(Illustration by Adam McCauley)
When Suntae Kim was a doctoral student at the University of Michigan, Ann Arbor, he became interested in alternative forms of business that were not just centered on maximizing shareholder value. After Kim began doing fieldwork at a for-profit business incubator in nearby Detroit that was committed to the city’s “sustainable revitalization” and that drew revenue from renting workspaces to small businesses, his advisors suggested that he pursue a comparative case study to identify what was different or special about its entrepreneurship-driven development.
Kim found a comparable nonprofit business accelerator owned by a locally headquartered company, where the mission was “turning Detroit into the next Silicon Valley.” Now a professor of management and organization at Boston College’s Carroll School of Management, Kim has a new paper with Anna Kim, a professor of management for sustainability at McGill University in Montreal, that evaluates the evolution and transformation of ideas at the two enterprises.
Initially, the authors selected the two organizations to compare social entrepreneurship with conventional business. They use pseudonyms to refer to the two enterprises; they call the first GREEN and the second ACCEL. But the dichotomy they sought to draw became blurred; ACCEL expressed social and environmental concerns, while GREEN had profit motives. What distinguished the two organizations, the authors realized, was the pursuit of venture growth in contrasting ways that resulted in different local impacts in Detroit, a high-poverty, low-resource city.
“The ventures out of ACCEL grew quickly and broadly,” Suntae Kim says, “which can be described as temporally compressed and spatially broad. These ventures soon left Detroit, scaling up to the national or global level.” By contrast, ventures that originated at GREEN “were scale-deep,” Kim explains, “or spatially focused, never moving out of Detroit, and temporally extended.” Businesses that came from GREEN did not experience explosive growth but grew for a more extended period, persisted longer, and had greater local economic impact.
The authors conducted ethnographic research—a combination of participant observation and interviews—and collected archival data, including news articles and social media postings, to follow the trajectory at each organization and assess the impact each created. In Detroit, as in many other places around the country and the world, efforts to bring about “the next Silicon Valley,” or high-growth, venture-capital-backed prosperity, have proved minimally effective.
“Recent research has found that the creation of high-tech ventures rarely contributes to the alleviation of poverty, and in some cases, it has contributed to worsening inequality,” Suntae Kim says. “Why is it that widely celebrated successes in Silicon Valley, or Boston, North Carolina’s Research Triangle, or Austin, Texas, have created regional prosperity, but not in places that are economically challenged or where poverty is concentrated?”
By scrutinizing the development of ideas at GREEN and ACCEL, the authors found that resourcing played a crucial role. ACCEL relied on financing through venture capital investment as its main resourcing mode, which meant shaping ideas to keep capital flowing from investors who prioritized maximum returns as swiftly as possible. The perpetual need to survive until the next round and drive up valuation meant that these entrepreneurs were rewarded for scalability, or the ability to replicate an idea quickly and widely.
Meanwhile at GREEN, the resourcing mode was bricolage, an anthropological concept used by scholars of entrepreneurship to describe the repurposing of readily available resources. For example, an African American food venture that began at GREEN turned to underutilized licensed kitchen spaces in Detroit’s churches and day-care centers to prepare food and to local urban farmers to obtain fresh, cheap produce.
“Their business ideas were infused with an orientation to grow locally and specifically,” Suntae Kim says, “and they didn’t face pressures to grow beyond Detroit. And because this venture was developing relationships with local actors, they were incentivized to persist.” If entrepreneurship intends to revitalize places like Detroit, ACCEL-style scaling-up ventures may not be the answer.
“The authors contribute to the case that entrepreneurship building on endogenous resources—bricolage—and aiming at slow and steady growth that remains in place creates a diverse and sustainable set of benefits,” says Ana María Peredo, a professor of political ecology at the University of Victoria in Canada. “The contrast with the storied interventions of large amounts of external capital, with dramatically scaling but less dense results that are often exported, is striking.”
Suntae Kim and Anna Kim, “Growing Viral or Growing Like an Oak Tree? Towards Sustainable Local Development through Entrepreneurship,” Academy of Management Journal, forthcoming.
Read more stories by Daniela Blei.