What the “new normal” means for entrepreneurs

Management professor Toyah Miller recently co-edited a special issue of Global Strategy Journal exploring how changes in our world are shifting the opportunity space for start-up founders and funders. Miller is the new research director of the Center for Innovation and Entrepreneurship at the School of Business and an expert in the rapidly expanding field of social entrepreneurship.

Today’s agile start-ups are well-versed in using disruption to gain opportunity. But what happens to opportunity when disruption becomes the norm?

Toyah Miller, a professor of management at George Mason University School of Business, recently co-edited a special issue of Global Strategy Journal about how institutions–meaning formal and informal structures that set the “rules of the game” for global economies and societies–are co-evolving with start-ups. “In a situation where the environment is changing constantly, and even the opportunities that you have as an entrepreneur are opened up because of changes in the environment, there is a need to study that environment and the way it influences us and the way we can influence it,” says Miller. She believes that this context of parallel change is reinventing the landscape of opportunity available to global entrepreneurs.

Concepts from the work of Nobel-winning political economist Douglass North were key to shaping the editorial focus for the special issue. North was instrumental in merging institutional theory with economics to explain the motivations behind corporate behavior.

In the 1990s, North imported the term “non-ergodic” from physics and mathematics to describe a world in which disruptive change was becoming the rule rather than the exception. “The idea of non-ergodic is that it doesn’t come back to the same natural order so that we can preserve our thought process on how things work,” Miller says.

As Miller tells it, the process of putting together the special issue was itself non-ergodic, coinciding as it did with the arrival of Covid. After a lockdown prevented a planned in-person conference from taking place, editors and contributors were forced to work together on extended Zoom calls. For Miller, these virtual collaborations were more rewarding than the revise-and-resubmit gauntlet scholars must routinely run. “I wish every journal would allow you to talk like that with the editor, because usually all you have to work on is a 20-page feedback letter that you have to figure out,” she says.

Miller and her co-editors selected several papers reflecting the relatively new reality of “born global” ventures. “Earlier, it was theorized that going abroad was not a major focus for entrepreneurial firms,” Miller says. “But starting in the 1990s, researchers found out that a lot of new ventures find many benefits in going abroad – even though they face significant challenges, being small and young, at the same time.” Entrepreneurial research and global-strategy scholarship, previously separate and disconnected fields, have had more and more to say to one another in recent years.

For example, one paper in the special issue draws upon data from one of the world’s top start-up accelerators–the government-backed Start-Up Chile based in Santiago – to show that the survival of global start-ups greatly depends upon the “institutional distance” between their home country and the market(s) they’re looking to enter. In moving to a target market with markedly weaker institutions (e.g., property rights, free trade) than at home, ventures face a much higher likelihood of failure in that market. Conversely, start-ups entering an economy with stronger institutions were more likely to succeed. Institutional distance, therefore, was found to be a key determinant of whether ventures’ attempt to embed themselves in the local environment paid off as intended.

Another paper finds a similar effect of institutional distance upon venture capitalists’ behavior. VCs from developed nations displayed less patience and exited faster when investing in emerging economies with weaker institutions, regardless of whether they shouldered all the risk themselves or were one of several co-investors. In contrast, foreign VCs from other emerging economies were more patient.

“Many times, when we’re going to emerging economies, especially in ventures that have social impact, we really need to educate VCs. These ventures come in with a built-in level of increased obstacles. In order to get the full benefit or allow entrepreneurs the full amount of time to perform, they may need to be a little more patient,” Miller comments.

This pair of papers illustrates how, in a non-ergodic world, cross-institutional strategies are increasingly important for entrepreneurial ventures. Internationalization strategies are one example – but Miller also sees opportunity ahead for start-up founders interested in bridging institutional logics, instead of or in addition to national contexts. For instance, the growth of social entrepreneurship into what the World Economic Forum calls “one of the largest movements of our time” both points to and capitalizes upon global trends toward socially conscious consumerism.

Social entrepreneurship, a topic of concentration in Miller’s research, blends “business logic with a social service logic”, she says. During her time at University of Texas at Dallas, for instance, Miller partnered with Café Momentum, a high-end restaurant that doubles as an ecosystem of support for formerly incarcerated youth. Young people (15-19 years old) cook and staff the restaurant under the tutelage of world-class chefs, as part of a 12-month paid internship that also involves financial literacy education, parenting courses, and career development training.

With locations set to open in Nashville and Pittsburgh, Momentum’s unique business model has proven it can hold its own in the marketplace. “The customer experience is so inspirational that people want to come back because they know they’ll meet youth that are trying to change their lives,” Miller explains.

However, she admits that most social entrepreneurs still struggle to synchronize social impact with business outcomes. As research director of the Center for Innovation and Entrepreneurship (CIE) at the School of Business, Miller hopes to spearhead scholarship that will shed light on these challenges, as well as other mysteries surrounding the evolving field of entrepreneurship.

“At CIE, we want to look at entrepreneurship in multiple settings,” she says. “We want to look at and think about research about entrepreneurship globally in social ventures. We are really trying to be inclusive in our understanding so that we can better coalesce a group of researchers that have strong skills in this subject.”