Pragmatic Turn And Entrepreneurship: Part one

In his book The Pragmatic Turn, Richard Bernstein provides an account of what he calls the “the pragmatic turn” that has been taking place over the past several years as philosophers and practitioners have taken up many of the themes explored by the classic American pragmatists. He argues that they are all converging on pragmatic themes—especially on how social practices shape who we are and how these practices can be improved (pointing and seconding Robert Brandom’s observations). With recent key publications(See google scholar) and the debates triggered by them, the domain of entrepreneurship to me is witnessing a pragmatic turn. We can find scholarly efforts towards the pragmatic turn in many previous works like Sarasvathy(2009), Kraaijenbrink(2012), Rubleske and Berente(2017), Shepherd(2015), Taatila(2010), Watson(2013), etc. Though this is the case, in this blog post, I will only give an overview of the recent(post-2020) advancement of pragmatism in Entrepreneurship. This is because of a Twitter discussion that pushed me into becoming a participator. In the next post(part two), I will discuss my own thoughts, critical points about the current works, and my own visions about the future course of pragmatism applied in entrepreneurship.

Following are the key articles that I will cover in this review.

  1. Zellweger and Zenger(2021); Entrepreneurs as scientists: A pragmatist approach to producing value out of uncertainty.”
    1. Sergeeva, Bhardwaj, and Dimov(2022); “Mutable reality and unknowable future: Revealing the broader potential of pragmatism.”
    2. Zellweger and Zenger(2022); Entrepreneurs as Scientists: A Pragmatist Alternative to the Creation-Discovery Debate
    3. Ehrig and Foss (2022); Why we need normative theories of entrepreneurial learning that go beyond Bayesianism.
    4. Zellweger and Zenger(2022, 1); Entrepreneurs as Scientists, Bayesian Inference, and Belief Revision
  2. Sergeeva, Bhardwaj, and Dimov(2021). “In the heat of the game: Analogical abduction in a pragmatist account of entrepreneurial reasoning.”  

Entrepreneurs as scientists: A pragmatist approach to producing value out of uncertainty. (Zellweger and Zenger, 2021)

Zellweger and Zenger (2021) try to advance an “entrepreneur-as-scientist” perspective viewing entrepreneurs as engaging in, “causally inferential action by forming beliefs, testing these beliefs, and responding to the feedback received”. They argue that entrepreneurs are “practical scientists” who form theories that aid entrepreneurial action under uncertainty. Under the philosophical umbrella of pragmatism, they attempt to bring together the “theory-based view” in entrepreneurship that was discussed in Camuffo et al(2020)and also mentioned in the Value-Lab paper(Felin et, al 2020) with a new addition, i.e. Bayesianism. To them, “Bayesian rationality proves helpful in understanding entrepreneurial reasoning. Consistent with Bayesian logic, entrepreneurial action rests on beliefs or priors that are updated as entrepreneurs incorporate information they gather.”

Sergeeva et al(2022)’s critical response points out that many important aspects of pragmatist thought that is relevant to entrepreneurship research remain obscure in Zellweger and Zenger (2021) due to their focus on learning anchored on a determinate future. They structured their response along three themes: 

  • limitations of the “scientists” analogy, 
  • the ontological difference between the present and future, and its implications for epistemic barriers and 
  • the creative agency of the entrepreneur.

Sergeeva et al(2022) basically call Zellweger and Zenger (2021) an opportunity-discovery theory that presupposes an unchanging universe. They reason that entrepreneurs are not just scientists, they are engineers, artists, and designers:  “To say that entrepreneurs are scientists is to say they get things right. To say they are engineers is to say they make things work. To say they are artists is to say they make things new. And to say they are designers is to say they make things practical. It is intuitive that, faced with an open future, they are all of these”. They argue that the future is not just unknown but unknowable. Citing emergence as a key feature of complex domains like entrepreneurship, they make a point that there are no future facts, “like the horizon, the future can never be reached.” With this, they expose the “scientist” perspective’s major weakness. i.e. no amount of information gathering at the level of the constituent elements in the present can foretell the “emergent” level as it remains beyond the horizon. For example, it is impossible to predict the new market category that will emerge from the complex web of interactions of entrepreneurs, consumers, media, etc. The market is more than an information discovery process: “future parts of a market simply do not exist; they are by definition not present”.

Zellweger and Zenger(2022) respond to Sergeeva et al(2022) with a wholehearted agreement that, “entrepreneurs act to create value as they solve problems”. But in this response, they double down on the original argument that, by doing so, “all humans, including entrepreneurs, engineers, and artists act as scientists”. They further reject Sergeeva et al(2022)’s placement of their perspective in the discovery camp. They add that the entrepreneur-as-scientist perspective and pragmatism more generally find little use for the made vs. found distinction. I.e. “any difference between “real scientists” and any other category of individual lies solely “in the problems with which they are directly concerned, not in their respective logics” (Dewey, 1938, p. 81). Zellweger and Zenger(2022) further argue that entrepreneurs as scientists don’t mean “they get things right”, as interpreted by Sergeeva, et al (2022), but rather that they behave as scientists—that they follow a scientific process and that in doing so they increase their odds of finding value; “They increase the odds of solving the problems they confront and frame. They increase the odds of composing a productive belief, updating with data and feedback, and ultimately producing value.”.

Ehrig and Foss (2022) primarily focused on Bayesianism which was proposed in Zellweger and Zenger(2021). They point to two major problems in Zellweger and Zenger(2021), that their model; 1) seeks to reduce uncertainty to risk and ignores the problem of unknown unknowns, and, 2) does not identify the key inferential problem of linking the few current data points known by an entrepreneur to her imagination as it pertains to an unknowable future.

According to Ehrig and Foss (2022), applying Bayesian rationality in a domain of Knightian uncertainty must fail, because core theoretical assumptions are not met. Thus Zellweger and Zenger (2021) is fraught with internal inconsistencies and not viable. “Modelling entrepreneurial learning processes using Bayes rule is a highly limited approach, and not the umbrella approach”. They further clarify that, “Bayesian learning fails when entrepreneurs encounter unknown unknowns which is typical to entrepreneurs. These are events with prior probability of zero because they were not included in the decision-maker’s ex ante representation”. They point out that in the case of ill-defined problems like that in entrepreneurship, learning cannot be understood as “getting closer” to an existing reality, which is exactly the logic behind bayesian approach. i.e. to rule out states by conditioning on observed evidence. It inherently cannot cope with the inclusion of new possibilities which is the key feature of entrepreneurship. Bayesianism fails once the decision-maker encounters an event that was not pre-modeled. They further point out the positive side of Bayesianism that it may be the correct normative tool to test the subset of assumptions in an entrepreneurial theory that are already testable, given the resources of the focal firm.

In the response, Zellweger and Zenger(2022, 1) agrees with the suggestion given by Ehrig and Foss (2022) but partially. They agree that “normative theory in which entrepreneurs are encouraged to act like scientists needs a model of learning that goes beyond Bayesianism or at least an augmented or qualified version of Bayesianism—one that allows unsupported beliefs or priors to be discarded and replaced”. Zellweger and Zenger(2022, 1) argue that this form of augmented bayesianism is what defines a pragmatist entrepreneur, an entrepreneur who acts like a scientist. They recognize that the entrepreneurial process is often filled with surprises or the arrival of information that lays outside the entrepreneur’s priors, which challenges Bayesian inference and its formal closure. Thus, “scientific entrepreneurship requires a version of or an addition to Bayesianism in which unsupported priors can be revised, discarded and replaced”. Zellweger and Zenger(2022, 1) further dilute the earlier rigid version with a much more pluralistic version. They “recognize wide variance in the degree to which entrepreneurs adopt and skillfully deploy the steps inherent to this pragmatic, scientific and at times Bayesian learning process. We thus refrain from suggesting that the scientific method is the only way to create value in entrepreneurship”. Another key insight revealed in this exchange was their aspirations to develop this theory to suit formal economic modeling. For them, “Bayesianism and theories of belief revision promise to render the entrepreneurial process more accessible to formal economic modeling, which should help augment the micro-foundations of entrepreneurial action”. They conclude by reiterating that “our scientific perspective of entrepreneurship is pragmatism”, but add a few new(but old) ideas that were traditionally considered part of Peircean pragmatism which “entails that entrepreneurship starts with abduction, suggesting that an idea may be, followed by deduction, suggesting what then must be, followed by induction, finding out whether the idea is actually operative. Adds further that, “getting to something actually operative may demand multiple cycles through this process as beliefs are revised.”

In the heat of the game: Analogical abduction in a pragmatist account of entrepreneurial reasoning(Sergeeva, Bhardwaj, and Dimov; 2021)

In this paper, Sergeeva et al(2021) introduce their key frame of pragmatism, i.e. “Navigating the entrepreneurial journey entails looking ahead to decide what to do next as well as looking back to take stock and learn”. They introduce a model of reasoning that balances these two stances, i.e. of player and analyst. Both as distinct ways for an entrepreneur to relate to the world: “one acting upon it to make her intentions work; the other taking it in to evaluate her premises”. With this in mind they use John Searle’s theory of speech acts and intentionality to distinguish;

  1. “opportunities” as utterances signifying an agentic stance towards the world, reflecting what entrepreneurs aim to make work and;
  2. opportunities as external conditions of satisfaction, or the way the future world will need to be for them to succeed.

Under the player stance, one aims for the world to fit the mind (world-to-mind fit). Under the analyst stance, one aims for the mind to fit the world (mind-to-world fit). They reason that, “with current scholarship primarily focused on the analyst stance, we aim to advance the player stance and elaborate on how entrepreneurs reason about what to do next”. For the development of the player perspective, American pragmatism was introduced as a philosophical foundation. To advance the player stance they say they draw from three features of American pragmatism.

“First, the pragmatist conception of truth is unique in that it evaluates the merits of beliefs in terms of the actions they enable and the consequences they bring. This allows us to conceptualize “opportunity” as something that, from the player perspective, one intends to make work.

Second, this school of thought recognizes that in a complex world characterized by emergence and unknowability, beliefs are fallible, which, in turn, requires revising them in light of new experiences.

Third, American pragmatists consider as empirical, and place at the center of their analysis, unobservable entities such as values, desires, and intentions. Adopting a pragmatist perspective of entrepreneurial reasoning and action opens up new exciting avenues in entrepreneurship research“.

Analogical abduction

They then introduce Peirce’s conceptualization of abduction and propose analogical abduction as one of the mechanisms for reasoning about and articulating “opportunities”. Analogical abduction involves drawing on the existing stock of knowledge and framing unfamiliar situations as if they were similar to familiar situations. It is introduced here as an engine that drives entrepreneurial reasoning and action and develops a corresponding process model as a dynamic guide for action. They reason that the role of analogies and imagination has already been examined in entrepreneurship research. The idea of analogical abduction here complements these studies by shedding light on the generative mechanism behind analogical or imaginative leaps conducted by entrepreneurs conjecturing about “opportunities”. They conclude by stressing analogical abduction as a – but not the only – mechanism through which entrepreneurs arrive at their conjectures about “opportunities”. 

Meta-Cognitive rigidity

The next key idea discussed in the work is the need to overcome, “metacognitive rigidity that impedes toggling between the player and analyst stances” or “toggling between the mind-to-world and world-to-mind direction”. They posit that metacognitive rigidity impedes learning because it precludes any attempts at even trying to update mental schemas. They further suggest that “Overcoming metacognitive rigidity enables entrepreneurs to interpret feedback from the world and act upon it with a renewed creative force”.

Conclusion

In this short review, I have touched on the recently(post-2020) published works that discussed pragmatism as a philosophical foundation for entrepreneurship theory. My agenda was to critically review this new development by sharing my own critical points and suggestions. Because of the content depth, I decided to divide the blog post into two. This part covered the recent literature. In part two, I will discuss my own thoughts, critical points about the current works, and my own visions about the future course of pragmatism applied in entrepreneurship.


Citations

Kraaijenbrink, Jeroen. “The nature of the entrepreneurial process: causation, effectuation, and pragmatism.” In New Technology-Based Firms in the New Millennium. Emerald Group Publishing Limited, 2012.

McVea, John F., and Nicholas Dew. “Unshackling Imagination: How Philosophical Pragmatism can Liberate Entrepreneurial Decision-Making.” Journal of Business Ethics (2021): 1-16.

Rubleske, Joseph, and Nicholas Berente. “A pragmatist perspective on entrepreneurial opportunities.” International Journal of Innovation Science (2017).

Sarasvathy, Saras D. Effectuation: Elements of entrepreneurial expertise. Edward Elgar Publishing, 2009.

Shepherd, Dean. “Party On! A call for entrepreneurship research that is more interactive, activity based, cognitively hot, compassionate, and prosocial.” Journal of Business Venturing 30, no. 4 (2015): 489-507.

Taatila, Vesa. “Pragmatism as a philosophy of education for entrepreneurship.” In Innovation and entrepreneurship in universities. The Proceedings of the 3rd International Finnish Network of Entrepreneurship and Innovation for Higher Education (FININ) 2010 Conference, Joensuu, Finland, pp. 52-63. 2010.

Watson, Tony J. “Entrepreneurial action and the Euro-American social science tradition: pragmatism, realism and looking beyond ‘the entrepreneur’.” Entrepreneurship & Regional Development 25, no. 1-2 (2013): 16-33.

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