th century. For the modern ‘founders’ of the concept, Bourdieu (1980) and Coleman (1988, 1990), social capital was not a main topic but merely an offshoot to their general sociological theories. It was not until Putnam (1993, 1995) published his book Making Democracy Work and his article ‘Bowling Alone: America’s Declining Social Capital’ that social capital became a worldwide concept, not only among social scientists of various disciplines but

62   Handbook of research on entrepreneurship and creativity also in the public debate, among politicians and other decision-­makers, and so on. In the dominating tradition of Putnam, social capital has most often been defined as social networks, and norms and values being distributed in these networks. A main concept in large parts of the social capital literature is that of trust. It can be discussed whether trust is a characteristic of social capital in itself or if it should be included in the category norms and values. Our standpoint is that trust should be included in the latter category. The network and the norm/value aspects of social capital have also been expressed in the form of social capital’s structural, relational and cognitive dimensions (Nahapiet and Ghoshal 1998). The structural dimension refers to the properties of relations of the networks as a whole, while the relational dimension represents types of personal relationships actors have developed with each other over time, as, for example, respect and friendship that affect their behaviour. This can be interpreted as the structural dimension is a reflection of the network aspect of social capital at a macro level, while the relational dimension reflects the micro level, the individual links of the networks. According to this view, the third dimension of social capital, the cognitive one, consists of ‘those resources providing shared representations, interpretations, and systems of meaning among parties’ (Nahapiet and Ghoshal 1998, p. 244). Nahapiet and Ghoshal claimed that this dimension had been overlooked in the literature, but in principle this dimension is nothing but the norms and values that Putnam mentioned in 1993. A key question is where social capital can be found in society. Putnam (1993, 1995, 2000) never discussed this issue but seems to have taken for granted that social capital is a feature of the civic (or civil) society.3 His measures of social capital have centred on associational activity and other civic activities, and trust in other people. The mainstream of the social capital literature has stuck to this Putnamian tradition and focused on networks, norms and values, in particular trust, of the civil society. However, the question that then arises is how these phenomena outside the civil society should be denominated. Should the term social capital only be applied to the civil society or should it be interpreted literally and include social networks, relations, values, norms etc. also within business life and the public sector? Or to ask the question in a very simple way: is social capital something that is created and used only during people’s leisure time? (Westlund 2006, p. 4)

A growing literature in the economic disciplines is taking this broader perspective on social capital’s occurrence in the sectors of society, and is

Creativity as an integral element of social capital  ­63 studying the social capital of firms and other organizations.4 This is also in line with the arguments raised by Westlund and Adam (2010) saying that, compared with the social capital of business life (and government), the social capital of the civil society seldom can be the type of social capital that has the strongest impact on economic growth of firms, regions and countries. A third division of social capital’s characteristics concerns the functions of the links of the social networks, and the norms and values that contribute to the creation or termination, support or prevention of these links. Westlund and Nilsson (2005) discussed these functions in terms of internal and external links. Another, more used division is that of bonding and bridging links, and the norms and values connected to them (Putnam 2000).5 Bonding links have the function to ‘bond’ the actors of the (spatial or organizational) unit in question together; that is, to secure the solidarity and cohesion of the unit. Bridging links are links between actors of the unit and actors of other units. The function of bridging links is to connect the group and its actors with ‘the rest of society’; among other things to get access to external information, knowledge and other resources. To these two functions of social capital Woolcock (2000) has added a third, viz. linking social capital. Woolcock defines linking social capital as the vertical relationships between actors with different possessions of power. Linking social capital empowers individuals and groups to access resources, ideas and information from policymakers and other decision-­makers. However, the social links between a centre of power and its ‘clients’ should probably also be denominated as a linking social capital. We have already indicated that social capital exists at a number of various spatial and organizational levels. This is illustrated in Figure 3.1. At the lowest level is the individual actor, who is connected to other individuals within a group/organization by group-­internal, bonding, horizontal links. Simultaneously, the group/organization that the individual belongs to is a decision-­maker of higher order, which means that the links between the individual and the group are of a vertical (linking) character. The second lowest level is the local group/organization. Groups within the same locality can hardly exist very independently of each other, but are coupled to each other by horizontal links. Collectively these co-­located groups form a place with a local, place-­bound social capital with a higher degree of heterogeneity than that of each group. In contrast to an organization, a place is not a decision-­maker, but the social networks of a place form opportunities and restrictions that influence the decision-­making of individuals and organizations. The local groups/organizations and the places in which they are located also have vertical links to actors at higher, regional, national and international levels. Social capital at regional level is

64   Handbook of research on entrepreneurship and creativity Schematic Degree of homogeneity Internal External

Transnational level Nation





Examples of commonly used terms for special capital National cultures








Regional mentality

Local level (Place)




Individual actors



Spirit of place, local relations


Individual actors


Relations, norms, networks

Behaviour, preferences, opinions, values, attitudes

Source:  Westlund and Bolton 2003

Figure 3.1 Spatial levels, degree of homogeneity, horizontal and vertical links between actors and levels, and examples of commonly used terms for social capital at different levels more heterogeneous than at local level, and so on, and the social capitals at these higher spatial levels constitute opportunities and restrictions, affecting decision-­making as well. The differences in homogeneity between social capitals at different levels constitute the fundamental problem in aggregating social capital. Knowledge about links on one level does not necessarily give any informa-

Creativity as an integral element of social capital  ­65 tion about links on a higher level. Information about links between two levels may not be valid at all for links between other levels. Glaeser et al. (2002, p. 442) recognize this when they point out that ‘the complexity of aggregation means that the determinants of social capital at the individual level may not always determine social capital at the society level’. The conclusion from Figure 3.1 is that analyses of the interplay between social capital and, for example, creativity must be adapted to the spatial or organizational level in focus. However, attempts to aggregate features of social capital specific to different levels into a ‘general’ level run up against great problems of principle. The common denominator of social capital must be sought at each level individually. 3.2.2  The Role of Social Capital in Economic Development As seen above, social capital has been divided after a number of different forms and functions. This subsection deals with the issue of whether these forms and functions vary with respect to their influence on economic growth and development.  The role of structural, relational and cognitive social capital According to economic theory, structural social capital, that is, social networks, should mainly have a positive influence on economic growth and development. The reason is the existence of market imperfections, for example that information is not immediately spread among the economic actors, the fact that there exist transaction costs, and so on. In principle, it can be argued that similar arguments to those Coase (1937) presented for the existence of organizations like firms in a market economy, and those Buchanan (1965) brought to the existence of clubs, can be raised for the existence of social networks and their (positive) effects on economic development. They lower the costs of transfer of information and other transaction costs. However, social networks are more complicated types of organizations than firms are in terms of their objectives and aims. Firms’ objectives mainly are economic (under legal and social restrictions), whereas the objectives of social networks can be much more diverse. Many social networks have probably no economic objectives but, as argued by Putnam (1993), voluntary associations and other social networks can still play a positive role in economic development, since they increase humans’ interactions and contribute to creating and strengthening trust among the participants of the networks. However, on the other hand there are many examples of social networks that do not play a positive economic role from society’s point of view. Mafia and other criminal gangs and networks are obvious examples of this. However, in this group we can also count

66   Handbook of research on entrepreneurship and creativity spatially and relationally bounded networks of ‘too much’ reciprocity, in which there are expectations that the entrepreneur’s successful economic results should be shared with a whole group, which leaves an initially successful entrepreneur without sufficient resources to expand (Portes and Landolt 1996). The above discussion shows that positive influence of structural social capital on economic development cannot always be taken for granted. It is the cognitive social capital – the values and norms being distributed in the networks of the structural social capital – that decides whether the social networks are having a positive impact on economic growth or not. This  was recognized by Schumpeter (although in other terms) when he pointed out the reaction of the social environment against one who wishes to do something new. . . any deviating conduct by a member of a social group is condemned . . . This opposition is stronger in primitive stages of culture than in others, but it is never absent . . . The manifestation of condemnation may even come to social ostracism and finally to physical prevention or to direct attack. (Schumpeter 1934, p. 86)

While Schumpeter underscored the possible negative impact of the (in our terms) cognitive social capital on entrepreneurship and economic change, the social capital literature has mainly focused on the positive impacts. The by far most acclaimed positive factor of cognitive social capital is that of trust. The main argument is that if people trust each other, this will lead to a number of positive effects. The availability of credit for investments should increase and interest rates would tend to be lower; the spread of information and the speed of the spread would be higher, thereby improving markets’ functions; knowledge spillovers would increase, contributing to creativity and innovativeness in the form of ‘new combinations of production factors’, that is, innovations. Putnam (1993) recognized trust as a key element of social capital. The availability of easily accessible statistics at national (and in certain countries at regional) level through the World Value Surveys and similar, has made trust the single most used empirical measure of social capital. The dominance of trust as a measure of social capital has meant that other components of cognitive social capital that affect economic performance have been somewhat overshadowed in empirical research. Factors like tolerance, attitudes to change and diversity have been highlighted by Florida (2002) but have so far not made much headway in the social capital literature.6 The third form of social capital in this division, the relational social capital, consists in contrast to the macro-­level structural social capital, of

Creativity as an integral element of social capital  ­67 individual relationships and links between actors at the micro level. The economic impact of these links depends primarily on which actors or, more formally expressed, which nodes are linked together. For economic performance, it should be obvious that links between economic actors are of more importance than links between non-­economic actors. From the perspective of innovation systems and triple-­helix theory, it could be objected that connections across the business, research and public sectors are also of great importance. However, such sectoral views are much more relevant for the structural, macro type of social capital than for the ­individual, relational social capital type.  Business-­related, governmental and civil social capital7 The discussion of different societal sectors and their economic impact cannot of course be isolated from the sectors’ various social capitals. According to the theories of innovation systems and the triple helix, three types of organizations – firms, universities and government – should cooperate in order to meet the needs of the knowledge economy. Universities should provide the knowledge, government should provide favourable institutions and development resources, and firms should provide resources and know-­how for commercialization. However, a dilemma is that the three actor blocs are based on different principles of exchange, which are reflected in different rules of the game. Based on Polanyi (1944) it can be argued that a firm bases its activities on a market principle where profit is a necessary ingredient. For public government, which has the power to collect the resources of individuals and organizations and redistribute them, the basic principle is redistribution. The third type of organization, the academy (or university), is for its part historically predominated by a third principle, viz. reciprocity – a mutual exchange of knowledge and ideas. Academy-­produced knowledge is by tradition neither sold on a market nor taken from one actor and given to another, but exchanged and valued by equals (peers) without any losses. It is understood that organizations with such fundamental differences build social capital with very dissimilar networks. These networks connect different types of actors and are based on different norms and attitudes. The activities of the firm are executed with the aim of making profit. The firm builds technical and economic links internally and to external actors. These links are established and maintained if they are assessed to bring net revenues. The social networks of a firm are based on more compound motives. Creation and maintenance of social links in which the firm makes deliberate investment– for example corporate culture, personal customer relations, and so on – are in principle controlled by the same net revenue principle as economic links. However, many social networks are

68   Handbook of research on entrepreneurship and creativity unintended by-­products of other interactions (Putnam 1993). Thus, many social links of the firm are by-­products of its economic networks. To the extent to which human beings are involved, social links/relations develop because of the economic links. A firm makes certain deliberate investment in social networks, but many of the social networks of a firm are by-­ products of technical and economic networks. Accordingly, companies’ social networks have two sources: deliberate, formal investment decisions by management on different levels, in accordance with the firm’s basic mission, and spontaneous, informal investment decisions by individuals, originally connected through the economic links, based on volition to interact, to socialize. The volition to interact is connected to the ‘affinity’ between the actors (cf. Johansson and Westin 1994). For a social link to be established, the nodes/actors should have something in common (e.g. some norms, values or preferences, or some minimum degree of mutual trust). The second type of organization, public government, is run by political objectives, but a fundamental need for public government is to legitimize itself. For this reason, it builds social links to the citizens and organizations of society, beside the necessary economic and technical networks it needs to fulfil its objectives. The activities of public governments, as in the case of the firms, also create ‘uncontrolled’ social networks as by-­products. However, as the basic mission of public government is to redistribute the resources of society, both the intended and unintended social networks of government, and the norms and values distributed in them, fulfil other objectives than the social networks of the firm. The third type of organization is the academy. In spite of the fact that it is financed in a number of different ways, it has an international, joint identity with missions, objectives and norms. This academy-­internal social capital is an important factor behind the academy’s relative independence vis-­à-­vis other actors in society. It is on the other hand a potential obstacle to collaboration with organizations having other missions and social capitals. These three types of organizations build social capitals deliberately and contribute to unintended, spontaneous social capital-­building as well. Table 3.1 describes the different component parts of organizations’ social capital. Depending on the organization’s mission, certain norms, values and attitudes are developed, which in their turn govern the extension and allocation of the organization’s internal and external links. It can be argued that organizations’ social capitals have become more and more complex. The assembly line – the archetypical symbol for manufacturing industrialism – required few social skills of its workers, not even a common language. In contrast, work in a consultancy company of today

Creativity as an integral element of social capital  ­69 Table 3.1 Social capital of organizations broken down into different component parts Organization’s internal social capital Links/relations filled with attitudes, norms, traditions etc. that are expressed in the form of: –  Internal ‘spirit’ – Climate for cooperation – Methods for codifying knowledge, product development, conflict resolution, etc.

Organization’s external social capital Activity-­related

Environment-­ related


Links/relations to suppliers, customers, clients, partners in cooperation and development

Links/relations to the local/ regional environment, to organizations of the two other types (non-­ activity-­related links to) other organizations of the same type

General relations to the anonymous mass of (actual and potential) customers and clients built through marketing, customer/client clubs, programmes, etc. and expressed in e.g. trademarks

requires ability to cooperate, build networks and even certain attitudes. People without this social competence do not get access to the social capital of these companies of the knowledge economy. In the period when public government was small, it was held together by a strong social capital, expressed in the ideology of the public official, standing above the interest groups of society. The increased involvement of government in different areas of society has made its mission much more complex and consequently the economic, technical and social networks of government and the values distributed within the social networks have become composite. The same can be said about the academy. As long as the university employed a small elite of researchers and students, it was easy to keep its identity, values and networks. With increased resources and increased demands from the resource-­providers, the university’s tasks have multiplied, as have its networks. Thus, the fact that the three types of organizations discussed are based on different missions results in different social capitals. These social capitals are an outcome of both intended and unintended investment. Over time, along with the development from industrial society to knowledge society, the social capitals of organizations have become more complex. Without considering the different missions and the differences in social capital of the three types of organizations, modern innovation policies prescribe that they should interact and create innovations. The problem is

70   Handbook of research on entrepreneurship and creativity Table 3.2 The traditional activity of the three types of organizations and the activities expected by modern innovation policies Activity

Type of organization University Government Firm

Education and research Public infrastructure and service Product development and production for profit

O (o) (o)

(o) O (o)

(o) (o) O

Note:  O: three types of organizations, (o) activities ex­pected by modern innovation policies.

described in Table 3.2. The traditional activities of the types of organizations are marked with an O. The consequence of innovation policies is that actors of the three organizational types partly should expand their activities to the fields traditionally upheld by the other types of actors. A successful fulfilment of these expectations demands new strategies for combining the organization’s core activity, O, with the new activities (o) that it, with few exceptions, has not been involved with previously. From a social capital point of view this means that, in order to support this cross-­ sectoral interaction, new links across sectors need to be formed and new norms and values need to be established.  The role of bonding, bridging and linking social capital It has been argued that ‘bridging social capital has a larger (positive) impact on economic growth than bonding social capital’ (Beugelsdijk and Smulders 2009). However, as pointed out by Westlund and Bolton (2003), such a claim is very dependent on the context and the measures being used for bonding and bridging social capital, respectively. It can easily be shown that what is bridging social capital at one (spatial or organizational) level is bonding social capital at another level. Take for example the social links between the researchers of two separate departments of a university; from the departments’ perspective, these links are bridging, but from the university’s perspective, these links are bonding links within the university. The links between inhabitants of two different neighbourhoods in a city are bridging from the neighbourhoods’ perspective but bonding from the city’s perspective, and so on. Regarding the measures of bonding and bridging social capital, it is of course possible to find measures of both bonding and bridging that are more or less connected to economic growth and thus give stronger or weaker – or even negative – impacts. In our view, it is not a question of whether bonding or bridging social capital has a stronger

Creativity as an integral element of social capital  ­71 impact on economic growth, but to realize that for each (organizational or spatial) unit there exists an optimal combination of bonding and bridging social capital when it comes to its impact on economic growth. When it comes to linking social capital, the vertical relationships between actors with different possessions of power, it is not possible to just state that ‘the more social capital, the better for economic growth’. What matters are the qualities of the linking social capital. The linking social capital that brings social cohesion and stability should in ‘normal’ market democracies be considered as positive for economic growth since cohesion and stability decrease uncertainty, which in its turn facilitates investment decisions. In addition, the function of linking social capital that facilitates access to resources, ideas and information between grassroots and decision-­makers should play a positive role in growth. There are, however, cases in which linking social capital might act as an obstacle for economic growth. From a Schumpeterian perspective, the path-­breaking innovations that lay the foundation for long periods of economic growth also bring ‘creative destruction’ to obsolete combinations of production factors. However, it is reasonable to assume that also obsolete formal and informal institutions (i.e. in the latter case social capitals) are being threatened by the potential path-­breaking innovations.8 If the new, revolutionary combinations of production factors threaten the dominating actors of the existing linking social capital in an economy, these actors have strong incentives to prevent the breakthrough of the new technology. Also from a non-­Schumpeterian perspective it should be recognized that certain general hierarchical relations between actors (i.e. linking social capitals) might contribute to or coexist with conformity, lack of tolerance of non-­established behaviour, even censorship, and ‘too much’ stability. In these cases, the linking social capital functions as a protector of obsolete vested interests that stand in the way of the creative thinking and activity, entrepreneurship and innovation that new actors can contribute and that results in economic growth (cf. Section 3.5 of this chapter).

3.3  CREATIVITY AND CREATIVE PROCESSES9 3.3.1  What is Creativity? Törnqvist (2011) maintains that the word ‘creativity’ derives from the Latin verb creare, but its use in modern vocabulary is quite recent. Citing the Oxford English Dictionary, he states that it first appeared in a book about dramatic literature (Shakespeare) in 1875 and that it appeared in the Francophone countries much later, that is, after world war two. In recent

72   Handbook of research on entrepreneurship and creativity decades, however, the literature on creativity has exploded. A search on Google Scholar on the word ‘creativity’, for instance, yields more than 1.2 million hits, of which more than half pertain to articles and work dated 2000 and later.10 Creativity is difficult to define, measure and narrow down. Without exaggerating, one can say that there are as many definitions and conceptualizations as there are papers and books on the concept. Some examples of conceptualizations are as follows (Rhodes 1961; Im 1999): ●

Creativity refers to the personality traits of individuals that facilitate the generation of new ideas. ● Creativity is the process of generating new ideas. ● Creativity is the outcomes of creative processes. ● Creativity regards milieus conducive to new ideas and behaviour. Historically, studies of creativity have focused on highly successful individuals in the arts as well as great inventors, such as Thomas Edison and Alexander Graham Bell. Therefore, creativity has often been associated with the arts and exceptionally imaginative and gifted individuals developing new technology with a (possible) industrial use. Current work has a broader perspective, and focuses on creativity as something that is economically valuable, team-­based, observable and learnable (McWilliam 2007). Boden (2004, p. 1) defines creativity as ‘the ability to come up with ideas that are new, surprising, and valuable’. This definition affords a broad perspective and emphasizes that creativity spans much more than the creation of cultural artefacts, expressions and radically new technology. Creativity is instead an ability of individuals, or groups of individuals, to generate ideas, which are perceived by relevant specialists to be new and useful for other creators, consumers and/or producers. 3.3.2  Creative Processes and the Sources of Creativity Closely connected to any discussion of creativity is the notion of creative processes at the micro level; that is, how creativity comes about at the level of individuals or at the level of small teams of individuals working together.11 Our understanding of creativity at the micro level is as yet rather limited. There have been numerous studies attempting to get a grip of the creative process that have employed laboratory studies as well as detailed examinations of historical accounts of major discoveries of men like Newton, Darwin and Einstein, but the underlying mechanisms of ­illumination remain elusive (Schilling 2005). Some aspects of creative processes may be understood by elucidating

Creativity as an integral element of social capital  ­73 key characteristics of the human brain. Andersson (1985a) emphasizes a number of attributes of the human brain that pertain to creativity and creative processes. These include the human brain’s capacity to ● ● ● ● ● ● ●

use heuristic reasoning, such as to associate ideas, to formulate problems, to be perceptive, to discover, and so on; remember important facts and theories; detect deep structures in a system of overlaid and interdependent structures; detect and use ambiguity and manifoldness such as the ability to deal with seriously non-­linear psychological processes; appreciate paradoxes and surprises; use and react upon experienced disequilibria; use fundamental uncertainties and structural instabilities.

There is indeed a long tradition in creativity research to focus on individual cognitive characteristics and traits that are associated with creative outcomes (Sternberg 1985; Tardif and Sternberg 1988; Glynn 1996). The bulk of studies on creativity have put the individual at centre stage (Montuori and Purser 1996), which may be explained by the traditional focus on ­artistic and inventor ‘geniuses’ as prime examples of creativity. Modern work on creativity emphasizes the role of interactions between people and combinations of knowledge, ideas and information, and more generally the social dimension of creativity. In the classic paper on Creativity and Regional Development (Andersson 1985b), Åke E. Andersson argued that understanding creativity requires a discussion of four related concepts: (i) information, (ii) knowledge, (iii) competences and (iv) creativity. He provides the following definition of each (ibid, p.13): ●

Information: the most elementary concept with very limited structure and can consequently be disaggregated and aggregated without losses. ● Knowledge: structurally ordered information. One may view information as variables, whereas knowledge is a set of equations containing these variables. Concepts, ideas and patterns are subsets of knowledge. ● Competences: embodied knowledge, which means that competence is knowledge regulated by the human body in its relation to other humans, machines and the environment. ● Creativity: the concept with the highest order. Creativity presumes a capacity to order and reorder information with the aid of a ­knowledge system.

74   Handbook of research on entrepreneurship and creativity Based on these concepts, Andersson (1985b, p.13) concluded that ‘the creative process is synergetic and dynamic. This implies that information, knowledge, and competence are brought into an extensive interaction with each other in order to fashion new knowledge or competence’. This characterization of creative processes emphasizes that they involve both mental and social dimensions. The mental dimension refers to individuals’ capacity to combine information and knowledge from different sources and contexts to create something new. The social dimension is reflected in that social interactions – that is, interaction between people – are a means by which individuals are exposed to new information and knowledge that can be combined with their existing information and knowledge of an individual or group of individuals. Andersson (1985b) provides an example of how Gutenberg solved the problem of finding a simpler method to replace the laborious carving of letters in wood in the development of the printing process. Gutenberg struggled with solving this issue for a long time, but his accumulated competence in printing technology was not sufficient. Citing Koestler (1975), Andersson (1985b) describes how it was not until Gutenberg interacted with workers and technicians in the wine industry and saw the wine-­ pressing technique that he found out how to do it: ‘when the possibility to print with lead was combined with the old regional wine pressing competence the printing process could be created’ (ibid, p.15). This example illuminates that creativity is much about combining existing knowledge, information and competence from different contexts, and that this leads to discovery of new ideas or concepts, or new associations between existing ideas or concepts.12 This means that there is a strong connection between creative processes and Schumpeter’s (1934) notion of innovation as ‘novelty by combination’. The idea that combination of information and knowledge from different contexts is important for creativity is actually embedded in the classic writings of Adam Smith. In arguing for the role of specialization in stimulating productivity, Smith implicitly remarks that specialization might limit creativity ([1776] 1937, p. 734): ‘[t]he man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same. Or very nearly the same, has no occasion to exert his understanding or to exercise his invention.’ He further maintains, ‘those who are called philosophers or men of speculation, whose trade is not to do anything, but to observe everything; and who, upon that account are often able of combining together the powers of the most distant and dissimilar objects’. Karlsson (2011) argues that Smith means to say that persons whose tasks are ‘not to do anything’ are theorists, and that when Smith records that such a person observes everything, the meaning is that he or she must talk

Creativity as an integral element of social capital  ­75 to many different people. The observation that the same person is good at ‘combining together’ additionally implies a superior ability to combine disparate and dissimilar knowledge. Almost 150 years later, Alfred Marshall (1890, p. 225) elaborated on Smith’s insights by describing the process by which knowledge variety stimulated the emergence of new ideas: ‘[I]f one man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus becomes the source of further new ideas.’ This again associates to Schumpeter’s (1934) notion of ‘novelty by combination’. Combination and reorganization of existing ideas and knowledge are thus fundamental in creative processes, and this has been labelled ‘bisociation’ (Koestler 1964). The scope for bisociation is greatest where there can be interactions between people, and exchange and dissemination of information and knowledge in heterogeneous groups. The influence of various contextual factors, including the social environment, on individual creativity has been documented by, for example, Amabile (1988) and Amabile et al. (1996). Woodman et al. (1993) stress that the group constitutes the social context within which creative behaviour occurs, and Hargadon and Bechky (2006) present evidence that many creative solutions are the product of collective creative processes. This reinforces the argument of a social dimension of creativity and creative processes. Combining and reorganizing existing ideas and knowledge of course requires that individuals and groups have absorptive capabilities; that is, an ability to recognize, assimilate and evaluate information, ideas and concepts (cf. Cohen and Levinthal 1990). In the previous example of Gutenberg, for instance, he needed to absorb, assimilate and evaluate the wine-­pressing technique in relation to the context of his own problem with the printing press. Törnqvist (2011, p. 11), for instance, states, ‘skilled specialists are in a position to understand the significance of an everyday experience only after having devoted a great deal of thought to a problem and performed many experiments’. In line with this, Koestler (1964, p. 95) rightly emphasizes capacities to ‘perceive . . . a situation or an event in two habitually incompatible associative contexts’ in creative processes. Thus, the capacities to select, re-­shuffle, combine or synthesize already existing facts, ideas, faculties and skills in original ways may be understood as essential for creativity.13 3.3.3  The Role of the Local Milieu Context for Creativity A main conclusion from the previous section is that the social dimension of creativity is important. Social interactions, that is, interaction between people, are often needed to be exposed to and to absorb new ­information and knowledge that can be combined with the existing information and

76   Handbook of research on entrepreneurship and creativity knowledge of an individual or group of individuals. It follows that the characteristics of the local environment in which people operate may play an important role in fostering creativity. The reason is that the local environment in many cases defines the ‘interaction arena’ and this differs greatly in terms of the variety in experiences, knowledge bases, education, and so on, of its inhabitants. The local environment may thus be claimed to have a strong influence on the variety of ideas and perspectives to which individuals are exposed. We introduce the established concept of local milieu to characterize all the resources available for every economic actor in a given locality, such as a municipality, a town, a city or even a district within a city. The milieu approach mainly tries to analyse and explain how a good regional endowment in terms of universities, research laboratories, public support organizations and firms, if combined with certain efficient means of inter-­ organizational interaction and coordination, can lead to highly positive regional outcomes, not least in terms of creativity (Fromhold-­Eisebith 2004). It is a generally accepted fact that some local milieus are more creative than other local milieus independent of which field of creativity we are talking about (Storper 1997; Florida 2002). Creativity is concerned with thought and action (at the level of both the individual and the group) directed to the generation of novel insights and perceptions that may or may not have tangible significance (Scott 2010). What, then, makes a local milieu creative? In addition, what is the role of social capital in this context? For several decades there has been more or less an agreement in the literature that exceptional creativity calls in particular for opportunities to learn from diverse knowledge bases, partly consisting of tacit knowledge, to bring together habitually incompatible ideas and to combine them in a way that gives deep new insights; that is, to generate novel combinations (Koestler 1964; Simon 1985). Ideas are carried in the minds of people and bringing ideas together demands opportunities for people with different backgrounds to interact face to face. Since we are talking here about incompatible ideas that should be brought together we are not talking about occasional or accidental face-­to-­face interactions but persistent, frequent and varied interactions over longer periods. Interpreting and synthesizing ideas, concepts, information and knowledge involves constant questioning and re-­interpretation through a process of trial, feedback and evaluation that is much facilitated by frequent face-­to-­ face communication. Furthermore, many of the individuals involved have different backgrounds and often do not even share key concepts, which generate a need to develop a common language in order to coordinate the creative sub-­processes. Such persistent and frequent communication can only occur if these persons are located in the same local milieu.

Creativity as an integral element of social capital  ­77 Given the emphasis on the role of interactions between people and exposure to different types of ideas, knowledge and information, it is clear that the local context in which people operate will have a strong influence on creativity and creative processes. Contexts in which there is a great pool of potential interactions with other people with a variation of ideas, knowledge, competence and creative abilities offer the best general opportunities for creativity and creative processes and for the initiation of increasing returns in creative activities. The diversity of people with varying skills, knowledge and competence is of critical importance since it is generally accepted that multidisciplinary teams, by helping individuals overcome the blinders created by their own particular expertise, most efficiently link concepts developed in one technology to problems developed in another (Desrochers 2001). However, the potential for such interactions is a function of a number of underlying factors, since recent research demonstrates that the most dynamic and creative local milieus are those that have both strong local interaction (collaboration and competition among local actors) and strong linkages to other local milieus of knowledge and creativity around the world (cf. Salone and Segre 2012): ●

The local networks of actors. These are the networks where individual, public and private actors interact with each other in different constellations. These networks are embedded in the local milieu through relationships of proximity and social capital. ● The local economic and social milieu, which is made up of immobile and semi-­immobile idiosyncratic resources that have been created partly through long-­term investment and migration processes. These resources are both material (infrastructures, man-­made amenities, etc.) and immaterial (culture, knowledge base, institutions, social capital, etc.). ● The interactions between the local networks of actors, that is, the local ‘buzz’ (Bathelt et al. 2004), which determine to what extent ideas, information and knowledge are diffused between and absorbed within the different local networks. ● The interactions between the local networks of actors and other local, regional, national and global networks, that is, global pipelines (Bathelt et al. 2004), which determine the flows of ideas, information, knowledge, people, firms, goods and services to and from other locations. Against this background, it seems safe to claim that the local milieu is critical for creativity and creative processes. The most successful ­creative

78   Handbook of research on entrepreneurship and creativity local milieus are those that combine a rich local milieu, where ideas, concepts, information and knowledge circulate with relative ease across disciplinary and organizational boundaries, with a high degree of openness and interaction with other dynamic and creative local milieus. The local milieu is the nexus of exchange where individuals with different skills, knowledge, competences and experiences belonging to different local as well as non-­local networks interact in different ways to generate new ideas, new concepts, new knowledge and new inventions that might be turned into innovations. It is important to observe that the local milieu is not an active creative agent but that it provides the components and resources of the local setting for creative processes. In line with the resource-­based view, we can claim that the performance of a local milieu in terms of creativity depends on its resources and capabilities (Wernerfeldt 1984; Barney 1991). Valuable, rare, non-­imitable and non-­substitutable resource configurations lay the foundation for the creative capabilities of a local milieu. However, the  world is continuously changing and the local milieus face the risk that the old resource base will become obsolete, leading to a declining creative performance. Therefore, the resource configurations need to be renewed regularly. The framework of dynamic capabilities offers a foundation on which to assess the capabilities needed in the transformation process of a local milieu (Teece et al. 1997). The dynamic capabilities of a local milieu can be defined as those processes that use resources, especially the processes that integrate, reconfigure, gain and release resources to match the changes locally and in the surrounding world. Thus, the dynamic capabilities are the organizational and strategic routines by which local milieus achieve new resource configurations for creative processes as the local and external conditions change. Unfortunately for the local milieus, many of these routines are not controlled by the responsible policymakers but by firms and households. Furthermore, local milieus may be confronted with problems of adjustment due to inertia or negative lock-­in effects (Grabher 1993). We might, in line with Camagni (1991), define a creative local milieu as the set or the complex network of mainly informal social relationships in a limited geographical area, often determining a specific external ‘image’ and internal ‘representation’ and sense of belonging, which enhance the local creative capability through synergetic and collective creative processes. However, this definition is very general and, based upon what we have seen in the literature, we maintain that the following characteristics of local milieus tend to stimulate learning and creativity: ●

Diversity in terms of ideas and specialized knowledge and competence in the local milieu stimulates creativity (Jacobs 1969; Saxenian

Creativity as an integral element of social capital  ­79

● ● ● ● ●

2000; Desrochers 2001). Diversity is not the absence of specialization, but rather the presence of multiple specializations based on comparative advantages at the level of economic agents (Läppälä and Desrochers 2010): ● Ordinary creativity is stimulated by diverse but semi-­related ideas and specialized knowledge and competence; that is, ideas, knowledge and competence with sufficient cognitive proximity for easy communication: ‘novel combinations are promoted by a constellation of separate, relatively small, weakly connected, spatially proximate units in complementary activities’ (Noteboom 1999, p. 144). ● Exceptional creativity, which is rare, is stimulated by diverse but unrelated ideas and specialized knowledge and competence. ‘It would therefore seem plausible to believe that the local presence of unrelated activities might not only enhance the capacity of individuals to see new possibilities, but also to act upon them’ (Desrochers 2001, p. 387). Size stimulates creativity, since the larger the local economic milieu, the greater the variety of skills, knowledge, experiences and competences and the larger the possibilities to form the right multidisciplinary teams. There are also more opportunities and lower costs for interaction and the diffusion of ideas, information and knowledge in large local milieus. Density, that is, a high accessibility between people, which generates proximity among people, stimulates creativity by making face-­to-­ face interaction less costly and less time-­consuming (Gordon and Ikeda 2011). Openness and tolerance to new ideas and cultural diversity stimulate creativity (Saxenian 2000; Florida 2002). Well-­developed formal and informal institutions that clarify ­property rights and reduce transaction costs stimulate creativity. A high exposure to imported ideas, knowledge and products stimulates creativity. A high in-­migration of people with diverse ideas, knowledge, skills and competence stimulates creativity (Saxenian 2000). Market access stimulates creativity. This is a general observation but is of course most obvious in the arts sector.

Even if we at least partly understand what factors in the local economic milieu stimulate creativity, it is by no means easy through policy measures to create creative local milieus. Certainly, policymakers can invest in infrastructures, amenities, public services, R&D and higher education.

80   Handbook of research on entrepreneurship and creativity However, at the same time we must acknowledge that much of the local development is path-­dependent, often initiated by some historical event, that is, chance, and a function of migration and investment decisions by individuals and firms, that is, selection processes. Path dependency might create difficulties for local milieus to adapt to changed external conditions due to a limited learning capability when faced with new circumstances. Thus, after a period, local milieus may become victims of their earlier success and lose their creative capacity for a variety of reasons. Policy decisions can be instrumental for where the flows will go but at the same time there are numerous examples of such policy initiatives that have totally failed and it is very difficult ex ante to know which initiatives will be successful and which will fail, since the locational pattern of creative processes is unpredictable. 3.3.4  How is Creativity Materialized? Creativity can be materialized in a variety of ways. We will here focus on creativity as captured by entrepreneurship and innovation. It is common to relate creativity to innovation. Amabile et al. (1996, pp. 1154–1155) state: ‘All innovation begins with creative ideas . . . We define innovation as the successful implementation of creative ideas within an organization. In this view, creativity by individuals and teams is a starting point for innovation; the first is a necessary but not sufficient condition for the second.’ Creativity is thus typically used to refer to the act of producing new ideas, approaches or actions, while innovation is the process of both generating and applying such creative ideas in some specific context. Despite this difference in the definitions, innovation is usually considered an accepted proxy for creativity and creative processes. Individuals and organizations introducing innovations, as well as regions in which such processes take place, are typically considered creative. In the economic research literature, definitions of innovations include: ‘putting new products and services on the market or new means of producing them’ (Bannock et al. 1992), ‘the economic application of a new idea’ (Black 1997), ‘the implementation of changes in production . . . [or] the introduction of new types of commodities on the market’ (Suranyi-­Unger 1982). These definitions stress an important feature of an innovation, namely that it has to be used on the market to be classified as an innovation. Thus, it has to be involved in a commercial transaction.14 Thereby, innovation share features with modern definitions of creativity, which emphasize usefulness, value and novelty as important characteristics of creativity. Entrepreneurship can be described as ‘an activity that involves the

Creativity as an integral element of social capital  ­81 discovery, evaluation and exploitation of opportunities to introduce new goods and services, ways of organizing markets, processes and raw materials’ (Shane 2003, p. 4). An entrepreneurial opportunity is a situation which enables this activity (Shane and Venkataraman 2000; Casson 2003) and typically consists of a combination of ideas, knowledge and actions (cf. Sarasvathy et al. 2003). Knowledge is perceived as the primary basis of new firms and it plays a fundamental role in the recognition and capitalization of entrepreneurial opportunities. Schumpeter’s definition of entrepreneurship placed an emphasis on innovation by novel combinations. In his writings, innovation may refer to new products, new production methods, new markets or new forms of organization. The idea of ‘novelty by combination’ links up the discussion of the role of variety of knowledge and ‘social dimension’ for creativity. Entrepreneurs that, for instance, combine existing knowledge and/or exploit entrepreneurial opportunities to produce novelties on the market can certainly be described as creative, or at least as initiating creative processes. Note also that as entrepreneurs bring in novelties to the market, either in the form of new firms or existing firms, entrepreneurship also conforms to the argument that creativity should also reflect usefulness, value and novelty. In summary, both entrepreneurship and innovation are measurable phenomena at the individual and collective levels that can be claimed to reflect creativity and creative processes.

3.4 SOCIAL CAPITAL AS AN EXPLANATORY FACTOR FOR INDIVIDUAL AND COLLECTIVE CREATIVITY 3.4.1  The General Importance of Social Capital for Creativity In the previous section, we provided arguments for the role of the local milieu in creative processes, as they constitute ‘interaction arenas’. The role of ‘interaction arenas’ was derived from the social dimension of creativity. We also provided a discussion of a number of characteristics of local milieus that should foster creativity. We begin this section with a discussion of social capital as a milieu characteristic of importance for creativity in general, and then go on to discuss the relationship between social capital and collective and individual creativity, respectively. That people are located in the same local milieu is no guarantee that interactions, in particular face-­to-­face interactions, will occur. There is also a need for arenas and meeting places where such interactions can occur, as well as networks, norms, attitudes, incentives, resources, ­information,

82   Handbook of research on entrepreneurship and creativity knowledge, competence, and so on, which create a foundation for meaningful interactions. It is with regard to these latter aspects that social capital comes into play. Spatial proximity and social capital are essential because together they stimulate a process of collective learning, which lowers transaction costs and encourages coordination between economic actors (Boschma and Lambooy 1999). This is mainly achieved through, (i) the mobility of human capital as the carrier of (often tacit) knowledge; (ii) the transfer and feedback of information via dense (mainly informal) networks of local actors; and (iii) a common local culture of trust, that is, social capital, based on shared practices and rules. This implies that the ideas, information and knowledge externalities that are critical for creative processes are indeed localized geographically. Social capital is expected to foster stronger inter-­firm ties, certain interpersonal dynamics (primarily of trust and reciprocity), and a common context, language and code of behaviour of individuals that are integrated in the structure of the local milieu (e.g. shared terms and experiences) (Lesser 2000). It follows that social capital can be imperative in stimulating creativity, as common norms, shared conventions, rules, values and attitudes are vehicles for learning, the development of communications and common knowledge interpretations. However, as emphasized by the discussion in the previous section, the local accumulation of social capital is not a sufficient condition for the emergence of comparative creative advantages. The local accumulation of a varied human capital, (intangible, un-­coded) knowledge, information linkages, network externalities (technological spillovers) and supportive institutions of the right and complementary kind must support it. A further argument for social capital is provided by the literature on the role of tacit knowledge in innovation processes, which we recognize should reflect creative processes. In contrast to explicit knowledge, that is, easily codified and ‘disembodied’ knowledge, tacit knowledge is knowledge that cannot be transformed to explicit knowledge. Skills and routines are examples of tacit knowledge (Lorenzen 1998). Tacit knowledge tends to coexist in very different activities such as scientific research and traditional manufacturing production (Grimaldi and Torrisi 2001). This can be explained by the fact that knowledge is inclined to always be partially tacit in the minds of the creators (Saviotti 1998). Hence, the importance of formal education does not oppose a significant role of tacit knowledge. Lawson and Lorenz (1999) affirm that tacit knowledge has a role to play in innovation processes in high-­technology sectors, which generally use formal knowledge and R&D extensively. The reasons given for the role that tacit knowledge plays are many. First, it is suggested that experiences, skills and know-­how, which by defi-

Creativity as an integral element of social capital  ­83 nition represent tacit knowledge, are without doubt important inputs in an innovation process. Secondly, tacit knowledge seems to be important to keep actors up to date and to share knowledge and in development processes. The rationale for this is that new knowledge is not devised codified (Saviotti 1998). The degree of knowledge explicitness is low in the development stage of new knowledge, such as the development process of Gutenberg’s printing technology. Lawson and Lorenz (1999) discuss the relative importance of tacit knowledge in different phases of an innovation process. They differentiate between four stages. The first entails sharing of tacit knowledge, the stage in which many of the new ideas are generated. In the second, the ideas become articulated and can be formulated more precisely; that is, the ideas are made explicit. After the second stage, the explicit ideas are combined with other known technologies and methods and it is in this third stage that prototypes are made. The third stage stands for the process in which explicit knowledge is combined. In the fourth, a new product is produced. New routines and skills, that is, new tacit knowledge, are developed upon which new knowledge may be created. Thus, the knowledge used in the early phases of an innovation process is mostly tacit and is important in order to keep up with other firms’ developments, such as new ideas on technical solutions and so forth. The role of social capital in transmission and exchange of tacit knowledge is made clear in that it necessitates that both the receiver and the transmitter are familiar with the ‘code’ of the tacit knowledge. Reciprocal understanding of codes demand prolonged interaction between the transmitter and the receiver. Lawson and Lorenz (1999) maintain that such elements may be developed through strong local institutions, intensive collaboration between firms or labour mobility; that is, social capital. The literature on the role of common conventions and rules shared by actors, that is, informal institutions, for the smoothness of knowledge transfers and spillovers is huge (see for example Maillat 1995; Storper 1995). In principle, this strand of literature tries to give an in-­depth explanation of the emergence and importance of local cultural institutions which, according to Lawson and Lorenz (1999), may generate shared tacit knowledge. It is maintained that not only geographical proximity but also relational proximity plays a prominent role. The latter encompasses relations developed by integration of firms and socio-­cultural homogeneity, and can be related to Storper’s (1995) untraded interdependencies and Maillat’s (1995) atmospheric externalities. Thus, common rules and conventions bring about mutual trust, which diminishes uncertainties, stimulates and facilitates interaction. As Harrison (1996, p. 235) writes: ‘[B]y increasing the likelihood of familiarity, proximity reduces the incidence of opportunistic behaviour by suppliers, customers and even competitors, thus facilitating learning.’

84   Handbook of research on entrepreneurship and creativity Finally, it should be underscored that it is not only the ‘tacit’ or explicit similarity between actors that creates the base for a favourable social capital. Social capital is also based on actors’ complementarity. Expressed in network terms, this means that ‘without heterogeneous ­characteristics . . . the nodes would be identical, would lack relative deficiencies and surpluses of different factors, and would therefore have no cause either to give or to receive flows in a network. Exchange in a network consists of flows of factors of which certain nodes have a relative surplus and others have a relative shortage. As long as the aggregate returns exceed the costs of the flows, exchanges within the network will continue. A plausible hypothesis might be that every network may require a specific combination of ­homogeneous and heterogeneous characteristics in its nodes for it to arise and survive’. (Westlund 1999, p. 104). 3.4.2  Social Capital and Collective and Individual Creativity15 In what way do different types of social capital contribute to individual and collective creativity? Below we discuss these issues using entrepreneurship and innovation as processes reflecting creativity. Expressed in simple terms, the social capital that promotes entrepreneurship and innovation consists of networks and links between actors that are entrepreneurial and innovative.16 This means that it is the actors’ values – or, expressed in other terms, the cognitive social capital of the actors – that are the decisive factor for whether social capital contributes to creativity in the forms of entrepreneurship and innovation, or not. In this perspective, it is also the actors’ values that mainly decide which other actors to link to and with which networks to connect. If creative actors form networks of likeminded actors, they simultaneously form a social capital that stimulates further creativity within the networks. From the sectoral perspective it can be argued that it is the social capital that promotes creativity in the business sector that has the strongest influence on economic growth (Westlund and Adam 2010), while creative-­supporting social capital in the public sector, universities17 and the third or voluntary sector is of less importance for economic performance. However, such a conclusion is not in full conformity with the ideas of cross-­sectoral growth policies, as for example those of innovation systems and the triple helix. First, creativity that leads to innovations in the non-­business sectors might have indirect effects on the economy: higher efficiency in the public sector can result in lowered taxes, which stimulates the economy; new organizations and methods in the third sector can reduce social problems, save public expense and increase the supply of labour, and so on. Secondly, as discussed in the former subsec-

Creativity as an integral element of social capital  ­85 tion, the theories of innovation systems postulate that knowledge spillovers and other creative exchange of resources across sectoral borders contribute to innovation and economic growth. These cross-­sectoral spillovers and more organized exchange of resources are facilitated if the actors of each sector belong to cross-­sectoral social networks and if they understand and accept values and norms that occur in sectors other than their own. What we have said so far in this section is related to creativity as a collective phenomenon, that is, creativity because of collective values, norms and attitudes, being exchanged in social networks. As social capital itself is a collective phenomenon, it is not hard to find arguments that it has an impact on collective creativity. A more thorny issue is how social capital is related to individual creativity. Yet, a good example of how social capital may influence individual creativity is given in the literature on how the role of entrepreneurship culture, understood as a subset of social capital, may foster individuals to start new firms, that is, to become entrepreneurs. As argued previously, this is a process with clear associations with creativity. In her well-­known book, comparing California’s Silicon Valley and the Route 128 corridor outside of Boston, Anna Lee Saxenian (1994) analyses why the two regions embarked on such different development paths. While both regions had a historically strong concentration of knowledge-­ and technology-­intensive sectors and bright prospects for a resilient economic development, the regions developed along different trajectories after the crisis period in the mid 1980s. Silicon Valley continued to flourish whereas Route 128 declined. Saxenian maintains that one important explanation for the divergent performance of the regions is rooted in differences in local social capital pertaining to entrepreneurship; henceforth we may call this ‘regional entrepreneurship culture’. The following statement from an entrepreneur with experience from both regions may serve as a case in point (Saxenian 1994, p. 63): In Boston, if I said I was starting a company, people would look at me and say: ‘Are you sure you want to take the risk? You are so well established. Why would you give up a good job as vice president at a big company?’ In California, I became a folk hero when I decided to start a company. It wasn’t just my colleagues. My insurance man, my water deliverer – everyone was excited. It’s a different culture out here.

A Swedish example of such a kind of locally embedded entrepreneurship culture is the so-­called ‘Gnosjö-­spirit’ (cf. Wigren 2003). This spirit is widely recognized in Sweden and is even listed in the Swedish National Encyclopaedia. It is described as follows therein (author’s translation):

86   Handbook of research on entrepreneurship and creativity The Gnosjö spirit refers to the enterprising culture that prevails in the municipality of Gnosjö and its neighbors in the county of Småland. In this region, self-­employment is a way of life that dominates the local community, which for instance implies that the local authorities, banks, and trade unions conform their way of working to the way the enterprises work.

This reflects the quite common argument that there are locally embedded values and attitudes towards entrepreneurship, exerting a strong influence on the rate and level of entrepreneurial activity in regions (Westlund and Bolton 2003). The concept of regional entrepreneurship culture aims to capture such phenomena, and refers in a general sense to the level of social acceptance and encouragement of entrepreneurs and their activities in a region (Fritsch and Wyrwich 2012). There is strong evidence in the literature that such a kind of entrepreneurship culture, as a subset of social capital, is important in promoting individuals to start new firms. A main piece of evidence is that rates of new firm formation across regions are highly persistent (Andersson and Koster 2011). Why is persistence of regional variations in new firm formation rates often interpreted as evidence of entrepreneurship culture? Culture is by definition a phenomenon that changes in slow processes. Williamson (2000) outlines different types of institutions and their time scale of change. He argues that social ‘embeddedness’ is the highest level of institution and that ‘this is where the norms, customs, mores, traditions, etc., are located’ (p. 596). These kinds of informal institutions change very slowly over centuries or millennia. They also impose constraints on other (formal) institutions as well as the general workings of the economy. Resource allocation and employment in the economy change continuously, and on a much faster time scale than institutions. A regional entrepreneurship culture may be defined as spatially localized informal institutions (i.e. social capital) that have to do with the general social acceptance and encouragement of entrepreneurs and their activities in a region. In view of this, the main argument is that if informal institutions such as regional entrepreneurship cultures are a historically rooted component part of regional social capital and evolve in slow processes over time, so should the phenomena dependent on them. What kind of social capital is relevant in the context of entrepreneurship cultures that stimulate individual creativity in the form of new firm formation? The literature emphasizes social capital that stimulates learning from role models and learning from the environment. The literature typically emphasizes social capital that stimulates ‘entrepreneurial learning’, and the role of imitation and entrepreneurial role models in such processes. Recognizing and acting upon business opportunities are inherently processes at the individual level, but the context in which these processes mani-

Creativity as an integral element of social capital  ­87 fest themselves is important in shaping individual responses (Verheul et al. 2001). Guiso and Schivardi (2005) argue that entrepreneurial talent is not innate and maintain that when more entrepreneurs are active in a region, people will have greater opportunities to acquire entrepreneurial skills. According to their framework, an individual’s accumulation of entrepreneurial skills is partly a function of the regional intensity of entrepreneurs. Entrepreneurial role models have indeed been shown to have a positive impact on the propensity of people to start new firms (Blanchflower and Oswald 1998; Aldrich 1999; Arenius and Minniti 2005). Knowing an entrepreneur and having an entrepreneur in the family are good estimators of entrepreneurship. Entrepreneur role models not only assist in developing entrepreneurial skills, they are also a sign of the social acceptability of entrepreneurship. In addition, existing entrepreneurs may serve as bellwethers of certain business opportunities that imitative entrepreneurs may follow (Baumol 1993). As such, this means that role models also influence the recognition of opportunities. At the regional level, a wide availability of role models may thus generate ‘demonstration effects’, such that ­potential entrepreneurs are stimulated to develop an idea in the form of a new firm.

3.5 CREATIVITY – AN ELEMENT OF SOCIAL CAPITAL? In this chapter, we have been analysing creativity and social capital, and their role in economic performance. We have argued that social capital can contribute to, or counteract, creativity – and that creativity changes the social capital of existing domains and even contributes to the emergence of new domains with new social capitals. However, is it also so that creativity is a component part of certain social capital? Our answer is yes – with emphasis on certain. If creativity can form a component part of social capital, this cannot be a part of the social capital that Putnam has made well known; that is, the social capital of stable, homogeneous networks with stable norms and values that bring stability and make people feel safe and trust each other. Putnam (1993) showed that variations in this type of social capital historically were related to a positive economic development among the regions of Italy. Other studies have also found support for this relationship. However, as shown by the meta-­study of Westlund and Adam (2010), the correlations between the Putnamian, stable type of social capital and countries’ and regions’ economic performance are far from unanimous. Also Putnam’s (2000) own studies of the weakened social capital in the

88   Handbook of research on entrepreneurship and creativity US cast doubt over the general positive relationship between stable social capital and economic growth. In spite of several decades of weakened social capital (of the Putnam type), the US showed a very strong economic growth in the 1990s. It is a fact that Putnam’s results can even be interpreted as social capital being negative for economic growth: the American regions that scored the highest social capital rates were homogeneous, stagnating, depopulating regions with limited immigration in the last generations. Conversely, expanding metropolises like Los Angeles showed a very low social capital in his measures. Our interpretation of this problem is that Putnam’s homogeneous social capital in general stood in a positive, mutual, self-­reinforcing relationship with economic growth during the late industrial period, which in most developed countries lasted up to the 1970s. During this period, economic growth was built on mass production based on improvement of old innovations through increased capital intensity of production, without any need for new, path-­breaking innovations. The decline of the industrial society and emergence of the knowledge economy have changed these conditions completely. Computerization and other applications of digital technology together with other emerging technologies have brought creativity, expressed in the form of entrepreneurship and innovation, back as an essential engine of economic growth (Westlund 2006). Thus, the social capital that promotes economic growth in the knowledge economy is of a different type from the social capital that Putnam ‘discovered’. In the knowledge economy, innovation has become the key ingredient for success in the increasingly competitive economy – and innovation is the result of creativity. The social capital that promotes growth in the knowledge economy is consequently not the social capital of stable, homogeneous networks and norms and values. Instead, it is a social capital of flexible, much more heterogeneous networks in which creativity, flexibility, diversity and tolerance are important norms and values. This line of ideas corresponds to those of Florida (2002). Putnam’s social capital has been criticized by, among others, Florida (2002) for being based on obsolete values that advocate a stagnated society with too hard social control. On the other hand, Florida’s uncritical views of flexibility have also met criticism. For example, Baris (2003, p. 44) points out that Florida glorifies the contracted-­out economy and its labour-­market flexibility, without recognizing the other side of the coin: the temporary labourers and day-­labourers that are forced to be flexible. Without taking a position in these discussions about what is desirable, we conclude that the social capital that supports economic growth in the knowledge economy of today is a social capital in which creativity is an essential component part.

Creativity as an integral element of social capital  ­89 Creativity’s position as norm, value or attitude of the knowledge economy’s social capital also has spatial aspects. While the last decade of the manufacturing-­industrialized economy was characterized by counter-­ urbanization, that is, shrinking population of metropolitan regions and population increase of smaller centres and rural areas, the knowledge economy has been characterized by an urban revival. The great metropolitan regions of the world are also the main hubs of the knowledge economy (Kourtit and Nijkamp 2012). The combination of big, local markets, concentration of human capital and creative people, and a social capital of diversity and flexibility, seems to make the metropolitan regions the ideal centres of the knowledge economy. The role of centres at lower levels in the urban hierarchies and of rural areas is mainly determined by how these places and areas are able to connect to the metropolitan hubs (Westlund and Kobayashi 2013). Another spatial aspect that must not be forgotten is the role of the Internet as a space for virtual social capital. Traditional research, both in social capital and in spatial sciences, has very much a traditional view of space in which (time) distances and transportation/communication costs are crucial factors for (social) network-­building. Correspondingly, face-­to-­ face contacts are considered decisive for social capital creation as well as for creativity. However, it is hard to deny that the Internet and all its social applications have created a new, virtual space for social capital in which physical distance does not matter. There is a growing body of research on how this new, virtual social capital relates to the ‘old’ space-­bound social capital (see for example Ellison et al. 2007). However, the role of this new form of social capital for creativity is still an almost unexplored field of research.

3.6  CONCLUSIONS In this chapter, we have summarized integrated and synthesized literature on social capital, creativity and their impacts on economic performance. We have shown that creativity has obvious connections to social capital as creativity has a social context; it is dependent on exchange of knowledge, ideas and skills between actors, and these processes are affected by the actors’ social capital. Social capital in this way exerts an influence on ­creativity – but not necessarily a positive influence. Depending on the actors of the networks, the types of networks and the values and norms being distributed and reproduced in them, certain social capital can promote creativity while certain social capital might inhibit it. Creativity, on the other hand, also influences the social capital of the actors being involved in or affected by the creative processes. In principle,

90   Handbook of research on entrepreneurship and creativity creativity brings change, and for social capital this means changes in social networks and their actor composition, and changes in the norms, values and attitudes that are being distributed in the networks. Lack of creativity contributes to a stagnated social capital. We have stressed the close relations between creativity, entrepreneurship and innovation. Creativity is a necessary property of the entrepreneur and innovation is the result of entrepreneurship. Just like its possible influence on creativity, social capital can either support or prevent entrepreneurship and innovation. It depends on which networks and which norms dominate the social environments in which the entrepreneurial and innovative ­activities take place. Entrepreneurship and creativity are high up on policy agendas worldwide, whereas creativity and social capital are given considerably less policy attention. The latter may be for many reasons but one is probably the problem in materializing the theoretical concepts in policy action that give results with a direct measurable impact on economic performance. Another reason might be that research on creativity and social capital hitherto has had very little focus on growth policy issues, which means that research so far can come up with logical arguments but has no policy to suggest. This means a great challenge for research in the fields of ­entrepreneurship, innovation, creativity and social capital! Thus, our main conclusion is that there is a great potential in integrating research on social capital and creativity with the research on innovation and entrepreneurship. This potential is not only scientific but indeed also policy-­relevant!

NOTES   1. The two definitions below are taken from http://celestra.ca/top-­10-­creativity-­definitions/ (Last accessed 27.12.2013).   2. Cf. Westlund (2006, p. 45): ‘It can be assumed that the motives for a link-­investment are completely based on economic considerations, but the outcome of this “long-­term” investment is dependent among other things on the social relations between the actors who establish, use and maintain the link. With negative attitudes to the link among these actors, incentives to use the link would be lower, and the link would yield lower returns than in the case of neutral or positive attitudes. Thus, it is in the interest of all the actors who invest in the link or network to establish a positive social capital among its users.’   3. While a majority of researchers dealing with social capital have used the term civil society, it should be noted that Putnam referred to the civic society. In practice, the difference is of course negligible.   4. For overviews, see Westlund and Adam (2010) and Westlund and Li (2014).   5. Another way of describing the bonding and bridging functions of social capital is its features as a ‘glue’ and a ‘lubricant’, respectively (see e.g. Anderson and Jack 2002; Rutten et al. 2010).

Creativity as an integral element of social capital  ­91   6. One exception is Westlund and Calidoni (2010).   7. This subsection is based on Westlund (2006, 2009).   8. For a general discussion on the importance of institutions for economic growth, see for example North (1990) and Williamson (1983). Regarding the relation between social capital and institutions, we regard social capital as being non-­formalized rules, norms and values, while we reserve the term ‘institutions’ for the formalized rules (see Westlund 2006, p. 9).   9. Part of this section draws on Karlsson (2011). 10. The search was made in January 2013. 11. A classic portrayal of the creative process is Wallas (1926), which suggested a model with six steps: (i) preparation; that is, acquisition of the skills, knowledge and information that allow a person to create; (ii) incubation; (iii) intimation; (iv) illumination or insight – the ‘Eureka moment’ of Archimedes; (v) verification; and (vi) communication. 12. New knowledge combinations are, according to Desrochers (2001), accomplished by (i) multidisciplinary teams working within a firm; (ii) employees adding to, or switching, their product line; (iii) individuals moving from one type of production to another; (iv) individuals observing a product/process in another setting and incorporating it into their main activity; or (v) individuals possessing different skills and working for different firms, collaborating with each other. 13. Perkins (1981) further insists that skills like pattern recognition, creation of analogies and mental models, the ability to cross domains, exploration of alternatives, knowledge of schema for problem-­solving, fluency of thought, and so on, are all indicators of creativity as a set of learning dispositions or cognitive habits. Many creativity researchers, such as Simonton (2000), Robinson (2000) and Sternberg (2007), maintain that there are three essential components in creativity: domain-­relevant skills, creative processes and intrinsic task motivation. It is also more often than not claimed that creativity is both a way of thinking ‘associated with intuition, inspiration, imagination, ingenuity and insight’ and ‘novel and appropriate response to an open-­ended task’ (Byron 2007). 14. However, Freeman (1974) points out the twofold meaning of an innovation: ‘the word is used both to indicate the date of the first introduction of a new product or process and to describe the whole process of taking an invention or set of inventions to the point of commercial introduction. 15. Part of this section draws on Andersson (2012). 16. Here we consider only entrepreneurship and innovation that are positive for society, that is, we leave entrepreneurship and innovation in criminal and destructive activities aside. 17. It can of course be discussed whether the university is a sector of its own, like the ­business, the public and the third sector.

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92   Handbook of research on entrepreneurship and creativity Andersson, Å. E. (1985b), ‘Creativity and Regional Development’, Papers in Regional Science, 56 (1), 5–20. Andersson, M. (2012), ‘Start-­Up Rates, Entrepreneurship Cultures and the Business Cycle – Swedish Patterns from National and Regional Data’, in P. Braunerhjelm (ed.), The Swedish Economic Forum Report 2012, Stockholm: Swedish Entrepreneurship Forum. Andersson, M. and S. Koster (2011), ‘Sources of Persistence in Regional Start-­Up Rates – Evidence from Sweden’, Journal of Economic Geography, 11 (1), 179–201. Arenius, P. and M. Minniti (2005), ‘Perceptual Variables and Nascent Entrepreneurship’, Journal of Small Business Economics, 24 (3), 233–247. Bannock, G., R.E. Baxter and E. Davis (1992), The Penguin Dictionary of Economics, 5th Edition, London, UK: Penguin Books. Baris, M. (2003), ‘Review of Richard Florida: The Rise of the Creative Class: and How It’s Transforming Work, Leisure, Community, and Everyday Life’, The Next American City, 1 (1), 42–45. Barney, J. B. (1991), ‘Firm Resources and Sustained Competitive Advantage’, Journal of Management, 17 (1), 99–120. Bathelt, H., A. Malmberg and P. Maskell (2004), ‘Clusters and Knowledge: Local Buzz, Global Pipelines and the Process of Knowledge Creation’, Progress in Human Geography, 28 (1), 31–56. Baumol, W. J. (1993), Entrepreneurship, Management and the Structure of Payoffs, Cambridge, UK: MIT Press. Beugelsdijk, S. and S. Smulders (2009), ‘Bonding and Bridging Social Capital and Economic Growth’, CentER Discussion Paper Series, 27 (2009). Black, J. (1997), A Dictionary of Economics, Oxford, UK: Oxford University Press. Blanchflower, D. G. and A. J. Oswald (1998), ‘What Makes an Entrepreneur?’, Journal of Labour Economics, 16 (1), 26–60. Boden, M. A. (2004), The Creative Mind: Myths and Mechanisms, 2nd Edition, London, UK: Routledge. Boschma, R. A. and J. G. Lambooy (1999), ‘Evolutionary Economics and Economic Geography’, Journal of Evolutionary Economics, 9 (4), 411–429. Bourdieu, P. (1980), ‘Le capital social. Notes provisaires’, Actes de la Recherche en Sciences Sociales, 3, 2–3. Buchanan, J. (1965), ‘An Economic Theory of Clubs’, Economica, 32 (125), 1–14. Byron, K. (2007), ‘Defining Boundaries for Creativity’, keynote presentation at the Creativity or Conformity? Building Cultures of Creativity in Higher Education Conference, University of Wales Institute, Cardiff, 8–10 January. Camagni, R. (1991), ‘Local “Milieu”, Uncertainty and Innovation Networks: Towards a New Dynamic Theory of Economic Space’, in R. Camagni (ed.), Innovation Networks: Spatial Perspectives, London, UK: Belhaven Press, pp. 230–240. Casson, M. C. (2003), The Entrepreneur: An Economic Theory, 2nd Edition, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Coase, R. (1937), ‘The Nature of the Firm’, Economica, 4 (16), 386–405. Cohen, W. M. and D. A. Levinthal (1990), ‘Absorptive Capacity: A New Perspective on Learning and Innovation’, Administrative Science Quarterly, 35 (1), 128–152. Coleman, J. S. (1988), ‘Social Capital in the Creation of Human Capital’, American Journal of Sociology, 94 Supplement, 95–120. Coleman, J. S. (1990), Foundations of Social Theory, Cambridge, MA, USA: Harvard University Press. Csikszentmihalyi, M. (1996), Creativity: Flow and the Psychology of Discovery and Invention, New York, NY, USA: Harper Perennial. Desrochers, P. (2001), ‘Local Diversity, Human Creativity, and Technological Innovation’, Growth and Change, 32 (3), 369–394. Ellison, N. B., C. Steinfield and C. Lampe (2007), ‘The Benefits of Facebook “Friends”: Social Capital and College Students. Use of Online Social Network Sites’, Journal of Computer-­Mediated Communication, 12 (4), 1143–1168.

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4.  Entrepreneuring as organisation-­creation Daniel Hjorth

Assemblages are passional, they are compositions of desire. . . . The rationality, the efficiency, of an assemblage does not exist without the passions the assemblage brings into play, without the desire that constitutes it as much as it constitutes them. (Deleuze and Guattari 1988, p. 399) I have’t. It is engender’d. Hell and night must bring this monstrous birth to the world’s light. (Iago speaking; Shakespeare’s Othello, Act I, end of Scene 3)

4.1  INTRODUCTION If creation is what we cannot exclude from an answer to the question ‘how does entrepreneurship become what it is?’ (Hjorth 2003b), then the question of how intensive, desire-­driven assemblages (developed below) are creatively organised into actual productive organisations takes the front seat. The question of organisation in entrepreneurship studies is as old as the concept of entrepreneurship per se. Lack of interdisciplinary conversations between organisation studies and entrepreneurship research, however, has prevented the development of knowledge of how new organisation of resources (in the broadest sense of the term) achieves being entrepreneurially. The ‘entre’ of entrepreneurship as practice has always addressed the gap that needs to be bridged: the in-­between that no one operates in or the potential that could be actualised (cf. Chia 1996; Steyaert 2000). A modest historical reflection (supported by Brewer 1992) will also reveal that creativity and imagination are central for this ‘entre’ to become virtually real and therefore represent the entrepreneurial ­potential for actualising the new. Cantillon (1755) thinks of entrepreneurship as risk-­taking (paying known costs to earn uncertain incomes) whereas Say (1880) considers the entrepreneur (or adventurer as the translator prefers) as a coordinating, planning and communicating organiser. Both planning and risk-­taking centre on the organisation of resources: if you know how to creatively organise resources in time (which takes planning) you might (risk is involved) profit from creating new demands (as in innovation) or meet existing demand with superior value. 97

98   Handbook of research on entrepreneurship and creativity However, the concept of entrepreneurship, in spite of how it enters academic discourse via Cantillon and Say, has not been centred on this particular form of organisation-­creation that an entrepreneurial use of in-­ betweens entails. More generally, this mismatch between the practice and the concept will per se represent the ‘entre’ that this chapter approaches as an opportunity that could be created and used. The performative nature of this chapter is thus manifest in the creative use of the above-­ mentioned in-­between entrepreneurship research and organisation studies. Our purpose will now need to be specified, which is done by positioning the contribution. There have been a few examples in entrepreneurship research where the author has brought organisation and organisation-­creation into the conceptualisation and study of entrepreneurship. Aldrich (as exemplified in Aldrich and Fiol 1994 and Aldrich 2011, but also in Aldrich 1999), Gartner (1985, 1988; and Katz and Gartner 1988), Katz (1993) and Vesper (1980, focusing on venture creation) are examples of entrepreneurship scholars paying attention to organisation and creation. As Katz and Gartner pointed out in 1988 (p. 430): ‘[M]ost traditional researchers of entrepreneurship . . . do not define organizations in organization theory terms’. This indicates the lack of a conversation between the fields, as pointed out above, which surely has contributed to the lack of attention to organisation-­creation in entrepreneurship research. For the purpose of this chapter, we will define entrepreneuring as organisation-­creation. However, a more elaborated definition of organisation will have to await our engagement with process thinking, which will affect the way we understand and define organisation. Understanding organisation and entrepreneurship from within process thinking will also make clear the contextual nature of all definitions, and thus reduce the usual scholarly interest in total or contextually independent definitions of what we concern ourselves with as researchers. In his writings, Gartner connects examples of entrepreneurship re­searchers with attention to organisation, and he will thus stand out as the central figure in the recent history of entrepreneurship research that point to organisation-­creation as a way to advance our understanding of entrepreneurship. If we follow Gartner’s trajectory in entrepreneurship research (cf. Hjorth and Johannisson 2008, for an overview) we will recognise a growing interest in: (1) imagination/fiction, narratives and storytelling as a way to understand, (2) how entrepreneurship is done as a creation process (Gartner et al. 2003; Gartner 2007). Gartner frames his interest in ‘stories that people tell’ by including it in a ‘science of imagination’ and suggests that: ‘an understanding of the phenomenon of entrepreneurship begs for the narrative mode’ (2007, p. 622). Gartner

Entrepreneuring as organisation-­creation  ­99 is increasingly interested in the variations of entrepreneurship (Gartner 2008) and, therefore, an approach to study this variation that does not kill it by looking for an average (that he thinks is not there; Gartner 2008, 2010). This is how both narrative and process become prioritised, for narrative ‘remains the quintessential form of imaginative invention, most particularly in science’ (Lyotard 1984, p. 60), and ‘the narrative form, unlike the developed forms of the discourse of knowledge, lends itself to great variety of language games’ (ibid., p. 20). In addition, when we are interested in thinking, studying and analysing not things made but things in the making, process thinking provides a way to do so (Nayak and Chia 2011). I cannot come up with a better empirical case of ‘things in the making’ than entrepreneurship. Whether studied as ‘creation of business’ (Gartner 2008) or ‘organisation-­creation’ (as suggested here; cf. Katz and Gartner 1988; Gartner 1985), entrepreneuring is ‘the new’ in the making. This chapter aims at making a contribution to the study of entrepreneurship and creativity by developing a processual conceptualisation of a form of entrepreneurial creativity called entrepreneuring or organisation-­ creation. Process philosophy provides concepts for thinking becoming, multiplicity and force (Helin et al., 2014) as it is concerned with how the new achieves being. Such a processual conceptualisation of entrepreneuring as organisation-­creation will answer to the long-­standing call in entrepreneurship research for an enhanced capacity to study organisation-­ in-­creation: ‘In order for us to identify, analyse, and understand the organization-­in-­creation we must change our perceptions and methodologies’ (Katz and Gartner 1988, p. 437). I believe recent advances in process thinking, in organisation studies (e.g. Tsoukas and Chia 2002), have provided us, finally, with such ‘changes in our perceptions and methodologies’, meaning we have now a capacity to step up to this challenge. This chapter attempts to make one contribution. It proceeds by preparing for a processual approach to the study of organisation-­creation. Following this opening, I introduce the central concepts for such a processual approach and relate them so they form a tentative conceptual framework. On the basis of this conceptual development, I take on the task of putting those concepts to use in an elaboration of organisation-­creation and discuss examples thereof. Entrepreneuring is then suggested as a processual concept describing the process of how organisation is entrepreneurially created. The chapter is concluded with an outlook from having taken on Katz and Gartner’s (1988) challenge to increase our capacity to describe, study and analyse organisation-­in-­creation.

100   Handbook of research on entrepreneurship and creativity

4.2 OPENINGS TOWARDS A PROCESSUAL STUDY OF ORGANISATION-­CREATION When we inquire into the organisation-­creating process of that particular social force we refer to as entrepreneurship, what kind of creation are we talking about? Roughly stated, the model that positions this chapter’s understanding of entrepreneurship is the following (Hjorth 2012): Invention (the new idea; the virtual) x Entrepreneurship 5 Innovation (actual value-­creating capacity is manifested for customers, users, citizens). Entrepreneurship in this ‘formula’ would then be organisation-­creation. Since this is describing an activity, using ‘Entrepreneuring’ as concept would be more precise. It goes back to an idea that surfaces within entrepreneurship research in the 1980s (Gartner 1985; Katz and Gartner 1988), and is perhaps most forcefully expressed in Gartner’s seminal 1988 article ‘“Who is an entrepreneur?” is the wrong question’ – where he says: ‘In behavioural approaches to the study of entrepreneurship an entrepreneur is seen as a set of activities involved in organization creation’ (1988, p. 47). Katz and Gartner (1988), however, is more central to the present chapter due to the explicit engagement with organisation studies and the visionary pointing out of a need for more processual ‘perceptions and methodologies’. That, in turn, relates further back to Vesper’s (1980) focus on organisation per se as central to understanding entrepreneurship, anticipated by Schumpeter, that also related entrepreneurship to organising and pointed out that this entrepreneurial function often is a collective achievement: Though the phrase ‘getting a new thing done’ may be adequately comprehensive, it covers a great many different activities which, as the observer stresses one more than another or as his [sic] material displays one more than another, may, locally, temporally, or generally, lend different colors to entrepreneurship. In some cases, or to some observers, it may be the activity of ‘setting up’ or ‘­organizing’ that stands out from others. (Schumpeter 1947] 1991, pp. 225–226) Finally, as has been often pointed out, the entrepreneurial function need not be embodied in a physical person and in particular in a single physical person. Every social environment has its own ways of filling the entrepreneurial function. (Schumpeter [1949] 1991, p. 260)

Weick’s (1979) work, often stressed in organisation studies as an early example of processual thinking, enters Gartner’s writing during the 1990s (clearer than before in the 1993 piece ‘Words lead to deeds’), although it is also lurking in the shadows as we more closely read the 1988 paper. This can be read as an attempt to move entrepreneurship research towards a more processual approach. This chapter will continue this focus and develop a

Entrepreneuring as organisation-­creation  ­101 processual approach in an attempt to conceptualise entrepreneuring (rather than entrepreneurship) as a creative practice of actualising organisation for the purpose of generating new value for a user. Such new or superior value is often made concrete through the purchase of a product or service – for example, a mobile phone that includes a camera (new product) and can send picture-­or video messages (new service) – that in turn makes possible new practices in the life of a consumer. Value is increasingly a question of experience and lifestyle; in the broadest sense this means that new possibilities for living are made possible by integrating a new tool or function into one’s life, and these new possibilities represent the added or superior value for which the consumer is willing to pay a price. A company’s capacity to sustain this superiority as supplier of value will also represent its capacity to sustain revenue streams, which per se is a key component in its profitability. How is this related to organisation-­creation, then? This is a question of what scope of attention we operate with as entrepreneurship researchers. As a process thinker, I am continuously stressing the ‘how’ and the ‘becoming’ of entrepreneuring; that is, how something new achieves being and how such processes of becoming involve creation of organisation. Organisation-­creation is, then, a key process when we try to understand how opportunities are created and how new and superior value is actualised. Processually thought, creation is immanent to entrepreneuring, or, to put it slightly differently, entrepreneurship is a result of entrepreneuring as a creation-­process. How entrepreneurship becomes will thus explain what entrepreneurship is, and the question of how it processually becomes is a concern with entrepreneuring. Somewhat provocatively we could thus say that entrepreneurship is what entrepreneuring does; that is, that entrepreneurship is only a theoretical construct, an imagined static entity that would have no life (or empirics) to refer to.

4.3 CENTRAL CONCEPTS: ASSEMBLAGE, DESIRE AND THE VIRTUAL 4.3.1  Assemblage and Desire We started this chapter with the concept of assemblage so that we would not get stuck in unproductive questions of individuals or organisations. Whereas definitions of organisations place emphasis on unity, consensus and reduction of lack of order, the concept of assemblage allows us to analyse how organisations are created, emerging out of assemblages. Assemblage is a concept that describes a more open sociality in which individuation (‘I am an entrepreneur’) as well as organisation-­creation

102   Handbook of research on entrepreneurship and creativity happens. Assemblages are multiplicities, which can be quantitative or qualitative, where the former corresponds to hierarchical systems of order, management and control, and the latter to the metamorphic dynamics of that which changes in nature (Patton 2000) from each addition. Assemblage is thus a concept that allows us to think the tension and dynamic between existing orders (quantitative, hierarchical systems) and the openings towards new orders, demanding new organisation. A new order – centred on a superior value offer – would then achieve being as a result of entrepreneuring as an organisation-­creation process. The concept of a qualitative assemblage helps us describe how this process of becoming-­new emerges out of organisation-­creation: assemblages are thus forms of sociality that hold immanent proto-­organisational potentials, entrepreneurially used in organisation-­creation. In process philosophy (William James, Alfred North Whitehead, Henri Bergson, Gilles Deleuze) the world continuously changes (becomes and perishes), making the new inevitable. Entrepreneurship, in this perspective, represents a social force that directs life’s immanent capacity for newness in a particular direction. There is a particular entrepreneurial desire for a particular newness. Such an idea of the new, a virtuality opening up towards its potential becoming, often emerges from experiences with an existing order. Desire springs from previous experiences of connections with the new and with assemblages capable of creating the new. Desire anticipates such newness and the creative capacity of assemblages. Rather than springing from lack, desire, in process thinking, is understood as productive and positive. This imaginative capacity to expect or anticipate, to extend ‘what could become’ beyond past experience – that is, to desire – anticipates the joy of a future connection, and is an investment in these images of the future. Gartner (et al. 1992) has touched upon this capacity by bringing in the concept of ‘as if’ (from the philosopher Vaihinger 1952) to explain this mode of organisation that directs an assemblage’s desire towards an investment in a future wanted image: ‘Emerging organizations are elaborate fictions of proposed possible future states of existence [. . .] Outsiders are then likely to respond to this emerging business ‘as if’ it were an existing business [. . .] The knowledge of what to do . . . and when to act, is what is generated in the process of organizational emergence’ (pp. 17, 18). And in the language of the time, they write: ‘Entrepreneurs, therefore, both seek out, as well as develop, motivations that will enable organizations to emerge’ (Gartner et al. 1992, p. 25). By centring on the concept of emergence, Gartner et al. (1992) point ahead towards a processual approach to entrepreneurship. The paper explicitly states such a focus: ‘This paper suggests that entrepreneurship is the process of “emergence”’ (p. 13). The concepts of assemblage and desire provide a way to think how

Entrepreneuring as organisation-­creation  ­103 emergence results in organisation by explaining what is there before organisations (assemblages as proto-­organisational forms) and how assemblages are made productive of a specific organisational form (by directing desire, providing an image that attracts investments). There is an important distinction to make between how organisations are defined (e.g. as patterns of interlocked behaviours; Weick 1979) and what we here describe through the concept of assemblage. The positive-­ productive force of desire, and the affective capacity of bodies – making them receptive to images of the future to invest in – define the latter, whereas the former is often understood as a solution to a lack of stability in relations of actions. Weick’s (1979, p. 3) definition of organising centres on ‘reducing equivocality by means of sensible interlocked behaviours’. Assemblages become productive when desire is intensified, when affective investment in a wanted future becomes a social force. Intensive images (attracting investments) here play the role of catalysing the creation of the emergent organisation. A simple example would be the story of why and how Linus Torvalds created what today is known as Linux. In 1991 Torvalds began developing the core of the future Linux operating system. He did so because of his frustration (intensity of problems) with the DOS operating system that came with his PC (Maccormack 2002). The rest is operating system history, including a growth of users from 1 in 1991 to 1000 in 1992, 20,000 in 1993, 100,000 in 1994, 1,500,000 in 1996, and so on. Desire for the new emerges from within the existing (DOS) order, and the new order – the Linux kernel, core of the operating system – demands a new system and ways of interacting with it. The latter also opened up to new businesses – for example, Red Hat, now a company of $1.13 bn in revenue that sells this integration of Linux components in one smooth operating system – Red Hat. Red Hat started in 1994, selling 500 copies, moving to 200,000 copies in the 1997/8 release (ibid.). Today Red Hat employs 3700 people. Torvalds’ idea draws an assemblage together, and the driving force is a desire to make computing – operating system wise – into a richer and more qualitatively stable experience. The assemblage’s productive capacity is increased by the programmers’ passion to ‘play together’ and actualise this virtuality – a new, open, free and better operating system. I propose we think entrepreneuring as organisation-­creation, contributing to what Katz and Gartner (1988) and Gartner et al. (1992) anticipated with their concepts of ‘organization-­in-­creation’ and ‘the process of emergence’. Desire explains how connections that make assemblages creative direct investments in a future so as to make new organisation incipient. Entrepreneurial desire is thus a social force that springs from the context of existing orders, as an intensity that cuts through such establishments like a movement/vector. It is the need to create organisation, to change

104   Handbook of research on entrepreneurship and creativity or transform the existing, that is intensified. Those fictions of proposed possible future lives (Gartner et al. 1992) potentialise ‘what could become’ and stories make it likely that this will indeed happen, wherefore ‘acting as if’ characterises processes of organisation-­creation. ‘The new’ (superior value for a user/consumer) becomes entrepreneurially necessary. The qualities of force, Nietzsche points out, are active or reactive (Deleuze 2006). Entrepreneurship, if we are interested in how people become entrepreneurs, is then understandable as becoming-­active (i.e. to acquire agency) as organisation-­creative. Entrepreneuring, if we here venture upon a preliminary definition, is in this sense an affirmation of desire’s socially productive capacity so as to create organisation that breaches the existing order, making the new achieve being. To further our understanding of the relationship between assemblages and organisations we may see organisations as composed and constantly re-­composed from multiple assemblages. Assemblages are here disclosed in their capacities as uniting heterogeneous bodies, forming consistencies. Assemblages are collective extensions of experiences that are simultaneously opening up to particular events (the molecular – open to many formations), and organised into (molar – whole) formations. Example: a theatre ensemble is simultaneously a molar whole formation (the ensemble as one company) and simultaneously molecular, open to become a particular formation, such as the characters in Shakespeare’s Hamlet. Organisations would also be both a consolidated, governing apparatus (molar) and a dispersed, swarming, affect-­based (molecular) form (Buchanan and Thoburn 2008). Organisations are different from assemblages in that they are formalised ‘force-­fields’ where subjectification (or individuation) into some form of unity – employment – takes place. Organisations thus acquire an entitative social status, as stabilised patterns of relationships with an object-­status. This also means that desire to connect with others in this force-­field is ordered by relations already coded as ‘collegial’, in-­between employees. Coding means desire’s attention is steered towards socially sanctioned objects/practices/subjectivities (Holland 1998, p. 65). Social formations, such as organisations, achieve being and endure by capturing and coding desires (ibid., p. 18) according to a specific (set of) goal(s) and by making assemblages productive in a certain way (e.g. creating an often pre-­defined value for a customer). Example: Apple codes bodies’ desire for creative work and belonging to the ‘creative class’ in a specific way, answering to how the organisation’s discourse on work treats creativity as naturally part of how it operates and generates superior value for its customers. Apple’s success will then, to some extent, build on its capacity – as a formal organisation – to direct the dynamic, metamorphic (molecular) assemblages (held together by aesthetic desires, technical desires, etc.)

Entrepreneuring as organisation-­creation  ­105 into one uniting, controlled (molar) direction. A ‘creative organisation’ nurtures the molecular, emergent, transformative forces well enough to keep its capacity for newness and avoid ossification into tightly governed patterns or relationships. Desire is this social force that brings capacities together, that assembles, but without a plan for doing so, beyond desiring its own furthering (Buchanan and Parr 2006). Desire is therefore not directly manageable, since social codes imposed on it will make it transform into interest, serving socially recognised purposes (cf. Deleuze and Parnet 1987). This coding of desire into socially sanctioned interests – such as a corporate strategy – represents the micro-­political processes that constitute managing as organisational practice. Organisations, composed from multiple assemblages that are both molar (is a body corporate, a whole that is represented as a unity) and molecular (processes, people, affects, decisions), hold within ‘them’ their transformative forces. This also means that ‘becoming is the process of desire’ (Deleuze and Guattari 1988, p. 272), for particular sets of relations connect to other particulars, establish relations to them, on the basis of the joy they draw from connecting, and transformative forces make organisation emerge/become from assemblages. ‘Joy’ is Spinoza’s term for an increased productive capacity (Deleuze 1988). Organisations, to use Gartner et al.’s (1992) language, are simultaneously existing (their molar dimension) and emerging (their molecular dimension). They are hierarchies of stable order, and networks of connections that pull them into processes of becoming what they presently are not. When we suggest thinking entrepreneuring as organisation-­creation, we are saying there is a molecular process that does not simply add to the molar whole (the dominant order, the governing apparatus), but makes the molar achieve being in new/different ways. Entrepreneuring is this particular desire for connecting with others for the purpose of increasing the creative capacity. Entrepreneurial desire assembles creative assemblages, for which ‘what is not but could become’ is in focus. This is not coded along interests of economic efficiency and social control; that is, what the managerial function centres on in maintaining the molar whole. It is desire for actualisation of the virtually real. The molar, governmental is central to bureaucracy, securing fair, predictable and transparent framing and application of policy (du Gay 2000), and to management prioritising efficiency (and its measurability) and control. Control literally means stopping something from rolling (contra 1 rotulus; against what is rolling). Entrepreneuring is rather molecular ‘as if’-­processes, a creative genre of organisational action, where prorol (pro 1 rotulus; for what is rolling) characterises what the assemblage does. This desire for connecting with others for the purpose of increasing the creative capacity is reflected in

106   Handbook of research on entrepreneurship and creativity entrepreneurship research by the concepts of ‘entrepreneurial capability’ (e.g. Zahra et al. 2006) and ‘entrepreneurial orientation’ (e.g. Wiklund and Shepherd 2005; Rauch et al. 2009), as well as in network studies (Johannisson 1987). Note that both these concepts reach for a language of the virtual – capability or orientation – a language we now move to extend. 4.3.2  The Virtual A philosophical invention by Henri Bergson is helpful in our attempt to extend the concepts of organisation-­creation beyond Katz and Gartner (1988) and Gartner et al. (1992). This extension is possible with the help of process philosophy or process thinking (Tsoukas and Chia 2002) for which ‘[W]hat really exists is not things made but things in the making’ (James [1909]1996, p. 263). Process philosophy attempts to think ontogenesis (emergence) rather than ontology (Massumi 2002; Thrift 2008), which seems to make possible and nurture an understanding of the world from the perspective of entrepreneurial emergence and becoming. Organisation-­ creation is what emerges, while organisations are what emerged. Bergson has pointed out (see Deleuze, 1988) that we conventionally use a badly composed concept of the new: thought in terms of the possible–real relationship. His point is that we need instead to use the actual–virtual relationship. His critique focused on the former (realisation) being often misunderstood as creation, while nothing of the kind, according to Bergson, takes place in such realisation-­processes. For if the possible contains the real that it is supposed to realise, there is only a difference in degree (quantitative) and a process of copying taking place: the real is a copy of what the possible has said should be effectuated. Instead, if we are interested in creation, it is the virtual–actual relationship we should keep in focus. Bergson suggests the virtual (such as an idea, an image of the new) is real but lacks actuality (extension in time and space, in contexts of everyday practices), which is achieved through qualitative differentiation, through creation. ‘The virtual,’ Massumi (2002, p. 30) suggests, is ‘the pressing crowd of incipiencies and tendencies, is a realm of potential’ (emphasis in original). The virtual makes ‘ingress’, which ‘injects potential into habitual contexts’ (ibid., p. 237). Had Massumi been an entrepreneurship scholar, he most certainly would have used ‘entrance’ rather than ingress, and thus made manifest the entre-­element. If entrepreneurship, as Katz and Gartner (1988) suggest, is organisation-­creation, and if this is the time of emergence (becoming) rather than an organisation (being), entrepreneuring is also the time of the virtual. Creation, then, as actualisation of the virtual, starts with a unity, the virtual totality that is often an image/vision of the new, which is differenti-

Entrepreneuring as organisation-­creation  ­107 ated in action resulting in an actuality different in kind from the virtual: it can be material, take new forms, establish new relations by becoming part of concrete contexts of practices. In perspective of our above elaboration of desire we could now say that the new is a result of how imagination/ fiction intensifies the sense of potentiality that characterises the actual, dominant orders of the present, frustration over the present state of things. The new in this way becomes entrepreneurially necessary. Actualising the new is thus a process we can describe as pastness (experience of frustration, joy, desiring connection) opening up onto a future (image/vision of the idea), ‘but without no present to speak of’ (Massumi 2002, p. 30). That is why organisation-­creation is needed, and why ‘acting as if’ is an appropriate concept describing the mode of action that dominates emergence. Organisations could now be conceptualised as multiplicities that contain molar change processes: realisations (managerial, administrative and bureaucratic) bringing the organisation from one order to another according to a possibility communicated in plans and strategies. Other change processes are actualisations (entrepreneurial) that are molecular, meaning the new is qualitatively different from what was there before. A realisation maintains the order of the organisation as it operates within the order of the molar. Actualisation creates new orders, qualitatively different in kind from what keeps the molar unity intact, and will therefore require new organisation; that is, require organisation-­creation. Entrepreneurship, as the concept is traditionally used in entrepreneurship research, operates mainly on the other side of actualisation. Organisation-­ creation (entrepreneuring) is a molecular actualisation-­process resulting in new orders. Making the new order work is a molar process that is soon dominated by management, which is the better tool for making actual(ised) things work efficiently. Entrepreneurship is not art and so it cannot settle with making creation incipient by intensifying an image of the virtually new, and actualise it. It also needs to capitalise on this actualisation in some form: rent, profit, enhanced possibilities for living, greater capacity to act. This is why there is no sharp distinction to be made between entrepreneurship and management, and why organisation-­creation – which in our creation perspective is limited to the time of emergence, becoming, ­actualisation – is soon dominated by management as the governmental concern for maintaining orders (control) and increasing efficiency. Elsewhere (Hjorth 2005) I have described realisation and actualisation, in the context of business, as two modes of collective activity: organising and organisation-­creation. Realisation processes is the strategic mode, departing from an image of past investments, from control, and working to realise new additions (quantitative change) to a future wanted position (organising; cf. Weick 1979). Actualisation is then a tactical mode

108   Handbook of research on entrepreneurship and creativity of ­creating/differentiating the new (organisation-­creation; qualitative change). Organisation-­creation is tactical as it cannot appropriate a place and defend a position. Instead it has to be ‘on the move’, in emergence, and always seek new ways of actualising the new. Whereas one can easily read the role and function of management (as developed in the history of industrialisation; O’Connor 1996, 1999; Hjorth 2003b) into the strategic realisation mode, we may think of entrepreneuring, in the context of existing organisations, as tactical processes of actualisation of the new; that is, as organisation-­creation. It would be a mistake to understand this as a dualism though, for the tactical and strategic, the entrepreneurial and the managerial, as well as the molecular and molar, are inseparably linked to each other, as modes of operating, parts of the dynamic multiplicity of assemblages, forming the inner dynamics of the molar whole which is that of the organisation. The tactical/molecular is therefore, due to not being stuck in dualism, not about opposition or negation. Rather it is about affirmation; affirmation of desire, which means intensification of potentiality, so that the incipient leaks into the actual and the new is thus created (Massumi 2002). We can now contextualise organisation-­creation in the recent history of entrepreneurship research.

4.4 ORGANISATION-­CREATION AND ENTREPRENEURSHIP RESEARCH The suggestion to focus on organisation-­creation as the defining characteristic of entrepreneurship is not totally new. As already indicated above, William Gartner represents the thread that binds this thinking together in entrepreneurship research (Vesper 1980; Gartner 1985; Katz and Gartner 1988; Gartner et al. 1992; Gartner 2004). Lately, Gartner has also advanced his interest in organisation to explicitly return to organisation-­ creation (Gartner 2012), based on Weick and resulting in arguments for a narrative approach to studying and making sense of entrepreneurship. The turn to a narrative approach is natural as an attempt to find a method and analytical strategy that enables a more precise way to study, describe and analyse processes, emergences, becomings (Dawson and Hjorth 2012). Also Sarasvathy (2001), while arguing persuasively for what could be described as a constructionist-­pragmatist theorisation of entrepreneurship, does so to enable the inclusion of creation as an entrepreneurial achievement. Sarasvathy binds Knight’s theory of the role of uncertainty, Weick’s theory of enactment and March’s theory of ‘technology of ­foolishness’ together in her effectuation theory (Sarasvathy 2001).

Entrepreneuring as organisation-­creation  ­109 What is striking, however, is that we are again dealing with the lack of processual thinking in entrepreneurship – as we pointed out in relation to ‘capabilities’ and ‘orientation’ above. Dealing with rational choice theory, the March (1982) and Sarasvathy (Sarasvathy 2001, 2003; Sarasvathy and Dew 2005) suggestions for adjusting this theory include ways of thinking what we (on the basis of process philosophy) can describe as pointing towards the virtual–actual relationship as identified by Bergson and adopted above. It seems accurate to point out that the lack of interdisciplinary research in entrepreneurship has prevented such developments from happening, in spite of them being anticipated (as in Katz and Gartner 1988). For in organisation studies, process philosophy has indeed made an entrance. March, however, opens up to philosophy and literature as he wonders why people do not behave according to rational choice theory: ‘Why might a person or institution intelligently choose to have ambiguous tastes?’ He provides a nuanced reply: ‘The answer, I believe, lies in several things, some related to ideas of bounded rationality, others more familiar to human understanding as it is portrayed in literature and philosophy than to our theories of choice’ (March 1978, p. 598, quoted in Sarasvathy and Dew 2005, p. 386). Sarasvathy connects this to entrepreneurship, noting that entrepreneurs act to know, rather than seek knowledge in order to act/ decide. This note evidently generates a silence: the references to Gartner et al.’s (1992) ‘acting as if’-­concept are obvious. Rather than explaining limited rationality with the exigencies of the situation (as Sarasvathy and Dew 2005, p. 385 suggest) we could think this, using the concepts of this chapter, as bodies’ power to be affected – their receptive capacity. This points us to literature and philosophy (as March did) where the dynamics of spontaneity and receptivity are central rather than peripheral (cf. Greenblatt 1984; Gallagher and Greenblatt 2000). In an attempt to further contextualise this chapter in entrepreneurship research, let us inquire further into the implicit theme present in the Gartner–Weick–Sarasvathy–March relationship: the opening up towards creativity in entrepreneurship research. The binding thread between Gartner and Sarasvathy, many will agree, is the work of Karl Weick and the idea of focusing on processes of organising (Weick 1979), rather than starting from the results thereof. As much as I agree with this movement in entrepreneurship studies towards a focus on organising, I am still convinced the ‘how’ of organisation-­creation is inadequately addressed or rarely attended to also within this stream of research, precisely as neither a processual conceptualisation, nor attention to the literary and philosophical (as March pointed out above), have been included.

110   Handbook of research on entrepreneurship and creativity 4.4.1  Organisations Normalising the Over-­Rational Decision Maker The problem with the Simon–March–Sarasvathy line of reasoning is the emphasis on the choosing individual. Process philosophy necessarily includes the choosing subject in what is chosen, so that processes of subjectification explain why we also are already chosen when we make a ‘rational choice’. Discourse analytical approaches (notably Foucault’s analysis of subjects, for example Foucault 1980; discussed by Deleuze 1999) have developed convincing and empirically well-­grounded conceptualisations of this productivity of discourse (such as in gender studies; Butler 1990, 1993, 1994). For sure, Sarasvathy and Dew (2005) are correct in pointing out that this is a contextual problem – studies of deciding individuals have often taken place in the context of corporations, where people want to pose as rational, self-­grounded (Cartesian, we may add) subjects that make rational choices. Entrepreneurship, they suggest (and here I am again in agreement, but notice that most entrepreneurship research would not acknowledge this difference), represents a different context where a broader spectrum of human action is available for study: also what falls outside the image of the rational decision maker. One could argue that such a broadening of the spectrum of human action means a more realistic empirical material is invited into our studies (cf. Hjorth 2007). This limitation of context (to the ‘normality’ of the economically rational decision maker) is also what makes corporate entrepreneurship (Burgelman 1983, 1984; Zahra 1991) and intrapreneurship (Pinchot 1985) into a difficult context for (studying) entrepreneurship. One way to deal with this lack of nuances is to introduce concepts that allow for contrast and affirmation of differences. We can thus frame entrepreneurial action in such contexts as tactical, differentiating it from management as a strategic form of action (Hjorth 2005), operating in the ‘genre’ of the intelligent, rational decision maker, as Sarasvathy and Dew (2005) also suggest. The lack of attention to entrepreneuring, as organisation-­creation, is thus a question of how a processual conceptualisation is negatively related to an over-­emphasis on economic rationality in organisational contexts. The latter makes students focus on contexts of efficiency and control, what has emerged rather than what emerges, leaving entrepreneurship research still unable to answer Katz and Gartner’s (1988, p. 437) call – if we want to study ‘organisation-­in-­ creation’ we must ‘change our perceptions and methodologies’. 4.4.2  Imagination and Storytelling Sarasvathy and Dew (2005) as well as Gartner et al. (1992) place emphasis on another important element in what we would propose as a renewed

Entrepreneuring as organisation-­creation  ­111 approach to understanding entrepreneuring or organisation-­creation, namely imagination and storytelling: Generally speaking it could be argued that before there are products, there is human imagination; and before there is a market, there are human aspirations. Successful entrepreneurs have long been creating firms, industries and even economies by matching up the offspring of human imagination with human aspirations. (Sarasvathy and Dew 2005, p. 387) Emerging organizations are elaborate fictions of proposed possible future states of existence. (Gartner et al. 1992, p. 17)

In the language of this chapter, we would have said ‘fictions of the virtually real’; that is, what anticipates potential becomings, rather than ‘possible future states of existence’. Gartner (2007) extends this importance of focusing on imagination when he introduces the Journal of Business Venturing special issue on narratives with an article entitled ‘Entrepreneurial narrative and a science of the imagination’. He stresses: ‘The narrative of entrepreneurship is the generation of hypotheses about how the world might be: how the future might look and act’ (ibid., p. 624), and thereby gestures not only towards an emphasis on imagination and storytelling, but also on a processual understanding of entrepreneurship. Even though Weick is focused on organising rather than organisation-­ creation, he is important as a thinker binding together Gartner’s and Sarasvathy’s move towards the organisational and their emphasis on creativity. In the last sentence of Weick’s celebrated The Social Psychology of Organizing (1979, p. 264) his emphasis on storytelling announces what is central also in Sarasvathy’s and Gartner’s conceptualisations of entrepreneurship: what we might think of as fabulation, defined as narratively performed imagination (Hjorth 2007). Weick writes: ‘Organizations keep people busy, occasionally entertain them, give them a variety of experiences, keep them off the streets, provide pretexts for storytelling, and allow socializing. They haven’t anything else to give.’ It comes close to Hirschman’s (1977, p. 129) description of how commerce, during the 18th century, offered a new (economic) reality for capturing desire, and kept people off the streets and out of misbehaviour. Part of the pretext that Weick mentions in passing is desire (to take pleasure in the process rather than in the outcome; 1979, p. 263). And it is desire and storytelling that are central for an understanding of entrepreneuring as organisation-­creation. What does desire do in entrepreneuring as creation-­process? In order to further develop a processual theorisation of entrepreneuring we need to conceptualise how affect/intensity is a force in such processes and how

112   Handbook of research on entrepreneurship and creativity narratively performed imagination (fabulation) provides a vehicle for ­connecting and directing desires. Desire, on the basis of our previous conceptualisation, is defined here as life’s striving to preserve and enhance itself. Spinoza is the thinker (of force and affect) that develops this using the concept of conatus to describe life’s striving (Deleuze 1988; Spindler 2009), how we become new, other or qualitatively different, beyond the limits of the present; the force driving actualisation of the new, the qualitatively different. Desire, we remind ourselves, seeks connections to others in striving to increase the productive capacity of a relation or set of relations. It is productive and starts from connecting with others. Example: we desire playing football on the basis of our previous relationships with the ball, the play, the people we played with. We will thus anticipate joy on the basis of a football’s appearance, and desire playing as a result. This desire will drive us to invite others to come and play; that is, to actualise this image of joyful connections with others. We will also desire the football as such, as this represents all these joyful things to us. We invest in the image of the football and the potential playing that it provides access to. Interest, which we need in order to explain why a certain result can be achieved rather than any, is defined as the social (organised, collective) coding of desire. Desire for football can then be coded as interest in consuming football merchandise. It can be coded as interest in a club, as being a fan. Interest will gradually take over as organisation-­creation becomes subject to social codings (Deleuze and Guattari 1988). As soon as organisation-­creation generates results – plans, employments, external capital and patents – there is a swarming crowd of social codes lying in wait. This easily exposes the process for demands, under the burden of which it will crack. When my desire to ‘create’ is coded as me being ‘an entrepreneur’, the joy I was seeking can quickly turn into an interest in doing things in a certain way to meet expectations of a certain ‘audience’: I will be informed that I need to write a business-­plan if I want to get ahead. The process of organisation-­in-­creation is always a target for social codings; interests with great appetite. Processes of organising are central to the field of management-­ and organisation studies more generally (van de Ven 1992), but, as Sarasvathy (2001, p. 243) points out, creation (of organisation) has historically been left out of this field. The ‘left out’ is the domain of entrepreneuring, the importance of which grows along an increasing demand for knowledge on processes of creativity and innovation in the postindustrial economy (Austin and Devin 2003). Our capacity for studying and analysing processes is raised with our development of concepts that allows us to think processually (Tsoukas and Chia 2002; Helin et al., 2014). Sarasvathy’s

Entrepreneuring as organisation-­creation  ­113 concept of effectuation (2008) – the process of selecting between possible effects to be created given a set of means – is one step towards bringing processes into the domain of entrepreneurship studies. What is added in this chapter is our capacity to think processually about processes. This is how attention to affect/intensity, desire to actualise (create), the virtual– actual relation, assemblage, imagination/fiction, emergence and storytelling become necessary. Without this language emergence will always end up in the black box, and the ‘how’ of imagination/fabulation, in storytelling, the evocation and intensification of images of desire, and the productivity of assemblages’ (joyful connections) will remain life outside our empirics. This approach shares with Sarasvathy (2001, 2008) and Gartner et al. (1992) an upgrading of the role of imagination, and with Aldrich and Fiol (1994), Lounsbury and Glynn (2001) and Gartner (2007) the additional upgrading of the role of storytelling. The difference from Sarasvathy is that the theorisation of the entrepreneurial creation process that is central to this chapter does not fall back upon a mastering/controlling actor. Such ipseity or self-­grounding ‘I can’ (control) inevitably goes back to a rational, Cartesian-­juridical subject, as Derrida (2005, pp. 11–12) has shown. This is a subject predicated by nothing else, but is that of which all other entities are predicated. This will lock us into the rational individual, the choosing subject. We cannot get ahead in a processual understanding of creation if we stick to that road (Tsoukas and Chia 2002; Chia and Holt 2009). We cannot get to entrepreneuring, a processually understood process of organisation-­creation, without process thinking put to work. Also Sarasvathy and Dew (2005) point out that the Cartesian rational decision maker gets in the way of the more central questions of what they – leaning on March (1978) – call foolishness, and what for them includes imagination and aspiration. This is what we can study as fabulation and desire. There is no entrepreneurial emergence of organisation-­creation without fictions, virtualities becoming actualised (Gartner et al. 1992). ‘There is no literature without fabulation,’ Deleuze points out (1988, p. 3) and goes on to explain that subjects are products of fabulation, rather than fabulation projecting an ego. There is first desire (or aspiration in Sarasvathy and Dew’s terms) that produced images and subjectivities. ‘Desire itself is power, a power to become and produce images’ (Colebrook 2002, p. 94). Process philosophy includes the traditional, knowing subject only as an achievement, a result of (often) reactive forces, negating movement beyond the limit of the present, a temporary arrest. What is more important is processes of subjectification or individuation: ‘Subjectification as a process is personal or collective individuation. . . Take Foucault himself: you weren’t aware of him as a person exactly. . . . It was a set of intensities’ (Deleuze 1995, p. 115). As pointed out above, a desire such as that drawing

114   Handbook of research on entrepreneurship and creativity together an assemblage (that as such is a set of connections between bodies) on the basis of intensive images of what could become, will inevitably be a target for social codings that make interest take over. The risk, in corporate contexts (something Schumpeter also pointed out; 1949), is that desiring the new soon will be assimilated into existing order according to an official interest that can legitimately be pursued. Institutional support becomes available, but the force of creation leaks out of the process. Entrepreneuring will in this sense, in organisational contexts, constantly be subject to social codings that make it into ‘managerial entrepreneurship’. To a student, as also Sarasvathy and Dew (2005) point out, this will often not be understood as a processual dynamics, but appear to be ruled by economic theory and rational decisions. In economic theory there is little room for desire, as it can only model rational-­calculative thinking and acting and, voila!, we are at March’s (1978) ‘complaint’ that we haven’t been able to theorise foolishness. Again, we are backed up by Sarasvathy and Dew (2005, p. 404) who conclude, with reference to March: As March (1994) explicates and summarizes it, our current decision logics are overwhelmingly fueled either by ‘consequences’– i.e., goal-­driven formal techniques, or by ‘appropriateness’ – i.e., adaptive reasoning driven by evolutionary techniques, both of which leave very little room for the playful foolishness of fictions that engender new meanings and imagined possibilities.

4.4.3  Processes of Becoming-­Entrepreneur Using concepts developed in Deleuze’s process-­philosophy (of becoming) instead gives priority to desire and intensity (affect) over subject and enables us to study also how subjects are produced by affect (both from dominant forces and from affirmation of desire, as a creation process); that is, how subjectification or individuation as entrepreneur happens (Deleuze 1995; Butler 1997). As illustrative case of how intensity/affect and storytelling/fabulation work in organisation-­creation processes one could pair Iago (from Shakespeare’s Othello) with the Ryanair CEO, Michael O’Leary (Warren and Anderson 2009). Pursuing a post-­subjectivist philosophy, one could focus on how the bodies of Iago and O’Leary are struggling to assemble themselves in a subjectivity, but oscillate between trying to master and being mastered, while assembling others to establish the order needed for their virtuality to become actual. Iago famously expresses this: ‘I am not what I am’ (Act 1, Scene 1). Anderson and Warren (2011, p. 603, studying O’Leary) write: ‘O’Leary plays with the collective identity to produce an idiosyncratic but dramatic personal identity as a champion, a people’s champion, of enterprising values.’ O’Leary is educated as accountant in

Entrepreneuring as organisation-­creation  ­115 one of Ireland’s best universities, but poses in public as a ‘rough-­tongued entrepreneurial jester’ (Anderson and Warren, 2011, p. 603). Iago and O’Leary, as well as Quixote, are many subjectivities, assembled in a paradoxical and difficult-­to-­grasp identity. Driven by desire to deceive, win or become other (as with Quixote), they provide examples of the ‘playful foolishness of fiction’ that March refers to above. Their desires are obviously coded into interests in different ways: Quixote struggles with the discourse of knighthood that assembles him under a particular style of acting; Iago is coded by the discourse of a military career and honour that has been overruled by Othello’s decision to pass over Iago when a new lieutenant is to be appointed (Othello chooses the younger Cassio for the position). Iago faces this ‘ontological void’ (Bloom 1998) and struggles to re-­establish his honour and bring down Othello by assembling other bodies, providing them (by fabulating) with intense images of what Othello supposedly has done/said so as to light their desire for revenge. Iago seeks ways to code this desire that he has lit up in them. He does so by intensifying their investment in the strategic image – to ‘get rid of the moor’, which becomes the dominant strategy for the assemblage-­ becoming-­organisation that Iago directs towards this goal. O’Leary, finally, is coded by a normative, managerial entrepreneurship (Hjorth 2003a) à-­la-­enterprise discourse (Gordon 1991; du Gay 1997) making it possible for him to simultaneously play the roles of everyday underdog guy, cost-­chasing accountant and job-­creating entrepreneur that fights the big corporations (in the airline industry; cf. Warren and Anderson 2009; Anderson and Warren 2011). O’Leary’s success is that he can make the image of David fighting Goliath dominate and shield the fact that the customer receives nothing, except a difficult-­to-­compare-­due-­to-­many-­ extra-­small-­fees-­but-­marketed-­as-­lower price, and transportation from ‘a to b’ (as an example Ryanair holds the record for receiving the most complaints by consumers to FACUA, the Spanish consumers’ association; www.consumersinternational.org).

4.5  CONCLUDING – ENTREPRENEURING The definition of an organisation-­creation process called entrepreneuring can now be further developed. On the basis of our use of the central concepts elaborated above, entrepreneuring can now be substantiated as describing a particular form of creation: the narratively performed (in storytelling, see above) fiction that intensifies the desire for and investment in a particular virtuality to become actualised and thereby assembles and extends the productive capacity of an assemblage. Entrepreneuring ends

116   Handbook of research on entrepreneurship and creativity when desire is coded into interest, for this is when management will do a better job. The character of Iago is studied as an emblematic example (Greenblatt 1980; Faherty 1991) of how fabulation (narratively performed imagination) is always both a joyous creation, increasing the productive powers of desire in an assemblage, and a leap into more molar organisation, governing interests for the purpose of securing a particular order. Such government hardens positions, and makes of molecular assemblages, molar ones (united by an interest). Assemblages are here understood as compositions of desire that become productive through the desire they bring into play. Iago, Quixote and O’Leary display great capacity for generating intensive images that attract investments and direct desire. They efficiently assemble a productive assemblage. They create organisation; that is, they are entrepreneuring. These compositions (assemblages) of desire achieve consistency through the investment in intensities or intensive images that connect bodies (ideas as well as people) in the social field of practices. When ‘local’ desire to produce is coded by a more general interest, institutional theory (Jennings et al. (2013)) and governmentality studies (Burchell et al. 1991) have a lot to say about such processes: for example Iago assembles individual desires to revenge Othello into a general interest to ‘get rid’ of him – a molar assemblage is formed and an organisation is created (organum, instrumental to an interest); starting a company, fighting off competition (O’Leary); becoming a knight proper (Quixote). At the end of the ‘interested molar assemblage’ is thus the beginning of an organisation created, the emerged, and the time when management will become more important. Entrepreneuring is thus thought as a two-­phased creation: (1) channelling desire forming dispersed, molecular, swarming assemblages, putting desire into play by intensifying images of the virtual, what could become actualised; (2) but also an affirmation of the investment in creation, desire turned into an interest by coding in specific language: winning Dulcinea’s heart (Quixote); beating competition and generating profit (O’Leary); love, jealousy, career, honour (Iago, who operates with multiple ‘local’ desires that he codes). The first move is the time of emergence, of organisation-­ creation, of multiplicity and becoming of a new order, the second is one of interest/organisation. Entrepreneurship is not artistic creation because of its coding of desire into the organisation of a business (or the generation of new, superior value for a user that is often a customer). I have used Gartner and Sarasvathy as ‘conversation partners’ in this chapter, because they argue for the relevance of attending to organisation in entrepreneurship studies; for attending to creation processes in entrepreneurship studies; and for the importance of imagination/fiction in studying and analysing such processes (cf. also Aldrich and Fiol 1994; Lounsbury

Entrepreneuring as organisation-­creation  ­117 and Glynn 2001). Sarasvathy (2003) proposed that we think entrepreneurship as a ‘science of the artificial’. Gartner (2007) relates entrepreneurship with a ‘science of the imagination’. However, they do not venture into developing processual thinking and language of entrepreneurial creation (cf. Steyaert 2007; Hjorth 2012). In this chapter I have sought to make a contribution to such a processual conceptualisation of entrepreneuring as organisation-­creation. Literature is important for the development of this conceptualisation precisely because it falls back on the visionary faculty – that Bergson called fabulation – that is common to people as well as art (Smith 1998). For me it is significant that this faculty manifests the importance of desire, intensity (affect) for an understanding of how creation processes become. This dynamics is desire, and entrepreneurial-­ as well as artistic processes become creative by channelling desire (for the necessary new) into productive assemblages. Deleuze suggests that literature opens up a passage of life within language, which is how new ideas are constituted and how a foreign language within language is created (Deleuze 1998). In entrepreneurship this would mean that the ‘virtually real’ (the idea of the new) is provided with ways of actualisation by this fabulating (foreign language) function: this is how ‘pastness’ opens up onto a future but without a present to speak of, and how organisation-­creation thus becomes entrepreneurially necessary. Fiction/fabulation is crucial for forming productive assemblages and creating organisation. All the time fragments of lived experience enter into literature, and everyday women and men find themselves speaking the language of the literary, not only in public speeches but also in private, intimate moments (Gallagher and Greenblatt 2000). The use of Shakespeare’s Othello provides an example of this companionship between life and literature. There is an improvisational mode of Renaissance that Shakespeare perfectly brings to his texts. Indeed, Shakespeare’s texts play a central part of inventing this Renaissance mode for us (Greenblatt 1984). Iago emblematically symbolises this improvisational mode, and thus continues to create what we take improvisation to be. Life and literature form a companionship in the adventure of multiplying the possibilities of life (Hjorth and Steyaert 2006). Entrepreneurship and literature both add to our imagination of what future life might become. Understanding entrepreneuring or organisation-­creation as a literary adventure opens our study thereof to process thinking, and a language of desire. I believe this provides for a more realistic entrepreneurship research, for indeed both entrepreneurship and literature move us every day beyond the limits of our experiences.

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5.  Knowledge creation in entrepreneurial teams Haïfa Naffakhi-­Charfeddine

5.1  INTRODUCTION ‘Innovate or die,’ this is ultimately the challenge of any business. We currently live in a knowledge society (Drucker 1993; Powell and Snellman 2004). Companies are increasingly aware of the importance of knowledge and skills of individuals, like “how to ‘manage’ to enrich” or “to draw profits” (Prax 2003; OECD 2005). Modern society is also characterized by turbulence (Greenspan 2007) and the pace of change and innovation is violent or even impetuous (D’Aveni 1995). Drucker (1993) maintained that innovation is better defined as the creation and application of new knowledge for useful purposes. Nonaka and Takeuchi (1995) and Leonard-­Barton (1995), among others, offer a thorough analysis of knowledge, but also its dynamic framework in the innovation process which represents a process of creation, application and dissemination of different types of knowledge. We find the same idea among the proponents of second-­generation knowledge management (McElroy 2000; Prax 2003). In fact, the management of innovation and knowledge management are considered, at least implicitly, as two “practical” activities which are not mutually exclusive of each other. They are complementary, and sometimes merge. When we approach relationships between knowledge and innovation, we are surprised to see how the two are related. Drucker (1993) taught that innovation is finally better defined as a new creation that can be implemented. As mentioned by Schumpeter, the decisive innovator is the entrepreneur, who introduces into the economic process inventions, provided by technical progress, or who exploits the potential offered by new markets and new sources of raw materials. Nowadays, entrepreneurs are aware that the environment changes and major a combination of skills and knowledge to carry out their new venture. Opting for association with other people in order to increase the chances of project survival is an increasing phenomenon. Different kinds of associations are developed in entrepreneurship, including cooperatives, business networks, team entrepreneurship, leaders’ SME clubs, and so on. Moreover, several studies confirm that the more 122

Knowledge creation in entrepreneurial teams  ­123 developed ventures are those created and managed by a team, not by a sole individual (Cooper and Daily 1997; Eisenhardt and Schoonhoven 1990; Kamm et al. 1990). The issue of the entrepreneurial team becomes interesting in view of its positive impact on the firm’s performance (Bird 1989). Teal and Hofer’s (2003) study shows that the chances of survival and success are greater when the company was created by a team rather than by a sole entrepreneur. Thus, Schoonhoven and Romanelli (2001) state that the myth of the sole entrepreneur should be buried. Reich (1987) was the first to oppose the myth of the entrepreneur as a lone hero. This myth is actually the symbol of the North American dream, but it is no longer appropriate in an increasingly globalized economy. Anyway, nowadays entrepreneurs are no longer alone, they are always accompanied in their creative process but also in the management of their companies: bankers, business incubators, the social network of the entrepreneur, accountants, legal advisers. On the other hand, during the set-­up stage, new venture teams have to develop a product or a service and the brand that goes with it. Team members have an idea for a new product or service and must find the right process to develop it. Then comes brand development, which is extremely important for the survival of the new venture because it will help consumers identify, select and associate those products and services with the company. A strong brand gives an organization, product or service a distinctive and unique position in the market. For those reasons, it is very important for the entrepreneurial teams to enhance an innovative process to find the best communication strategy and how it could be implemented. Nonaka et al. (2000) raise the question of the place of knowledge creation (the concept of “Ba”) and emphasize the role of the project teams in improving the process of this creation. They have announced that the concept of “Ba”: Building a foundation for knowledge creation . . . The key platform of knowledge creation is the “phenomenal” place. Such a place of knowledge can emerge in individuals, working groups, project teams, informal circles, temporary meetings, e-­mail groups . . . within an organisation, knowledge creation teams or projects play key roles in value creation. (Nonaka and Konno1998, p. 41)

This announcement leads us to suppose that entrepreneurial teams provide a good opportunity to create knowledge during the venture creation process. Also, it should be noted that knowledge is at the heart of the globalized economy and gives a competitive advantage to organizations (Gunnlaugsdottir 2003). Additionally, it has been shown that new knowledge is developed by individuals and that the organization plays an

124   Handbook of research on entrepreneurship and creativity i­mportant role in developing and articulating that knowledge (Nonaka 1994). To enhance economy, today more than ever, researchers and business consultants must keep in mind the importance of diversity and complexity of entrepreneurial teams because of their potential to shape venture growth. In particular this includes a better understanding of how entrepreneurial teams’ members should work together in order to allow innovative process in their firms. Despite the importance of this topic, there are limited researches about knowledge process and entrepreneurial teams. Thus, we believe it is useful to look at the process of creating and developing knowledge within entrepreneurial teams. In fact, many studies have been proposed about knowledge creation on the one hand and entrepreneurial teams on the other; few, however, have put these two fields together to explore the relationship between them (Naffakhi et al. 2008). In this chapter, the linkages between the knowledge process and the entrepreneurial team will be highlighted based on existing literature. The next section presents the theoretical background of our definition of the entrepreneurial team and its attributes. I then define knowledge and describe the knowledge management process during the early stage of venture creation. The fourth section discusses the emergence of knowledge processes within the entrepreneurial teams, and the chapter finally concludes that the entrepreneurial team can be a place of knowledge creation, and that empirical studies are important to enrich this review of literature.

5.2 ENTREPRENEURIAL TEAM DEFINITION AND ATTRIBUTES Teamwork has become essential in today’s organizations. The entrepreneurial team is in many researches named as a top management team. So, what is an entrepreneurial team? 5.2.1  Entrepreneurial Team Definition Team entrepreneurship is what Johannisson (2002) called partnerships. According to him, “partnership is today in entrepreneurial contexts as much associated with the teaming up of individuals for venturing as of established firms.” (p. 14) It should also be noted that in the literature, the entrepreneurial team is not always clearly differentiated from the top management team, although the two concepts may overlap. Inbetween entrepreneurial teams’ members work together to create and develop a business. This association may be

Knowledge creation in entrepreneurial teams  ­125 formed during the emergence of the idea, from the start of commercial operations, or later, because it may happen that one of the contractors joins the other (or others) when the new venture has already started (Boncler et al. 2006; Naffakhi 2008). However, detailing the characteristics of both concepts, this mixture loses its legitimacy, and the differences seem obvious. Top management team is defined as a group of managers who use internal and external information to make strategic decisions that involve sustainability of the company (Bantel and Finkelstein 1995; Hambrick et al. 1996). Top management team is thus constituted by the heads of various departments or an organization that has passed the start-­up phase. In contrast, the entrepreneurial team is the sole owner of the company and has specific skills in the business creation context: entrepreneurial, managerial and technical-­functional competencies (Chandler and Jansen  1992). In fact, Chandler and Jansen (1992) divided these skills to abilities like: identify and take advantage of opportunities, work hard, coordinate activities, human resources management, strengthen position in a network business and have technical capabilities (ability to use tools and procedures). Also entrepreneurial team members personally take risks and assume the consequences of their decisions (Kamm et al. 1990; Chandler and Hanks 1994; Gartner et al. 1994; Cooney and Bygrave 1997). Thus, entrepreneurial teams do not have the external pressure from the board of directors or the market to leave the company or the position they hold, should things go wrong. In addition, the entrepreneurial team does not have to report to shareholders, as does the top management team. So, the entrepreneurial team is a small group of two or more persons, who together create or develop an entrepreneurial project in which they have a common interest (financial or otherwise). The team members must actively participate in the various activities of the organization throughout its evolution (Naffakhi 2008). In a recent article, Harper (2008) defines the entrepreneurial team as “a group of entrepreneurs with a common goal which can only be achieved by appropriate combinations of individual entrepreneurial actions.” (p. 5) In an article presenting the definitions and determinants of entrepreneurial teams, Schjoedt (2002) offers a definition intended to be exhaustive: An entrepreneurial team consists of two or more persons who have an interest, both financial and otherwise, in and commitment to the venture’s future and success; whose work is interdependent in the pursuit of common goals and venture success; who are accountable to the entrepreneurial team and for the venture; who are considered to be at the executive level with executive responsibility in the early phases of the venture, including founding and pre-­start up; and who are seen as a social entity by themselves and by others. (p. 2)

126   Handbook of research on entrepreneurship and creativity We can see in the above definition that one of the determinants for the existence of an entrepreneurial team is the representation that the team members have of the nature of their association and the reason for the team formation. In fact, team formation is profitable to the new venture creation when team members gain from complementarities, encourage knowledge transfer of information and create synergy (Lazear 1998; Hamilton et al. 2003). On the other hand, researchers found that the size of top management teams has a positive impact on innovation in the firm (Somech 2006) and large teams are more likely to radically innovate (West and Anderson 1996; Jones 2009). Some researchers tried to find out the effects of the entrepreneurial team on new venture performance, such as the effects of team composition (Ensley and Pearce 2000; Chandler and Lyon 2001), and team interpersonal process (Watson et al. 1995). Thus, the literature has provided evidence that the entrepreneurial team has a significant impact on venture performance (Kamm et al. 1990; Watson et al. 1995). Team’s members bring a right mix of qualified persons who have the appropriate set of knowledge, skills, information and abilities to make decisions and try to find solutions to unpredictable problems (Alberto 2001). Their work is interdependent in the pursuit of common goals and venture success (Kamm et al. 1990; Cooney 2005). The entrepreneurial team is an interesting field of research. It provides a place enabling entrepreneurs to share and exchange information, experience and knowledge, and to create a collective knowledge. The dynamic of the team could also be a key factor to enhance knowledge sharing and creation (e.g., leadership style, conflict and homogeneity/heterogeneity). Entrepreneurial teams have high impacts on the success of new ventures. However, to release team members’ creativity in order to increase venture performance, members must be open minded and accept the others’ points of view (e.g., Greve 1995; Chandler and Lyon 2001; Aldrich et al. 2004). However, little research is focused on how the relationships within entrepreneurial teams are organized and how the team members’ creativity is converged in order to increase venture performance. So, the positive association of entrepreneurial teams and new venture performance has been emphasized by previous research. However, little research has focused on how the relationships within entrepreneurial teams are organized and how the team members’ creativity converges in order to increase venture performance. Timmons (1999) emphasizes the role of the team leader, but sharing the same strategic vision seems to be as important as the leadership process. Based on the creative problem-­solving training programs at team-­based levels, Rickards et al. (2001) found that seven team factors are strongly

Knowledge creation in entrepreneurial teams  ­127 associated with creative team performance. Among these factors, entrepreneurial leadership and team composition may have the possibilities of releasing team members’ creativity. Payne (1990) identified resource availability, leadership, group size, cohesiveness and communication as important factors in creative performance. West and Wallace (1991) found there are three variables related to creative performance: climate, commitment and collaboration (like the different approaches team toleration, new ideas encouragement, and so on). Rickards and Moger (2000) suggested that platform of understanding, shared vision, climate, resilience, idea management, network activators and knowledge capitalization can be factors of effectiveness development that may be strongly associated with creative performance. 5.2.2  Leadership and Conflict as a Key Factor of Knowledge Process Entrepreneurial leadership could be an important determinant of teams’ performance. Leadership that allows high tolerance of ambiguity, persistence and perseverance, with high networking and communication abilities shows creativity (Stuart and Abetti 1987) and builds entrepreneurial culture and organization (Timmons 1999). Researchers demonstrate that the top management team can affect the development and implementation of new products by providing the leadership necessary to stimulate. Leadership plays an important role in the knowledge capitalization process. The entrepreneurial team would achieve more in the knowledge creation process when leadership process encourages communication, sense of criticism and persuasion. The knowledge creation process is seen as the result of a cohesive team. On the one hand, shared leadership is a process that involves all members of the team based on their skills and experience (Barry 1991; Pearce 1997; Perry et al. 1999). Following this leadership process, members are investigated fully in activities and tasks of leadership considered essential to the effective functioning of the team (Katzenbach 1997). Research suggests that when the shared leadership occurs at the team level, it is more effective (Barry 1991; Katzenbach and Smith 1993; Manz and Sims 1993; Pearce 1997). With shared leadership, teams have greater collaboration, coordination, cooperation and innovation (Manz and Sims 1993; Yeatts and Hyten 1998) and are better able to interpret the needs of the team (Perry et al. 1999). Ensley and Pearce (1999) found that shared leadership has also been recognized as a predictor of the performance of new firms. On the other hand, conflict may emerge within team members and could have a dual effect, positive and negative. Indeed, Schweiger et al. (1986) point out that, on the one hand, conflicts improve the quality of the

128   Handbook of research on entrepreneurship and creativity decision and, on the other hand, weaken the ability of the team to work together. In the same vein, Eisenhardt and Bourgeois Kahwajy (1997) describe the importance of conflict in scanning alternatives and ideas in the process of decision making. Jehn (1992) qualified conflict as a multi-­dimensional phenomenon; it is possible that conflict dimension improves the quality of decision when it is a question of consensus and emotional acceptance. Cognitive conflict is based on discussion and interaction in order to find the most effective way to achieve common goals (Jehn 1992). This kind of conflict is inevitable in a team leader because “different positions see the environment differently” (Mitroff 1982, p. 375). Cognitive conflict contributes to improve the quality of the decision because the synthesis of different points of view expressed within the team is generally better than individual perspectives (Amason 1996). Emotional conflicts arise within management teams when cognitive disagreement is perceived as personal criticism. A misinterpretation can cause discomfort leading to emotional conflicts (Brehmer 1976). The two kinds of conflict appear together and this is the origin of the paradox; however, effective leadership is likely to generate better decisions with fewer emotional conflicts. From the moment the team overcomes the conflict, it is clear that these moments of exchange are primarily learning time required for the life of the team. Also, decisions can be a source of knowledge creation, especially during the start-­up phase. Members make decisions intuitively, they do not have the feedback required to resolve some problems, such as strategic or organizational ones. This lack of feedback doesn’t give them a chance to compare or gain reliable information (Naffakhi 2008). The entrepreneurial team is a dynamic entity which evolves over time. To remain effective, an entrepreneurial team must be ready to adapt but also to cope with its environment. During the decision-­making process, team members exchange and debate alternatives. Each member brings his knowledge and past experience to the benefit of the project. They are in a learning and sharing process. Referring to the work of Piaget (1968) or that of Kolb (1984), assimilation and accommodation are two phases of the learning process. Assimilation is what is perceived from the outside world and incorporated into the inner world, without changing the internal structure of the world. According to Piaget, accommodation is when a child must alter the ideas in its head in order to “fit” the realities of external objects (Atherton 2009, p.7). Individual and group knowledge creation processes are complementary in knowledge creation. The individual enriches his knowledge by experience, education and training, and tries to transmit it to the other members of his group. To be able to do that, individuals should be willing to learn

Knowledge creation in entrepreneurial teams  ­129 from the other, too. Thus, constructive communication is important to establish knowledge creation processes within teams. In the literature, there are three stages that constitute the individual knowledge creation process (Mitchell and Nicholas 2006): ●

Transmission that works as a transfer of information from transmitter to receiver. Through this transfer, there is a filtration of information to useful or not useful for knowledge creation from the receiver’s mental model. This interpretation according to the individual’s mental model could lead to new ideas and creativity generation (DeDreu and West 2001). ● According to Kolb (1984), accommodation describes forms of knowledge in the elaboration of the cycle of experimental learning. ● Cognition process also includes intuiting, defined by Crossan et al. (1999) as “the preconscious recognition of the pattern and/or ­possibilities inherent in a personal stream of experience.” (p. 525) The knowledge-­based view claims that the creation and use of knowledge are very important to firm survival. This suggests that leading knowledge processes constitute one of the most important tasks of the team. The resource-­based view points out that the executive and leadership team influence knowledge assets. Team-­level knowledge starts at the interpreting process and is explained as the process of developing shared understanding among individuals, and of taking coordinated action through mutual adjustment (Crossan et al. 1999). This idea generates a four-­step process (Mitchell and Nicholas 2006). The first step consists of the accumulation of knowledge, as each team member brings in his/her knowledge (which is theoretically available to the group). As we have stressed elsewhere (see Naffakhi et al. 2008, p. 579), this kind of knowledge generation is generally developed within individual groups from the same functional area. Indeed, individuals from the same functional area share the same experience. This sharing leads to the development of shared tacit knowledge and contributes to the growing group’s culture (Brown and Duguid 2001). However, diversity in functional area provides opportunity to exchange knowledge specific to each area. These weak ties formed in cross-­functional teams areas, provide access to further information (Granovetter 1983). However, collective knowledge is still more interesting because of synergy; two plus two can equal five or even six (Boateng 2011). In fact, when people exchange knowledge, they all gain information (Davenport and Probst 2001). If they share their knowledge with others and feed back the new information gained, the benefits become exponential (Hope and

130   Handbook of research on entrepreneurship and creativity Hope 1997; Boateng 2011). Collective knowledge is less volatile and less easily affected by staff turnover (Chua 2002; Boateng 2011). Due to its adaptability, its dynamics and its composition, an entrepreneurial team is likely to develop individual and collective learning processes to capitalize on the knowledge and new skills (Doz 1994). According to Charue (1992), learning is a way of knowledge capitalization. Learning in management teams can also help to better understand the construction of the common strategic vision (Edmilson 2004). Filion (1988) addresses the theme of learning as a process that contributes to build the vision. To understand deeply the link between entrepreneurial team and knowledge process, the next section presents the theoretical background of both of these fields.

5.3 THE KNOWLEDGE CREATION PROCESS IN THE STARTING PHASE OF NEW VENTURE CREATION The ability to create new knowledge is often at the heart of the organization’s competitive strategy. Knowledge is created through sharing, collaboration and interaction. Beyond this, the knowledge is also supported by relevant information and data which can improve the decision-­making process. The ability of the entrepreneurial team to integrate knowledge is a strategic asset and this is qualified by the ability of the members to transform tacit and explicit competencies of team members “into a wide body of organizational knowledge” (Lorenzoni and Lipparini 1999, p. 320). In fact, knowledge sharing leads to mutual understanding that has a strategic implication for the entrepreneurial teams’ management. In the following subsection, the process of knowledge creation will be presented. 5.3.1  Knowledge Process Presentation Knowledge is divided into tacit and explicit (Polanyi 1966). Tacit knowledge comes from an individual and is very difficult to articulate. It is made explicit by conversion into messages that can be processed as information. Grant (1996) identified tacit knowledge as the most strategic resource of firms since tacit knowledge is difficult to imitate and immobile. Nonaka and Takeuchi (1995) present the organizational knowledge creation process based on two dimensions: epistemological and ontological. The epistemological dimension highlights individual knowledge creation and the ontological dimension relates to the interaction between tacit

Knowledge creation in entrepreneurial teams  ­131 and explicit knowledge. These two dimensions constitute the knowledge creation process composed of four dimensions: socialization: refers to the process that transfers tacit knowledge from one person to another; externalization: refers to the process for making tacit knowledge explicit among individuals within a group; combination: refers to the knowledge transfer once knowledge is explicit; and internalization: the process of understanding and absorbing explicit knowledge into tacit knowledge held by the individual. However, this ‘SECI’ model of Nonaka and his colleagues has been widely criticized (Tsoukas 1996; Tsoukas and Vladimirou 2001; Tsoukas 2003; Gourlay 2006). This criticism is due to erroneous interpretation of Polanyi (1966). To explain the process in a simple way, explicit knowledge is conceptual (e.g., the scientific knowledge of a computer engineer), whereas tacit knowledge is perceptual (e.g., the practical knowledge of a salesman). Thus, conceptual knowledge, regardless of its complexity, can be verbalized, whereas perceptual knowledge is essentially inexpressible verbally. Tacit knowledge can only be displayed and manifested; that is the reason why salesmen learn their job through practise and experience with clients, not at school. Tsoukas concludes: Tacit knowledge has been greatly misunderstood in management studies . . . Nonaka and Takeuchi’s interpretation of tacit knowledge as knowledge-­not-­ yet-­articulated—knowledge awaiting for its “translation” or “conversion” into explicit knowledge—an interpretation that has been widely adopted in management studies, is erroneous: it ignores the essential ineffability of tacit knowledge, thus reducing it to what can be articulated. (Tsoukas 1996, p. 425)

Thereby, Tsoukas proposes that “tacit knowledge cannot be captured, translated, or converted, but only displayed and manifested, in what we do” (Tsoukas 1996, p. 426). In addition, some research suggests that, contrary to what was suggested by Nonaka and Takeuchi (1995), knowledge is more periodic and even more personal, and the conversion process is dependent upon attention and more voluntary (Logan 1988, 1992; Vokey and Brooks 1994; Logan et al. 1996; Logan 1997; Perruchet and Gallego 1997; D’Eredita and Hoyer 1999). However, the perspective offered by Tsoukas (2003) does not explain the mechanism responsible for the proliferation of tacit knowledge, given its ineffable, or personal, quality (see d’Eredita and Barreto 2006). Below, we introduce the advantage of creating a venture within a team to benefit from the tacit knowledge of each member. The sharing of knowledge within the members of the entrepreneurial team is one of the key factors for developing a high quality product and/ or a service. Tacit knowledge is the property of the person; acquired by ­education, experience, interpersonal relationships, it emerges over the

132   Handbook of research on entrepreneurship and creativity shared experiences, as consequence of organizational routines (Argyris and Schön 1978, 1996). Creating a venture by a business team whose members are complementary in terms of training, experience and personality is beneficial to the proliferation of knowledge. Indeed, each member has a number of tasks and responsibilities within a team without being obliged to find how to share his own tacit knowledge. The next subsection presents the specificity of the entrepreneurial team and its advantage to the knowledge creation process. 5.3.2  Entrepreneurial Team as a Tool of Knowledge Proliferation Entrepreneurial team members learn from each other during the new venture creation process, which leads to the emergence of a collective explicit knowledge. In the literature, confidence is a result of interrelation phenomena. It appears in the dynamic process of work teams as the result of a long period of working together. However, confidence in the entrepreneurial team appears as an input, it is one of the criteria for choosing a partner. It is a condition in advance and not a result (Naffakhi 2008). This criterion is very helpful to the knowledge sharing. Teams’ members often work together, trust each other and have to react quickly to ensure the success of the project. The meetings are held at a rapid pace, especially during the preparation of the project of creation but also during the first years of a new venture activity. This is an opportunity to enrich knowledge sharing, especially during the decision-­making process. This knowledge exchange, whatever its nature— technical or ­cognitive, leads to organizational core capabilities development. Entrepreneurial team members are always in interaction, especially during the starting phase. As the literature suggests, the team members are in spontaneous and planned, formal and informal, personal and impersonal human interactions. This process is very useful to share explicit knowledge (Leonard-­Barton 1995; Choo 1998; Madhavan and Grover 1998; Hansen et al. 1999). Open discussion, either in a formal or informal way, through face-­to-­face meetings and phone calls, is the most commonly used technique for sharing knowledge between the team members (Naffakhi 2008). In addition, most of the time entrepreneurial teams begin as a small-­size team. This choice leads us to infer that the entrepreneurial teams could be a source of innovation and knowledge creation when they are small, particularly at the beginning of creation (Naffakhi and Bayad 2007). The explicit knowledge forms a direct source of competitiveness because it results in the exercise of intellectual expertise (Nonaka et al. 2006). Knowledge and information are both at the base of creativity. Very often we are not aware of our potential creativity or how much we know, because

Knowledge creation in entrepreneurial teams  ­133 of lack of motivation, time or tools to guide us in practising creativity. Entrepreneurship is a way that allows us to realize our individual potential as well as a collective potential if we proceed with a team. Each member puts his tacit and explicit knowledge in favor of the project while agreeing to cooperate with the rest of the team. In fact, during the new venture creation phase, team members are motivated, spend all their time setting up their project and volunteer to cooperate. New venture team members feel motivated primarily by the interest, satisfaction and challenge of the situation and not by external pressures, so they become more creative. Drucker (1985) argued that innovation is the tool of entrepreneurship. However, both innovation and entrepreneurship demand creativity. Creativity is the ability to make or otherwise bring into existence something new, whether a new solution to a problem, a new method or device, or a new artistic object or form. Culture, especially routine, exerts a negative force on creativity according to Pearce (1997); however, “were it not for creativity, culture itself would not be created.” (p. 23) Individual creativity is a function of three components: expertise, creative thinking skills and motivation. Expertise includes the knowledge of the person and what he can do in his work in terms of technical abilities and management. Creative thinking refers to how problems and solutions are approached. Skills depend on the capacity to put existing ideas together in new combinations but also on personality as well as on how a person thinks and works. Motivation is the desire and the interest to do something. When people are intrinsically motivated, they are more ­challenged and engaged in what they do. In entrepreneurship, expertise, creative thinking and motivation are required and form the base of the entrepreneur’s natural resources. So how does the knowledge creation process occur within teams? The following section will discuss the knowledge creation process within entrepreneurial teams.

5.4 KNOWLEDGE PROCESS EMERGENCE WITHIN ENTREPRENEURIAL TEAMS According to Kamm and Nurick (1993) there are two ways to form a team. The first is when the lead entrepreneur— the member who has had a business idea, or just wants to start a new venture—proposes to others the idea of the business and asks them if they want to help him to execute the plan. The second is the group approach. In this situation the team already exists, but not yet a business idea. Together they will search for business ­opportunities to start a new venture.

134   Handbook of research on entrepreneurship and creativity Lechler (2001) found that great numbers of new high-­technology ventures are started by entrepreneurial teams instead of single entrepreneurs. This could be explained by the complex knowledge required in high-­tech sectors that would overcharge the capacity of a single entrepreneur. Due to this, it could prove more successful to start in a team, as two or more individuals would have greater collaborative knowledge (Gartner 1985). As far back as 1977, Cooper and Bruno (1977) had already done research on the success of high-­technology firms. They studied the impact of the individual founders and team founders on firms’ growth. They found a significant result: high-­growth firms more often were started by two or more individuals; in other words, by an entrepreneurial team. 5.4.1 How does Knowledge Process Emerge from the Entrepreneurial Team? In the entrepreneurship field, it appears that during the new venture creation phase and partly during the development phase, the functional diversity of partners’ traits significantly influences the process of decision making and creativity. Associates are usually from different functional areas and have lived different experiences even if they have worked together in the past. Working together involves them sharing their knowledge in order to create a new venture project proposal in response to an idea. In face-­to-­face dialogue during formal and informal meetings, they prepare a business model and thus jointly shared tacit mental models are developed. This process of social interaction accesses knowledge that is embedded in the entrepreneurial team members. Members start to learn to work with each other, and start to use all their knowledge to develop a collective expertise that can sustain their new venture. They are motivated, they have faith in their project, and these factors are very important to make exchange and sharing easier. The second step of the knowledge creation process is based on the interaction intensity between team members to develop tacit language and shared understanding. During this second phase, entrepreneurial team members collectively reflect on the shared tacit mental models developed in the first phase and start to establish a team culture. The third phase represents exchange and negotiation around different points of view. Different ideas rise and become shared in the group. This phase allows team members to link their past experience to current situations (Hargadon and Sutton 1997). For these reasons it is more efficient for team members to have diverse backgrounds in order to be able to bring more knowledge and new ideas to their shared space. The fourth step of the knowledge creation process through the team

Knowledge creation in entrepreneurial teams  ­135 is the stage of integration. This phase explains the output of the team negotiation; it could be considered as the stage of decision making based on knowledge sharing and new ideas generation. Therefore in a cross-­ functional team, diversity pushes the various team members to think about information transmitted through the members. This will raise a common interpretation and generate an efficient result from an individual’s knowledge at the team level. It is collaboration; it is the process in which actors from different disciplines share their knowledge about both the project process and the project content. Doing that, they will create shared understanding on both aspects. This facilitates knowledge integration and exploration, which is necessary for achieving goals. Actors share their design knowledge through communication. These knowledge creation processes emerge from interactions between explicit knowledge and tacit knowledge, and form a spiral of knowledge creation that moves at different levels of entities: individual, group, organizational and inter-­organizational (Nonaka 1994). As Poh (2001) explained, knowledge creation is no longer the activity of an organization (network component) working in isolation, but the collaborative result of its members working closely in internal groups and in partnership with other organizations. Some studies indicate that the start-­up phase is critical and important to knowledge creation processes within the team (Naffakhi 2008). Based on research on entrepreneurial teams (Naffakhi and Bayad 2007; Naffakhi 2008), the most important key factors to enhance knowledge creation within entrepreneurial teams are explored in the following sections. Entrepreneurial team members manage the total organizational knowledge creation process at the corporate level by articulating the company vision, “establishing a knowledge vision” and setting the standards for “justifying the value of the knowledge that is being created” (Nonaka and Takeuchi 1995, p. 156). In fact, the entrepreneurial teams can be defined by reference to their strategic vision but also members’ composition which leads that vision. Demographic attributes of the entrepreneurial team may give some indication regarding the knowledge creation processes within heterogeneous members. Yet structural and behavioral attributes seem to be more important. Teams constituting members that have different areas of expertise have more chance of generating new ideas. However, the capability to reach consensus in this kind of team can influence the productivity of such knowledge processes, especially when it comes to conflict emergence (Reich 1983). However, the specificity of the entrepreneurial team members is their commitment to their own project. Their commitment is higher than the

136   Handbook of research on entrepreneurship and creativity commitment of an employee or a manager, the project is their baby, they have to take care of it and try to solve problems and conflicts as quickly as possible to continue the venture. They are much attached to their company, more than a simple employee. They are associated with their own business and act for the same goal. Even where conflicts are likely to occur, such as when individual interests are inconsistent or when there is an organizational problem, members of entrepreneurial teams are more likely to try to solve interpersonal problems promptly and concentrate on their project to avoid jeopardizing their results. Many teams break their commitment and leave the project when affective conflict emerges,; this occurs during the early phase of business plan elaboration or with the evolution of the venture, when personnel objectives tend to diverge from organizational ones. This kind of conflict rarely happens at the beginning of starting-­up activity. 5.4.2 The Impact of Organization Evolution on the Knowledge Creation Process With the development of the organization, members of entrepreneurial teams evoke a sense of collective operation that helps further build a shared vision. The roles within the organization are clearly distributed. A set of routines is taking place and heterogeneous knowledge at the beginning of the project tends to homogenize. At this stage, team members could be helped by their employees that are both diverse and specialized in their respective fields, to collect information necessary for decision making and its implementation. Thus, following the development of the business and the phenomenon of entry, the team could increase its size to bring the knowledge and the skills needed. The context which may lead to the combination within a team is linked to the process of actively seeking opportunities to raise new ideas and effective solutions to problems. The teams’ heterogeneity and a good exchange between members can positively influence the development of knowledge needed for the new venture that a sole entrepreneur cannot generate. Team creativity is defined as divergent thinking in groups, as reflected in ideational fluency (Brown et al. 1998). Creativity coming from the exchange of team members is impressive. A small group of people gives better creative solutions to problems evolving from collective interaction (Timmons 1999). In addition, as mentioned earlier a diverse business team cannot succeed in the strategic decision-­making process if the power is held by one person. Melaville et al. (1993) note the importance of sharing power and responsibility in collaboration for collective decision making. Thus, an entre-

Knowledge creation in entrepreneurial teams  ­137 preneurial team is most effective when partners have the opportunity to exercise leadership. Partners need to work collectively instead of dominating those they perceive as being less powerful. Ideal partners are those who bring a variety of contributions in terms of professional but also cognitive skills. The team members collectively decide the objectives and activities throughout the process of decision making. In the doctoral dissertation of Naffakhi (2008), it is shown that, over time, only strategic decisions create an ongoing debate within the entrepreneurial team. This type of decision requires the involvement of all the associates. During the process of strategic decision making, interpersonal interactions, team dynamics, leadership style and the shared vision are at the heart of the action. The role of functional diversity of team members evolves with the evolution of the organization. During the start-­up and increased development phases of the organization, the impact of this diversity between partners is important, not only in the emergence of creative ideas but also in ­disagreement and cognitive conflict. Over time, the logic of collective operation helps to further build a shared vision. A common operating system is formed within the team with informal rules setting expectations and obligations of each member in terms of mutual gain. At this stage, roles and responsibilities within the organization are clearly distributed. Collective knowledge slowly starts to accrue and it is not easy to introduce other members to the existing team. However, to preserve the diversity that helps to create knowledge and to make appropriate decisions, entrepreneurial team members collaborate also with their employees to combine their knowledge. During the pre and the post start up of the venture, members learn by doing. They are in a constant problem solving, in a learning administrative tasks process and decision making stages. Throughout these years, the entrepreneurial team is boiling. Members learn on the job. They are constantly problem solving, in a learning administrative tasks process and decision-­making stages. Market penetration and searching for customers are not easy tasks; entrepreneurial team members are in an ongoing debate to make the right decisions and to find the best strategy for their business. In addition, team members get to know each other professionally; learn to work together. In general, partners know each other before the establishment of the business: they are friends, colleagues, family members, and so on. So during the first years, they learn to work together. Conflicts that do not directly affect the overall purpose of the organization are quickly resolved. Members who joined the team during the early stages of creation participate in expanding the functional diversity of the partners and expand the alternatives and the rich discussions that could

138   Handbook of research on entrepreneurship and creativity lead team members to combine their knowledge and learn from each other during the decision-­making process. However, the positive influence of diversity in the decision-­making process is achieved only when the work rules and distribution of power are clearly dictated and members capitalize on their knowledge at the feedback stage. Over time and as the organization increases in size, the entrepreneurial team begins to delegate tasks. The entrepreneurial team becomes the top management team and tactical decisions are taken more individually; the combination process takes place. During the first years, team members follow their common professional goal, based heavily on their instincts, to move the organization forward. Over time, and through years of experience, the entrepreneurial team develops routines. Successes and failures are capitalized. It means that the team stores for future similar situations. Thus, when the business reaches a certain stage of maturity and the company becomes economically stable with a good market share, the role of functional diversity in decisions declines because the members know each other better and start to have routines and a more collective experience. At the mature stage, the communication between members is less intense and attention turns to their respective functions. Partners are at the same level of knowledge; certain homogeneity tends to dominate the team. However, organizations that operate in an unstable environment, for example the high-­tech sector, keep their competitiveness over time, based on their employees who represent a competitive advantage in terms of innovative and creative skills. Each member responsible for a number of employees uses his specific skills to fill in the knowledge gap of the entrepreneurial team and thus advance the organization.

5.5  CONCLUSION The multiple opportunities for exchange within the entrepreneurial team help develop gradually an organizational learning process. Indeed, the entrepreneurial adventure is a discovery for many entrepreneurs. The involvement of members of the entrepreneurial team in the decision-­ making process enables them to learn from their experiences, to sustain their organizations and improve their competitiveness. This learning process starts with the emergence of the entrepreneurial project. In the entrepreneurial process, the first decision is always hard to make. The entrepreneurial team members experience allows the process of decision making to become clearer and more organized. Decisions are discussed with greater ease and a learning process develops informally within the team. This process allows members to acquire new knowledge and improve their skills.

Knowledge creation in entrepreneurial teams  ­139 During the early months of the new venture creation, the partners feel the emergence of a logical evolutionary learning. This logic helps the partners to better accept their failures and consider that it is a part of entrepreneurial learning that can be used in the future. Individuals do not have the same mental models; even if they worked together for years, they see things differently. This difference can be a source of learning. Indeed, intelligent observation allows team members to learn from the experiences of others, to be aware about how the others react in certain situations. Thus, knowledge created by entrepreneurial teams, as explained by Chua (2002), is socially and contextually embedded in a memory of organization. Individuals’ knowledge is transformed and enriched within a dynamic process of team members sharing and leads to a collective knowledge. Over time, this collective knowledge is preserved through the entrepreneurial members; thus each individual forms part of the memory of collective and tacit knowledge (Walsh and Ungson 1991; De Freitas 2002). Learning by doing and by making decisions helps the entrepreneurial team to develop an organizational memory. This memory also consists of explicit collective knowledge codified in the explicit and implicit culture of the organization. Last but not least, we note a lack of research on knowledge creation in entrepreneurial teams, despite the complexity of the phenomenon. This research gap could be the starting point for further empirical investigations in order to gain a better understanding of the knowledge creation process within entrepreneurial teams. This kind of research could help novice entrepreneurs to manage their teams efficiently.

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Knowledge creation in entrepreneurial teams  ­141 Edmilson De Oliveira, L. (2004), Apprentissage Systémique et Stratégie de PME, Thèse de doctorat en Sciences de Gestion, IHEC Montréal. Eisenhardt, K.M. and C.B. Schoonhoven (1990), “Organizational Growth: Linking Founding Team, Strategy, Environment, and Growth Among U.S. Semiconductor Ventures, 1978– 1988,” Administrative Science Quarterly, 35, 504–529. Eisenhardt, K.M., L.J. Bourgeois and J.L. Kahwajy (1997), “Conflict and Strategic Choice: How Top Management Teams Disagree,” California Management Review, 39, 42–62. Ensley, M.D. and A.C. Amason (1999), “Entrepreneurial Team Heterogeneity-­Task Fit and Its Link To Decision Making Conflict and New Venture Performance: The Moderating Effect of TMT Tenure,” Frontiers in Entrepreneurship Research. Ensley, M.D. and C.L. Pearce (2000), “Vertical and Shared Leadership in New Venture Top Management Teams: Implications for New Venture Performance,” paper presented to the 20th Annual Entrepreneurship Research Conference, June, Babson Park, MA. Filion, L.J. (1988), The Strategy of Successful Entrepreneurs in Small Business: Vision, Relationships and Anticipatory Learning, Doctorate thesis, Lancaster, University of Lancaster. Gartner, W.B. (1985), “A Conceptual Framework for Describing the Phenomenon of New Venture Creation,” Academy of Management Review, 10, 696 –706. Gartner, W.B. (1988), “‘Who Is an Entrepreneur’ Is the Wrong Question,” American Journal of Small Business, Spring, 11–32. Gartner, W., K. Shaver and J. Katz (1994), “Finding the Entrepreneur in Entrepreneurship,” Entrepreneurship Theory and Practice, 18 (3), 5–10. Gourlay, S. N. (2006), “Conceptualizing Knowledge Creation: A Critique of Nonaka’s Theory’, Journal of Management Studies, 43 (7), 1415–1436. Granovetter, M. (1983), “The  Strength  of  Weak Ties: A Network Theory Revisited,” Sociological Theory, 1, 201–233.  Grant, R.M. (1996), “Prospering in Dynamically-­Competitive Environments: Organisational Capability as Knowledge Integration,” Organisation Science, 7 (4), 375–387. Greenspan, A. (2007), The Age of Turbulence: Adventures in a New World, New York: Penguin. Greve, A. (1995), “Networks and Entrepreneurship—An Analysis of Social Relations, Occupational Background, and Use of Contacts during the Establishment Process,” Scandinavian Journal of Management, 1 (1), 1–24. Gunnlaugsdottir, J. (2003), “Seek And You Will Find, Share And You Will Benefit: Organising Knowledge Using Groupware Systems,” International Journal of Information Management, 23 (5), 363–380. Hambrick, D.C., T. Seung Cho and M.-­J. Chen (1996), “The Influence of Top Management Team Heterogeneity on Firms’ Competitive Moves,” Administrative Science Quarterly, 41, 659–684. Hamilton, B.H., J.A. Nickerson and H. Owan (2003), “Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation,” Journal of Political Economy, 111 (3), 465–497. Hansen, M.T., N. Nohria and T. Tierney (1999), “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, 77 (2), 106–116. Hargadon, A. and I. Sutton (1997), “Technology Brokering and Innovation in a Product Development Firm,” Administrative Science Quarterly, 42 (4), 716–749. Harper, D.A. (2008), “Towards a Theory of Entrepreneurial Teams,” Journal of Business Venturing, 23, 613–626. Hope, J. and T. Hope (1997), “Issue 3 Knowledge Management—Leverage Knowledge for Competitive Advantage,” in J. Hope and T. Hope (eds.), Competing In The Third Wave— The Ten Key Management Issues of The Information Age, Boston: Harvard Business School Press, pp. 65–85. Jehn, K. (1992), The Impact of Intragroup Conflict on Effectiveness: A Multimethod Examination of the Benefits and Detriments of Conflict, Unpublished Doctoral Dissertation, Northwestern University Graduate School of Management, Evanston, IL.

142   Handbook of research on entrepreneurship and creativity Johannisson, B. (2000), ‘Entrepreneurship as a Collective Phenomenon’, presented at RENT XII Conference, 26–27 November l998, Lyon, France, http://citeseerx.ist.psu.edu/viewdoc/ download?doi510., (Last accessed January 2014). Johannisson, B. (2002), Entrepreneurship as a Collective Phenomenon, Scandinavian Institute for Research in Entrepreneurship (SIRE), Växjö University. Jones, B. (2009), “The Burden of Knowledge and the Death of the Renaissance Man: Is Innovation Getting Harder?” Review of Economic Studies, 76 (1), 283–317. Kamm, J.B. and A.J. Nurick (1993), “The Stage of Team Venture Formation: A Decision-­ Making Model,” Entrepreneurship Theory and Practice, Winter, 17–27. Kamm, J.B., J.C. Shuman, J.A. Seeger and A.J. Nurick (1990), “Entrepreneurial Teams in New Venture Creation: A Research Agenda,” Entrepreneurship Theory and Practice, Summer, 7–17. Katzenbach, J.R. (1997), “The Myth of the Top Management Team,” Harvard Business Review, November–December. Katzenbach, J.R. and D.K. Smith (1993), The Wisdom of Teams: Creating the High-­ Performance Organization, New York: Harper Business. Keeley, R. and J. Roure (1990), “Management, Strategy, and Industry Structure as Influences on the Success of New Firms: A Structural Model,” Management Science, 36, 1256–1267. Kolb, D.A (1984), Experiential Learning: Experience as the Source of Learning and Development, Englewood Cliffs, NJ: Prentice Hall. Lazear, E.P. (1998), “Hiring Risky Workers” in Isao Ohashi and Toshiaki Tachibanki (eds.), Internal Labour Market, Incentives, and Employment, New York: St. Martin’s Press. Lechler, T. (2001), “Social Interaction: A Determinant of Entrepreneurial Team Venture Success,” Small Business Economics, 16 (4), 263–278. Leonard-­Barton, D. (1995), Wellsprings of Knowledge: Building and Sustaining the Sources of Innovation, Boston, MA: Harvard Business School Press. Logan, G.D. (1988), “Toward an Instance Theory of Automatization,” Psychological Review, 95, 492–527. Logan, G.D. (1992), “Shapes of Reaction-­Time Distributions and Shapes of Learning Curves: A Test of the Episode Theory of Automaticity,” Journal of Experimental Psychology, Learning, Memory and Cognition, 18, 883–914. Logan, G.D. (1997), “The Automaticity of Academic Life: Unconscious Applications of an Implicit Theory,” The Automaticity of Everyday Life: Advances in Social Cognition, 10, 157–179. Lorenzoni, G. and A. Lipparini (1999), “The Leveraging of Interfirm Relationships as a Distinctive Organizational Capability: A Longitudinal Study,”  Strategic Management Journal, 20 (4), 317–338. Madhavan, R. and R. Grover (1998), “From Embedded Knowledge to Embodied Knowledge: New Product Development as Knowledge Management,” Journal of Marketing, 62 (4), 1–12. Manz, C.C. and H.P. Sims Jr (1993), Business without Bosses: How Self-­managing Teams are Building High Performance Companies, New York: Wiley. McElroy, M.W. (2000), “The New Knowledge Management, Knowledge and Innovation,” Journal of the KMCI, 1 (1), 43–67. Melaville, A.I. and M.J. Blank with G. Asayesh (1993), Together We Can, Washington, DC: U.S. Department of Education and U.S. Department of Health and Human Services. Mitchell, R and S. Nicholas (2006), “Knowledge Creation in Groups: The Value of Cognitive Diversity, Transactive Memory, and  Open Mindedness Norms,” Electronic Journal of Knowledge Management, 4 (1), 67–74. Mitroff, I. (1982), “Talking Past One’s Colleagues in Matters of Policy,” Strategic Management Journal, 3, 374–375. Naffakhi, H. (2008), Equipe Entrepreneuriale et Prise de Décision: une Étude Exloratoire sur le Rôle de la Diversité du Capital Humain, Thèse de doctorat en Sciences de Gestion, Université Nancy 2. Naffakhi, H. and M. Bayad (2007), The Role of Entrepreneurial Team Diversity in Knowledge

Knowledge creation in entrepreneurial teams  ­143 Creation: Proposition of Theoretical Model and Dialectic Relationship, presented to ICSB World Conference, June, Finland. Naffakhi, H., Y. Boughattas, M. Bayad and C. Schmitt (2008), “Process of Knowledge Creation within Entrepreneurial Teams: Illustration Using the Nonaka and Takeuchi Model,” paper presented at 9th European Conference on Knowledge Management (ECKM), Southampton Solent University, Southampton UK, 4–5 September. Nonaka, I. (1994), “A Dynamic Theory of Organizational Knowledge Creation,” Organization Science, 5 (1), 14–37. Nonaka I. and N. Konno (1998), “The Concept of Ba: Building for Knowledge Creation,” California Management Review, 40 (3). http://www.reims-­ms.fr/agrh/docs/actes-­agrh/pdf-­ des-­actes/2010bazin-­notais.pdf – 955.0kb (Last accessed January 2014). Nonaka, I. and H. Takeuchi (1995), The Knowledge Creating Company, New York: Oxford University Press, p.84. http://www.syre.com/racine/Nonaka.htm (Last accessed January 2014). Nonaka, I., H. Takeuchi and M. Ingham (2006), La Connaissance Créatrice, Bruxelles: DeBoeck University. Nonaka, I., R. Toyama and N. Konno (2000), “SECI, Ba and Leadership: A Unified Model of Dynamic Knowledge Creation,” Long Range Planning, 33, 5–34. OECD (2005), Education at a Glance, Paris: OECD. Payne, R. (1990), “The Effectiveness of Research Teams: A Review,” in M.A. West and J.L.  Farr (eds.), Innovation and Creativity at Work: Psychological and Organizational Strategies, Chichester, England: Wiley, pp. 100–122. Pearce, C.L. (1997), The Determinants of Change Management Team Effectiveness: A Longitudinal Investigation, PhD dissertation, University of Maryland, College Park. Penrose, E. (1959), The Theory of the Growth of the Firm, Oxford: Basil Blackwell. Perruchet, P. and J. Gallego (1997), “A Subjective Unit Formation Account of Implicit Learning’ in D.C. Berry (ed), How Implicit is Implicit Learning?, New York: Oxford University Press, pp.124–161. Perry, M.L., C.L. Pearce and H.P. Sims, Jr. (1999), “Empowered Selling Teams: How Shared Leadership can Contribute to Selling Team Outcomes,” Journal of Personal Selling and Sales Management, 19 (3), 31–35. Piaget, J. (1968), On the Development of Memory and Identity, Barre, MA: Clark University Press with Barre Publishers. Poh, L.G. (2001), Knowledge Management and Creation of Project Teams for Developing Customer Proposals when Responding to Customer’s RFP (Request for Proposal) in Singapore-­Based Telecommunications Companies, Unpublished DBA dissertation, University of Southern Queensland, Australia. Polanyi, M. (1966), The Tacit Dimension, London: Routledge and Kegan Paul. Powell, W.W. and K. Snellman (2004), The Knowledge Economy, Greenwich, CT: JAI Press. Prax, J.Y. (2003), Le Manuel du Knowledge Management, Paris: DUNOD. Reich, R.B. (1983), The Next American Frontier, New York: Times Books. Reich, R.B. (1987), “Entrepreneurship Reconsidered: The Team as Hero,” Harvard Business Review, May– June, 77–83. Rickards, T. and S. Moger (2000), “Creative Leadership Processes in Project Team Development: An Alternative to Tuckman’s Stage Model,” British Journal of Management, 11, 273–283. Rickards, T., M.H. Chen and S. Moger (2001), “Development of a Self-­report Instrument for Exploring Team Factor, Leadership and Performance Relationship,” British Journal of Management, 12, 243–250. Schjoedt, L. (2002), “Entrepreneurial Teams: Definition and Determinants,” Annual National Conference on Entrepreneurial Bonanza, August, Reno, Nevada. Schoonhoven, C.B. and E. Romanelli (2001), “Emergent Themes and the Next Wave of Entrepreneurship Research,” in C.B. Schoonhoven and E. Romanelli (eds.), The Entrepreneurship Dynamic, Stanford, CA: Stanford University Press, pp. 383–408. Schumpeter, J.A. (1934), The Theory of Economic Development, 2nd edition, Cambridge, MA: Harvard University Press.

144   Handbook of research on entrepreneurship and creativity Schweiger, D., W. Sandberg and J. Rogan (1986), “Group Approaches for Improving Strategic Decision Making: A Comparative Analysis of Dialectical Inquiry, Devil’s Advocacy and Consensus,” Academy of Management Journal, 29, 51–71. Somech, A. (2006), “The Effects of Leadership Style and Team Process on Performance and Innovation in Functionally Heterogeneous Teams,” Journal of Management, 32 (1), 132. Stuart, R. and P.A. Abetti (1987), “Start-­Up Ventures: Toward the Prediction of Initial Success,” Journal of Business Venture, 2, 215–230. Teal, E. and C. Hofer (2003), “The Determinants of New Venture Success: Strategy, Industry Structure, and the Founding Entrepreneurial Team,” Journal of Private Equity, Fall, 38–51. Timmons, J.A. (1999), New Venture Creation: Entrepreneurship in the 21st Centuries (6th edition), Homewood, IL: Irwin. Tsoukas, H. (1996), “The Firm as a Distributed Knowledge System: A Constructionist Approach,” Strategic Management Journal, 17 (Winter Special Issue), 11–25. Tsoukas, H. (2003), “Do We Really Understand Tacit Knowledge?” in M. Easterby-­Smith and M.A. Lyles (eds.), The Blackwell Handbook of Organizational Learning and Knowledge Management, Malden, MA and Oxford: Blackwell Publishing Ltd, pp. 410–427. Tsoukas, H. and E. Vladimirou (2001), “What is Organizational Knowledge?’, Journal of Management Studies, 38. Vokey, J.R. and L. Brooks (1994), “Fragmentary Knowledge and the Processing-­Specific Control of Structural Sensitivity,” Journal of Experimental Psychology: Learning, Memory and Cognition, 18, 328–344. Walsh, J.P. and G.R. Ungson (1991), “Organizational Memory,” Academy of Management Review, 16 (1), 57–91. Watson, W.E., L.D. Ponthieu and J.W. Critelli (1995), “Team Interpersonal Process Effectiveness in Venture Partnerships and its Connection to Perceived Success,” Journal of Business Venturing, 10, 393–411. West, M. and N. Anderson (1996), “Innovation in Top Management Teams,” Journal of Applied Psychology, 81 (6), 680–693. West, M.A. and M. Wallace (1991), “Innovation in Health Care Teams,” European Journal of Social Psychology, 21, 303–315. Yeatts, D. and C. Hyten (1998), High Performing Self-­managed Work Teams: A Comparison of Theory and Practice, Thousand Oaks, CA: Sage Publications.

6.  Entrepreneurship and creative professions—a micro-­level analysis Michael Fritsch and Alina Sorgner

6.1  INTRODUCTION Creativity plays an influential role in the process of economic development. Its significance has been notably recognized in two respects. Firstly, creativity is a key input into research and development (R&D) and innovation, which is a main driver of economic growth (Solow 1988; Gittleman and Wolff 1995). Secondly, there has been increasing demand for goods and services produced by creative industries (Caves 2000; Howkins 2001) as well as employment growth in such industries (Florida 2004) over the last decades. As far as creativity can be nurtured and stimulated (Simonton 1984), it may be regarded as a target for a policy devoted to foster ­economic growth (Florida 2004). Several dimensions or types of creativity may be distinguished, such as artistic or cultural creativity,1 technological creativity or innovation, as well as economic creativity or entrepreneurship. Richard Florida (2004) in his book The Rise of the Creative Class argues that these three types of creativity are mutually dependent. Lee et al. (2004) attempt to investigate such relationships for the USA by asking if regions with a high level of cultural activity are also characterized by a correspondingly high level of start-­ups. Indeed, they find some coincidence of these two types of creativity at a regional level and conclude that there may be a close relationship.2 However, the geographic coincidence of cultural creativity and entrepreneurship does not necessarily suggest a coincidence at the level of individuals. The reason for geographic coincidence may simply be that the regional levels of new business formation and of cultural activity depend on the same factors while the entrepreneurs and the creative people are different persons. Florida (2004, p. 33), however, claims that “the varied forms of creativity—technological creativity (or invention), economic creativity (entrepreneurship), and artistic and cultural creativity are in fact deeply interrelated. Not only do they share a common thought process, they reinforce each other through cross-­fertilization and mutual stimulation.” He also argues (2003, 2004) that people with high ambitions of becoming self-­employed prefer locations which are characterized by high 145

146   Handbook of research on entrepreneurship and creativity levels of cultural creativity. This implies that (potential) entrepreneurs have a special interest in cultural activity. The main reason for such a positive association between entrepreneurship and cultural activities is that culture may stimulate creativity of an individual and can serve as a rich source of new ideas.3 In this chapter, we aim at investigating the question of whether creativity and entrepreneurship coincide not only within regions but within individuals. In what follows, we first provide an overview on the state of research on entrepreneurial creativity (section 6.2). Section 6.3 introduces the theory of the creative class and its relationship to entrepreneurship. Section 6.4 describes the data, and section 6.5 reports the results of the empirical analysis. The final section summarizes the evidence and concludes.

6.2 APPROACHES TO THE STUDY OF ENTREPRENEURIAL CREATIVITY 6.2.1  Overview For a long time, research on creativity has been a domain of psychologists, mainly due to the fact that creativity is an attribute of the personality, which is the main topic of this academic discipline (Sternberg and Lubart 1996; Hennessey and Amabile 2009). Only recently have scholars from other research fields, such as educational research, organizational and business research, and entrepreneurship, made significant contributions to this topic (Runco 2004). In particular, it has been recognized that creativity is a major driver of innovation, and thus, is of crucial importance for economic growth. The heterogeneity of approaches in the study of creativity may be one of several reasons why a generally accepted definition of this phenomenon does not yet exist. Most researchers seem to agree that creativity involves the development of an idea (a product, a problem solution) that is both novel (i.e., original, unexpected) and useful (i.e., is of value for the individual and/or the larger social group) (see Amabile et al. 1996; Feist 1998; Sternberg and Lubart 1999; Hennessey and Amabile 2009). Usefulness, however, should not be understood in a merely pragmatic sense: while it is of central significance for technological creativity (innovation), artistic creativity is usually not of instrumental, but of intrinsic value (Deutsch 2001, p. 227). Entrepreneurship essentially involves the creation of new businesses. According to Schumpeter (1934), entrepreneurs contribute to economic growth through the process of creative destruction; that is, they introduce innovations that lead to reduced value of established firms. Early discus-

Entrepreneurship and creative professions—a micro-­level analysis  ­147 sions of possible connections between creativity and entrepreneurship (e.g., Lessem 1980; Gilad 1984; Whiting 1988) were based on a rather intuitive understanding of both issues. The obvious reason is that a few decades ago, research in both fields was at a rather early stage, still seeking suitable definitions and research methods. Amabile (1997, p. 20) proposed a definition of entrepreneurial creativity as “the generation and implementation of novel, appropriate ideas to establish a new venture.” She claims that entrepreneurial creativity does not only occur in start-­up firms, but that it also can be exhibited in established organizations, which implies that creativity is related to a more integrated concept of entrepreneurship that includes established firms. Zhou and Shalley (2008, p. 360) argue that entrepreneurship research and research on creativity are connected in a natural way, since “all entrepreneurs need some level of creativity, whether it is in identifying an opportunity, coming up with new ideas, being creative in how they seek venture capital funding, or pitching their ideas to potential investors.” Block and Koellinger (2009) conclude that entrepreneurship is a particularly attractive career option for people who strongly value creativity. They argue that such people may experience high levels of satisfaction in entrepreneurship because the creativity that is required for starting and running one’s own business matches their preferences. The three main approaches to the study of entrepreneurial creativity that prevail in the literature are reviewed below. 6.2.2  Cognitive Approach Studies of cognitive processes consider the cognitive skills (i.e., intellectual abilities and knowledge, among others) as an important factor influencing creativity. Based on a cognitive approach, Ward (2004) shows that conceptual combination (i.e., the fundamental capacity to interpret concepts and to produce new combinations of already existing ideas) is an important attribute of creativity, and is particularly relevant for entrepreneurs in search of new ideas for their business ventures. Another process described by Ward (2004) with a special link to creativity and entrepreneurship is analogical reasoning (i.e., the transfer of ideas from a familiar domain to a new field). Hence, the cognitive approach suggests that knowledge plays an important role in discovering or creating entrepreneurial opportunities (Shane 2000; Shane and Venkataraman 2000). For instance, Shane (2000) shows that many entrepreneurs create ideas for their new business ventures based on their previous knowledge and their familiarity with the field where they start their venture. The observation that the majority of transitions into self-­employment occur after a spell of dependent employment (Fritsch et al. 2012) points to the crucial role of work experience for the

148   Handbook of research on entrepreneurship and creativity accumulation of knowledge and other entrepreneurship-­related resources. Accordingly, Fritsch and Falck (2007) find that people often set up their businesses in the industry where they have been previously employed. Another popular concept in the study of creativity is divergent thinking, i.e., the ability of individuals to generate many creative ideas in approaching a problem rather than provide a workable solution (McCrae 1987; Carson et al. 2005; Batey and Furnham 2006). Divergent thinking or flexibility also appears to be crucial for entrepreneurs who are searching for new opportunities to try out (Nyström 1993); it can be regarded an important determinant of innovation (Heunks 1998) as well as serial ­entrepreneurship (Ames and Runco 2005). Although cognitive skills and, in particular, high levels of human capital have been found to be related to entrepreneurship in several studies (Block et al. 2011), a person’s intelligence seems to be only slightly associated with creativity (Batey and Furnham 2008). Hence, in the next sections we address other personal and environmental factors that may also influence an individual’s creative ability with regard to entrepreneurship. 6.2.3  Personality Approach Apart from the cognitive approach, empirical studies have focused on the personality of creative people and the characteristics that distinguish them from the remaining population. This type of research often applies the Five Factor Model (called the “Big Five”) that reduces the personality traits into five broad factors: openness to experience, conscientiousness, extraversion, agreeableness and neuroticism (Costa and McCrae 1992). The most intriguing result of these studies is that the distinguishing characteristics of creative persons have also been found to be relevant to entrepreneurs. One of these characteristics is openness to experience, which conveys someone’s intellectual and experiential curiosity, originality and ability to come up with new ideas (see McCrae 1987; King et al. 1996; Feist 1998; Glück et al. 2002; Perrine and Brodersen 2005; Kaufman 2009), but is also related to entrepreneurial behavior (cf. Schmitt-­Rodermund 2004; Zhao and Seibert 2006; Rauch and Frese 2007; Obschonka et al. 2010; Zhao et al. 2010; Sorgner 2012). A recent study by Shane et al. (2010) investigates whether openness to experience and an individual’s ability to recognize entrepreneurial opportunities are influenced by the same genetic factors. They indeed find that the influence of genetic factors on an individual’s ability to recognize opportunities is mediated by their openness to experience. While openness to experience was found to be closely related to the creative and entrepreneurial performance of people, the findings about the

Entrepreneurship and creative professions—a micro-­level analysis  ­149 impact of the remaining four factors of the Big Five are rather unstable and differ according to the respective group of professions. For instance, Feist (1998) in his meta-­analytical study shows that scientists tend to be much more introverted than non-­scientists whereas artists are more extraverted than non-­artists. Extraversion was found to be relevant for both entrepreneurial activities (see Brandstätter 1997; Shane 2003; Schmitt-­ Rodermund 2004, 2007) and creative performance (Ivancevich et al. 1994). However, a study by Zhao and Seibert (2006) that compared self-­employed with dependently employed managers did not observe such a relationship. Moreover, the relationship between extraversion and self-­employment varies considerably depending on people’s profession (Sorgner 2012). Furthermore, empirical analyses that used more narrowly defined personality constructs than the Big Five arrived at the conclusion that creativity and entrepreneurship are both associated with high levels of risk taking (Heunks 1998; Caliendo et al. 2009), richness of ideas and imagination, hard work (Glück et al. 2002), intrinsic motivation (Amabile et al. 1994; Rauch and Frese 2007; Prabhu et al. 2008) and self-­confidence (Feist 1998), among others. 6.2.4  Developmental Approach As described above, research on creativity has traditionally relied on the differences in individuals’ cognitive abilities and personality traits. In recent years, however, it has been increasingly recognized that individual creativity may develop as a result of a complex interaction between nature (i.e., genes, personality traits, cognitive abilities) and nurture; that is, the social context can play an immense role in fostering one’s creativity (see, e.g., Amabile 1996; Shalley et al. 2009). While behavioral genetics appears to be able to show a certain genetic predisposition needed for creative performance (cf. Reuter et al. 2006), the development of creative abilities demands a favorable social context and occurs throughout the course of people’s lives, starting as early as in childhood (Simonton 2000). In this respect, great attention has been paid to the role of family and interpersonal environments for the development of an individual’s creative potential. Some studies have investigated how creative role models, such as being engaged in creative activities or observing creative people, affect an individual’s own creative abilities. The results strongly suggest that the existence of creative peers can considerably contribute to a person’s level of creativity (Shalley and Perry-­Smith 2001; Zhou 2003; Sacchetti et al. 2009). The notion that creativity can be stimulated or even learned (Amabile 1996; Funke 2009) has attracted increasing interest among business organizations in the so called ‘artistic interventions’. The idea behind artistic interventions is

150   Handbook of research on entrepreneurship and creativity the introduction of artistic methods into business organizations, and in particular, interaction with artists that is supposed to stimulate creativity, innovation and learning processes among employees (Antal 2014; Darsø 2004; Barry and Meisiek 2010). Similarly, the developmental approach to the study of entrepreneurial behavior emphasizes the importance of individual characteristics and of the environment for all stages of the entrepreneurial process (Obschonka and Silbereisen 2012). According to this approach, entrepreneurship can be stimulated through people’s interaction with their environment at different stages of their lives. For instance, entrepreneurial creativity can be learned from observing entrepreneurial role models in a person’s close context, such as family, workplace peers, friends, and so on (Bosma et al. 2012; Nanda and Sørensen 2010). Moreover, a person’s entrepreneurship-­ relevant skills may develop during work experience (Lazear 2005) and increase his or her ability to recognize valuable entrepreneurial opportunities (Shane 2000). Moreover, work experience may also be conducive for the cultivation of entrepreneurial values and attitudes. Last but not least, being in regions with high levels of cultural activities and presence of the so called creative class (Florida 2004; Lee et al. 2004) can act as a stimulant towards an individual’s entrepreneurial creativity.

6.3 ENTREPRENEURSHIP IN THE CREATIVE CLASS The significant role of the creative class for regional economic growth and, particularly, its relationship with the regional level of entrepreneurial activity has been put forward by Florida (2004) in his provoking book The Rise of the Creative Class. Florida (2004) proposes to measure the creativity in a region by means of the share of people in creative professions. Accordingly, he distinguishes between several types of professions based on different degrees of creativity that may be assumed necessary for performing the respective tasks. In this approach, the creative class consists of professions in which the major task is “complex problem solving that involves a great deal of independent judgment and requires high levels of education or human capital” (ibid, p. 8). Florida’s creative class consists of two larger subgroups: the creative core and the creative professionals (Table 6.1). The creative core includes “people in science and engineering, architecture and design, education, arts, music and entertainment, whose economic function is to create new ideas, new technology and/or new creative content” (ibid.). Surrounding the creative core is “a broader group of creative professionals in business and finance, law, health care and related

Entrepreneurship and creative professions—a micro-­level analysis  ­151 Table 6.1 Overview of professions in the creative class and non-­creative professions Creative core

Creative professionals Non-­creative professions

Bohemians (writers and creative or performing artists, photographers and image and sound recording equipment operators, artistic, entertainment and sports associate professionals, fashion and other models), natural scientists and engineers, teaching professionals, designers, engineers, computer programmers, psychologists, etc. Department managers, lawyers, judges, science technicians, engineering technicians, finance and sales associate professionals, health professionals, finance dealers and brokers, insurance representatives, etc. Social work professionals, school inspectors, computer assistants, aircraft pilots, fire inspectors, sanitarians, travel consultants, clearing agents, bookkeepers, police inspectors, secretaries, office clerks, construction workers, bakers, etc.

fields” (ibid.). Although the job duties of these professionals are more routinized than those of the creative core, they regularly face problems that require creative solutions (e.g., managers). People in the two subgroups of the creative class—creative core and creative professionals—tend to possess a high level of human capital, but they differ with regard to the extent to which they have to use their skills creatively. An important subgroup of the creative core is the bohemians, which includes culturally and artistically creative people such as authors, designers, musicians, composers, actors, directors, painters, sculptors, printmakers, photographers and dancers (Table 6.1). According to Florida (2004), the creative class represents a certain environment that may be assumed to be particularly favorable for people to unfold their creative abilities. A key hypothesis of Florida’s approach is that creativity has a positive effect on regional economic growth (Figure 6.1). In particular, he argues that entrepreneurs, scientists, ­engineers, artists Entrepreneurship Regional growth

Cultural creativity

Regional growth Invention and innovation

Figure 6.1 Cultural creativity, invention, innovation, entrepreneurship and regional growth

152   Handbook of research on entrepreneurship and creativity and other creatively active people may have strong preferences for locations that offer a rich spectrum of cultural activities. Hence, he concludes that a growth-­oriented policy should not neglect the cultural sector of the regional economy but try to create a regional environment that is attractive to creative people. The identification of such a growth-­enhancing effect of artistic culture in a region is, however, faced with a possible hen–egg problem. Because prosperous locations are able to spend relatively large amounts of resources for culture as a kind of luxury, high levels of cultural and artistic activity in a region could be primarily the result of previous growth, not necessarily a determinant of growth. Hence, the finding of a positive statistical relationship between a relatively high level of cultural activity in a region and subsequent growth as such cannot be regarded a convincing proof that cultural creativity is conducive to regional development.4 Previous research has shown that the presence of a creative class in a region is related to relatively high levels of entrepreneurship (Lee et al. 2004). However, the reasons behind such a relationship are not clear. One explanation might be that people in creative professions have a high proclivity for entrepreneurship so that creativity and entrepreneurship coincide within the same people. Alternatively, there may be diverse factors at play that influence both the presence of the creative class in the region and the regional level of entrepreneurship. In this respect, it appears plausible that a favorable regional climate with high living standards makes a region attractive for both artistically creative people and entrepreneurs (cf. Fritsch and Stuetzer 2013). A deeper look at the micro level of individuals may provide helpful insights into the relationship between creativity and entrepreneurship. Specifically, it appears important to understand whether artistic, economic and technological creativity coincide at the individual level. Upon closer examination, a question arises whether artistically creative people have a higher proclivity towards entrepreneurship as compared with people who are not necessarily supposed to perform creatively. Since artists often produce new and original ideas, artistic creativity can be regarded as conducive for generating promising concepts for new businesses (Sundbo 2011). Moreover, similar personality traits, cognitive processes and developmental patterns are likely to underlie both artistic creativity and entrepreneurship (see the previous section). Since a significant part of people in the creative class perform creative tasks and are supposed to demonstrate a creative way of thinking while performing their job tasks, our hypothesis 1 states: H1: People in the creative class are more likely to be self-­employed than people in non-­creative professions.

Entrepreneurship and creative professions—a micro-­level analysis  ­153 Empirical research has shown that entrepreneurial role models can have a significantly positive effect on an individual’s decision to set up his or her own business (Bosma et al. 2012). If people in the creative class should be more likely to start an own business according to our first hypothesis, then a high share of the creative class in a region implies the presence of a higher share of entrepreneurial role models that may be conducive to new business formation. However, artists may transmit entrepreneurial skills independently of being self-­employed or not. A number of authors (Antal 2014; Darsø 2004; Barry and Meisiek 2010) have argued that much may be learned from artists in terms of innovation and business capabilities such as leadership development, problem solving and team building, among others; abilities that can be regarded as conducive to starting and running a business. Hence, the presence of the creative class in a region may stimulate proclivity for entrepreneurship also among people in other occupations. Accordingly, our hypothesis 2 states: H2: The presence of a creative class in a region is positively related to the individual probability of self-­employment. Another related question regards the determinants of entrepreneurship in the creative class. Since entry conditions, entrepreneurial opportunities and motivations for entrepreneurship can vary across professions and industries, the requirements for entrepreneurship as well as the characteristics of self-­employed persons may differ considerably between the creative class and non-­creative fields. Hence, we expect that: H3: The determinants of self-­employment in the creative class differ from those in non-­creative professions. These three hypotheses will be tested in section 6.5.

6.4  DATA AND INDICATORS Our empirical analysis is based on the German Socio-­Economic Panel (SOEP), a representative longitudinal study of private households in Germany (see Wagner et al. 2007 for details). For the purposes of the present analysis, we use the wave 2009, which includes detailed information on individuals’ personalities and their socio-­economic characteristics. We restrict the sample to individuals between 18 and 65 years of age and exclude persons who were in full-­time education, unemployed or retired. We also do not use information about civil servants or respondents in

154   Handbook of research on entrepreneurship and creativity military service since we consider the occupational choice of these groups of persons to be rather different from employees in the private sector. Self-­ employed farmers are excluded for the same reason.5 Next, all persons who have declared their primary activity to be helping in a family business are also left out of our sample because they are neither entrepreneurs nor dependent employees. After excluding respondents with missing values for relevant information, there are 7,918 individuals left in our sample. The remaining sample contains 850 self-­employed persons, accounting for 10.7 percent of the total sample. This corresponds quite well to the share of self-­ employed persons in the overall population (Fritsch et al. 2012). Previous empirical analyses of the determinants of self-­employment at different stages of an entrepreneurial process have found a significant impact of diverse factors such as human capital, social capital and socio-­ demographic characteristics, as well as characteristics of the macro environment on the probability of being engaged in entrepreneurial activities (see Parker 2009 for an overview). We account for these influences found in earlier studies as far as the respective information is available in our data. Since we know the planning region (Raumordnungsregion) where a person resides, we are able to account for characteristics of the individual’s macro environment. Planning regions consist of at least one core city and the surrounding area, and can be regarded as functional units in the sense of travel to work areas.6 Data about the regional environment used in the empirical analysis include the regional unemployment rate as provided by the Federal Employment Agency (Bundesagentur für Arbeit), the regional start-­up rate derived from the German Social Insurance Statistics (for details see Fritsch and Brixy 2004), and population density. Moreover, we are able to account for the regional share of people working in professions of the creative class, as proposed by Florida (2004).7 In order to allow some time lag for the regional characteristics to unfold their effect on new business formation, the respective indicators correspond to the year 2007. We follow Florida’s (2004) approach and classify persons into three groups based on their current occupation: creative core, creative professionals, and non-­creative professions. Additionally, we distinguish bohemians, who constitute a subgroup of the creative core. The definition of the different classes of professions is based on the International Classification of Occupations (ISCO-­88, see International Labour Office 1990), which is available in the SOEP data at the four-­digit level (see Table 6A.1 in the appendix). In our sample, 37.3 percent (2,956 individuals) belong to the creative class. Among them 1,083 individuals (13.7 percent of the full sample) belong to the creative core and 1,873 individuals (23.6 percent of the full sample) are classified as creative professionals. Bohemians constitute about 0.93 percent of the sample (about 6.8 percent of the creative

Entrepreneurship and creative professions—a micro-­level analysis  ­155 core). The remaining 62.7 percent (4,962 individuals) are in non-­creative professions. The set of control variables that we are able to use includes socio-­ demographic variables, such as age and its squared value,8 gender, nationality and marital status. We further control for the level of human capital by including information about the number of years a person has spent in formal education, as well as the number of years of unemployment. Moreover, the dataset contains a psychological scale that measures the Big Five dimensions of personality (Costa and McCrae 1992) based on three questions for each of the broad dimensions. The Big Five dimensions are openness to experience, conscientiousness, extraversion, agreeableness and neuroticism.9 Empirical entrepreneurship research provides evidence that entrepreneurs tend to have a higher propensity to take risks than dependently employed persons (Kihlstrom and Laffont 1979; Stewart et al. 1998; Ekelund et al. 2005; Caliendo et al. 2009). Thus, we employ a measure of a person’s willingness to take risks, which is an experimentally validated 11-­ point scale based on the question, “Are you generally a person who is fully prepared to take risks or do you try to avoid taking risks?” (see Dohmen et al. 2011).

6.5  RESULTS 6.5.1  Descriptive Evidence There are substantial differences in the distribution of self-­employed people and paid employees in the creative class (see Figure 6.2). While most self-­ employed people (44.2 percent) are in the category of creative professionals, the majority of paid employees (66 percent) are working in non-­creative professions. The share of self-­employed in the creative core (21.2 percent) is significantly larger than the share of paid employees (12.8 percent) in this group of professions. Remarkably, the self-­employment rates in the creative core (16.6 percent) and among creative professionals (20.1 percent) are both considerably above the sample average self-­employment rate (10.7 percent). In contrast, the self-­employment rate in non-­creative professions is only 5.9 percent. These figures, that are in accordance with our hypothesis 1, make it clear that some professional groups are much more ­economically creative in terms of entrepreneurship than others. The findings concerning the characteristics of self-­employed people and employees suggest further differences between these two groups (Table 6.2). Self-­employed people are more likely to be located in regions with a significantly higher share of people employed in the creative class,

156   Handbook of research on entrepreneurship and creativity 70.0% 60.0%


Paid employees Self-employed Self-employment rate





21.2% 16.6%


Creative core






*** 20.0%




Creative professionals

Non-creative professions

Note:  t-­test of equal means between the groups of employees and self-­employed; ***: statistically significant at the 1% level.

Figure 6.2 Distribution of paid employees and self-­employed in the creative class and particularly in its subgroups: the bohemians, the creative core and the creative professionals. Moreover, the regions where self-­employed people reside are characterized by on average higher unemployment rates and higher population density, as compared to regions with an average paid employee. There is no statistically significant difference, however, between the two groups with regard to the regional start-­up rate. With regard to individual characteristics, self-­employed people have on average spent almost 1.5 years more in formal education, and tend to be older than persons that are dependently employed. About 62 percent of the self-­employed people are male as compared with 49.4 percent among the paid employees. Self-­employed people are more likely to have had self-­ employed parents when they were around 15 years old (about 16.4 percent), and they are more likely to be married. With regard to personality characteristics, self-­employed people score on average higher than dependently employed people on the dimensions conscientiousness, extraversion and openness to experience, and they score significantly lower on neuroticism. Finally, self-­employed people are significantly more willing to take risks than employees. Overall, this evidence is in line with the previous findings on the characteristics of self-­employed people (see, e.g., Parker 2009).

Entrepreneurship and creative professions—a micro-­level analysis  ­157 Table 6.2  Mean differences between self-­employed and paid employees  


Paid employees


Regional share of bohemians Regional share of the creative core Regional share of creative professionals Regional share of the creative class Regional unemployment rate Regional start-­up rate Population density in a region Bohemian profession Profession of the creative core Creative professional Profession of the creative class Years of formal education Unemployment experience, in years Age Male (yes 5 1, no 5 0) Either parent self-­employed   (yes 5 1, no 5 0) Married (yes 5 1, no 5 0) German (yes 5 1, no 5 0) Conscientiousness Extraversion Agreeableness Openness to experience Neuroticism Willingness to take risks

0.008 0.076 0.495 0.571 0.241 11.787 535.568 0.029 0.212 0.442 0.654 13.931 0.654 46.748 0.621 0.164

0.007 0.073 0.485 0.558 0.234 11.694 451.257 0.007 0.128 0.212 0.340 12.517 0.676 42.113 0.494 0.083

0.000 0.001 0.000 0.000 0.079 0.362 0.000 0.000 0.000 0.000 0.000 0.000 0.712 0.000 0.000 0.000

0.652 0.961 5.940 5.000 5.239 4.843 3.573 4.578

0.583 0.955 5.861 4.804 5.281 4.396 3.758 4.036

0.000 0.389 0.014 0.000 0.229 0.000 0.000 0.000

Number of observations



Note:  t-­test of equal means of the group of self-­employed and employees.

6.5.2  Multivariate Analysis While the descriptive evidence in the previous section has already provided indications in favor of hypothesis 1, which states that people in the creative class are more likely to be self-­employed as compared with people in non-­creative professions, the multivariate analysis offers additional support for this proposition.10 When including a variable that indicates a respondent’s affiliation with the creative class, we find a positive and ­statistically ­significant association of this variable with the respondent’s self-­employment status (column I of Table 6.3). Having a


Male (yes 5 1,   no 5 0)

Age, squared

Respondent in the   creative class Respondent in a  bohemian profession Respondent in the   creative core Respondent is a  creative professional Regional share of the   creative class (t–2) Regional share of   bohemians (t–2) Regional share of the   creative core (t–2) Regional share of the  creative professionals (t–2) Regional unemploy  ment rate (t–2) Regional start-­up   rate (t–2) Regional population   density (t–2) Age

0.039 (0.026) −0.0002 (0.001) 0.00001** (0.000) 0.012*** (0.002) −0.0001*** (0.000) 0.037*** (0.006)

0.078*** (0.008)


0.036 (0.027) −0.0003 (0.001) 0.00001** (0.000) 0.0121*** (0.002) −0.0001*** (0.000) 0.040*** (0.006)

0.120** (0.049)


0.036 (0.027) −0.0002 (0.001) 0.00001** (0.000) 0.012*** (0.002) −0.0001*** (0.000) 0.040*** (0.006)

0.008 (0.008)


0.047* (0.026) −0.00003 (0.001) 0.00001** (0.000) 0.0117*** (0.002) −0.0001*** (0.000) 0.037*** (0.006)

0.074*** (0.009)


0.050* (0.028) −0.001 (0.001) 0.00001 (0.000) 0.012*** (0.002) −0.0001*** (0.000) 0.040*** (0.006)

0.110** (0.056)


0.038 (0.027) −0.0004 (0.001) 0.00001 (0.000) 0.0120*** (0.002) −0.0001*** (0.000) 0.040*** (0.006)

1.893** (0.903)


0.036 (0.027) −0.0002 (0.001) 0.00001** (0.000) 0.012*** (0.002) −0.0001*** (0.000) 0.040*** (0.006)

0.047 (0.147)


0.056** (0.028) −0.001 (0.001) 0.00001 (0.000) 0.0120*** (0.002) −0.0001*** (0.000) 0.0400*** (0.006)

0.151** (0.067)


Table 6.3 The role of the regional share of the creative class and respondent’s affiliation with the creative class for individual self-­employment


−2,360 635.2*** 0.126

−2,417 535.2*** 0.105


−0.003 (0.007) −0.015 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006 (0.004) 0.008*** (0.003) −0.004 (0.003) 0.017*** (0.003) −0.001 (0.003) 0.007*** (0.001)

−0.004 (0.006) −0.022 (0.017) 0.006*** (0.001) 0.004*** (0.001) 0.006* (0.004) 0.008*** (0.003) −0.004 (0.003) 0.014*** (0.003) −0.0002 (0.003) 0.003*** (0.001)


0.059*** (0.013)

0.055*** (0.012)

−2,424 534.9*** 0.102


−0.003 (0.006) −0.015 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006 (0.004) 0.008*** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.006*** (0.001)

0.058*** (0.013)

−2,372 607.4*** 0.121


−0.005 (0.006) −0.024 (0.0182) 0.009*** (0.001) 0.003** (0.001) 0.005 (0.004) 0.007** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.006*** (0.001)

0.054*** (0.012)

−2,422 533*** 0.103


−0.002 (0.006) −0.014 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006* (0.004) 0.008*** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.006*** (0.001)

0.058*** (0.013)

−2,419 532.7*** 0.103


−0.002 (0.006) −0.016 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006 (0.004) 0.008*** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.007*** (0.001)

0.057*** (0.0126)

−2,424 530*** 0.102


−0.003 (0.006) −0.015 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006 (0.004) 0.008*** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.006*** (0.001)

0.058*** (0.013)

−2,422 533.4*** 0.103


−0.002 (0.007) −0.0141 (0.017) 0.0110*** (0.001) 0.002 (0.001) 0.00620* (0.004) 0.008*** (0.003) −0.005 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.007*** (0.001)

0.058*** (0.013)

Notes:  Marginal effects after logit regressions are reported. Dependent variable 5 1 if self-­employed and 5 0 if dependently employed. Robust standard errors are in parentheses. ***: statistically significant at the 1% level, **: statistically significant at the 5% level, *: statistically significant at the 10% level.

Number of   observations Log likelihood Chi2 Pseudo R2

Willingness to   take risks

Openness to   experience Neuroticism



Either parent self-­  employed (yes 5 1, no 5 0) Married (yes 5 1,   no 5 0) German (yes 5 1,   no 5 0) Years of formal   education Unemployment  experience, in years Conscientiousness

160   Handbook of research on entrepreneurship and creativity ­ ohemian ­profession has a strong and positive association with the status b of being self-­employed (column II), but also being a creative professional is statistically significant and positively related to the probability of self-­ employment (column IV). However, the effect is not statistically significant for people in the creative core (column III). In order to test our hypothesis 2, which states that the presence of the creative class in a region is positively associated with an individual probability of self-­employment, we conduct a logistic regression analysis with the binary dependent variable that equals one if a respondent is self-­ employed and is zero otherwise. As expected, the regional share of people employed with creative class professions is significantly and positively associated with the individual probability of self-­employment (column V). More specifically, a strong effect on the probability of self-­employment is observed for the regional share of bohemian professions (column VI), as well as for the regional share of creative professionals (column VIII). For the subgroup of people in the creative core the respective coefficient is not statistically significant (column VIII). Overall, hypothesis 2 cannot be rejected. In a final step we investigate the determinants of self-­employment within the creative class in order to test our hypothesis 3. Table 6.4 presents the results (marginal effects) for the full sample, for people in the creative core, for the creative professionals and for persons with non-­creative professions. Unfortunately, a more detailed analysis for the subgroup of bohemians was not possible due to a rather low number of cases. Interestingly, the regional unemployment rate is only significantly and positively associated with the probability of self-­employment in non-­creative occupations, which may point to the prevalence of necessity-­motivated entrepreneurship in this group of professions. There seems to be no significant effect of the regional level of unemployment on the probability of being self-­employed in the creative professions. High population density is only significantly and positively related to self-­employment in the creative core. In particular, large cities might be more attractive for highly creative self-­employed people, for instance, because of the rich cultural life and closeness to other creative people. Interestingly, there are only few statistically significant determinants of self-­employment in the creative core, as compared with other professional groups. For instance, there is no statistically significant effect of age, gender, parental role models of self-­employment, or education. On the one hand, this result may be regarded as an indication that highly creative people are likely to become self-­employed more or less independently of their socio-­economic background. Thus, certain barriers for self-­ employment entry appear not to be particularly strong in the creative core.

Entrepreneurship and creative professions—a micro-­level analysis  ­161 Table 6.4  Determinants of self-­employment in the creative class Variable Regional unem­ploy  ment rate (t–2) Regional start-­up   rate (t–2) Regional populat  ion density (t–2) Age Age, squared Male (yes 5 1,  no 5 0) Either parent  self-­em­ployed (yes 5 1, no 5 0) Married (yes 5 1,  no 5 0) German (yes 5 1,  no 5 0) Years of formal  education Unemployment  experience, in years Conscientious­ess Extraversion Agreeableness Openness to  experience Neuroticism Willingness to  take risks Number of  observations Log likelihood Chi2 Pseudo R2

Full sample 0.036 (0.027) −0.0002 (0.001) 0.00001** (0.000) 0.012*** (0.002) −0.0001*** (0.000) 0.040*** (0.006) 0.058*** (0.013) −0.003 (0.007) −0.015 (0.017) 0.011*** (0.001) 0.002 (0.001) 0.006 (0.004) 0.008*** (0.003) −0.004 (0.003) 0.018*** (0.003) −0.001 (0.003) 0.007*** (0.001) 7,918 −2,424 528.8*** 0.102

Creative core

Creative profes­sionals

−0.051 (0.099) 0.004 (0.004) 0.0001*** (0.000) 0.005 (0.008) −0.00002 (0.000) 0.024 (0.024) 0.034 (0.038)

0.077 (0.088) 0.0005 (0.004) −0.000003 (0.000) 0.034*** (0.007) −0.0003*** (0.000) 0.071*** (0.018) 0.128*** (0.034)

−0.002 (0.024) −0.137 (0.085) 0.006 (0.004) 0.023*** (0.008) −0.013 (0.013) 0.001 (0.011) 0.002 (0.013) 0.047*** (0.011) 0.009 (0.011) 0.009 (0.006) 1,083

−0.019 (0.021) −0.003 (0.066) 0.012*** (0.003) 0.023*** (0.008) 0.006 (0.012) 0.026*** (0.009) −0.008 (0.009) 0.005 (0.009) −0.003 (0.008) 0.011** (0.004) 1,873

−4,53.6 67.96*** 0.0688

−851.3 155.5*** 0.0936

Non-­creative professions 0.046** (0.022) –0.001 (0.001) 0.000002 (0.000) 0.007*** (0.002) −0.0001*** (0.000) 0.029*** (0.006) 0.038*** (0.013) 0.001 (0.006) −0.011 (0.014) 0.006*** (0.001) 0.0001 (0.001) 0.009*** (0.003) 0.003 (0.002) −0.003 (0.003) 0.012*** (0.002) −0.001 (0.002) 0.004*** (0.001) 4,962 −1,006 216.8*** 0.0987

Notes:  Marginal effects after logit regressions are reported. Dependent variable 5 1 if self-­ employed and 5 0 if dependently employed. Robust standard errors are in parentheses. ***: statistically significant at the 1% level, **: statistically significant at the 5% level.

162   Handbook of research on entrepreneurship and creativity On the other hand, this finding may indicate that entrepreneurial individuals are more likely to self-­select into professions of the creative core. If this is the case, people in the creative core will be rather homogeneous with regard to their individual characteristics, which then explains the few observed significant effects. The amount of time that a person has experienced unemployment during their career has a positive effect on the decision to be self-­employed among the creative core and the creative professionals. This again may be regarded an indication that entrepreneurship in these groups is more likely to be necessity-­driven than in other types of professions. With regard to the Big Five dimensions of personality, we find that openness to experience appears to have the strongest effect on the probability of being self-­employed in the full sample, for people in creative core professions, and among non-­creative professions. However, it is not associated with the probability of self-­employment among the creative professionals. Instead, extraversion is most strongly associated with self-­employment status among creative professionals. This finding indicates that the personality profile of self-­employed people may vary across the occupational context, probably because occupations differ substantially with regard to entry barriers, institutional regulations with regard to self-­employment, and conditions on the occupation-­specific labor market, among others (Sorgner 2012). These variations in occupational contexts appear likely to attract different kinds of people who have different motivations for becoming self-­employed. Summarizing, we can say that the analyses show some significant differences in the determinants of self-­employment between groups of professions according to hypothesis 3.

6.6  DISCUSSION AND CONCLUSIONS There can be little doubt that creativity is of crucial importance for entrepreneurship. While there is strong evidence that creativity and entrepreneurship coincide at the regional level, in this contribution we have analyzed the relationship between the two issues at the micro level of individuals, in order to gain insights into the sources of people’s entrepreneurial activity. In particular, we have investigated the propensity and the determinants of self-­employment among different groups of professions based on Richard Florida’s (2004) concept of the creative class. We have found that people in creative professions are more likely to start and operate business ventures than people in professions that are not classified as particularly creative. This means that creativity and entrepreneurship are not completely different phenomena that correlate by chance through unobserved factors, but

Entrepreneurship and creative professions—a micro-­level analysis  ­163 rather that they do have commonalities and are likely to coexist within the same people. Hence, attractiveness of places for creative people should have a positive effect on the regional level of entrepreneurship. However, it remains less clear why people in creative professions are more likely to act in an entrepreneurial manner. On the one hand, it could be assumed that particularly entrepreneurial types of people tend to self-­ select into the professions of the creative class due to their personalities, interests and talents. In this case, entrepreneurial and artistic creativity are regarded as an expression of some innate talent. On the other hand, the environment of creative professions may nurture entrepreneurs by providing them with entrepreneurship-­relevant skills and values, such as striving for freedom and independence, following creative ways of thinking and problem solving, and flexibility, among others. Based on our data, we were not able to answer this question, which is highly relevant due to a wide range of implications for policy and practice. Another important finding of our empirical analysis is that not only do creativity and entrepreneurship tend to coincide within people of certain professions, but—much more importantly—the presence of the creative class in a region seems to positively influence entrepreneurship among people in this region. Upon closer examination, we find that a high share of creative class in a region, and particularly the share of bohemians and creative professionals, is strongly associated with a higher individual probability of self-­employment. This effect was statistically significant when controlling for a wide range of regional, socio-­economic and psychological factors. A possible explanation for such a creativity spillover being at play could be that creative people, particularly if self-­employed, serve as role models for other people in a region, thereby increasing their willingness to become entrepreneurs. In this respect, it appears important to gain a better understanding about who is more likely to be affected by such positive externalities (other creative people or also people from different professions). Another explanation could be that the presence of the creative class in a region fosters a favorable regional climate with high levels of tolerance that is attractive for other creative people as well as for people with atypical lifestyles and cultures. Such a regional climate may be entrepreneurship-­friendly, resulting in a higher propensity of people to become self-­employed. A further explanation could be that places that are especially attractive to creative people are also attractive to entrepreneurs, for instance places characterized by a rich supply of cultural amenities. Moreover, our analysis of the determinants of self-­employment among the creative core, the creative professionals and the non-­creative professions has revealed a number of differences between these groups of professions with regard to regional and individual characteristics related to a person’s

164   Handbook of research on entrepreneurship and creativity proclivity of being self-­employed. For instance, we observe that the level of regional unemployment is only associated with the likelihood of self-­ employment in non-­creative professions, which may be regarded as an indication of the necessity-­driven motivation to be self-­employed in these professions. On the one hand, this indicates that people in non-­creative professions may be more vulnerable to unemployment as compared with people in the creative class. On the other hand, however, this finding may suggest that entrepreneurial opportunities in non-­creative professions are less demanding with regard to the required amount of human and financial capital, so that they are more pursued in regions with high levels of unemployment. Concerning individual determinants of self-­employment in different types of professions, it is particularly interesting that the creative core is the only group in which we do not observe a curvilinear relationship between an individual’s age and his or her proclivity towards entrepreneurship. It has been commonly observed that middle-­aged people have a higher propensity to be self-­employed when compared with people in other age cohorts. This can be explained by a number of factors including a higher willingness to take risks and accumulation of knowledge in the early stages of the career, among others. The estimates for the creative core suggest that for people in these professions (e.g., bohemians such as artists, writers, musicians and fashion designers) entrepreneurship is an attractive career option or a necessity, independent of their age. All in all, our analyses provide some support for the hypotheses about the effect of the creative class on entrepreneurship that have been put forward by Richard Florida (2004). Bohemians and creative professionals represent the two subgroups of the creative class that appear to be closely related to individual entrepreneurship. It is both the regional share of people in the creative class and the affiliation with the creative class that are positively associated with individual self-­employment. What we can say with a considerable degree of certainty is that the propensity for self-­employment as well as the determinants of entrepreneurial choice may vary considerably across professions, be it due to self-­selection of certain types of people in certain professions, or be it because different professions provide different possibilities and incentives for self-­employment (Sorgner 2012; Sorgner and Fritsch 2013). More research is necessary to analyze such differences and to identify the relevant relationships. One strand for further research in this area could be a higher level of disaggregation among professional groups. The three groups under inspection here—creative core, creative professionals and non-­creative ­professions— are rather heterogeneous. For example, the creative core comprises professions such as actors, natural scientists, psychologists and engineers (Table 6.1) that may require rather different talents and provide dissimilar

Entrepreneurship and creative professions—a micro-­level analysis  ­165 economic conditions and career paths. Unfortunately, the data base that we have used here does not provide a sufficient number of observations to perform the analysis on a more disaggregated level.

NOTES   1. The term “culture” here refers to the fine arts such as painting, sculpture, music, dance, theatre, architecture, and so on.   2. Florida (2003) shows that there is some correspondence between his creativity indicators and the share of high-­tech industries in large cities of the USA.   3. See, for instance, KEA European Affairs (2009) as well as Sacchetti et al. (2009) for an extensive discussion of this issue.   4. Falck et al. (2011) could solve this hen-­–egg problem using the presence of a stand-­alone opera house in the late baroque era as an instrument for a region’s cultural tradition. They show that, during the late baroque era (c. 2nd half of 17th century–2nd half of 18th century) opera houses in German regions were not set up because of economic prosperity but resulted from a competition of local rulers for prestige. Those regions that had an opera house in the year 1800 were characterized by higher shares of today’s highly qualified workforce that makes a significant contribution to growth.   5. Most farms in Germany are family businesses. Self-­employment of farmers may be a result of a family tradition or of the tradition in the particular region.   6. Planning regions are slightly larger than what is usually defined as a labor market area. The advantage of planning regions in comparison to districts (Kreise) as spatial units of analysis is that they account for economic interactions between districts. See Federal Office for Building and Regional Planning (2003) for the definition of planning regions and districts.   7. These data are also taken from the German Insurance statistics.   8. The model accounts for the possibility of a non-­linear relationship between an individual’s age and his or her propensity of being self-­employed that is usually found in the empirical studies on the determinants of self-­employment. A common explanation provided for a reversed u-­shaped form of the relationship between age and the likelihood of self-­employment is that older people are more risk averse than younger people, and thus they are less likely to take risks associated with setting up a new business venture. In turn, young people often lack competencies resulting from work experience that are conducive for a start-­up. Hence, middle-­aged people are more likely to be engaged in entrepreneurship than people in other age cohorts. For a more detailed discussion of the relationship between entrepreneurship and age see Parker (2009).   9. The SOEP respondents were asked to rate themselves on a seven-­point scale, with 1 indicating that a given personality characteristic does not apply to them at all and 7 meaning that the characteristic applies perfectly. Gerlitz and Schupp (2005) show that the self-­reported personal attitudes based on the Big Five related questions in the SOEP are valid and reliable. We calculate the value for each of the Big Five dimensions as arithmetical means of the responses to the three questions. 10. See also the descriptive Tables 6A.2 and 6A.3 in the appendix.

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Entrepreneurship and creative professions—a micro-­level analysis  ­167 Florida, R. (2003), “Entrepreneurship, Creativity, and Regional Economic Growth,” in D. M. Hart (ed.), The Emergence of Entrepreneurship Policy: Governance, Start-­ups and Growth in the US Knowledge Economy, Cambridge, USA: Cambridge University Press, pp. 39–58. Florida, R. (2004), The Rise of the Creative Class, revised paperback edition, New York, USA: Basic Books. Fritsch, M. and U. Brixy (2004), “The Establishment File of the German Social Insurance Statistics,” Journal of Applied Social Science Studies, 124 (1), 183–190. Fritsch, M. and O. Falck (2007), “New Business Formation by Industry over Space and Time: A Multi-­dimensional Analysis,” Regional Studies, 41 (2), 157–172. Fritsch, M. and M. Stuetzer (2013), “The Geography of Creative People in Germany Revisited,” in B. Asheim, R. Florida, M. Gertler and C. Mellander (eds.), The Creative Class Goes Global, Abingdon, UK: Routledge, pp. 210–226. Fritsch, M., A. Kritikos and A. Rusakova (2012), “Who Starts a Business and Who is Self-­ employed in Germany?” Jena Economic Research Papers, # 001-­2012, Friedrich Schiller University and Max Planck Institute of Economics Jena. Funke, J. (2009), “On the Psychology of Creativity,” in P. Meusburger, J. Funke and E.  Wunder (eds.), Milieus of Creativity: An Interdisciplinary Approach to Spatiality of Creativity, Dordrecht, Netherlands: Springer, pp. 11–23. Gerlitz, J.-­Y. and J. Schupp (2005), Zur Erhebung der Big-­Five-­basierten Persönlichkeitsmerk­ male im SOEP, DIW research notes 2005-­4, Berlin: German Institute for Economic Research (DIW). Gilad, B. (1984), “Entrepreneurship: The Issue of Creativity in the Market Place,” Journal of Creative Behavior, 18 (3), 151–161. Gittleman, M. and E. N. Wolff (1995), “R&D Activity and Cross-­country Growth Compari­ sons,” Cambridge Journal of Economics, 19 (1), 189–207. Glück, J., R. Ernst and F. Unger (2002), “How Creatives Define Creativity: Definitions Reflect Different Types of Creativity,” Creativity Research Journal, 14 (1), 55–67. Hennessey, B. A. and T. M. Amabile (2009), “Creativity,” Annual Review of Psychology, 61, 569–598. Heunks, F. J. (1998), “Innovation, Creativity and Success,” Small Business Economics, 10 (3), 263–272. Howkins, J. (2001), The Creative Economy: How People Make Money from Ideas, London, UK: Penguin. International Labour Organization (1990), ISCO-­88, International Standard Classification of Occupations, Geneva, Switzerland: International Labour Office. Ivancevich, J. M., P. Lorenzi, S. J. Skinner and P. B. Crosby (1994), Management, Quality and Competitiveness, Burr Ridge, USA: Irwin. Kaufman, J. C. (2009), Creativity 101, New York, USA: Springer. KEA European Affairs (2009), The Impact of Culture on Creativity, study prepared for the Directorate-­General for Education and Culture, European Commission. Brussels: KEA European Affairs. http://www.keanet.eu/docs/impactculturecreativityfull.pdf (accessed January 23, 2014). Kihlstrom, R. and J. Laffont (1979), “A General Equilibrium Theory of Firm Formation Based on Risk Aversion,” Journal of Political Economy, 87 (4), 719–748. King, L., L. Walker and S. Broyles (1996), “Creativity and the Five-­Factor Model,” Journal of Research in Personality, 30 (2), 189–203. Lazear, E. P. (2005), “Entrepreneurship,” Journal of Labor Economics, 23 (4), 649–680. Lee, S. Y., R. Florida and Z. Acs (2004), “Creativity and Entrepreneurship: A Regional Analysis of New Firm Formation,” Regional Studies, 38 (8), 879−891. Lessem, R. (1980), “Creativity and Entrepreneurship,” Management Education and Develop­ ment, 11 (1), 21–39. McCrae, R. R. (1987), “Creativity, Divergent Thinking, and Openness to Experience,” Journal of Personality and Social Psychology, 52 (6), 1258–1265. Nanda, R. and J. B. Sørensen (2010), “Workplace Peers and Entrepreneurship,” Management Science, 56 (7), 1116–1126.

168   Handbook of research on entrepreneurship and creativity Nyström, H. (1993), “Creativity and Entrepreneurship,” Creativity and Innovation Management, 2 (4), 237–242. Obschonka, M. and R. K. Silbereisen (2012), “Entrepreneurship from a Developmental Science Perspective,” International Journal of Developmental Science, 6 (3–4), 137–150. Obschonka, M., R. K. Silbereisen and E. Schmitt-­Rodermund (2010), “Entrepreneurial Intention as Developmental Outcome,” Journal of Vocational Behavior, 77 (1), 63–72. Parker, S. C. (2009), The Economics of Entrepreneurship, Cambridge, UK: Cambridge University Press. Perrine, N. E. and M. R. Brodersen (2005), “Artistic and Scientific Creative Behaviour: Openness and the Mediating Role of Interests,” Journal of Creative Research, 39 (4), 217–236. Prabhu, V., C. Sutton and W. Sauser (2008), “Creativity and Certain Personality Traits: Understanding the Mediating Effect of Intrinsic Motivation,” Creativity Research Journal, 20 (1), 53–66. Rauch, A. and M. Frese (2007), “Let’s Put the Person Back into Entrepreneurship Research: A Meta-­analysis on the Relationship between Business Owners’ Personality Traits, Business Creation, and Success,” European Journal of Work and Organizational Psychology, 16 (4), 353–385. Reuter, M., S. Roth, K. Holve and J. Hennig (2006), “Identification of First Candidate Genes for Creativity: A Pilot Study,” Brain Research, 1069 (1), 190–197. Runco, M. A. (2004), “Creativity,” Annual Review of Psychology, 55, 657–687. Sacchetti, F., S. Sacchetti and R. Sugden (2009), “Creativity and Socio-­economic Development: Space for the Interests of Publics,” International Review of Applied Economics, 23 (6), 653–672. Schmitt-­Rodermund, E. (2004), “Pathways to Successful Entrepreneurship: Personality, Parenting, Entrepreneurial Competence, and Interests,” Journal of Vocational Behavior, 65 (3), 498–518. Schmitt-­Rodermund, E. (2007), “The Long Way to Entrepreneurship: Personality, Parenting, Early Interests and Competencies for Entrepreneurial Activity among the Termites,” in R. K. Silbereisen and R. M. Lerner (eds.), Approaches to Positive Youth Development, Thousand Oaks, USA: Sage, pp. 205–224. Schumpeter, J. (1934), The Theory of Economic Development, Cambridge, USA: Cambridge University Press. Shalley, C. E. and J. E. Perry-­Smith (2001), “Effects of Social-­Psychological Factors on Creative Performance: The Role of Informational and Controlling Expected Evaluation and Modeling Experience,” Organizational Behavior and Human Decision Processes, 84 (1), 1–22. Shalley, C. E., J. Zhou and G. R. Oldham (2009), “The Effects of Personal and Contextual Characteristics on Creativity: Where Should We Go From Here?,” in J. A. Wagner III and J. R. Hollenbeck (eds.), Readings in Organizational Behavior, New York, USA, London, UK: Routledge, pp. 82–105. Shane, S. (2000), “Prior Knowledge and the Discovery of Entrepreneurial Opportunities,” Organization Science, 11 (4), 448–469. Shane, S. (2003), A General Theory of Entrepreneurship: The Individual–Opportunity Nexus, Cheltenham, UK and Northampton, USA: Edward Elgar. Shane, S. and S. Venkataraman (2000), “The Promise of Entrepreneurship as a Field of Research,” Academy of Management Review, 25 (1), 217–226. Shane, S., N. Nicolaou, L. Cherkas and T. D. Spector (2010), “Do Openness to Experience and Recognizing Opportunities Have the Same Genetic Source?” Human Resource Management, 49 (2), 291–303. Simonton, D. K. (1984), Genius, Creativity and Leadership–Historiometric Inquiries, Cambridge, USA: Harvard University Press. Simonton, D. K. (2000), “Creativity: Cognitive, Personal, Developmental, and Social Aspects,” American Psychologist, 55 (1), 151–158. Solow, R. (1988), “Growth Theory and After,” American Economic Review, 78 (3), 307–317.

Entrepreneurship and creative professions—a micro-­level analysis  ­169 Sorgner, A. (2012), “A Physician with a Soul of a Cook? Entrepreneurial Personality Across Occupations,” Jena Economic Research Papers, #063-­2012, Friedrich Schiller University and Max Planck Institute of Economics, Jena. Sorgner, A. and M. Fritsch (2013), “Occupational Choice and Self-­employment —Are they Related?” Jena Economic Research Papers, #001-­2013, Friedrich Schiller University and Max Planck Institute of Economics, Jena. Sternberg, R. J. and T. I. Lubart (1996), “Investing in Creativity,” American Psychologist, 51 (7), 677–688. Sternberg, R. J. and T. I. Lubart (1999), “The Concept of Creativity: Prospects and Paradigms,” in R. J. Sternberg (ed.), Handbook of Creativity, Cambridge, USA: Cambridge University Press, pp. 3–15. Stewart, W. H. Jr., W. E. Watson, J. C. Carland and J. W. Carland (1998), “A Proclivity for Entrepreneurship: A Comparison of Entrepreneurs, Small Business Owners, and Corporate Managers,” Journal of Business Venturing, 14 (2), 189–214. Sundbo, J. (2011), “Creative Artists and Entrepreneurship,” in K. Hindle and K. Klyver (eds.), Handbook of Research on New Venture Creation, Cheltenham, UK and Northampton, USA: Edward Elgar, pp. 328–343. Wagner, G. G., J. R. Frick and J. Schupp (2007), “The German Socio-­economic Panel Study (SOEP), Scope, Evolution and Enhancements,” Journal of Applied Social Science Studies, 127 (1), 139–169. Ward, T. B. (2004), “Cognition, Creativity and Entrepreneurship,” Journal of Business Venturing, 19 (2), 173–188. Whiting, B. G. (1988), “Creativity and Entrepreneurship: How Do They Relate?,” Journal of Creative Behavior, 22 (3), 178–183. Zhao, H. and S. E. Seibert (2006), “The Big-­Five Personality Dimensions and Entrepreneurial Status: A Meta-­analytical Review,” Journal of Applied Psychology, 91 (2), 259–271. Zhao, H., S. E. Seibert and G. T. Lumpkin (2010), “The Relationship of Personality to Entrepreneurial Intentions and Performance: A Meta-­analytic Review,” Journal of Management, 36 (2), 381–404. Zhou, J. (2003), “When the Presence of Creative Coworkers Is Related to Creativity: Role of Supervisor Close Monitoring, Developmental Feedback, and Creative Personality,” Journal of Applied Psychology, 88 (3), 413–422. Zhou, J. and C. E. Shalley (2008), “Expanding the Scope and Impact of Organizational Creativity Research,” in J. Zhou and C. E. Shalley (eds.), Handbook of Organizational Creativity, New York, USA: Lawrence Erlbaum Associates, pp. 347–368.

170   Handbook of research on entrepreneurship and creativity

APPENDIX Table 6A.1  Definition of the subgroups of the creative class Subgroups of the creative class

4-­digit codes of International Standard Classification of Occupations (ISCO-­88)

Bohemians Creative core

2451–2455, 3131, 347, 521 1236–1237, 2111–2213, 2310–2351, 2359, 2431–2443, 2445, 2451–2455, 3131, 3310– 3340, 3434, 3471–3474, 7313, 7324, 7433 1110–1120, 1140–1143, 1200, 1210, 1221– 1229, 1231, 1232, 1234, 1235, 1239, 1300, 1311–1319, 2221–2224, 2229, 2230, 2400, 2411, 2412, 2419, 2421, 2422, 2429, 2470, 3111–3119, 3132, 3211, 3223–3229, 3231, 3232, 3241, 3411–3413, 3416, 3417, 3419, 3432, 3475, 7312, 7331, 7332

Creative professionals

Entrepreneurship and creative professions—a micro-­level analysis  ­171 Table 6A.2  Descriptive statistics Variables


Self-­employed 0.11 0.008 Regional share of  bohemian professions Regional share of 0.07   the creative core 0.486 Regional share  of creative professionals Regional share of 0.56   the creative class 0.23 Regional unemploy  ment rate Regional start-­up 11.70   rate Population density 460.31 Bohemian profession 0.009 Profession of the 0.14   creative core Creative professional 0.237 Profession of the 0.37   creative class 12.67 Years of formal   education 0.67 Unemployment  experience, in years Age 42.61 Age, squared 1,943.59 Male 0.51 0.09 Either parent   self-­employed Married 0.59 German 0.96 Conscientiousness 5.87 Extraversion 4.83 Agreeableness 5.28 Openness to 4.44  experience Neuroticism 3.74 Willingness to take 4.09  risks




Standard deviation

0 0.007

0 0.002

1 0.017

0.31 0.004





















256.63 0 0

46.83 0 0

2,345.20 1 1

476.87 0.096 0.34

0 0

0 0

1 1

0.425 0.48









44 1,936 1 0

18 324 0 0

65 4,225 1 1

11.31 943.78 0.50 0.29

1 1 7 7 7 7

0.49 0.21 0.89 1.14 0.97 1.16

7 10

1.20 2.10

1 1 6 5 5.33 4.33

0 0 1.67 1 1 1

3.67 4

1 0



10 11

 6  7  8  9






Regional share of bohemians Regional share of creative professionals Regional share of the creative core Regional share of the creative class Regional unemployment rate Regional start-­up rate Population density Bohemian profession Profession of the creative core Creative professional Profession of the creative class Years of formal education



0.06 0.09

0.29 0.57 0.04 0.05

0.16 0.56 0.07 0.08

0.05 0.1












Table 6A.3  Correlation matrix


0.04 0.09

−0.14 0.31 0.05 0.08





0.14 0.02 0.01 0.03





0.07 −0.03 0.11 −0.01

0.2 0.58 0.05 0.07





0 0.01

1 0.23 0.03 0.02



0.05 0.08

1 0.06 0.05




−0.05 0.13

1 0.24



−0.22 0.52




1 0.72








18 19 20 21 22 23 24 25

14 15 16 17


Unemployment experience, in years Age Age, squared Male Either parent self-­employed Married German Conscientiousness Extraversion Agreeableness Openness to experience Neuroticism Willingness to take risks

−0.04 −0.05 0.01 −0.02 0.03 −0.04 0.05 −0.02

0.07 0.06 −0.05 −0.05



0.42 0.07 0.15 −0.07 0.01 0.01 −0.02 −0.14

1 0.99 0.01 −0.01


0.39 0.07 0.14 −0.07 0.02 0.01 −0.02 −0.13

1 0.02 0




0.02 −0.01 −0.01 0.01 −0.09 −0.02 −0.13 0.02 −0.16 −0.01 −0.08 0.05 −0.2 0 0.19 0.04

1 −0.01


1 −0.05 0.1 −0.03 0 −0.07 0.02 −0.1


1 −0.02 −0.02 −0.02 0 0 −0.01


1 0.17 0.26 0.11 −0.09 −0.09


1 0.08 0.34 −0.15 0.17


1 0.12 −0.12 −0.14


1 −0.04 0.16


1 −0.15


PART II The local/regional environment’s impact on entrepreneurship and creativity

7.  Entrepreneurship in creative industries: the paradox between individual professionalization and dependence on social contexts and professional scenes Bastian Lange

7.1 INTRODUCING ENTREPRENEURSHIP IN CREATIVE INDUSTRIES This chapter aims at discussing the issue of entrepreneurship in creative industries. The key question is: How do entrepreneurs in creative industries invent strategies to cope with the paradox between individual professionalization and dependence on social contexts and professional scenes? The chapter refers to the striking moment that the high proportion of factual micro-­entrepreneurial professions emerged without direct governmental support. For a few years, the status of entrepreneurs in creative industries has been associated with a highly ambiguous situation: the newly invented catchword of a ‘new entrepreneurship’ that alludes to individualized marketing strategies, self-­promotion and social hardships on the one side, but also to skilful alternation between unemployment benefit, temporary jobs, self-­employment structures and new temporary network coalitions on the other (McRobbie 2002; Ross 2008). Following Scott, performing intense multiple and constantly shifting transaction structures in cultural-­products industries means that much of the workforce becomes enmeshed in a network of ‘mutually dependent and socially coordinated career paths’ as he describes it (Scott 2006, p. 13). This new work ethos has been celebrated ironically with the term ‘digital bohème’ (Friebe and Lobo 2006). Key urban and cultural developments in recent years have been propelled by new hybrid cultural as well as entrepreneurial agents (Wry et al. 2011; Navis and Glynn 2010; Steyaert 2007; Svejenova et al. 2007; Hjorth 2005, 2004; Neff et al. 2005; Wilson and Stokes 2005; Wagner and Sternberg 2004). Nevertheless, there is an ongoing debate on how context-­relevant these developments are (Morgan and Pritchard 2004; Scott 2004; Gertler 2003; Christopherson 2002; Grabher 2002a; Strathern 1995; Knorr-­Cetina 1981). In order to contribute to this discussion, I bring 177

178   Handbook of research on entrepreneurship and creativity forward the argument that the conceptualization of the term ‘scene’ helps in order to shed light on action logics by cultural entrepreneurs caught in rather paradoxical circumstances. With the term ‘scene’ increasingly used in various fields of daily routines and habits as well as in applied, social, cultural and conceptual science (Hesmondhalgh 2005; Pfadenhauer 2005; Blum 2001; Irwin 1977), I will demonstrate and compare the various kinds of entrepreneurial embeddedness and its structural paradoxes in two urban settings: Berlin and Leipzig. On the one hand, in colloquial language, the term ‘scene’ describes and relates creative groupings and volatile collectivizations but also informal professional networks in the creative and knowledge-­based industries (Hitzler et al. 2005; Hitzler and Pfadenhauer 2004, 1998). On the other hand, in cultural and social science, concepts of the term ‘scene’ have been developed which aim at describing the way the urban space functions (Lange 2005). Therefore, my central question will be: Can I understand the concept ‘scene’ as a concept of economic geography in order to understand the embeddedness of entrepreneurial scenes as an expression of the performative production of space for the purpose of better understanding cultural entrepreneurship and its structural paradoxes in creative industries?

7.2  OUTLINE Following this line of thinking the plan of the argumentation is as follows. Firstly, in order to adequately understand the dilemma of micro-­ entrepreneurs and their dependence on various forms of social contexts on the one hand, and that of individual improvement and professionalization on the other, various strands of debate are presented. Secondly, I clarify the notion of scenes as well as four types of ‘paradoxes of creativity’ formulated by DeFillippi et al. (2007). These scholars describe organizational dilemmas linked to epistemological problems of the study of creativity. DeFillippi et al. have focused on the inner-­ organizational dimension of the emergent network-­based project ecologies and their entrepreneurial and socio-­spatial practices in these industries (DeFillippi et al. 2007; Grabher 2002a, b). The chapter then focuses on the so-­called ‘paradox of professionalization’. Rapidly changing project-­ based constellations within flexible network formations in particular pose structural constraints, especially when it comes to steps of professionalization. The fate of these creative communities of practice is shaped and partly driven by professionalization for the simple reason that they have to survive economically.

Entrepreneurship in creative industries  ­179 Thirdly, based on this introductory conceptualization it becomes obvious that cultural entrepreneurs had to invent new forms of project-­based cooperation (Bresnen et al. 2004; Sydow et al. 2004) as well as specific spatial practices in order to economically, culturally and socially sustain highly risky and instable markets. From the perspective of professionalization, especially in harsh transformation contexts such as post-­reunification Berlin and Leipzig, only little formalized expertise and know-­how existed when becoming an entrepreneur in a more or less undefined market. These agents have been developing their practices in an unclear, unstructured and unstable market realm (White 2002; Thomas 1999). Fourthly, the chapter will refer to and make use of two existing databases and recent studies on Berlin’s and Leipzig’s creative industries, in particular the attempts of the public administration to assess the economic contribution of creative industries. I will show the potential for self-­organization – and thus self-­governance – of creativity and creative industries in Berlin and Leipzig in respect to the conceptualized problems. This self-­organized potential is linked to the activities of communities of practice that make use of Berlin’s and Leipzig’s specific urban fabric: the ‘paradoxes of creativity’ that have become obvious in the case of Berlin’s and Leipzig’s creative industries concern, for instance, the tension between the autonomy of creative production, on the one hand, and the necessities of professionalization on the other. The local entrepreneurial scene and its communities of practices – of which most of Berlin’s and Leipzig’s creative industries are made – serve both as quality evaluation circles and drivers of creativity and innovation.

7.3 ON THE DEPENDENT RELATIONS BETWEEN CULTURAL ENTREPRENEURS AND THEIR SCENES IN CULTURAL AND CREATIVE INDUSTRIES The following section explores the relationship between cultural entrepreneurs and conceptual attempts in various disciplines to connect as well as to elude the notion of relevant social embedding context with the term and the concept of ‘scene’. Thereby, the main emphasis will be on the various conceptual approaches of the term ‘scene’ that so far have not been put firmly on the academic agenda, where the term ‘scene’ is widely used in the everyday colloquial manner. At the end of this overview, a concluding discussion presents extracts and theoretical arguments from where to deduce empirical case material from two contrasting cities, Berlin and Leipzig.

180   Handbook of research on entrepreneurship and creativity 7.3.1  Creative Industries Not least since the coining of the branch concept ‘creative industries’ by the British Department of Culture, Media and Sport in the late 1990s, creative production has counted as an important cornerstone of contemporary national and urban economies. This labelling implies that economic exchanges rather than the production of art for art’s sake are expected of a new creative and economically productive workforce (e.g. Coulson 2012; Eikhof and Haunschild 2007). Accordingly, creative industries have become an exemplary subject of study in an effort to understand Post-­ Fordist knowledge creation and production models. Existing research has increased our knowledge about the diversity of contractual arrangements that are used to organize employment in these industries (e.g. Marchington et al. 2005), about the creative labour process and labour market (Ross 2008), about the role of personal networks for individual careers (e.g. Vinodrai 2006), about flexible rewarding practices (Ebbers and Wijnberg 2009), and about the balancing of strong and weak ties to generate social capital (Antcliff et al. 2007). However various attempts are aiming at conceptualizing the very nature of creative markets, sectors and their social context, it becomes clear that the fine graded structure of mainly freelancing cultural entrepreneurs are the main protagonists of these markets. But at the same time, we still know little about how cultural entrepreneurs and their intermediaries form new creative markets on the basis of rather informal social structures. Before I define ‘scene’ as such, I understand and define market as ‘a social structure for the exchange of rights in which offers are evaluated and priced, and compete with one another, which is shorthand for the fact that actors – individuals and firms – compete with one another via offers’ (Aspers and Darr 2011, p. 4). These creative markets are heavily conditioned by the field of art (e.g. Townley et al. 2009) and revolve around experiences, experiments, surprises and irritation rather than standardized and reliable production in formal organizational settings. As such, they can also be seen as representing Post-­Fordist volatile market structures. In these newly invented markets, few codified market practices or strategic guidelines exist for market participants. Although it is inextricably linked to production processes, the analysis of market-­making shifts attention away from the organization of flexible labour markets to the processes of establishing structures for supply and demand by identifying and ordering market actors, establishing values and prices (e.g. Beckert and Aspers 2011; Lampel 2011), or developing distinct market categories (e.g. Khaire and Wadhwani 2010). The clear difference from other either technological-­ oriented start-­up contexts or service-­oriented entrepreneurial contexts

Entrepreneurship in creative industries  ­181 and the different approaches to becoming an entrepreneur – not to say, to successfully perform as an entrepreneur over time – have led to a reconsideration of how appropriate the notion of entrepreneur is for cultural and creative industries. Therefore, some scholars have adopted the term ‘culturepreneur’, which is a compound of ‘culture’ and ‘entrepreneur’ and was first suggested by Davies and Ford (1998, p. 13), following Pierre Bourdieu’s typological notion of an entrepreneur as someone who embodies various forms of capital (Bourdieu 1986, p. 241). ‘Culturepreneur’ describes an urban protagonist who possesses the ability to mediate between and interpret the areas of culture and service provision. He may be characterized, first and foremost, as a creative entrepreneur, someone who runs clubs, record shops, fashion shops, galleries and other outlets, as well as someone who closes gaps in the urban landscape with new social, entrepreneurial and socio-­spatial practices. Such intermediaries increasingly emerged in the gallery, art and multimedia scene in different European metropolises, foremost in London in the 1990s (Grabher 2001). Davies and Ford (1998) characterized this type of people who, in structural terms, are communicative providers of transfer services between the sub-­systems ‘business-­related services’ and ‘creative scene’ and, in doing so, seem to have satisfied a necessary demand. In addition to that, creative agents, providing services for other sectors, not only transfer and sell symbolic goods, but also provide access to cultural milieus, avant-­garde-­like attributes and symbolic surplus, that, for example, corporate companies and other service industries like to inscribe in the internal as well as public reputation. Therefore, it is not only the symbolic product that raises the attention of various clients, but the overall symbolic surplus and its perceivable access to cultural milieus and creative scenes. 7.3.2  Conceptualizing (Creative) Scenes So far, the term ‘scene’ has hardly been used to describe social context within economic geography. It has rarely been explicitly used in cultural and social geography (e.g. O’Connor 2002), but almost never in the context of economic geographies to date, and therefore needs further explanation. An exponentially increased use of the term can be stated in its wider social sciences and scientific, administrative, as well as colloquial linguistic usages. Firstly, the existence of scenes and creative milieus is regarded as indispensable (Crevoisier 2004; Hospers 2003, p. 43) for the development of attractive economic sites. This can be deduced from observing that new types of media and producers of cultural goods require specific spatial

182   Handbook of research on entrepreneurship and creativity qualities, which they only find in certain places (Grabher 2002a). The existence of close interactions between production areas in the urban context is nowadays seen as a crucial characteristic of a metropolis (Hesse and Lange 2007, p. 65). Entrepreneurial actors in the field of cultural or creative industries basically depend on participating in the creation of those spaces. Following Reckwitz’s argument, the key factors for the change towards what is called a creative city are art scenes, which are able to enforce the city’s process of self-­culturalization due to their performative character (Reckwitz 2009, pp. 22–23). This new kind of symbolic economy not only presents an affinity towards socio-­cultural milieus of metropolises. It also settles in certain areas of cities, as for example inner-­city in-­quarters, districts with a high density of gentrified and renovated old buildings providing a high living standard (such as coffee-­bars offering wireless-­LAN), as well as former harbour districts or fabric buildings now converted to lofts and ateliers. These places truly bring into reality the vision of space and room, especially if low rents make them affordable, as for example in Berlin and Leipzig. Thus, these metropolises are attractive to a clientele, which mainly works under precarious conditions and therefore is not able to afford the high rents usually charged in metropolises. Secondly, recently the term ‘scene’ has started to appear in administrative reports and consultancy studies, aiming at describing more adequately the growth of creative labour markets as well as the functionality of their adjacent networks, especially in the area of creative and knowledge-­based economies (SMWA 2008, p. 78; Weckerle et al. 2007, p. 108). In doing so, the term ‘scene’ has been applied to the behaviour of new professional actors of creative or cultural industries in regard to networks. In this context, the term ‘scene’ describes types of exchanges established between newcomers and established actors. It refers to a certain density and a certain critical mass in communications and interactions. Apart from actors of those sub-­markets, actors of established markets and administrations emphasize the increasing relevance of ‘creative scenes’ in regard to a city’s economic structure. Especially in those informal networks, processes of social and symbolic innovation can be performed, from which all branches benefit. The so-­called ‘entrepreneurial scenes’ (ibid.), interactions which provide innovation and creativity to market actors, seem to function as incubators for regional economic processes. Therefore, the presence of these kinds of entrepreneurial market actors seems to be crucial for regionally competitive strength. Thirdly, the term ‘scene’ has experienced a wider distribution in respect of its colloquial usage. Basically, it is applied by the media to describe cultural events or places rich in cultural happenings. On a linguistic level, the

Entrepreneurship in creative industries  ­183 term serves to arrange in groups political or cultural micro-­collectives, as for example the right wing or leftist scene or the jazz music scene. Due to their thematic focus, scenes represent an additional social sphere in respect of more established social groupings and their forms of collectivization. In colloquial usage, the term ‘scene’ also refers to phenomena such as alternative scenes and creative scenes, as well as the description of events in cultural or city magazines. 7.3.3  From Sociology of Subcultures to Sociology of Scenes The discipline of sociology early contributed to clarify informal social gatherings apart from formal institutions. Thereby, the term ‘subculture’ is of central importance. The term ‘subculture’ has been subject to a constant transformation since its appearance in the 1940s. Above all, the Centre for Contemporary Cultural Studies (CCCS), founded in 1962 at the University of Birmingham, UK had an important, 20-­year influence on themes and methods of subcultural analyses (Gelder 1997). The CCCS’ scientific investigations mainly focused on proletarian subcultures of the 1960s until the early 1980s. The understanding of subculture, as it was developed at the CCCS, assumes that the social point of reference for subculture is class. Thus, the subcultural status of youth subcultures relates to the subordination of the working class, from which those subcultures emerge (Gelder 1997, p. 84). Of central importance for the development and territorialization of subcultures are the type of style evolved by the respective subculture, the transformation of cultural objects of dominant cultures and the appropriation of those objects. Criticizing the concept of subcultures of the CCCS, Stanley Cohen formulated an alternative concept for analysis (Cohen 1997). He argues for an ethnographic analysis of subcultures, thus being able to observe and describe the inner mechanisms in as an unfiltered way as possible. Furthermore, he calls not merely for analysing subculture in regards to the categories of spectacle and resistance, but rather as a mechanism of reacting to and coping with actual problems and transformation processes of youths (Gelder 1997, p. 146). In respect to some conceptual weaknesses of the term ‘subculture’, an important contribution to the understanding of scenes was made recently by the sociology of youths (Hesmondhalgh 2005; Hitzler et al. 2001; Massey 1998; Gelder and Thornton 1997). According to Roland Hitzler, ‘scenes’ are types of collectivization, which are not created by common situations or class interests of their respective participants, but by interest in a thematic focus (Hitzler et al. 2001, p. 5). Scenes present a significantly low grade of obligation. They are differentiated from subcultures by being more diffuse regarding inclusion and exclusion, as well as from cliques by

184   Handbook of research on entrepreneurship and creativity being less homogeneous regarding age, by their lesser density of interactions and by their lesser commitment to places or social spaces, so to speak, by their trans-­locality. For juvenile persons, scenes provide complex social alliances for interests, passions and preferences, which cannot be realized within the social structures of their daily routines. Scenes offer the option of finding persons of the same convictions, and thus creating specific cultures. Scenes can be defined as a type of collectivization that shares specific material and mental forms of collective self-­stylization, which are aware of this process and aim at stabilizing, modifying or transforming common characteristics through communication. Hitzler et al. (2005) deny the voluntary potential of self-­organization of scenes, arguing that scenes are, on the one hand, connected to physical localities and, on the other hand, to organizational elites (Hitzler et al. 2001, p. 27). Nonetheless, following Hitzler, localities are a counter pole to the social, and thus Hitzler creates a duality of the social and space. But mainly physical-­spatial meeting points offer temporarily stabilizing patterns for communication and identity-­ finding to those unstable social commitments which prevail amongst participants of the same scene. The functional organizational elites structure limitations amongst a scene’s meeting points as well as their permeability to other scenes. This part has shown that the use of the concept ‘scene’ has left its application to describe subcultural processes. Therefore, sociological approaches have acquired scenes as a valuable concept to describe post-­ traditional societal forms. 7.3.4  Scenes as Markets – the Social Network Approach Since the early 2000s, the term ‘scene’ has faced a strikingly increased use in the description of market processes of the cultural and creative industries, especially in regard to emerging market participants (Lange and Mieg 2008; SMWA 2008, p. 78; Weckerle et al. 2007, p. 108; Lange 2007). Equally, from the point of view of economic-­sociology, the process of establishing a business in emerging markets is basically described as based on the existence of scenes (Schallberger 2003). Emerging markets in cultural and creative industries are often characterized by instability, by a lack of order and by being multi-­faceted (Rossiter 2007). Formalized concepts and a static understanding of actors and their respective relations amongst each other can easily be confuted. Therefore, Harrison White emphasizes the areas of transition between social networks, social spaces and rigid concepts of roles and identities in social networks. White rejects definable terms and formal-­technical network information (White 2002). From this point of view, Gernot Grabher interprets White’s understanding of actors

Entrepreneurship in creative industries  ­185 and persons as ‘not necessarily being the sovereign creator of network relations, but as the essence of histories and identities which sediment at the interfaces of multiple networks’ (Grabher 2006, p. 104). White presents an intellectually challenging point of view. He claims fragility, brittleness and transgression to be intra-­systemic elements of collectives, networks and markets, and therefore his concept can be regarded as a counter project to a rigid and hermetic understanding of, for example, formal concepts of social networks. Especially in cultural and creative industries, I observe the manifestation of new types of labour and organization as types of ‘disorganized labour’ (Rossiter 2007, p. 156), which are characterized by being fragile and changing. Ned Rossiter points out that consistently the patterns of social structures in networks have to be reorganized every now and then. Also in the urban context, a striking concordance can be observed in Harrison White’s basic understanding of networks and more recent forms of the constitution of social spaces. In particular, very small enterprises in cultural and creative industries are providing important input (Ertel 2006, p. 18). They can be regarded as representing ‘cultural individualization’ (McRobbie 2005, p. 21) and stand for a new type of subjectivism of labour, a process which increasingly takes place in social networks: highly flexible labour loses its traditional limitations and as well extends to social spaces of private and family relations, which rely on those structures. Important competences in coping with those challenges usually have been acquired ‘in passing’ by leisure time activities. Not-­for-­profit clubs or sports events make use of fallow lots or unused buildings due to subcultural competences and fondness for experimenting for which only those places can provide adequate space and atmosphere. Entrepreneurial practices complement the spatial experiment, as only through this is it possible to provide financial support. Therefore, spatial and scene competences are informal but nevertheless crucial qualities for entering into markets where (new) types of entrepreneurial biographies can be created. Club socializations are central points where access to labour can be renegotiated as well as the realization of new projects and the creation of entrepreneurial processes. So-­called entrepreneurial scenes fulfil an important task for the market participants: in these informal networks, trends (fashion, style) and symbolic innovations are negotiated on a linguistic level. Especially symbolic products such as signs, style and images require appreciation by creative experts to be accepted as relevant and marketable ‘products’. Stable infrastructure such as market-­like platforms, fairs or likewise arise from entrepreneurial scenes. On the one hand, scenes arrange around physical localities, and on the other hand they focus on a functional organizational elite, which does not possess authority (Lange and Ehrlich 2009). The existence of a critical mass and an at least temporary dense

186   Handbook of research on entrepreneurship and creativity c­ ommunication network of those entrepreneurial scenes mould places: quarters are regarded as being ‘hip’ or as being ‘scene’ quarters, which indicates the prevalence of a stimulating cultural or creative atmosphere. Those entrepreneurial scenes are referred to as being an incubator for regional economic processes. Furthermore, entrepreneurial scenes are interesting because they bear a high ability of self-­organization: they themselves are creating necessary structures as fairs and sales prospects. With those informal networks, actors expect to open access to information not available via formalized communication (e.g. branch-­specific media). Thus, entrepreneurial scenes can be described as a collectivization of entrepreneurial actors, as is the case in various sub-­markets of creative and cultural industries (e.g. music, architecture). Scene contexts therefore meet the urgent demand for communication and interaction. 7.3.5  Scenes as Performances and Performativity I define a social-­phenomenological understanding as a counter pole to the above-­mentioned theory of action-­based understanding. Because of their temporary character, scenes are referred to as highly dynamic constructions (Blum 2001). By producing social events, cities have turned into stages for performative practices for enhancing the attractiveness of the urban space (Janson 2004, p. 20). Comparably, Jürgen Hasse, as Janson and Blum, states that the urban space is increasingly oriented towards ‘subjective experiences’ and therefore the ‘personal situation’ shifts into focus (Janson 2004; Blum 2003; Hasse 2002b, p. 19). In cities, situational qualities rank higher than a mere functional organization of spaces. Matters of ‘humane experience’ present characteristics of the ‘scenic experience, which makes us all actors and spectators at the same time’ (Hasse 2002a, p. 21; Hasse 2008). In a similar way, Alan Blum developed a theory of scenes to describe the urban space in the context of socio-­phenomenological theory (Blum 2003, 2001). Based on the understanding of ‘the city as a stage’ as well as urban theatricality, Blum identifies urban arrangements in terms of experiencing, seeing and feeling oneself while at the same time being seen by others. It is not possible intentionally to exclude oneself. Also as a stranger or a non-­local, not used to the specific urban situation, one has to take a position in regards to certain situations and thus act performatively. All these performative actions underlie grammar-­like patterns: ‘a grammar of the scenic and scenes’ (Blum 2001, p. 10). Blum therefore analyses scenes by applying criteria such as regularity, richness, transitoriness, collectiveness, performance, transgression and theatre, as well as the relationships between public and private (Blum 2001, p. 10).

Entrepreneurship in creative industries  ­187 Furthermore, Alan Blum adds the category ‘creative city’, which he postulates as ‘relentless circulation of capital in search for markets’ overcoming the compulsions of the local space (Blum 2001, p. 25). Following Blum, scenes are intentionally designed and calculated with the aim of maximizing profits in market economies. Thus, scenes can as well be understood as an economic concept, which does not correspond to the targeted groups’ original concept of scenes. In contrast, Blum interprets scenes as a dialectic phenomenon: the vitality of scenes can develop into an economic good by making use of the crucial component of its social capabilities, thereby stimulating the entrepreneurial assimilation of scenes (Blum 2001, p. 26). Following Blum, the reference to the criteria of the creative city is that scenes bear the promise of being part of the city’s bohemian activities by participating in the scenes’ practices. Through the current of time, the core practices diffuse to mundane practices, lowering the aesthetic, originary and game-­like character of scenes. If those practices dissolve to wider segments of society, scenes might transform to mass phenomena. Or they mythologize, which means that they lose their authentic space for experience. Following a socio-­phenomenological approach such as that of Blum and others, it becomes clear that urban creativity strongly depends on scenes and efforts of social collectivization, which permanently generate new patterns of culture, interpretation, meaning and identification as well as style-­creating localizations. Scenes function as transitory nature and allow their members to reinvent their own identity and, in doing so, to transform culturally in the course of time (Blum 2003, p. 183). Members of scenes choose places, but the process of collectivization is strongly related to the invention, framing and codification of those localities. 7.3.6  First Summary: Scenification of Urban Space Building on the various approaches presented earlier, it becomes clear that a distinct relationship has to come to the fore in order to better understand the articulation of cultural entrepreneurial practices on the one side, and their relations to criteria such as urban experiences, emotions, and the opportunity to perform at distinct places and spaces. Following this line of thinking, more recent approaches are pointing to this subject of urban inquiry. First, cultural theorists combine scenes with concepts of performativity, therefore understanding the urban space as situational topoi – a situational urbanism (Legnaro 2004). Those concepts ask for the contemporary forms of urban perception and appropriation of urban space. The city is no longer perceivable as holistically functional, but rather is experienced as a

188   Handbook of research on entrepreneurship and creativity rhizomatic network in the process of walking, finding or losing one’s way as well as in relation to more recent forms of media (pop-­music, cinema, public arts) (Berking and Löw 2005, p. 10; Klein 2005a, p. 25). Secondly, ‘city’ is understood as a certain type of the urban and the local space. Pop-­music, cinema and public arts are types of social practices, which reveal new interactions by reflecting the materiality of the city as well as urban experiences, emotions and the opportunity to interact in urban spaces. Thirdly, the professional group of cultural entrepreneurs is considered to be able to create new topoi of the urban and they allow for aesthetic experiences of the urban space. In doing so, they produce, for example, new and different sounds of and types of local urbanity (Certeau 1988). Following this idea, every city has its own song! The imageries that come to the fore in an image, a design, in a song, portray types of urban reality production. Summing up, these new types of local urbanity therefore have to be understood as performative processes of appropriation in adaptable and open sub-­systems. Performative processes of appropriation are highly situational: they manifest most obviously at the predetermined breaking points (fallow lots, vacancies, construction sites) of urban space and its subareas, which are often out of use. The performative practices of temporary re-­valorization, such as culture, sports and party events, usually are non-­linear, disharmonic and dissonant and non-­representative of the established types (Klein 2005b). The theatrical practices of scenes configure and measure new spaces. The essential basis of these practices is the insight that whatever is done is always performed as well. This can be applied especially to the formation of urban space, a process that many actors try to influence. The theatricalization of the social, the scenification of urban space, the musealization of public space are all in one way or the other trying to enforce the accumulation of symbolic capital. While as a brand, the city has to present a consistent and clear image as well as a message, the rhizomatic city is in regard to its postmodern understanding multi-­faceted, fragmented and in constant change (Lange 2008, pp. 161–162). What does this mean for better understanding the role and situation of cultural entrepreneurs? When summing up this part on the various discussions of scenes in relation to creative industries and to urban space, it becomes clear that the targeted protagonists – cultural entrepreneurs in creative industries – can be looked at and approached by their expressive formulation in distinct urban settings. Although this is constantly expected as a central effect of the so-­called ‘creative city’ – its atmosphere, its experiences, its liveability – this mainly takes place and is mainly only possible in

Entrepreneurship in creative industries  ­189 less-­and almost de-­institutionalized professional contexts (e.g. considering Disneyland as a creative city would not be plausible). It is now that I address the ‘paradox between individual professionalization and dependence on social contexts and professional scenes’: these protagonists provide rich symbolic experiences in urban settings whereby they depend on a rather open and independent social context. Nevertheless, they are aiming at formulating more institutionalized professional contexts in the same manner as they are depending on their rather de-­institutionalized social contexts, creative scenes. In order to clarify my understanding of professional context and of professionalization, I will allude conceptually to the concept of professionalization and its paradoxes.

7.4  PROFESSIONALIZATION AND ITS PARADOXES As both a phenomenon and a standard term, the notion of professionalization links work biographies to the formatting of sub-­markets and professional categories. In addition to observations concerning mobility and theoretical assumptions regarding place-­binding criteria, professionalization relates creative industries directly to socio-­spatial constellations, new network practices and the creation of identity. Particularly rapidly changing project-­based constellations within flexible network formations pose structural constraints, especially when it comes to steps of professionalization. The fate of these creative communities of practice is shaped and partly driven by professionalization for the simple reason that they have to survive economically. Thus, professionalization has become a limiting context restriction that can in particular restrict creativity. In creative industries, professionalization serves, from a socio-­professional point of view, three essential functions (Lange and Mieg 2008) and can be explained on three levels: a control function, an evaluation function and an expert function. The inherent control function of professionalized work is currently one of the main topics of discussion in the sociology of professions (Evetts 2003; Freidson 2001). Professionalized action is generally subject to the self-­control of professionals. In professional work, other common forms of organizational or institutionalized control are substituted by self-­control. Professional self-­control is also at work in organizations: new forms of human resource management even assume self-­control from employed professionals. Here organizational control takes on the form of ‘control at a distance’ (Fournier 1999, p. 280) – that is, internalized self-­control. The second function, evaluation, is closely linked to the first. If there is today an enduring source of legitimization for professions, then it has to be

190   Handbook of research on entrepreneurship and creativity based on the institutionalized control of evaluation standards for particular professional work. Classical professions (such as the medical profession or sciences), as well as new professions or professional groups (such as in the field of web design or patent auctions) attempt to define standards for professional work in their domain and to establish systems of evaluation that also include standards for professional training. Thus, professions have certain basic, socially accepted monopoles of defining work in their domains. These monopoles are variable and subject to the dynamics of changing jurisdiction in the ‘system of professions’ (Abbott 1988). The third function, the expert function of professionalized work, plays a decisive role in the domain of creative industries from two perspectives. I see not only an external expert function (towards clients and the public), but also an internal one (in the network). The internal expert function serves to differentiate and legitimate evaluation processes by identifying those professionals who set new quality standards and – equally important – who are renowned trainers or coaches in that particular professional domain. The attribution of the ‘experts’ in the field also determines the direction of ‘collective’ competence development of local creative economies (as professional groups). Therefore professionalization has to be considered as a process. Professionalization involves the transformation of trust regulation (from trust in single experts to trust in qualifications), the transformation of learning (from erratic individual learning to a more academy-­like training) and the transformation of quality control (from individualized trust to quality reflections in globalized professional networks). To sum this up, professionalization denotes the transformation of an occupation into a profession, which is an occupation with certain autonomy in defining and controlling the standards of the work of its members. Furthermore, professionalization denotes the transition towards paid work that is subject to binding quality standards. In this wide sense, people and activities can be professionalized, gaining in professionalism. In contrast to the expectation of professionalization, the high number of recently emerged creative agents in creative industries depend to a great extent on spontaneous informal social bonds as well as network alliances that have enabled the appearance of new creative milieus. New social practices concerning the temporary organization of projects are intertwined with the production of new social places for the exchange of experiences, knowledge and expertise. To sum this up, paradoxes of professionalization have become obvious in creative industries; for instance, the tension between the autonomy of creative production, on the one hand, and the necessities of professionalization on the other. The local communities of practice – of which most of Berlin’s creative industries are made – serve both as quality evaluation circles and drivers of creativity and innovation.

Entrepreneurship in creative industries  ­191

7.5 TWO CONTRASTING CASES: BERLIN AND LEIPZIG Continuing with the understanding of the term ‘scene’ as presented previously, the following parts will designate parameters, leading to a context-­specific definition of entrepreneurial scenes, their structural logics, and attempts to relate and to interpret their practices in respect to the introduced paradoxes. This presentation will be related to elements of two entrepreneurial scenes of two different contexts – Berlin and Leipzig – thus allowing for conclusions about their specific paradoxical expressions as well as first insights into how to temporarily overcome these constraints. For a better understanding of the respective situations, to start I will describe briefly their contexts, which – as I will argue – are characterized mainly by the entrepreneurial scenes of the cultural and creative industries. 7.5.1  Methodological Prerequisites As case-­reconstruction methods provide for a wide thematic and contentual openness, they are appropriate to the present object of research (Bogner and Menz 2002a, b; Elliott 2002; Froschauer and Lueger 2002). The following analysis is based on the assumption that entrepreneurial actions in cultural and creative industries have to be embedded as well in social-­structural as in social-­spatial contexts. An empirical method has to provide information about the appropriation of localities as well as about the representation of ‘city’. The typology of scenes for Berlin and Leipzig is based on qualitative interviews and group discussions, each with 25 participants. By applying rules of minimal and maximal contrasting, the results have been edited for a case-­reconstruction (Matthiesen 2002, pp. 25–27). The interpretation focuses on how market participants evaluate branch-­specific contexts of interaction, how they describe the access to those materializations of informal networks, and which strategies are visible concerning positioning in a new area. 7.5.2  Context Description Keeping in mind the question of the social-­spatial condition of cultural and creative industries, the situation in Eastern Germany appears to be paradoxical. On the one hand, since 1990 de-­industrialization, emigration and demographic change have led to a high vacancy rate. On the other hand, this has opened new space for experiments: galleries, ateliers or temporary projects are locations which creative folks use for their entrepreneurial actions and, thus, re-­introduce them to the economic cycle

192   Handbook of research on entrepreneurship and creativity (Steets 2005, pp. 108–112). In those places manifest social networks of creative folks, claiming feasibility: in times of a global crisis of economy, of a shrinking in production, lack of ideas of established and administrative functionaries and increasing need of individualization, young creative folks claim new forms of collaboration and collective (economic) actions (Friebe and Ramge 2008). It is not the economic profit that is in focus, but the implementation of individual interests in collectives, thus furthermore gaining autonomy in regard to time, sociality and symbolic winnings. 7.5.3  Entrepreneurial Scenes in Leipzig For a long time, Leipzig was viewed as the secret cultural capital of the GDR, being a melting pot of diverse subcultures and creative actors (Farin 2002, p. 154). The image and atmosphere of the city were shaped by writers, artists and punk bands (Bismarck and Koch 2005). In Leipzig, as elsewhere, the political changes of 1989 and the globalization which began in the 1990s led to a reorganization of the cultural creators’ networks and scenes. Informal communication networks were crucial for coping with these changes. In 2006, over 1996 small and middle-­sized companies operating in cultural and creative industries had a turnover totalling over 1.5 billion Euros. The cultural and creative industries employ about 10,500 people, which make them a relevant factor in the labour market. Leipzig is the centre of Saxony’s cultural and creative industries. Throughout Saxony, 35 per cent of all publishing companies, 23 per cent of all advertising companies, 36 per cent of all film industry companies and 34 per cent of all editorial offices are based in Leipzig (SMWA 2008, p. 17). The micro-­spatial practices of Leipzig’s cultural and creative industries have to be seen in the context of a ‘perforated city’. Leipzig’s cityscape is dominated by deterioration, housing vacancy and especially inner-­city modernization. The city no longer corresponds to the typical European image of a dense city structure (Steets 2008, p. 167). In the following, the micro-­spatial practices of the Leipzig design and art scene will be described, taking as examples the design fair Designers’ Open and the Baumwollspinnerei (a former cotton mill). The Designers’ Open was initiated in 2004 by the designers Jan Hartmann and Andreas Neubert from Hartensteiner Design, inspired by the Kölner Designmesse (Cologne Design Fair) and aimed at the creation of a Saxony-­wide design platform. Today it serves as a central gathering point of the design industry, as a launching pad for young national and international designers, and as a communication forum. The actors of the design scene adopt a policy that also reacts to the city’s unstable spatial

Entrepreneurship in creative industries  ­193 situation: in 2007, the main exhibition spaces of the Designers’ Open were vacant former department stores and exhibition houses in inner-­city and central areas. In 2008, they changed their decentralizing practice of space utilization by looking for new and smaller event locations spread over the inner city, turning the whole inner city into exhibition space. This closely interrelated conception of space represents the network-­based cooperation which is essential for the scene. Furthermore, the acquisition of central areas of Leipzig represents a desire for a larger part in defining the city’s image. By advertising in the city media as well as through flyers and mail addressed to the scene and beyond, the marketing measures for the Designers’ Open aimed to attract a greater number of suitors, exhibitors and members of the general public so as to stimulate interest in the Leipzig design scene and increase demand for output. In contrast to the recent and decentralizing trend within the Leipzig design scene, the art sector reacted early to the urban spatial situation, adopting a different policy with regard to the use of space and sites. Over the years, the Baumwollspinnerei, situated in Leipzig’s west, became a model for the use of space, influencing other creative actors in Leipzig: low-­cost purchase of former industrial areas for use as creative spaces was combined with the establishment of social networks. An essential starting point of development of the Baumwollspinnerei area was the boom of the trend-­setting New Leipzig School. Today, about 80 artists work on the site, which is now professionally managed. In 2005, Leipzig’s most important art galleries moved to the area, and various enterprises have settled there (Steets 2008, pp. 174–177). So far, the working and exhibition sites in the Baumwollspinnerei have been renovated by their users only to the degree required to make work possible. The anticipated authenticity and symbolic significance of the place have thus been preserved. Members of the scene and visitors are intended to feel that the place is unfinished and that it can and should be used in a playful and free manner. Apart from that, the unfinished aspect of the Baumwollspinnerei also indicates temporary habitation and room acquirement practices. Now the actors stop over in Leipzig while being deeply rooted in the city milieu, but keep new ways open leading out of Leipzig. Unlike the Leipzig design scene, the micro-­spatial practices of the art scene of Leipzig and Berlin are similar: during the annual exhibitions, new locations are introduced and symbolically developed, thus attracting the attention of members and connoisseurs of the art scene. Social exclusion takes place in a subtle manner, by announcing parties and exhibitions via e-­mail newsletters, or by selling works of art to specific persons revealing themselves as being part of the scene.

194   Handbook of research on entrepreneurship and creativity 7.5.4  Entrepreneurial Scenes in Berlin In 2010, over 25,000 small and medium-­sized enterprises belonging to the cultural and creative industries in Berlin had a turnover totalling over 22 billion Euros, which is more than 20 per cent of the city’s GDP. The cultural and creative industries employ about 180,000 people, which makes them a relevant factor in the labour market. Saying this, over 10 per cent of all employees in Berlin work in different sectors of the cultural and creative industries (Senate for Economics, Technology and Sciences 2011). Annual fairs and frequent exhibitions emphasize these facts. Fairs and exhibitions are the first step in boosting Berlin’s image-­shaping process. Suffering a steadily growing socio-­economic structural crisis, since the year 2000 Berlin has been trying to stimulate new economic dynamics by introducing the slogan ‘Neues Unternehmertum’ (‘New Entrepreneurship’, transl. by B. Lange). Hence, creative professions were attached by politics and economy with a forward-­looking role for the information-­and innovation-­ based sectors. In 1998, the first attributes and characteristics of this newly developing Generation Berlin were outlined by the sociologist Heinz Bude (Bude 2001), trying to prepare a discursive basis mainly determined by practices and articulations of actors now called ‘new cultural entrepreneurs’. One of the key cultural and urban developments of post-­socialist Berlin is the presence of new hybrid, cultural and entrepreneurial scenes. Where awareness, creation and organization of social and physical space as well as symbolic bodily affiliation are fundamental, the cultural and entrepreneurial scenes are the meaning makers of dynamic everyday culture. Identities can be shaped and differentiated within and by means of these places. The issue of entrepreneurial practices is relevant not only to economic development and labour politics, but also to the city’s image. As in other metropolitan areas, key concepts like ‘Capital of Talents’ or ‘Young Creative Industries’ echo one of the most dynamic potentials of urban economics. Behind concepts like ‘Cool Britannia’ and ‘Generation Berlin’ lie unexamined types of relations between new and initially spatially flexible occupational groups and icons on the one hand, and their temporary rooting in new local structure patterns with new spatial necessities as well as strategies of space acquisition and differentiation on the other hand. 7.5.5  Spatial Practices of the Design and Art Scene The micro-­spatial practices of the design and art scene are to be considered in the context of a city with culturally and symbolically disputed areas. The cultural dispute is about sovereignty of interpretation and space acquisi-

Entrepreneurship in creative industries  ­195 tion practices. Young groups of actors from expressive occupational categories were motivated to play the gallery in areas usually reserved for global players, due to slow growth, low investment and exaggerated planning expectations. In reclaiming urban space by means of temporary events (e.g. beach bars), the new cultural entrepreneurs play a key role: their resources of knowledge and experience regarding the interrelationship of networks – events – constitute spatial practices which not only provide precise distinction, but rather – by force – assume their individual understanding of territory, and finally develop and practice another spatial theory. This territorial practice not only represents a playful handling of symbols, aesthetics and semiotic materials. It illustrates social participation and exclusion in milieus, scenes and other networks. These materials are expressive manifestations, superficial phenomena based on the claim to informal networking and continuous ascertainment of those networks. Basically, the protagonists’ micro-­spatial strategies point out the capability to expose immobile and apparently well-­programmed space to temporary changes and reprogramming of spatial functions. Offices are turned into organizational workshops and clubs, then temporarily relocated and strategically equipped with communicative attraction potentials. The necessary organizational workshop character of these enterprises shows communicative strategies to develop the micro-­location ‘office’ as an interface between fluid social networks and the art scene. The examined location – an office of the company ‘Greige’ – points out the idiosyncratic and at the same time playful policy of attention applied by the actors. In order to make the location exist in the scene’s members’ heads, a specific spatial policy of renegotiation of social affiliation is adopted. Such a location can be the meeting point of an open and clearly defined group of friends, colleagues, competitors and others. Access to the location and its perception are managed by a club-­like policy. However, in this case, the common selection mechanisms of a club, like a doorman refusing entry, take on far subtler forms. Different mediums like mouth-­to-­mouth propaganda, mailing lists and flyers ensure the systematic spread of information about upcoming events, inaugurations of exhibitions and new products. Apart from this information policy, a lot of effort goes into making the location sink into oblivion again, thus ­minimizing social affiliation. Certain behaviour can be observed which consists in balancing out the visitors, disguising the location and subsequently calling it back into the people’s mind: there are no event calendars, and exhibitions are announced on short notice by e-­mail invitations to specific friends and other related persons from the Berlin, Cologne, national or European art scene. The criterion for exclusion or inclusion is the affiliation to the scene, indicated

196   Handbook of research on entrepreneurship and creativity in the e-­mail header, although no one really cares about it. The strategy of disclosure, which initially seems astonishing and contradictory, takes up an attitude reminiscent of the former socialism’s service mentality: the customer does not have the power, and apparently business does not matter. This strategy is also applied on the external level: from the outside, one cannot tell what kinds of events take place inside. The location is only perceived and ‘read’ as an event location by those who are familiar with the area. Placing the location in the urban space by means of a policy of disclosure not only creates social difference but also a certain distance from the broad public. Yet, when someone, after a diligent search, still finds the location, another subtle distinction criterion comes into force. At parties, for instance after inaugurations, different identification patterns in terms of art and electronic music are offered to the visitors. The experience of being part of the event is provided by the attribution to those identification patterns based on the discernibility and readability of the performance. Here, a subtle strategy of exclusion can be observed: nobody is expelled and, in fact, everybody is admitted; yet only few people are really integrated. And this first integration contains a demand to permanently reassert oneself of one’s affiliation to the scene. Understanding this micro-­territorial practice is only at first glance astonishing, if I assume that slow business and harsh competition lead to a bundling of all forces on the creation and sale of direct products. Yet, this spatial practice shows that the locations’ intentionally temporary and flexible nature is necessary to present oneself, via the nucleus ‘location’, as a designer and attractor of social formations. Hence, first of all, within these micro-­arenas, a product, a style, a trend – namely, a cultural innovation – has to stand its ground. It has to pass the test stage at parties, exhibitions and inaugurations, first, in order to expand, and secondly, in order to provide temporarily distinctive materials and network processes. Retrospectively, scenes and milieus are in need of these unstable arenas of short-­term manifestation, so to speak; locations where latent relations become explicit, where the scene manifests, experiences, informs itself, where, by means of this experience, exchange can be transformed and modified.

7.6 VARIATIONS AND TYPES OF ENTREPRENEURIAL SCENES IN LEIPZIG AND BERLIN In Leipzig and Berlin three relevant entrepreneurial variations and types of scenes can be identified.

Entrepreneurship in creative industries  ­197 The first type I prefer to call ‘entrepreneurial winner scenes’. First of all, Leipzig has well-­known multiplicators, for instance, stable small-­scale enterprises in the advertising, design and gallery sector, with a big influence on other scenes. They have a high transfer capability between market sub-­segments. Often the drive for profit is combined with investments in non-­profit activities (for instance, public art), making them an important factor for cultural sites (for instance, the design scene). In Berlin, by contrast, multiplicators like fashion label owners and gallery owners have a rather transnational orientation, giving them a big influence on the whole market. They are dependent on local networks of small-­scale enterprises. These entrepreneurial elites are to a high degree locally independent. Their drive for profit is combined with investments in other areas (for instance, art), making them an important factor in Berlin as a cultural site. Secondly, however, both cities also show young, ephemeral micro-­ entrepreneurial scenes situated in rapidly changing networks of young entrepreneurs who are in a transitional stage between obtaining qualifications and finding existence-­securing employment options. They are deeply rooted in city district milieus (niche structures), often coping with ­precarious existence levels. Thirdly, unlike Leipzig, Berlin has established entrepreneurial scenes on a mature level, which are more formalized than the niche scenes. Due to the size of the Berlin metropolis, they show a high degree of locally bound knowledge, production and operational capacity.

7.7 CONCLUDING REMARKS: THE PARADOX BETWEEN INDIVIDUAL PROFESSIONALIZATION AND DEPENDENCE ON SOCIAL CONTEXTS AND PROFESSIONAL SCENES The preceding explanations have highlighted the present and increasing use of the concept ‘scene’ within social sciences and urban studies, as well as in application-­oriented fields (for instance, economic-­political consultancy or economic planning). These illustrations have concentrated on the application of the concept ‘scene’ on place, space and city, as well as, in a more detailed manner, on its use in cultural and creative industries. In this rather young segment, scenes are understood as social environments and social incubators for new cultural value-­adding processes, which then can influence regional competitiveness in a positive way. The following summary focuses on the connection between scenes, space and location, as well as on location-­specific articulations of scenes.

198   Handbook of research on entrepreneurship and creativity 7.7.1 Scenes Represent Processes of Temporal Collectivization in Fragmented Markets In the scenes examined, expressive values like self-­fulfilment, individuality, autonomy and creativity are transmitted and actualized (Koppetsch and Burkart 2002). The articulated values and connections of values have to be permanently reproduced, comparatively mobilized and frequently checked in social arenas. As a result, scenes show a demand for individualization rooted in an experience-­oriented cultural practice, which generally is no fun-­oriented experience at all. Moreover, the basic principle is collectivization. Entrepreneurial scenes articulate themselves in new project-­based forms of cooperation with altered spatial practices and localized policies. These new practices are characterized by a playful handling of ‘location’ and ‘space’, where, by means of specific strategies of allocation, different scenes aggregate from time to time. Locations are thus the terrain of the post-­industrial city, disputed in a symbolic way by heterogeneous groups, communities and attitudes as well as entrepreneurial scenes. By being physically present in the urban area, scene members are able to integrate and position themselves. The cultural encryptions, urban legends and local narratives are often co-­designed and formulated by the scenes at selected urban locations. As a result, now and in the future, scenes act as social hubs of individualized society, allowing new constellations to be tested. Spatial practices and movement patterns intentionally stand out and keep a distance from the strategies of centralist geography: the geographies of the ephemeral, temporary and selective presented in the examples of Leipzig and Berlin compete with the geography of symbolic-­touristic and consumer-­oriented centralism. The applied practices can be viewed as tactics in the Certeauian sense, for their subtle practices of temporary resistance against the powerful economic and political structures and their disciplinary regulations can be easily illustrated. However, this political practice is not counter political in the classical sense, but rather intentionally subtle, aimed to create a (discernible) place of contradiction. The arising spatial ambivalences or breaches offer enough material for the actors to grapple with, to become aware of and to reflect upon themselves. Hence, the scene, expressing itself at these locations, is formed by and with the charisma of this location, which is emotionally linked to the persons. 7.7.2  Scenes Reproduce In-­between Spaces The recent conclusions have illuminated the reciprocity between the conceptual approaches to new collectivization and the concept of space.

Entrepreneurship in creative industries  ­199 Sociologist Silke Steets has made a significant contribution to the understanding of this reciprocity in the case of Leipzig. According to her, (urban) space is an instrument for cultural providers to create temporary places with spatial micro-­politics (Steets 2005). These urban places are seen by Steets from the view of artists who, in times of shrinking cities, reuse and re-­evaluate ‘laid-­off’ places which have lost their original purpose (industrial units) and turn them into clubs, pubs and galleries. This form of spatial acquirement results in ephemeral places arising from the interaction between material-­physical arrangements, their narrative and visual cargo, and the actions of the users. These places find themselves in an inter-­stage between private and public, legal and illegal, market and criticism (Steets 2005, pp. 115–118). The formation process of ephemeral places is based on alienation of the audience by discursive and effective blending of different types of events like workshops and cafés; and furthermore, by the artists’ high degree of self-­organization, little structuralization of actions by fragmentary spacing, completion of space with the help of various actors, and inclusion or exclusion of space by implicit readability of arrangements (Löw 2001, pp. 98–99). Yet, the latter constrains the focused openness of these places by postulating certain know-­how typical in the scene. 7.7.3  Scenes in Corporate Intrinsic Logics Both case-­reconstructions have shown that entrepreneurial scenes are generally based on socio-­spatial differentiation practices. Yet, instead of following universal rules, they show an intrinsic logic of the city (Löw 2008). There are rules and certainties of the extraordinary of a city, of the way certain rituals, sociolects and ideologies work. Intrinsic logics can be described as the grammar of a city or place, determining what is possible in the city and where the specific within the usual is situated (Löw 2008, p. 43). This is especially true for the places and working contexts of the cultural and creative economy. Places reveal themselves through social and communicative processes. Social densification and physical presence of the scene’s members are thus necessary, because the discernible relation between the actors is necessary to make Leipzig collectively discernible as a significant place. Yet, for members of the scene, these places are seen as ways to get access to the market on the basis of cultural networks. Creative actors organize exhibitions, product presentations, vernissages, closing events, parties – in other words, short-­term events that co-­form social space by performativity. Dominating behavioural and language codes is crucial in order to get access to these social places and events. The ‘“look” and “feel” of the location’ (Helbrecht 2004, p. 200) determine success. Places

200   Handbook of research on entrepreneurship and creativity thus have an intrinsic logic revealing itself in local-­specific and not universally homogeneous forms of collectivization. Creative people organize events displaying places as social fields on the urban map. These activities are aimed at obtaining social affiliation and certainty of action. They create social intensities and highly stimulating densifications which attract attention and are aimed at introducing trends, styles, codes – in short: symbolic products – into social networks. As can be observed best in the fields of design, music, literature and fashion, these spatial policies are aimed at testing the products of cultural and creative industries – sounds, pictures, texts, techniques, graphics – for performative effects. The social and performative testing process takes place inside the temporary and transitional rooms of these creative scenes. Berlin could offer these places, thus allowing the development of specific capabilities for the staging of a place. Leipzig began to discover these spatial options on a large scale from 2010. At these places, the performative qualities of immaterial and symbolic products can develop in social networks and can then be negotiated. Only then is it possible to generate the communicative vocabulary necessary to express the quality of a thing  –  the quality of a product to be tested. The case-­reconstructions indicate two basic, diametrically opposed processes: first, the significance of social places attributed with intrinsic logic acting as an access to market ­processes, and, secondly, the volatility of this social field of creation. 7.7.4  Scenes and Professionalization With qualitative interpretative methodologies, it was possible to show that young cultural entrepreneurs in these emerging markets attach more and more importance to informal milieu and knowledge of social networks than to codified forms of knowledge. In contrast to such codified modes of knowledge (either of a technical, management, business and organizational nature), their ability to know how, where and when to interact is of utmost importance in order to establish a professional identity as an emerging entrepreneur. But these social network and milieu forms of knowledge have a distinct, yet non-­essentialist relation to space and place. Considering creativity as a decisive source for competitive advantage, it is crucial to shift the focus to spatially relevant practices in the field of symbolic production, because symbolically designed products must be introduced, tested, adapted and upgraded first and foremost in social contexts. The permanent creation of new genres, formats and products demanded by the market is connected with inventing narratives and social practices as well as with spatial strategies to place these products symbolically but also spatially in urban-­based social places. Before being able to talk about,

Entrepreneurship in creative industries  ­201 let alone sell and distribute products, it is necessary to invent a narration connected to the product. Apart from these opportunities to communicate, these social practices allow potential clients to be able to talk about and to experience symbolic goods in the first place. Therefore, the encounter with the immaterial good, an imperative part of the process, has to happen on the basis of affective experiences. While focusing on the way in which products are introduced into the markets of creative industries, it is important to take into consideration that immaterial products, meaning symbols, signs, sounds, and so on, not only have to be communicated in social networks, but they should also initially be tested on the basis of their performative and atmospheric qualities. That is why products have to be placed in carefully and consciously arranged places – such as gallery openings, exhibitions, show cases, clubs, and so on – in order to allow performances to take place at all. Symbolic products therefore acquire social relevance when people experience their performative and distinctive quality first hand; they then have the vocabulary with which to talk about the quality of immaterial products, communicate it to the respective clients, write about it, and so on. From this perspective, producing symbols is a social process that is stimulated, fostered, orchestrated or hampered by specific ­organizational as well as spatial contexts. So the category of space and spacing provides the opportunity to analyse processes of product-­based symbolical upgrading as well as re-­evaluation in the field of creative industries. Forming space aims at achieving a necessary degree of professional competency with which creative people can present their symbolic products. These spaces provide an atmospheric-­ based story to accompany their immaterial products. With this in mind, professional scenes need club events, galleries, exhibitions and staged office openings, and so on, that can be understood as temporary place-­makings resulting from social formation on the urban stage. Scene-­related clubbing practices not only have infiltrated the formation of professional identities as well as respective entrepreneurial strategies to access markets, but they have even become a constitutive prerequisite to forming an entrepreneurial identity in the first place. Subcultural creative scenes as well as their milieu practices, which previously operated informally, have been transformed into professional scenes of design production providing a minimum of individual and collective ground for establishing the confidence needed for communicating their products and their modes of business procedures. In respect to the theoretical reflection that substantial paradoxes (Lange and Kalandides 2008; DeFillippi et al. 2007;) are crucial in determining the way sub-­segments of creative industries function organizationally, the empirical material provides a preliminary answer to these paradoxes. The dynamic spatial patterns I observed in the context of Berlin’s and Leipzig’s

202   Handbook of research on entrepreneurship and creativity creative industries concern various modes of self-­regulation as well as the establishment of new professional standards. The identified social networks are organized differently in that they are perpetually changing, necessarily mobile and they operate in the context of temporary working projects (Grabher 2004). The cultural entrepreneurs can be seen as one possible answer to this growing hybridization of urban economies. Within these emerging design markets boundaries as well as socio-­spatial work-­relations constantly blur. This gives rise to flexible and precarious urbanites who position themselves carefully in between different systems in order to avoid getting caught in the paradoxes of long-­term working models. This reflects on the one hand an administrative state body that, by and large, follows a rather standard approach towards organizing and planning labour within a given territory, while on the other hand exhibiting the reality of a market that is abandoning these parameters and constituting itself far beyond the administrative borders. Reacting to this paradox, cultural entrepreneurs create their own spaces of interaction where traditional borders systematically blur. Referring to Foucault’s concept of heterotopia (Hjorth 2004; Foucault [1984] 2000), one can grasp how competition and cooperation, exchange and isolation, private and public, work and leisure can temporarily co-­exist and thus allow for a new understanding of how an entrepreneurial position is formed in a newly established market. The creative people researched for this chapter invent forms of self-­organization in order to gain access to power structures based on their ability to work with socio-­spatial networks and symbolic coding practices.

7.8  OUTLOOK If scenes are not only applied in terms of time diagnostics, as a figure of the post-­traditionalization of society, but also as transferable to entrepreneurial contexts of the production of symbols, it has to be recognized that the concept ‘scene’ can be dissolved from its main context (youth and subcultures) and applied to unexpected socio-­economic fields of action (e.g. creative industries). Hence, this application does not situate social determinants next to spatial ones, but allows for the so-­called spatial turn in social sciences: social practices do not take place in a city; they rather embody the specific of the city. While Ronald Hitzler (Hitzler and Pfadenhauer 2004) conceptualizes the phenomenon ‘scene’ as mainly non-­spatial and puts social determinants next to spatial determinants, consequences arise from giving scenes, which are characterized by constructivity and performativity, a reciprocity to space. Thus, a first contextual determinant can

Entrepreneurship in creative industries  ­203 be conceptualized. A second determinant can be found in Hitzler’s point of view and in sociology of knowledge: the concept and understanding of scene are applicable on the context of entrepreneurial action and, as a result, on forms of interaction in certain markets, that is, entrepreneurial scenes in the cultural and creative industries. However, the contextual dimension arising from the spatial turn has to be conceptualized as an explanatory and differentiating dimension, thus acting as a starting point to approach contextual articulations of entrepreneurial scenes in market sub-­segments of cultural and creative industries. Five aspects mark the central ­conclusion of this chapter: Firstly, ‘scene’ has to be viewed as a social spatial, structural category. It consists of flexible, event-­oriented interaction forms with high-­grade internal communication characterized by implicit, shared knowledge of common temporary forms of practice. Secondly, entrepreneurial scenes in the field of cultural and creative industries not only provide employment options, but also structuralize entrepreneurial relation networks by spatial practices. Thirdly, considering scenes exclusively in the sociological sense as staging practices, as done by Ronald Hitzler and others, means placing social determinants next to spatial determinants, considering space as a container next to social determinants, or even completely ignoring space. Likewise, there seems to be little reason to speak of the immediateness of the urban by means of a concept of the theatrical scene, because the structuralizing effect of scene knowledge and scene experience on the social spatial level is thereby ignored. Fourthly, scenes are formed around organizational and professional elites; they are not homogeneous networks. Fifthly, the potential of ‘scene’ as an analytical concept of space is based on the fact that informal networks based on collocation practices can be controlled for their space-­structuralizing effects.

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Entrepreneurship in creative industries  ­207 of legitimacy, identity, and entrepreneurship in satellite radio, 1990–2005’, Administrative Science Quarterly, 55, 439–471. Neff, G., E. Wissinger and S. Zukin (2005), ‘Entrepreneurial labour among cultural producers: “cool” jobs in “hot” industries’, Social Semiotics, 15 (3), 307–334. O’Connor, J. (2002), ‘Local scenes and dangerous crossroads: punk and theories of cultural hybridity’, Popular Music, 21 (2), 225–236. Pfadenhauer, M. (2005), ‘Ethnography of scenes: towards a sociological life-­world analysis of (post-­traditional) community-­building’ (31 paragraphs), Forum Qualitative Sozialforschung/ Forum: Qualitative Social Research, 6 (3), Art. 43. Reckwitz, A. (2009), ‘Die Selbstkulturalisierung der Stadt. Zur Transformation moderner Urbanität in der “creative city”, Mittelweg 36. Zeitschrift des Hamburger Instituts für Sozialforschung, 18 (April/Mai), 2–34. Ross, A. (2008), ‘The new geography of work: power to the precarious?’, Theory, Culture Society, 25 (7–8), 31–48. Rossiter, N. (2007), Organized networks: media theory, creative labour, new institutions, Rotterdam, Amsterdam, Netherlands: NAI Publishers. Schallberger, P. (2003), Junge Gründerinnen und Gruender. Motive, ökonomisches Denken und Möglichkeiten der Förderung, Bern, Switzerland: Institut für Soziologie der Universität Bern. Scott, A. J. (2004), ‘Cultural-­products industries and urban economic development: prospects for growth and market contestation in global context’, Urban Affairs Review, 39 (4), 461–490. Scott, A. J. (2006), ‘Entrepreneurship, innovation and industrial development: geography and the creative field revisited’, Small Business Economics, 26 (1), 1–24. Senate for Economics, Technology and Sciences (ed.) (2011), Report on cultural and creative industries in Berlin, Berlin, Germany: Senate for Economics, Technology and Sciences. SMWA (ed.) (2008), 1. Kulturwirtschaftsbericht für den Freistaat Sachsen, Dresden, Germany: Sächsisches Ministerium für Wirtschaft und Arbeit. Steets, S. (2005), ‘Doing Leipzig. Räumliche Mikropolitiken des Dazwischen’, in H. Berking and M. Löw (eds.), Die Wirklichkeit der Städte, Baden Baden, Germany: Nomos Verlagsgesellschaft, pp. 107–122. Steets, S. (2008), ‘Wir sind die Stadt!’ Kulturelle Netzwerke und die Konstitution städtischer Räume in Leipzig, Frankfurt am Main, Germany: Campus. Steyaert, C. (2007), ‘Life worlds – “Entrepreneuring” as a conceptual attractor? A review of process theories in 20 years of entrepreneurship studies’, Entrepreneurship and Regional Development, 19 (6), 453–477. Strathern, M. (1995), Shifting contexts: transformations in anthropological knowledge, London, UK: Routledge. Svejenova, S., C. Mazza and M. Planellas (2007), ‘Cooking up change in haute cuisine: Ferran Adrià as an institutional entrepreneur’, Journal of Organizational Behavior, 28 (5), 539–561. Sydow, J., L. Lindkvist and R. Defillippi (2004), ‘Project-­based organizations, embeddedness and repositories of knowledge: editorial’, Organization Studies, 25 (9), 1475–1490. Thomas, M. (1999), Neoinstitutionalismus, Economic Sociology und der Transformationsfall, Frankfurt/Oder, Germany: Frankfurter Institut für Transformationsstudien. Townley, B., N. Beech and A. McKinlay (2009), ‘Managing in the creative industries: managing the motley crew’, Human Relations, 62 (7), 939–962. Vinodrai, T. (2006), ‘Reproducing Toronto’s design ecology: career paths, intermediaries, and local labor markets’, Economic Geography, 82 (2), 237–263. Wagner, J. and R. Sternberg (2004), ‘Start-­up activities, individual characteristics, and the regional milieu: lessons for entrepreneurship support policies from German micro data’, The Annals of Regional Science, 38 (2), 219–240. Weckerle, C., M. Gerig and M. Söndermann (2007), Kreativwirtschaft Schweiz – Daten, Modelle, Szene, Basel, Switzerland: Birkhäuser Verlag.

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8.  The creative environment as stimulator for entrepreneurial opportunities Michael Stuetzer

8.1  INTRODUCTION Entrepreneurship is of central importance for regional development. Entrepreneurs are credited to introduce new products and services into the market (Schumpeter 1934). Other scholars highlight the importance of entrepreneurship for both economic growth and employment growth. It is argued that new ventures – which are often used as an indicator for entrepreneurial activity – challenge incumbents, thereby amplifying structural change and securing market efficiency. In this indirect way entrepreneurship leads to an improved overall competitiveness of the economy and subsequent growth (Andersson and Noseleit 2011; Fritsch and Mueller 2008, 2004; Audretsch and Keilbach 2004). While the impact of entrepreneurship on economic development at both the regional and national level is widely acknowledged, the impact of the regional environment on individual entrepreneurial behaviour and entrepreneurial opportunity perception is less often considered. Nonetheless, an individual is embedded in the regional environment in which he/she lives. Feldman (2001), for example, argues that entrepreneurship is ‘a regional event’, thereby emphasizing the role of regional characteristics. One emerging stream in the literature on entrepreneurship deals with the region both as a spatial level, where entrepreneurial effects are observable, and as a potential determinant of an individual’s entrepreneurial perception and activity. As individuals’ entrepreneurial behaviour is embedded in the wider social and spatial sphere, regional characteristics are important determinants of the entrepreneurial activity (Brixy and Grotz 2007). For example, studies have found that regional income levels are linked with regional start-­up rates (Reynolds et al. 1995). Acs and Armington (2004) revealed a link between regional population growth and start-­up rates. Urbanization and localization economies are also discussed as determinants for regional entrepreneurship (Bosma et al. 2008; Krugman 1991). Knowledge creation is another regional determinant which has received considerable attention in the literature (Fritsch and Falck 2007; Armington and Acs 2002). The basic idea that new knowledge is the driver for 209

210   Handbook of research on entrepreneurship and creativity e­ ntrepreneurship is not a new one. Most prominently, Schumpeter (1934) popularized the role of the innovative entrepreneur who sets in motion the wheel of creative destruction. Knowledge can be created in various types of organization – innovative firms, public or semi-­public research institutions. It is, however, always dependent on people who are creative; that is, who create new knowledge based upon the (re-­)combination of available knowledge. This creation, since Florida’s (2004) seminal work, is attributed to members of the ‘creative class’. Florida’s main argument is that creative individuals are engaged in innovative tasks in their job. Florida (2004, p. 9) states that it is particularly the members of the creative core who have the ‘economic function . . . to create new ideas, new technology, and/ or new creative content’. Acs, Audretsch and their co-­authors argue that new knowledge – which is created but left uncommercialized by incumbent organizations – can serve as a base for entrepreneurial opportunities (Audretsch and Keilbach 2007; Acs and Plummer 2005; Qian and Acs in press). An often stated research need in understanding the effect of the creative environment is the investigation of the mechanisms through which the creative environment actually affects the enterprising individual. Even if the presence of the creative class is shown to be of particular importance for regional start-­up rates (Boschma and Fritsch 2009; Lee et al. 2004), this effect is not strictly causal as such, but rather operates via more proximal predictors that are most likely located on the personal level (e.g. Sternberg 2009). As past analyses, however, usually investigated correlations between regional characteristics and regional start-­up rates, our knowledge of the mechanism between the creative environment and entrepreneurial behaviour is very limited. What is missing is theory-­driven research on the specific nature of knowledge creation and on its direct and indirect impact on individual entrepreneurial behaviour. One possibility to close this research gap is to look at mediating variables which are located in-­between regional knowledge creation and the formation of (innovative) new businesses as its ultimate outcome. Following this line of reasoning, I focus on individual opportunity perception as the central concept of this chapter. Thereby opportunity perception is understood as the individual assessment of a situation conducive for new economic activity (Davidsson 2012). Focusing on opportunity perception is appropriate for three main reasons. First, main definitions in the entrepreneurship literature link knowledge creation with entrepreneurial opportunities. Casson (1982), Eckhardt and Shane (2003) and, most prominently, Shane and Venkataraman (2000, p. 220) define entrepreneurial opportunities as ‘those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production’. Secondly, individual per-

The creative environment as stimulator for entrepreneurial opportunities  ­211 ception of entrepreneurial opportunities appears to be a central motivating factor for entrepreneurial behaviour (McMullen and Shepherd 2006; Shane et al. 2003). Such opportunity perception can, for example, trigger entrepreneurial intentions which in turn result in entrepreneurial activity. Thirdly, focusing on individual opportunity perception is also compatible with theories in regional entrepreneurship. For example, Sternberg and Rocha (2007) champion a model which focuses on the individual’s perception of regional characteristics (e.g. opportunities) which then in turn drives entrepreneurial intentions, attitudes and actions. Similar analytical strategies are also applied in more general research on the individual-­level effects of contemporary social and economic change (e.g. Obschonka et al. 2012). Armed with this knowledge, this chapter sets out to investigate the link between regional knowledge creation and individual opportunity perception. Thereby I heavily build on my own prior work as published in Stuetzer (2011), Stuetzer et al. (2010, in press). I am particularly interested in the geography of opportunity perception. Where do those people perceiving opportunities live? And what characterizes these regions? Based on established theory, I develop a model of how the regional creative environment affects individual opportunity perception. Beside a direct effect of the creative class on individual opportunity perception, I also hypothesize a potential moderating effect of regional bridging social capital. Social capital deals in general with the embeddedness of individuals in social relations (Coleman 1988; Granovetter 1973). In particular bridging social capital in the region can be beneficial for opportunity perception as it provides potential entrepreneurs with access to non-­redundant information. However, the knowledge spillover literature teaches us that the tacit component of knowledge does not travel well and needs face-­to-­face interaction for transmission (Gertler 2003). Bridging social capital might facilitate the spillover of new created knowledge, ultimately fostering opportunity perception of others. In order to test these hypotheses, I combine data at the regional level (drawn from different sources, e.g. German Social Insurance Statistics) and data at the individual level (drawn from the German data of the Global Entrepreneurship Monitor (GEM) for survey years 2002–2006 and 2008– 2009). Although such a multi-­level approach promises to enrich our understanding about the individual–context interplay, only a small number of studies employ this analytical strategy (e.g. Bergmann and Sternberg 2007; Mueller 2006; Tamásy 2006; Sternberg and Wagner 2005; Wagner and Sternberg 2004). Consequently, I employ multi-­level techniques for the statistical analyses. The empirical results support the hypotheses. The regional creative environment as indicated by the regional share of the creative class

212   Handbook of research on entrepreneurship and creativity is positively correlated with individual opportunity perception. Regional bridging social capital has a positive direct effect on individual opportunity perception but also positively moderates the relationship between the creative environment and opportunity perception. The remainder of this chapter is organized as follows. In the next section, I revisit the theory on entrepreneurial opportunities, creative class and social capital in order to develop the hypotheses. Section 8.3 is dedicated to the presentation of the data and the variables used. The results of the empirical analysis are presented in Section 8.4. Section 8.5 discusses the findings as well as opportunities and challenges for future research on opportunity perception.

8.2  THEORY AND HYPOTHESES 8.2.1  Entrepreneurial Opportunity According to the Oxford English Dictionary, an opportunity is ‘a time, juncture, or condition of things favourable to an end or purpose, or admitting of something being done or effected’. Analogous to this general description, definitions of an entrepreneurial opportunity usually refer to a situation conducive to profit-­making. Most prominently, Casson (1982) as well as Shane and Venkataraman (2000, p. 220) state that ‘entrepreneurial opportunities are those situations in which new goods, services, raw materials, and organizing methods can be introduced and sold at greater than their cost of production’. Building on this definition Shane and Venkataraman (2000) developed a framework for entrepreneurship research which focuses on the nexus of entrepreneurial opportunities and enterprising individuals pursuing those opportunities. Shane and Venkataraman’s paper has often been cited and the praise is well deserved. While prior research had often looked at specific but unconnected ‘pixels’, such as personality traits of entrepreneurs or success factors of small businesses, Shane and Venkataraman offered a ‘painting’. This has certainly helped entrepreneurship to gain legitimacy as an independent field of research and to make valuable contributions to the more general field of management and other disciplines such as sociology, economics and psychology. However, Shane and Venkataraman’s paper has also triggered much discussion – most importantly about the nature of entrepreneurial opportunities and their role in the entrepreneurial process (e.g. Alvarez and Barney 2007; McMullen et al. 2007; Davidsson 2004; Singh 2001). There are some excellent reviews about this topic (e.g. Davidsson 2012; Alvarez et al. 2010; Sarasvathy et al. 2010) and several special issues in

The creative environment as stimulator for entrepreneurial opportunities  ­213 Strategic Management Journal and Small Business Economics. Thus, I will be selective and brief in the discussion of some of the different issues before moving forward. The first major issue concerns the question of whether entrepreneurial opportunities are objectively existent or are inextricably linked to the entrepreneur pursuing the opportunity, and thus subjective. Shane and Venkataraman (2000, p. 220), and more recently Shane (2012), hold that entrepreneurial opportunities ‘are objective phenomena that are not known to all parties at all times’. This builds on assumptions of market imperfections (von Mises 1949; Hayek 1945) and is consistent with several theories in management and economics (McMullen et al. 2007). Moreover, the objective view of entrepreneurial opportunities is linked with a realist perspective and classic positivism which holds that there is a real world about which we can learn by obtaining and verifying data (see for a discussion Alvarez et al. 2010). Other researchers claim that opportunities are interlinked with the entrepreneur to the point of inseparability (Klein 2008; Dimov 2007) as individuals differ in their knowledge, background, beliefs and thus perception of the world. This line of thinking is consistent with a constructionist view arguing that reality is constructed in the individual mind and thus subject to interpretation (Azevedo 2002). A closely related discussion in the opportunity literature is whether entrepreneurial opportunities are created by individuals or can be discovered. Discovery (sometimes also called recognition) of opportunities is championed by Shane and Venkataraman (2000) and Eckhardt and Shane (2003), and builds on the notion that ‘alert’ individuals are able to identify profitable opportunities when they see them (Kirzner 1973). Much research has looked at the cognitive processes related to discovery. A robust finding here is that prior knowledge from past experience is an important determinant for ‘connecting the dots’ to identify entrepreneurial opportunities (Baron 2006, p. 1; Shane 2000). Proponents of the creation view, however, argue that more is involved than simply picking up opportunities like a $10 bill from the ground. Their main argument is that opportunity recognition is a ‘continuous, proactive process essential to the formation of a business’ (Ardichvili et al. 2003, p. 109). As individuals or groups of people work on, reframe and evaluate ideas, they create an opportunity (O’Connor and Rice 2001). My purpose here is not to take sides. Having conducted 1001 face-­to-­ face interviews with (nascent) entrepreneurs in my PhD research, I have learned that some opportunities are indeed discovered almost by chance while others are the outcome of a decade of hard work. The researchers championing either the objective or subjective view on entrepreneurial opportunities also have convincing arguments at hand. This multi-­faceted

214   Handbook of research on entrepreneurship and creativity nature of entrepreneurial opportunities has severe consequences for entrepreneurship research. Most importantly, researchers obviously attach different meaning to the term ‘entrepreneurial opportunity’. Reviewing the use of the term, Davidsson (2012) concludes that the term ‘entrepreneurial opportunity’ lacks construct validity. Related to this, the lack of tangibility as to what constitutes an entrepreneurial opportunity hampers the development of operational definitions and consequently measurement of entrepreneurial opportunities (Dimov 2011). Without a sound base for measurement, scholars face severe constraints of accumulating knowledge by empirical observation and hypothesis-­testing. Faced with this dilemma, recent theorizing has started to disentangle the entrepreneurial opportunity construct (Shane 2012). In this chapter I follow Davidsson’s (2012, p. 1) delineation of an entrepreneurial opportunity into opportunity conditions, opportunity perception and subjective business ideas. Consider Google as an example. The opportunity conditions underlying Google are the invention of the Internet. The permanent connection of independent servers and computers has led to an increase in the amount of available data for science, business and leisure. This has generated market needs such as accessing information contained in web pages and servers. Recognizing such market needs is opportunity perception. The subjective business idea which has become Google is to search for text in the Internet and to rank these results. Davidsson’s approach is an important step forward. In particular the sub-­construct opportunity perception promises good research opportunities. Thereby opportunity perception is understood as the individual assessment of a situation conducive to new economic activity (Davidsson 2012). Prior research in this area has found that opportunity perception is a central motivating factor that triggers entrepreneurial behaviour (McMullen and Shepherd 2006; Shane et al. 2003). Such opportunity perception can, for example, trigger entrepreneurial intentions which in turn result in entrepreneurial activity (Krueger 2000). Some researchers argue that opportunity recognition represents an attitude measure that, according to the theory of planned behaviour (Fishbein and Ajzen 2010), directly underlies entrepreneurial intentions and thus entrepreneurial behaviour (Bosma and Schutjens 2011; Obschonka et al. 2010; Bergmann 2005). Davidsson’s view offers new research perspectives for economic geography by investigating the spatial variance in opportunity perception. Reformulating one of Shane and Venkataraman’s (2000) initial research questions on base of Davidsson’s view, it is important to understand why and how people perceive these opportunities. The role of regional characteristics in this process is under-­researched and not well understood. What we already know is that there are large regional differences in opportunity

The creative environment as stimulator for entrepreneurial opportunities  ­215 perception (Bosma and Schutjens 2011). Stuetzer et al. (2010) show that regional determinants are better predictors of individual opportunity perception than individual engagement in entrepreneurship. Moreover, they find that individual opportunity perception is correlated with a regional entrepreneurial culture, knowledge creation and GDP per capita. Spin-­offs are often based on opportunities developed but not further pursued by incumbent firms (Klepper and Thompson 2010). Together with the pronounced spatial immobility of entrepreneurs, this mechanism can explain the formation of clusters in specific industries (Klepper and Sleeper 2005). In the following, I will develop three theoretically informed hypotheses on how regional characteristics – most importantly the creative environment and social capital – affect individual opportunity perception. 8.2.2  Creative Class The basic idea that new knowledge is the driver for economic development is not a new one. Most prominently, Schumpeter (1934) popularized the role of the innovative entrepreneur who sets in motion the wheel of creative destruction. Knowledge can be created in various types of ­organization – innovative firms, public or semi-­public research institutions. It is, however, always dependent on people who are creative; that is, who create new knowledge based upon the (re-­)combination of available knowledge. This creation, since Florida’s (2004) seminal work, has been attributed to members of the ‘creative class’. Florida’s main argument is that creative individuals are engaged in innovative tasks in their job. Florida (2004, p. 9) states that it is the members of the creative core in particular whose ‘economic function is to create new ideas, new technology, and/or new creative content’. Therefore they are regarded as being key drivers for regional development by creating knowledge which can be commercialized in start-­ups but of course also in incumbent firms (Fritsch and Stuetzer 2009). Florida’s argument builds on Jane Jacobs’ (1985,1969), ideas about the important economic role of cities. There are also links to the basic hypotheses of the new economic growth theory which address the origins of endogenous growth (Romer 1993, 1986; Lucas 1988). However, there is still much scepticism in the scholarly community about the characteristics and the role of the creative class (e.g. Musterd and Murie 2010; Glaeser 2005). A number of studies have investigated this hypothesis applying a wide range of economic performance indicators. When looking at patents as dependent variable, Knudsen et al. (2008) find a positive correlation with the density of the creative class in US regions. A similar finding is reported by Boschma and Fritsch (2009) for German regions. These two

216   Handbook of research on entrepreneurship and creativity studies suggest that the creative class plays an important role in generating knowledge spillovers. More empirical evidence is available when looking at entrepreneurship as dependent variable. The presence of creative people in a region is an important determinant of start-­up activity (Bieri 2010; Boschma and Fritsch 2009; Lee et al. 2004, 2002) and the expansion of existing firms (Stolarick et al. 2011). With respect to indicators of economic development, other studies have found significant correlations between the creative class and growth in income, productivity and employment (Boschma and Fritsch 2009; Florida et al. 2008; McGranahan and Wojan 2006). While most of these studies just report correlations or employ short-­term time lags between the creative class and economic development, the innovative study of Falck et al. (2011) convincingly shows that impact of creative people is long lasting. Analysing German regions, Falck et al. (2011) find that spatial proximity to an opera house built before 1800 still has explanatory power regarding the actual regional distribution of high-­skilled employees. Taken together, the above cited papers present convincing evidence that the creative class has positive effects on economic wellbeing. As these studies usually correlate the regional share of creative people with regional start-­up rates or regional patenting activities, they are nevertheless somewhat silent about the actual micro-­level mechanisms of how creative people stimulate the regional economy. Florida’s original theory posits that creative people are central actors in the knowledge creation process by recombining existing knowledge and thereby forming new means–ends relationships (Florida 2004; Lee et al. 2004). For various reasons this new knowledge, however, is often not commercialized in the incumbent organization in which the creatives are working. In contrast, new knowledge often and sometimes even unintentionally spills over to other actors. Employee mobility, R&D cooperations and spin-­offs are common routes of knowledge spillovers. Regarding entrepreneurship, a theoretical underpinning of this process is the recently proposed ‘Theory of Knowledge Spillover Entrepreneurship’. Acs, Audretsch and their co-­authors theorize how new knowledge – that is created but left uncommercialized by incumbent organizations – can serve as a base for entrepreneurial opportunities (Audretsch and Keilbach 2007; Acs and Plummer 2005; Qian and Acs in press). In other words, entrepreneurial opportunities tend to be more prevalent in regions with a higher share of the creative class. However, one cannot simply argue that opportunities are automatically seized. Stuetzer et al. (2010, in press) show that the regional share of the creative class does not predict an individual’s propensity to start a business. Opportunities must first be perceived before they can be acted upon. Taking these ­arguments together, I hypothesize:

The creative environment as stimulator for entrepreneurial opportunities  ­217 Hypothesis 1: A higher share of the creative class in a region is associated with a higher likelihood of individuals to perceive entrepreneurial opportunities. 8.2.3  Social Capital Besides regional knowledge creation by the creative class, I also deem regional social capital to be another relevant determinant of individual opportunity perception. Social capital, originally developed in sociology, deals in general with the embeddedness of individuals in social relations and the possible benefits and drawbacks associated with these relations (Coleman 1988; Granovetter 1973). While there are various definitions of social capital in the literature (for an overview see Adler and Kwon 2002), I follow the integrative approach of Nahapiet and Goshal (1998). They define social capital at the individual level as ‘the sum of the actual and potential resources embedded within, available through and derived from the network of relationships possessed by an individual or a social unit’ (Nahapiet and Goshal 1998, p. 243). Social capital is multidimensional, encompassing a structural, a relational and a cognitive dimension (Nahapiet and Goshal 1998). While the structural dimension is concerned with the properties of the social network, such as the density and the connectivity among actors (Burt 1992), the relational aspect of social capital refers to the quality and kind of interpersonal relationships (Granovetter 1992). The cognitive dimension of social capital captures shared representations and systems of meaning that individuals have with one another (Nahapiet and Goshal 1998). A different classification in social capital literature distinguishes bridging and bonding social capital (Putnam 2000). Bridging social capital refers to links between individuals and organizations representing different expertise, views of the world and cultural habits (e.g. Samuelsson and Davidsson 2009). In contrast, bonding social capital refers to the positive (but sometimes negative) effects of cohesion and trust between actors enabling collective actions (Putnam 2000). In a closely related classification of social capital, theorists distinguish between weak and strong ties (Granovetter 1973). Thereby, weak ties describe loose relationships to actors providing non-­redundant information (e.g. Davidsson and Honig 2003), whereas strong ties refer to close relations to a limited set of actors featuring trust and its positive by-­products (e.g. Samuelsson and Davidsson 2009). One way in which social capital affects entrepreneurship is by accessing resources in the venture creation process. In particular scholars highlight the importance of social capital in providing access to novel information and trusted feedback to individuals concerning business strategies (Uzzi 1997) and in product development (Lechner and Dowling 2003). These are

218   Handbook of research on entrepreneurship and creativity also critical processes for opportunity perception (Ozgen and Baron 2007; Sorenson and Stuart 2001). For example, Davidsson and Honig (2003, p. 309) argue that in particular bridging social capital assists individuals ‘by exposing them to new and different ideas . . . in effect, providing them with a wider frame of reference both supportive and nurturing to the new potential idea or venture’. Some more support for this basic hypothesis is provided in qualitative analyses of high-­tech start-­ups by Elfring and Hulsink (2003). In addition, social capital is central to reduce uncertainty. This is particularly relevant for opportunity perception as information relevant to opportunity perception is dispersed among many actors (cf. Hayek 1945). Social capital allows individuals to access this dispersed information, ultimately fostering opportunity perception. Taking this idea to the regional level, I argue that individuals living in a region with more access to bridging social capital will have more access to non-­redundant information, ultimately fostering opportunity perception. In related research and also using GEM data, Arenius and de Clercq (2005) report that individuals living in agglomeration areas (where relationships are more loose and bridging social capital is more prevalent) have a higher likelihood of perceiving opportunities than individuals residing in rural areas. But how to measure regional bridging social capital? Because of its multidimensionality, social capital is often viewed as a fuzzy concept defying precise quantification and measurement. It is beyond the scope of this chapter to fully review the numerous measurement approaches, but in general researchers agree that at the individual level social capital can best be studied by investigating social network characteristics and resource flows from these networks (e.g.Hoang and Antoncic 2003; Lin 2001). Adapting this approach to the regional level is somewhat difficult. Building on the assumption that the best network contacts for aspiring entrepreneurs are other entrepreneurs, the regional start-­up rate might be a reasonable proxy for bridging social capital relevant for opportunity perception and entrepreneurial activity. More precisely, the higher the regional start-­up rate, the larger the set of potential contacts people can utilize for assessing information about means–ends relationships, prices, inputs, markets and competition – all crucial ingredients for opportunity perception. Thus, I hypothesize: Hypothesis 2: A higher start-­up rate in the region is associated with a higher likelihood of individuals to perceive entrepreneurial opportunities. In addition to the direct effect of regional social capital on individual opportunity perception, I also hypothesize a moderating effect. As out-

The creative environment as stimulator for entrepreneurial opportunities  ­219 lined above, the creative class is involved in the generation of knowledge spillovers which build the base for entrepreneurial opportunities. However, the knowledge spillover literature teaches us that in particular the tacit component of knowledge does not travel well, as it needs face-­to-­face contact for transmission and is thus bounded in space (e.g. Gertler 2003). Analysing data on patent citations, knowledge spillovers might be limited to a range of 75 km (Anselin et al. 1997) – a distance where daily commuting turns from being doable to wearing. Because these face-­to-­face contacts often take place in networks, bridging social capital can stimulate the knowledge spillover process, ultimately fostering individual opportunity perception. Investigating the rise of the Silicon Valley electronics cluster, Saxenian (1994) points to the relevance of a variety of regional institutions, such as trade associations and specialized consulting and venture-­capital firms, in establishing network contacts for individuals and firms. She describes a decentralized and fluid environment which supports the formation and maintenance of relationships, the exchange of information and the establishing of business contacts. In contrast to the flourishing Silicon Valley cluster, the case of Cambridge (UK) provides a negative example of the impact of social networks on knowledge spillovers. Garnsey and Hefferman (2005) point to the detrimental effects of the concentration of competence in large vertically integrated companies in Cambridge’s ­instruments and electronics sector where network closure took place. Thus, while the generation of new knowledge by the creative class is a crucial prerequisite for the generation of new knowledge, the magnitude of knowledge spillovers might depend on the connectedness of the regional actors. In this respect, regions with a large start-­up rate are at an advantage. The larger network size and the weak tie character of the relationships among the entrepreneurs can facilitate knowledge spillovers relevant to opportunity perception. This moderation hypothesis can be summarized as follows: Hypothesis 3: The positive effect of a higher regional share of the creative class on individual opportunity perception is intensified by a higher regional start-­up rate.

8.3  DATASET AND METHODS In order to test the above hypotheses I consider different levels of analysis at the same time, which is the recommended strategy for studying the phenomenon of entrepreneurship (e.g. Davidsson and Wiklund 2001). More specifically, the analysis combines primary data for individuals and

220   Handbook of research on entrepreneurship and creativity Table 8.1 Overview of the number of interviews of the GEM in Western Germany (2002–2006, 2008–2009) Year

Total interviews used

2002 2003 2004 2005 2006 2008 2009

8,662 4,396 4,368 5,233 3,272 3,856 4,762



secondary data for regional characteristics, thereby drawing from different data sources. Although such a multi-­level approach promises to enrich our understanding about the individual–context interplay, only a small number of studies employ this analytical strategy (e.g. Bergmann and Sternberg 2007; Mueller 2006; Tamásy 2006; Sternberg and Wagner 2005). 8.3.1  Individual-­Level Data At the individual level I use data from the representative adult population surveys of the GEM project in Western Germany covering seven years (2002–2006, 2008–2009).1 I focus on the Western part of Germany, because even 20 years after German reunification considerable differences regarding entrepreneurship and economic conditions exist between the former separated parts of Germany (Fritsch 2004) which can skew important results. A detailed description of the GEM methodology and data can be found in Reynolds et al. (2005). As Table 8.1 shows, the number of people randomly interviewed considerably exceeds the minimum level of 2,000 in every year per GEM country. So, for Germany, GEM data, though originally designed to study country differences, also provide the opportunity for inter-­regional (sub-­national level) analyses, as is demonstrated by other studies (e.g. Bergmann and Sternberg 2007). At this point I should note some drawbacks of GEM data. Most importantly, GEM employs a cross-­sectional design. In every GEM cycle a different random sample of the adult population is interviewed. This distinguishes GEM from other databases such as the PSED which follow entrepreneurs over time (Reynolds 2007a, b). Table 8.2 provides a description of all individual variables. I measure the individual opportunity perception with a tailor-­made GEM ­question


Age Gender Fear of failure Household income

Dependent variable Perceived founding   opportunities Level 1 controls Knowing other   entrepreneurs Perceived entrepre  neurial skills Years of schooling


Overall / between variation

Mean / SD

1.24 / 0.66

0.46 / 0.50 12.31 / 3.10

4.78 / 1.89 0.18 / 0.07 0.49 / 0.09 0.92 / 0.43

0.24 / 0.09

0.41 / 0.49

Dummy: 15The participants personally knew someone who had started a business within the last two years. Dummy: 15Participants believed to have the knowledge, skills and experience required to start a new business. The measure of educational attainment is based on the harmonized categorical classification of participants’ educational degree and vocational attainment. I recoded this information into years of schooling to obtain a more continuous indicator for human capital. The categories of educational attainment and the respective years of schooling are: 15no school leaving certificate (7 years); 25primary or secondary school without vocational training (8 years); 35primary or secondary school with vocational training (10 years); 45secondary school without general qualification (11 years); 55secondary school with general qualification (13 years); 65post secondary degree (18 years). Age of respondents in years. Dummy: 15female. Dummy: 15Participants stated the fear of failure would prevent them from starting up. Categorical variable: 15less than 500 euros; 25500 to 999 euros; 351,000 euros to 1,499 euros; 451,500 euros to 1,999 euros; 552,000 euros to 2,499 euros; 652,500 euros to 2,999 euros; 753,000 euros to 3,499 euros; 853,500 euros to 3,999 euros; 954,000 euros or more.

42.44 / 12.74 0.54 / 0.50 0.42 / 0.49 5.56 / 2.22

0.22 / 0.09

0.24 / 0.43

0.22 / 0.10

Aggregated at the regional level

Individual level

Dummy: 15The participants saw good opportunities to start up in the next six months in the area in which they live.


Table 8.2  Individual-­level variables – GEM waves 2002–2006, 2008–2009 for Western Germany

222   Handbook of research on entrepreneurship and creativity of whether or not the participants perceived founding opportunities in the area where they live. The GEM dataset also allows controlling for an array of other factors explaining individuals’ opportunity perception. Following prior research on new venture creation, I use years of schooling (Davidsson and Honig 2003) and perceived entrepreneurial skills as indicators for human capital (Arenius and Minniti 2005). Knowing entrepreneurs in the last two years prior to the interview is used as a basic indicator for receiving assistance in the venture creation process (Davidsson and Honig 2003). I also control for fear of failure as it might prevent individuals from searching for entrepreneurial opportunities (Tamásy 2006; Arenius and Minniti 2005). Extant research has shown access to financial capital is conducive for entrepreneurship (Dunn and Holtz-­Eakin 2000; Blanchflower and Oswald 1998). I thus include household income as an additional control. In order to account for any gender-­specific differences, I include a gender dummy variable (15women, 05men). I further include time dummies indicating the year of the observation. 8.3.2  Regional-­Level Data The individual-­level data described above are linked with archival regional-­ level data characterizing the socio-­economic environment of the respondents. Regional-­level data (Table 8.3 provides detailed description and descriptive statistics) are drawn from various sources and are at the district level (NUTS3; Kreise). The most important source is the German Social Insurance Statistics, as described in Spengler (2008), covering all employers and employees who are subject to obligatory social insurance. The choice of the district as the level of analysis needs some explanation. Arguably, NUTS3 regions are not functional units and the relevant regional dimension for many entrepreneurs is of a smaller size, such as municipalities. Using a more fine-­grained spatial dimension in the analysis would probably yield more precise results. However, data for many regional characteristics are only available at the district level, leaving no choice but to use this more rough-­grained spatial dimension. I use the share of the creative class among the regional workforce as an indicator for knowledge creation in the region. According to Florida (2004, p. 9) it is particularly the members of the creative core who have the ‘economic function to create new ideas, new technology, and/or new creative content’. For empirical studies the creative class is often operationalized via occupations. I use an updated list of creative occupations provided by Fritsch and Rusakova (2010) which takes into account the criticism regarding construct validity (McGranahan and Wojan 2006). I should note here that measuring the creative class on the basis of occupations is


Level 2   controls GDP per   capita Unemploy  ment rate Change of  unemployment

Start-­up   rate

Level 2   predictors Share of  creative class





GDP per capita in euros. Source: 26,389 Federal Statistical Office. Unemployment rate in per cent. 7.74 Source: Federal Statistical office. Percentage change in unemployment 1.69 level. Source: Federal Employment Agency.

Share of employees in creative core occupations in per cent. I adopt an updated version of Florida’s (2004) original list of creative occupations. Fritsch and Rusakova (2010) provide a list of the respective occupations. Source: Social Insurance Statistics. Number of start-­ups per 1,000 employees. Source: Social Insurance Statistics.


14.38 / 2.53 / 14.15

2.91 / 2.65 / 1.22

10,127 / 10,079 / 1,109

2.30 / 2.21 / 0.63

1.96 / 1.95 / 0.22

Overall / between / within variation













5.61 −20.01 −10.81








17,262 19,942 23,721 29,208 40,822




Table 8.3  Regional-­level variables – 2001–2005, 2007–2008, Western German districts




Level 2   controls Share of Share of plants with less than 20 91.28   small firms employees in per cent. Source: Social Insurance Statistics. External Level of external university funding 33.64  university per capita in euros. Source: Federal Statistical Agency. funding Population 568.84 Number of inhabitants per square metre.   density 0.37 Settlement Classification of German planning   structure regions according to core cities and their population density. Binary variable: 15agglomeration areas; 05urban or rural areas. Source and further detailed information: The Federal Institute for Research on Building, Urban Affairs and Spatial Development (BBSR).


Table 8.3  (continued)

0.48 / 0.48 / 0






97.48 130.99


99.37 / 97.98 / 17.32 690.51 / 691.32 / 11.30



1.74 / 1.72 / 0.28

Overall / between / within variation



6.45 100.34






232.06 785.17 1,583




The creative environment as stimulator for entrepreneurial opportunities  ­225 not without difficulties. Most importantly, many of the listed occupations such as engineers, architects and computer programmers require a high level of human capital. Accordingly, Glaeser (2005) criticizes Florida for measuring not creativity but human capital. This critique is accurate to the extent that there tends to be a high positive correlation between the share of the creative class and the share of highly educated people. However, as Boschma and Fritsch (2009, p. 393) correctly note, ‘it is what people actually do, rather than their industry affiliation or educational attainment that makes them economically productive’. I will return to this issue in the results section when I conduct robustness tests for the models. I use the regional start-­up rate as an indicator of bridging social capital. All things being equal, I expect start-­up rates to be ceteris paribus higher in regions with more bridging social capial, but lower in those regions lacking this attribute. In a related approach, Audretsch and Keilbach (2004) use a similar measure as an indicator for regions’ endowment with entrepreneurship capital. Regarding operationalization, I use the Establishment History Panel of the IAB (Institute für Arbeitsmarkt and Berufsforschung) to compute start-­ups at the regional level (Spengler 2008). For the technique of how to identify newly founded firms, see Fritsch and Brixy (2004). Note, that in IAB databases start-­ups are only taken into account if they employed at least one person, that is, were subject to compulsory social insurance. This operationalization of start-­up activity deviates from GEM concepts such as Total Early-­Stage Entrepreneurship Activity, and arguably underestimates the level of entrepreneurial activity because of the exclusion of entrepreneurs without employees and its focus on the latter part of the entrepreneurial process. However, I use this data source because of its complete coverage, providing a sufficient number of observations in all districts. Individual opportunity perception might also depend on other regional-­ level variables (Bosma and Schutjens 2011; Stuetzer et al. 2010, in press). First, vocational choice models claim that people become entrepreneurs when their expected entrepreneurial earnings exceed wages from paid employment (e.g. Lazear 2005). Accordingly, a higher GDP per capita indicating regional purchasing power should make entrepreneurship more profitable, ultimately fostering the perception of opportunities. Secondly, a relatively large regional share of small firms may be interpreted as an indicator of a small-­firm-­friendly economic environment in the region, for example in terms of the procurement behaviour of private and public firms. In principle, this might have a positive impact on individual opportunity perception as it signals that entrepreneurs can make a living in this region. Thirdly, unemployment has the potential to influence opportunity perception. One of the main negative effects of unemployment is that

226   Handbook of research on entrepreneurship and creativity unemployed people often lack skills and contacts necessary for entrepreneurship (Edin and Gustavsson 2008). People living in regions with high or growing unemployment will thus probably be less likely to search and detect opportunities (Ritsilä and Tervo 2002). Population density is used as a catch-­all variable to control for various kinds of regional characteristics such as land prices, size of the labour market and availability of infrastructure. I also take into account that districts are embedded in higher-­order spatial units. Here I use the settlement structure (agglomeration vs. other areas) of the respective region (NUTS2) as an additional control.

8.4  RESULTS 8.4.1  Descriptive Results Tables 8.2 and 8.3 present descriptive statistics and Table 8.4 shows correlations for all variables included in this study. Turning first to the regional-­ level variables, in the period from 2002–2006 and 2008–2009 the average share of creative class was in the region of 4 per cent, and the start-­up rate was approximately 8 per 1,000 employees. On average the GDP per capita in Western German districts amounted to 26,389 euros, while the unemployment rate was around 8 per cent and rising by 2 per cent in that time period. The economy was dominated by small firms (91 per cent). The respondents have an average age of 42 years, and regarding educational attainment 12 years of schooling. Forty-­one per cent of the individuals indicate knowing entrepreneurs. Some 46 per cent state that they have the necessary entrepreneurial skills to start a business. However, 42 per cent acknowledge that fear of failure would prevent them from doing so. Despite this, 24 per cent of the participants perceived founding opportunities in the regions where they live. Aggregating to the regional level reveals substantive regional differences (between variation) for opportunity perception (0.10). This raises the question, where do people perceiving opportunities live? In order to map opportunity perception I aggregate the individual-­level GEM data to the level of planning regions (Raumordnungsregionen). This aggregation is necessary as the low number of individual observations at the district level would result in too large confidence intervals. Figure 8.1 presents the geography of opportunity perception for the years 2002–2006 and 2008–2009 in Western German regions. Additionally, Table 8.5 lists the planning regions with the 15 highest and lowest rates of opportunity perception. The highest shares for opportunity perception are found in Munich (39.2 per cent), Bonn (34.4 per cent), Franconia (34.4 per


0.02 –0.00

–0.05 –0.06 0.02 –0.06 0.02 –0.04 –0.00 0.05 0.00 –0.00 0.01 0.11 0.01 –0.02 –0.01 –0.02 0.03 0.07 0.01 0.00 –0.01 –0.03

0.11 –0.07



–0.03 0.08 0.07



0.02 –0.02


0.00 –0.00


0.01 –0.03 –0.01 –0.02 0.01 0.01 0.00 0.00



0.68 0.09

– – – – – –



– 0.06

– – – – – –



– –

– – – – – –



– –

– – – – – –


– –

– – – – – –


– –

– – – – – –


0.04 –0.43 –0.57 –0.10 –0.05 0.78 – –0.04 0.63 0.69 0.38 0.07 –0.36 –0.34 0.03 0.37 0.24 0.18 0.06 –0.04 0.01

0.05 –0.40 –0.56 –0.28


–0.02 –0.09

– – – – – –0.01

Note:  Correlation coefficients displayed in bold are significant at the 1 per cent level.

0.10 0.02

0.26 0.13 – – – – 0.10 0.01 –0.11 – – – –0.19 –0.09 –0.14 0.02 – – –0.24 –0.12 –0.12 –0.03 0.12 – 0.18 0.30 0.14 0.08 –0.11 –0.13 0.02 0.13 0.02 –0.04 –0.01 –0.03

0.18 –0.02 –0.13 –0.13 0.13 0.12








  (1) Perceived founding opportunities   (2) Knowing other entrepreneurs   (3) Perceived entrepreneurial skills   (4) Years of schooling   (5) Age   (6) Gender   (7) Fear of failure   (8) Household income   (9) Share of creative class (10) GDP per capita (11) Unemployment rate (12) Change of unemployment (13) Share of small firms (14) Start-­up rate (15) Population density (16) Settlement structure





Table 8.4  Correlation matrix

– – 0.48

– –

– – – – – –


228   Handbook of research on entrepreneurship and creativity


< _ 16.81 16.81 < _ 20.79 20.79 < _ 22.97 22.97 < _ 28.15