Feature of the Week

February 6, 2012 12:17 am

Innovation and creativity move to the heart of the curriculum

When US President Barack Obama announced his $447bn American Jobs Act in September, an ambitious plan to create work across the country, entrepreneurship was a key component of the proposed legislation. The aim was to accelerate the pace of innovation and the success of entrepreneurs who have historically been responsible for virtually all new job growth across the US.

In his recent State of the Union address, President Obama again stressed the importance of innovation and financial support for entrepreneurs for long-term job growth.

Business schools too have recognised the importance of investing in entrepreneurship, particularly after the banking scandals of 2008-09, which saw the subsequent breakdown of trust in business. Fostering an environment for budding entrepreneurs has been significant for both schools, which have questioned how to rebuild the tarnished MBA brand, and students, who are less likely to get high-powered corporate jobs in an increasingly uncertain economic climate.

Against a backdrop of turbulent global markets, unemployment at more than 8 per cent and anxiety surrounding US economic growth prospects, the recent government jobs push has given renewed vigour to business schools, from Stanford on the west coast to NYU Stern on the east, which have all tried to incorporate entrepreneurship into their syllabuses.

“Entrepreneurs are our best shot at pulling the current economy from the doldrums,” said Rhett Weiss, executive director of the Entrepreneurship and Innovation Institute at Cornell University’s Johnson Graduate School of Management during Global Entrepreneurship Week late last year.

“We in the higher education space have a responsibility to commit to the growth and training of tomorrow’s entrepreneurs for both their own prospects and the global economy’s prospects,” he added.

There are more than 22m small enterprises in the US accounting for 99 per cent of all US businesses, according to the Association of Small Business Development Centers, and small business employs about 53 per cent of the private-sector workforce. Yet entrepreneurship has only emerged as an interdisciplinary field of study over the past 10 years, as shown by the growing body of research on new business creation and the increase in introductory undergraduate courses on the subject.

Top schools have devoted considerable resources to entrepreneurship, from electives and specialist courses to in-house incubation centres to help groom the creative leaders of the future. While some business leaders question whether entrepreneurship can be taught – some of the best entrepreneurs such as Michael Dell, Ralph Lauren and Richard Branson do not have an undergraduate degree – the best programmes acknowledge that they do not create entrepreneurs but merely nurture them.

The Wharton School at the University of Pennsylvania is attached to a Small Business Development Center – partnerships primarily between the government and universities that aim to provide educational services for small business owners and aspiring entrepreneurs in the community.

“We have a twofold mission. First is to help small businesses grow and prosper and second to support the education of Wharton students,” says Therese Flaherty, director of the Wharton centre. Small businesses are given help with accounting, marketing, production and other feasibility and organisational problems, while students have the opportunity to learn in a “live” classroom, helping them to be better prepared to start up and run their own enterprises.

Harvard Business School has opened its own “innovation lab” to foster team-based and entrepreneurial activities among students, faculty staff and entrepreneurs. And the Haas School at the University of California, Berkeley, has overhauled its core MBA curriculum with an explicit commitment to shaping innovative leaders. “Whether it is producing more fuel-efficient autos or creating new business processes, innovative leaders are the ones who will deliver into our idea-driven economy and create opportunity from the major challenges facing us within the lifetimes of our children,” says Rich Lyons, dean of the Haas school.

Spurred by a surge in students across the US wanting to be technology entrepreneurs, schools have tailored their entrepreneurship initiatives accordingly. Cornell University’s Entrepreneurship and Innovation Institute at the Johnson school hosted an event last year, partly sponsored by Facebook, where students had to start a technology company over the course of three days. Meanwhile, the University of Michigan’s Ross School of Business is launching a masters degree in entrepreneurship, offered jointly with the College of Engineering from the start of the 2012 academic year.

Pulin Sanghvi, director of the Career Management Center at Stanford Graduate School of Business, says that entrepreneurship and innovation have always been big themes at the school because there is a close symbiosis with Silicon Valley.

“Students are exposed to alumni, faculty, entrepreneurs, venture capitalists, where they can vent ideas and build on what they have started,” says Mr Sanghvi.

Business school alumni have traditionally become entrepreneurs five to 10 years after graduating, but Mr Sanghvi says 16 per cent of the graduating class of 2011 are in the process of starting their own companies, the largest number in the school’s history. Although their figures are less than 10 per cent, schools such as MIT Sloan and Harvard have also seen increasing numbers of their MBA graduating classes opting to start companies.

While mounting interest in entrepreneurship by the government and business schools is encouraging, analysts say it is not enough to create the support needed to foster new business creation, which has fallen year-on-year since before the financial crisis.

“Only very recently has the term ‘small and medium enterprises’ (SME) entered into American vocabulary,” says Carl Schramm, president and chief executive of the Kauffman Foundation, a private philanthropic foundation devoted to entrepreneurship and education.

“There has been a steady decline in the creation of new business. The government is only now absorbing the statistics. If you were to start a business in this economic climate, you would be very cautious.”

. . .

The dwindling birth rate for new businesses matters because companies less than five years old have generated all the net jobs in the US economy since the 1970s, according to research by the Kauffman Foundation.

From the mid-1980s to the mid-2000s, 450,000-550,000 new businesses with at least one employee were created in the US annually, compared with just 400,000 in 2009. The total number of jobs created by start-ups, which had been running at 3m-3.5m a year, dropped to just 2.3m in 2009.

While some schools have strongly pushed the jobs agenda, others say the increasing numbers of students opting to become entrepreneurs is not a reflection of the macroeconomic environment.

Michael Roberts, senior lecturer in business administration at HBS, says that entrepreneurship “has always been important for the economy and it has never been more true than today”. But he believes there are three factors behind the increase in interest: a rise in the number of angel investors keen to support such ventures; the perception that recent graduates have been successful, particularly in the technology space; and the relatively straightforward process of starting up a lean company.

Howard Anderson, senior lecturer at the MIT Entrepreneurship Center, agrees. Job creation is the last thing on his students’ minds, he says. “They create companies because they want to create companies.” To create jobs, he adds, these start-ups would need to grow by 20 per cent a year.

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