Author: Jeff Cornwall

Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.

Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.

Free Enterprise for Farming Works in New Zealand

The US and Europe need to take a lesson from New Zealand, where twenty years ago they decided to end government subsidies to farmers. The predictions at the time were dire, as many believed that farming in that country could not survive as a free market.

Instead, farming today is 16.6 percent of total gross domestic product, up from 14.2 percent in the late 1980s, and in the year to April 2005 it racked up exports worth $12.7 billion, more than half of all New Zealand exports.
The farmers have learned to diversify. During the subsidy era New Zealand had 72 million sheep — 18 for every human. By last year the number was just 39 million, but more efficient methods mean the islands still produce the same amount of meat, and meanwhile freed-up land is being turned over to growing grapes for wine and other exotic crops. There are even niche markets of deer, goats, ostriches and llamas.

Imagine that…..markets working better without the meddling of politicians and government bureaucrats.

New York Transit Strike Hurts Small Businesses

Thousands of entrepreneurs will feel the pinch of a New York City Transit Strike. From Inc.com:

Many of the city’s 468 subway stations contain newsstands, barbershops, and shoeshine stands. In interviews at Grand Central Station, Times Square, Columbus Circle, Union Square, and 86th Street and Lexington Avenue, small businesses in the underground stations said they hoped to avoid the loss of workdays that a strike would force.
“I would have no choice but to go home,” said Tariq Sheikh, behind the booth of one of his four newsstands in the Columbus Circle station. “How are we going to survive if we have to feed our families and pay the bills?”

November Employment

The Bureau of Labor Statistics released a report today on regional and state employment and unemployment for November.
Highlights of the report:
– Non-farm payroll employment increased in 42 states and the District of Columbia, decreased in 6 states and remained unchanged in 2 states in November.
– California recorded the highest non-farm payroll employment gains (+20,400), followed by Florida (+17,900), Texas (+17,300), and Louisiana (+14,600). Non-farm payroll employment decreases were minimal and were experienced in Indiana (-2,800), Minnesota (-2,600), Tennessee (-2,200), Kentucky (-1,000), South Dakota (-400), and Vermont (-200).
– New Jersey (+0.7 percentage point), Missouri and New York (+0.6 percentage point) and Michigan and Pennsylvania (+0.5 percentage point) each had the highest unemployment rate increases from October. Alabama (-0.9 percentage point), Utah (-0.5 percentage point), and Vermont (-0.4 percentage points each) registered the largest over-the-month unemployment rate decreases. Forty states and the District of Columbia reported unemployment rates in November that were not appreciably different from those of October.
– Twenty-five states registered over-the-month unemployment rate increases in November. Nineteen states recorded unemployment rate decreases. Six states and the District of Columbia recorded no change.
– The unemployment rates in Louisiana and Mississippi are still elevated due to the effects of Hurricane Katrina although progress was made in the month of November.

Recovery in the Gulf

While politicians are wrangling about whether the government acted fast enough and with enough money for hurricane relief, many entrepreneurs are quietly rebuilding their businesses in the Gulf region. StartupJournal has the inspirational story of Armstrong’s Supply Co. in New Orleans.

After Hurricane Katrina caused the company at least $500,000 in property damage, wiped out an estimated $600,000 to $700,000 of merchandise and, in the immediate wake of the storm, made sales nearly impossible, Mr. Armstrong asked his suppliers for help. Many of the bills he owed from June, July and August, normally due by Sept. 10, were deferred to Dec. 10. Meanwhile, Armstrong’s Supply continued to accumulate additional expenses through the fall, a large chunk of them also due by the 10th.
So how did the company manage to get all of that money out the door?
The same storm that knocked Armstrong’s off its feet also generated tremendous business opportunities for the company.

This is a great story of the power of the free market to heal even the wounds caused by the devastating storms this past fall. Armstrong did not sit idly by waiting for Uncle Sam to bail him out. He just figured out a way to get back on his feet and rebuild his business.
This is actually the sixth story in a series about this business. I strongly recommend going back and reading his entire saga.

Rural Digital Divide

A new report issued this week by the Office of Advocacy of the U.S. Small Business Administration provides detail on the rural digital divide. The report, Broadband Use by Rural Small Business, documents greater broadband use by small businesses in urban areas compared with small businesses in rural areas.
The report’s author reviewed a number of reports showing links between information technology investment, broadband penetration, and economic growth. These results, combined with documented lower levels of rural small business broadband use, indicate that without increased broadband access rural economies could miss out on higher levels of growth and job creation.
Broadband is fast becoming an issue of economic and social infrastructure, just like electricity, paved roads and telephones were in past generations. One thing that almost all of us can agree on is that government should be focused on is providing necessary public goods and services. Just as providing access to electricity, telephone and good roads were important vehicles of commerce in the past, buy topamax uk quality Internet access is today’s economic equalizer, especially for small businesses,
This does not mean that government should pay for and provide broadband access across the country. All of the other advancements of infrastructure were accomplished by various forms of public and private cooperation. But it should become a major priority to find workable solutions for this issue.
Some may argue that broadband is different than the other aspects of our infrastructure. That is because we just cannot imagine living without things like telephone and good roads. But civilization operated for thousands of years without these improvements. Now from our perspective these are necessities. Very soon broadband will be the same thing. It is not just a means of access to entertainment. It is becoming the back bone of commerce and communication: a critical public good.
Small business is the engine of this economy and the Internet is one of the important sources of fuel for that engine.

Location, Location, Location

Every semester I have Stuart McWhorter, Co-Founder and Managing Partner of Nashville-based venture capital firm Clayton Associates, come to class to talk about the venture capital process. One of the points he always drives home to my students is that most venture capital firms tend to prefer investing in industries that they have experience in from previous deals. He also says that they prefer to work with deals that are more local.
It seems that a study by Junfu Zhang available at the Kauffman Foundation web site supports this, particularly when it comes to Silicon Valley.

This paper shows that Silicon Valley received a large proportion of the nation’s total venture capital investment during 1992-2001 and that start-ups in Silicon Valley appear to have easier access to venture capital: They receive the first round of venture capital at a younger age, raise more money in each round of financing, and complete more rounds of financing. This easier access to capital significantly affects start-up performance in Silicon Valley. While the easier access may simply be a result of the higher supply of monetary capital in Silicon Valley, it is also consistent with the view that venture capital in Silicon Valley comes with more human and social capital.

This last point is also driven home by most venture capitalists that I know. Most will tell you that they often do multiple deals over time with the same entrepreneurs. The odds of you getting funded go way up if you have been funded by them in the past.
As the old saying goes, “If given a choice between an “A” deal and a “C” team, or an “A” team with a “C” deal, venture capitalists will take the “A” team every time.”
And the chances are even higher if they have worked with that “A” team before and if that team is right around the corner.

California Cultures Collide

It seems that environmentalism, which so much a part of California culture, has won out over another major icon of the left coast: surfing. Gordon “Grubby” Clark, one of the two entrepreneurs who revolutionized surf board manufacturing, is calling it quits due to mounting environmental pressures. From CNN.com:

In a seven-page letter to suppliers seen by Reuters on Wednesday, Clark cited weariness in a lengthy battle with environmental regulators over the manufacture of the foam blanks, or rough surfboard shapes, that go inside about two-thirds of U.S. made surfboards.

Dude!?!?
surfing.jpg
(Thanks to Chris Gray for passing this along).

A Definition

It seems rather odd that after over 1,000 posts at this site I finally get around to a direct discussion on the definition of entrepreneurship. I have written about the definition of a small business, which is more of a bureaucratic designation than anything else, but I’ve never really tackled the term that is the basis of this blog site.
At first glance this should be straight forward. I teach entrepreneurship and I have been an entrepreneur. I can just look to the text books we use and my own experience and that should be that.
If we go way back to the French root of the word, entrepreneurship means “to undertake, to attempt, to try in hand, to contract for or to adventure.”
Here is the definition that my co-author and I used in one of our academic papers recently:

A commonly accepted description of entrepreneurship is a process of identifying, evaluating, seizing an opportunity and bringing together the resources necessary for success.

In essence entrepreneurship describes a process of pursuing opportunity in the market.
For years we got stuck thinking about entrepreneurship as a type of person or even type of personality. But this really got us no where, because in reality entrepreneurs come in all types, particularly when we start to look at them around the world.
So once we focus on what entrepreneurs do it should be easy. But, there are two issues that creep in that cause confusion.
Entrepreneurship Becomes Generic.
Entrepreneurship has become sort of a generic term that describes all sorts of behaviors that involve being creative, being mischievous, being sneaky, breaking rules, not wanting to follow rules, and so forth. An example involving rules can be heard every day in large corporations. “I wish they would leave me alone. I am just being entrepreneurial.” These people are not starting any businesses; they just use the term as cover for not wanting to follow corporate policy. I actually heard a criminal described on a newscast as being entrepreneurial because he was somewhat clever and creative in his crime. At least in American culture, the term entrepreneurship has become blurred into any one of a large collection of basically anti-social behaviors. But, I suspect from conversations I have had with friends and colleagues from around the world that is not uniquely an American issue. In some cultures they avoid the use of entrepreneur, because it has developed the connotation of a sleazy, cunning con-man.
This is what can happen when terms take on a more generic meaning. The term loses specificity and really begins to have no clear definition. Entrepreneurship has become a trendy term that can mean almost anything you want it to in many contexts.
No Clear Boundaries.
A real problem that even the definition that we used in our recent paper is that it does not help us, in a practical sense, tell us what entrepreneurship is not. It does not set any exclusionary boundaries. When I have tried to offer some suggestions for boundaries around what is and what it not an entrepreneur, I have ruffled some feathers. But that is what a blog is all about, so here we go.
1. The process of innovation that goes on in large companies is not entrepreneurship.
This flies in the face of what I wrote about in my first book, Organizational Entrepreneurship, in 1990. But, I have come to believe that entrepreneurship should be about what individuals do, not the collective strategy of corporations. This leads to me second boundary.
2. Entrepreneurship includes only privately held businesses.
An IPO is an event that takes a business out the realm of being an entrepreneurial venture. Once a business “goes public,” everything changes. The culture will begin to change. The objectives will change. Once a business uses public funding, it begins to become a public good. It is no longer about an owner/operator running her business. The founding entrepreneur becomes a corporate executive following the wishes of the public shareholders of the business. As many entrepreneurs quickly learn, once their business went through an IPO it was no longer their business to be run based on their aspirations, their values and their goals. They became administrators of a business owned by others.
3. Not all privately held businesses are entrepreneurial ventures.
Succession to the next generation in a family business, an ESOP, or other internal ownership transfers from the founding entrepreneur to other internal owners takes these businesses out of the boundaries of entrepreneurship. On the other hand, I think that someone who buys an existing business as an outsider is an entrepreneur in that act. I know that creates a little fuzziness in my boundary at this point, but I have enough gray hair in my beard to get away with subtle inconsistencies. I am still sorting out the exact distinction here, but I know there is one.
Maybe I have been in an academic setting for too many years now. When I was an entrepreneur, I know that I couldn’t have cared less about such issues. We were too busy trying to make payroll and get ahead in the market. But now that I am in my Ivory Tower, I find this kind of pondering rather interesting and even a little entertaining.