Why Aren’t Entrepreneurs More Creative?

I just read a provocative research article that makes a surprising claim: most new startups aren’t very creative. The authors, Professors Howard Aldrich and Martha Martinez-Firestone, state their claim on the first page:

Generally, entrepreneurial efforts leading to stable, self-sustainable organizations yield simple replications of existing organizational forms. The products and services offered are typically slight variations on what already exists, rather than dramatically different ones. Indeed, radical innovation in entrepreneurship is an uncommon phenomenon.

But all of the conversation I hear is about how entrepreneurs drive innovation. We keep hearing that small startups identify opportunities that big companies miss. Visionary outsiders come up with radical ideas, that transform entire industries, and make billions of dollars in the process. That’s the story we’re used to hearing…and this new article says just the opposite! If you care about innovation and entrepreneurship, you need to read their argument very closely, because it turns out, it’s pretty convincing. Even better, they conclude by offering great advice for entrepreneurs, about how they can break this pattern and truly innovate.

They ground their argument in New Institutional Theory (NIT) (after all, in an academic paper you need a theory!). NIT argues that “institutional forces severely limit variations in behavior” and “NIT downplays the likelihood of human creativity and innovation” (p. 3). Most institutions that occupy the same markets and industries tend to converge on pretty much the same organizational form; “they develop similar structures and strategies over time” in what is called institutional isomorphism. Even when everyone realizes that the world has changed, and these routines and structures are no longer optimal, they persist due to inertia and the difficulties of changing. Basically, entrepreneurs have only two choices. Either they can work in ways that are “compatible with existing institutions” or they can “engage in collective action to change the institutional order.” The second option is pretty darned hard, and usually isn’t possible. (p. 6)

The article argues that entrepreneurs are even more  constrained by these institutional forces than established firms, because they’re just trying to get on their feet and stay alive; and they have to steal away customers from the established players, and those customers are comfortable with the old ways of doing business. “New ventures often adopt the structures of incumbent firms in their industry. Although not very creative, it is a rational choice for entrepreneurs wishing to grow their ventures successfully” (p. 4).

The good news is that this research helps us understand what situations are more likely to result in genuine innovation. The first is institutional complexity. The second is when there are multiple audiences with divergent expectations. Institutional complexity has been increasing for years, with decentralization and globalization. As a result, the “institutional isomorphism” is beginning to break down in certain organizations and industries. This is also why “chaos and uncertainty” are more likely to foster entrepreneurial innovation: because the routines and practices inherited from history break down and stop working.

A final characteristic that fosters innovation is network structures: connections among people that are diverse, with lots of small and indirect relationships.

Entrepreneurs with diverse networks and many weak ties are more likely to be innovators, as are entrepreneurs who have contacts that go beyond their local environments (p. 7)

Sad to say, most startups don’t have any diversity. Founders they “assemble teams of cofounders very much like themselves” (p. 8). This makes it much less likely they’ll be creative.

They conclude by saying it’s time to get rid of “the heroic image of innovative entrepreneurs that have plagued entrepreneurship research for decades” (p. 9). It’s the same point I’ve been arguing about creativity: creative breakthroughs never come from a single solitary individual. Creativity and innovation always emerge from collaborations, teams, and networks. It’s a myth that super-creative people generate brilliant ideas while they’re alone, and then reveal them to the world (and are showered with venture capital). It doesn’t happen that way–not with entrepreneurship, and not with any other type of creativity, either.

 

 

3 thoughts on “Why Aren’t Entrepreneurs More Creative?

  1. I have been reflecting on this blog and some of your others. I am glad that the studies cited point to factors for true innovation. But I am not ready yet to give up on the lone creator idea in part due to group think and some of the abuses of group collaboration which can be personality or power driven. What exceptions to your rule of group genius are there? If there are no exceptions of exceptional people, does this limit creativity by giving a “can’t” or “don’t” to it?

    In another blog you mentioned the “patent thicket” as stifling rather than encouraging or protecting creativity. Isn’t this an example of group creativity that needs the lone individual to find a way to be truly innovative? Don’t we need even an occasional “hero” to discover or be the exceptions for the as yet unimagined way to do or create something?

  2. Yes, there are definitely dysfunctional teams that result in group think and reduce creativity of the individual members. I summarize this research, and how to overcome it, in Chapter 4 of my book GROUP GENIUS.

    Regarding the patent thicket, no solitary individual stands a chance. You have to be another huge corporation with a big staff of IP lawyers, with your own portfolio of patents as negotiating leverage. The patent thicket is designed to squash innovators.

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