In this chapter, we reviewed numerous definitions of the entrepreneur’s role in the economy (and society), finishing with an analysis of the motivations behind starting a business. We also considered the context in which an enterprise’s project is selected – among an infinite number of imaginable opportunities. Now it is time to revisit the central question of this work, namely that of complexity. What is the emergent function from this standpoint? Can we possibly propose a new characterization of
entrepreneurship?
When making decisions, entrepreneurs face a complex world. Let us recall that they do not know their market perfectly (decision-making with incomplete information) and they sometimes foresee creating one, an action that is at least as complex and uncertain. The project notion implies a decision in the present with effects on the future, yet these effects can only be partially anticipated since the project is acting on a complex system.
What, then, will guide the entrepreneur to assume such responsibility? The response lies in the imagination.
In fact, since reality cannot really be deciphered, the entrepreneur’s work is based on a mental representation of the world. Entrepreneurs do not have objective information on the present and future environment. The information they have is partial, and the choice of their project as well as the decision to take part in a venture will be guided by a
particular perception that resembles the construction of an image (a vision).
The notion of perception, the mental construction concerning reality, deserves some explanation. The term, in French or in English, harks back to the idea of deciphering a meaningful form in a complex exterior message, mixing a great deal of information and various sources of noise. Implicitly, the message sought after is present in the
environment, but difficult to discern. The German translation of “perception” is
Wahrnehmung: “that which is taken to be true”. This belies a slightly different notion, one related to the philosophical idea of truth. In German, perception is a constructed truth. This definition seems better adapted to the entrepreneur’s approach. The choice of a project and the decision to carry it out are based on a structure of the current and future world imagined, then assumed to be representative of reality.
The imagination is essential to act in a complex world, for this is by definition impossible to fully decipher. From this standpoint, the entrepreneur’s fundamental role is to imagine – an activity that partially substitutes that of knowing and understanding.
We can find interesting analytical elements in Peter Earl’s book The Economic Imagination (Earl 1983). In the real world of economic decision-making, it is not a question of knowing how decision-makers optimize their decision, but “how decision makers cope with ignorance and complexity” (op. cit. p. 81). The author revisits a
wonderful expression by Kenneth Boulding: “Any decision is a choice among alternative perceived images of the future” (op. cit. p. 28).
In fact, all individuals – not only entrepreneurs – seek to perceive or impose order upon the complex world they are immersed in. The imagination allows the formation of a representation of reality, knowing that we cannot reason about reality, which is itself
unthinkable. Reality, on the contrary, will end up manifesting itself as the project is carried out: it is a source of potential surprises for the entrepreneur. What must be understood when observing entrepreneurs is what creates their representation of the world and what motivates their action. Peter Earl provides leads to understand the individual’s choice of a project. In particular, he mentions the following attitudes:
– satisfying their aspirations and controlling the world in a way that is coherent with their representational system (their imagination);
– avoiding situations where they risk facing their inability to understand reality;
– promoting a certain self-image;
– escaping a negative vision of the world; breaking away from the present situation, which is seen as being non-satisfactory.
We have already seen the contribution of social psychology, which explains the choice of entrepreneurial project through the desire to play a role in a particular community, to personally express a collective identity. In this case, the entrepreneur’s imagination is largely explained by his or her community belonging. Other patterns exist to explain the project’s nature and genesis, possibly more individual ones, but we always return to an inescapable pattern: the entrepreneur’s project is rooted in his or her imagination. This is itself the product of long-term interaction between the individual and the complex system he or she is immersed in.
1 In the “Austrian” literature, an arbitrageur is an investor who profits from price inefficiencies in a market by making two simultaneous off-setting trades.
2 “Je me sens profondément responsable; pour autant, je ne me sens pas coupable, parce que vraiment, à l’époque, on a pris des décisions dans un certain contexte, qui étaient pour nous des décisions qui nous paraissaient justes”.
5
Managerial Approaches and Theories of the Firm
Over the last two decades, complex systems have drawn the attention of numerous researchers from different disciplines. Allen et al. (2011, p. 2) remind us precisely that complexity cannot be studied in a monodisciplinary framework. Each discipline offers its own methods, approaches and measures, and all converge towards common definitions.
Rarely can one find fields of transdisciplinary research where the advances in one domain (e.g. cybernetics) are considered by another discipline (e.g. philosophy) to then inspire the practices of a third (e.g. management) with considerable transparency and respect between the various disciplines. It is true that no discipline can claim to have an answer to every question related to complexity, which obligates a rather rare sort of mutual respect upon authors.
A complex system is made up of interacting parts forming a “whole”. Each of these parts is governed by a set of rules, routines or forces that determine their behavior at a given moment based on the state and behavior of other parts. The interactions between the parts are generally numerous, dense and not necessarily limited in terms of location.
These interactions may be formal, informal, virtual or suffused with materiality. Each part reacts according to its own stimuli on local or global emergent phenomena, even in the absence of coordination between the parts. However, the results of these interactions are difficult to foresee, even if abundant knowledge on the parts and the interaction rules is available, for there are many independent causal links. The system’s “complexity”
manifests itself through the issue of phenomena that affect all or part of the system with a regularity that is neither static nor random, but difficult to describe precisely and
exhaustively.
Works on complexity in economics and management aim to study complex systems, their appearance and their evolution. These works are sometimes highly quantitative (use of mathematical modeling or computer tools) and sometimes qualitative (case studies, analogies, longitudinal studies).
The hierarchic view of economic systems as complex adaptive systems in a state of constant evolution owes a great deal to the precursory works of Nelson and Winter (1982). At their instigation, management of a firm and economics have shifted from a situation with absolute, quasi-Newtonian rules on steering organizations to situations where decision makers’ knowledge is limited in an ever evolving environment with rules that are themselves undergoing change.
No manager faces an environment where the rules never change. We are able to describe the organizational dynamics of numerous economic and social systems primarily based on our own experience, and it is highly likely that another person’s perception of these dynamics and its interpretation would be different. These differences in perception paired with other goals and constraints lead to divergent behavior that will either reinforce one another or come into conflict, and thus influence the overall dynamics of the system.
Although it is possible to predict the evolution of the system to some extent, under a given set of conditions, small-range and a priori inconsequential local events disturb and modify the system as a whole in the long-run. The science of complexity offers a
framework for accepting two situations, i.e. individuals are neither omnipotent nor
significant. They are certainly not capable of modifying a system as they please, but their role is not insignificant either. They can change the system through their actions if they take on the system’s complexity readily rather than rejecting or fighting it. Based on this fact, studies on complexity as well as those on creativity use dynamic approaches rather than visions of static equilibrium. Dynamics do not follow fixed rules or new qualitative elements; random variations show up as other elements fade away. In fact, complexity is a science for any organization, and research on creativity studies the indications of
(sometimes weak) signals causing the system’s evolution. Creativity thus is an aspect that exists both in entities (individual creativity) and the system as a whole (organizational creativity).
In section 5.1, we will provide a non-exhaustive list of works in management, grouped conforming to broader functions (strategy, information system, etc.), explicitly referring to complex systems, chaos theory, etc. In section 5.2, we will return to a conceptual model that enables us to distinguish between concrete actions and different positions to be
assumed by a manager when faced with a complex system. The following sections will focus on two specific managerial functions: marketing (and its strong connection with strategy) and human resource management.
Indeed, the place of marketing in a complex adaptive system is less apparent initially.
Wollin and Perry (2004) have a rather clever approach to this relationship, recalling that the theory of complexity enables marketers to understand a market’s function.
Complexity provides global and local explanations for markets and complements other theories such as relational marketing. By employing the Honda case, Wollin and Perry illustrate the extent to which complex systems can be employed in strategic marketing.
Colbert uses an approach, connected with theories of the firm, to indicate through an example of human resource management how a conceptual approach far from the field can enlighten managers.