The Relationship Between Work Context and Entrepreneurship

Wednesday, July 16, 2014

Entrepreneurship has become an increasingly hot topic in the last few years. Much of the analysis and discussion has attempted to discern what drives the aspirations of individual entrepreneurs.

Assistant Professor Martin Ganco has contributed an important--and eye-opening--new element to that conversation with a recent paper which focuses on the role that work environments play in cultivating entrepreneurship. Ganco's research studied individuals employed in the U.S. semiconductor industry over a 25-year period, looking specifically at the nature of their work.

The key finding: Employees who worked on highly complex technological problems were far more likely to become entrepreneurs. One reason why: "While they are solving these complex problems, they may discover viable solutions that aren't necessarily of use to their employer," he explains. "But while the complex knowledge associated with solving these problems doesn't diffuse easily to existing companies, it can flow easily to startups. In a startup setting, the entire company can be designed around a single newfound solution."

Ganco notes that there are multiple implications from these findings. One is that employees at work on solving cutting-edge problems could one day become competitors to their current employers. "Firms need to realize that and potentially design incentive systems to mitigate their risks," he says. "They might also need to design legal structure to prevent employees from appropriating the knowledge that has been created."

On the flip side, aspiring entrepreneurs should be aware that the type of work they do today will play a crucial role in their futures. "Individuals thinking about one day starting a company should be careful and strategically select assignments that will allow them to acquire the best skills," says Ganco. "The technological context matters. Whether people select simple or difficult challenges greatly affects the likelihood of them starting their own firms."

"Cutting the Gordian Knot: The Effect of Knowledge Complexity on Employee Mobility and Entrepreneurship" Ganco, M., Strategic Management Journal, (forthcoming)