Fuqua Insights Podcast: Is the Entrepreneurial Spirit Contagious?

SPEAKERS

Tanner Morgan, Melanie Wallskog

Tanner Morgan 00:03

Welcome to Duke Fuqua insights, a Podcast where we explore faculty research and the actionable takeaways for business leaders at every level. As any entrepreneur will tell you, the path to leading a successful startup is a maze of complexities and challenges, but what if you had someone to show you the way? My name is Tanner Morgan, a recent Fuqua daytime MBA graduate, and I'm joined by Professor Melanie wall Skog, an assistant professor of finance and labor economist. She studies how people's careers are shaped by their social and economic environments. Her latest research explores what nudges people towards starting their own ventures. Who's benefiting the most from these nudges, and what it all means for building a more inclusive entrepreneurial economy. Melanie, thanks for joining me.

Melanie Wallskog Thank you. 

Tanner Morgan So let's start at the beginning. What made you curious about how entrepreneurship spreads at work? Was there a moment or data point that sparked your curiosity?

Melanie Wallskog 01:02

There's really two things. So first off, I started this research agenda when I was a student during my graduate studies at Stanford. And I think that anyone who's been in any group setting, whether it's school or work or anything in your community, something that's really obvious as soon as you're in that community is that, for one time, there's people around you who are very similar to you, you know, you're all studying the same program, or you're all doing the same job, but at the same time we're also incredibly different. We all have different experiences, different backgrounds and so forth. So I was sitting in my graduate program, and, you know, I'm American. I had classmates from all over the world. I had classmates studying all different types of topics, and it was just really immediately clear that we could learn a lot from each other, and we could be inspired by each other. And so then, when I was trying to come up with a project to work on for my dissertation, I started to work on the topic of entrepreneurship. And I was reading about, you know, how people become entrepreneurs, what prompts people to become entrepreneurs, and it became really obvious that, well, one reason why you might become an entrepreneur is you see someone else do it, and you talk to someone who has that experience. There's already some work out there on this topic, but I had access to some really cool data that allowed me to take the question of what causes someone to learn or be inspired to become an entrepreneur, to take that question further and learn a lot more. 

Tanner Morgan 02:32

I think that's super interesting. This notion of kind of quote, unquote entrepreneurial spillovers sounds really intuitive, right? Being around founders may inspire others to follow. But what surprised you about the who and the how of these spillovers?

Melanie Wallskog 02:47

Yeah, so you're absolutely right that it feels very intuitive that if you run into someone who says they were an entrepreneur and they had a lot of experience, you might naturally be inspired. But what's surprising is that -- what happens is that, in reality, if you are a worker at a firm and you run into someone who is an entrepreneur, chances are they were not one of the successful ones. So it's very easy to imagine you, you know, open whatever newspaper you like to read. You see, you know, incredibly successful tech CEOs, tech startup founders, and you can be inspired by them, but most of the people you get to meet in your everyday life who actually have this experience, well, they tried something, maybe it survived for a couple of years, but it didn't end up taking off, and it wasn't incredibly successful. And so those people may naturally not actually tell you good stories about entrepreneurship. They might say, hey, it's really hard. It's really challenging. It's a difficult thing to do. And so those are the people that we see you actually interact with on a daily basis. And despite the fact that they didn't necessarily have fantastic experiences, we still see that group really, actually inspiring and promoting entrepreneurship. I know we're going to talk about it a little bit later, but we're also going to see that this spillover, this learning, this inspiration, really doesn't happen for everyone. It's really for particular groups in the economy, and in particular, it's for those who might otherwise become entrepreneurs. Anyway, it's the people for whom entrepreneurship can be a little easier, namely, white men and Asian men.

Tanner Morgan 04:28

You found that some of these effects are strongest when coworkers have been relatively successful as entrepreneurs. What does this say about the kinds of knowledge or inspiration being shared in the workplace? I know you spoke a little bit about that, but, yeah, if you could elaborate

Melanie Wallskog04:44

So you can think of it as there's two different types of types of entrepreneurs you might meet in the workplace. One is someone who, you know, they started something, it didn't go particularly well, but they learned some stuff along the way. They learned the logistics of starting a company. They learned, you know, how do you file for a tax ID? How do you do those basic necessary startup things? But then there's a second group of people who… they did that, but they also were able to produce something relatively successful. And what we see in my work is that both groups seem to inspire entrepreneurship, but it's that second group, those successful ones, who actually generate more successful entrepreneurship down the line. And it's not really surprising, because in some ways that group, they have more to teach you. They, you know, had a relatively good go of it, and so they're able to convey some of those skills, some of that knowledge of how to succeed to these future entrepreneurs.

Tanner Morgan 05:42

So one of the more sobering findings that you previously mentioned is that these spillovers don't seem to help everyone equally. Can you walk us through some of the demographic patterns that you found?

Melanie Wallskog 05:54

That's right. So there's going to be two different dimensions along which not everyone's going to experience this inspiration and learning equally. The first is that not everyone gets to work with these former founders. These former founders don't appear in every workplace. They're in special workplaces. The second component is going to be that not everyone will experience this inspiration in the same way, conditional on getting to work with these people. So we're going to see that the main groups who are impacted by these spillovers, who actually become entrepreneurs after working with these former founders, are going to be the two groups that are really the main groups in entrepreneurship -- in the US, white and Asian men. On the flip side, we're going to see women and Black workers experience significantly less, let's call it learning or inspiration, and it's going to come through two different channels. So women are going to work at workplaces where they see former entrepreneurs, but it's going to turn out that they will only be more likely to become entrepreneurs themselves in the future if those coworkers who have this experience are also women. So in some ways, it's not that surprising. If you talk to any woman out there, they will say, yeah, sometimes, I, you know, will listen to another woman more than maybe, maybe someone else. There's also an important component, which is that some of the lessons that an entrepreneur might teach you could vary with your demographics. Entrepreneurship is such a male dominated field that women entrepreneurs might have something special to tell another woman, and that might actually matter. So this kind of demographic specific lessons could be at play for Black workers. On the other hand, it's going to turn out that there's two different forces that lead to them not experiencing the same, you know, narrative. The first is that Black workers actually don't work at firms that have as many entrepreneurs, so they are less likely to have an entrepreneurial coworker. The second component is that even when they work with an entrepreneurial coworker, they're less likely to become entrepreneurs in the future. So there's something about how that group, on average, is experiencing these conversations or talking about ideas, that that experience is quite different from other groups. What this means as a whole is that when these spillovers happen, they're happening out there. As we speak, people talk to their coworkers and learn from them. What happens is that the groups that have a lot of entrepreneurial experience -- those white and Asian men --they generate more white and Asian men entrepreneurs. And so we're going to basically see an exacerbation of a lack of diversity. I do want to briefly mention, though, that it's not obvious that this is a bad thing for the individuals. As I mentioned. Entrepreneurship is incredibly challenging, it can be incredibly personally costly. And so it might not be that people actually should, should experience these things if they, you know, don't truly want to, don't have a truly good idea. So it's possible that these individuals, these minority, would be entrepreneurs who are holding themselves back -- maybe they're doing something that's totally right for them. But as a society as a whole, we tend to think that it's fantastic to have more diversity of thought, more experiences behind entrepreneurship, and so policy makers might be interested in trying to address this minority entrepreneurship issue further.

Tanner Morgan 09:38

Yeah, that's really fascinating. Your research focuses on what you call everyday entrepreneurship, right? The kinds of businesses that aren't backed by venture capital, and you mentioned policy makers. Why is this focus on everyday entrepreneurship important, especially for policy makers? 

Melanie Wallskog09:56

That’s right. So everyday entrepreneurship, when I say the. I really mean any kind of business that you could think of, whether it's a construction firm, a cafe or, you know, a hardware store, all of these firms are started by everyday people. They oftentimes dig into their savings. Start a firm because they want to be their own bosses, or they have a new idea. And this is really kind of the backbone of the US economy. This generates a lot of jobs. This is where a lot of the action is. You might have taken a venture capital course or a PE class or something like that. It's really important to know that a tiny, tiny, tiny fraction of startups in the US or worldwide are financed by these extreme kind of elite capital sources. Instead, almost every business is going to be financed by people's personal savings, maybe money from their family and friends, maybe, if they're very lucky, a bank loan. What that means is that, if a policymaker wants to encourage more entrepreneurship, because we know entrepreneurship is super important for economic growth, there has to be a caution, because when people become entrepreneurs, they are risking their personal savings, their personal liability, and so this is an incredibly important group to study and understand what's going on, both because they're important for economic growth, but also because there's a lot at stake for them.

Tanner Morgan 11:25

What kinds of organizational practices or maybe even just small changes would potentially help people better benefit from these workplace spillovers? Is there something that managers or companies could be doing differently?

Melanie Wallskog 11:38

It's an interesting question of, what companies should think about these spillovers and these learning opportunities and whether they actually want them to happen at all in some ways. You know, let's suppose someone goes into work one day, they meet a co-worker who previously was an entrepreneur, and that previous entrepreneur inspires them to go and start their own firm. Often, when that happens, they leave the firm, and so from the firm's perspective, they're losing talent. This is potentially very costly. Now, I don't think the solution is ban coworkers from talking to each other. That's not the workplace we want. That's not what we want. Instead, what I would say is that companies should take from this research that a lot of people want to be entrepreneurs. They are nudgeable towards entrepreneurship. They either want to have more autonomy in their lives or more flexibility, or they have entrepreneurial ideas that they want to develop. And so if you're a company and you want to retain your talent, perhaps you want to generate more entrepreneurial experiences within your company. What that means is giving people opportunities to innovate within the workplace, giving people opportunities to learn and encourage each other and develop their own ideas. A lot of large companies actually already do this. Some tech companies will give their workers one day a week to experiment and, you know, try new things. And the idea is that if we keep that in-house, then the company will benefit from it. Obviously, not every company can afford to do this, but to the degree to which you want to retain workers and kind of take advantage of, and in a very, you know, collaborative way, people's entrepreneurial spirit, encouraging that in house is definitely one way to go.

Tanner Morgan 13:26

So you mentioned a little bit about the worker experience, thinking about their perspective. What insights does your research offer about the best way someone interested in entrepreneurship can build meaningful connections at work?

Melanie Wallskog 13:38

In some ways, it's a really simple prescription: if you want to be an entrepreneur, talk to people, listen to them, learn about their stories, be inspired. With a big caveat, though. You're going to meet people in your workplace, in your life, in your communities, and they're going to have very different experiences from you. You can learn a lot from them. But it's also important to know that what might have worked for them as an entrepreneur might not work for you. It's also possible that they remember it better than it was, and so they might tell you tales of the good times without telling you tales of the bad times. And so as a potential entrepreneur, you're going into your workplace, into your community, talk to people, learn from people, but have a grain of salt to all of that that you know, you need to think it through carefully. It is definitely a risky thing. But if you want to be inspired, be inspired. Well,

14:34

Tanner Morgan Thanks so much, Professor.

Melanie Wallskog Thank you.