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Entrepreneurship Education Comes of Age on Campus

Two white papers feature diverse examples of university entrepreneurship instruction helping students solve real-world problems.

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Kauffman Campuses Reports

Reports from the 16 institutions that participated in the Kauffman Campuses Initiative, which encouraged interdisciplinary entrepreneurship education programs.
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The first paper “Entrepreneurship Education Comes of Age on Campus” is a qualitative report on a gathering of educators from 16 institutions with notable entrepreneurship education programs – including some who participated in the Kauffman Campuses Initiative, which encouraged interdisciplinary entrepreneurship education programs – to discuss common practices and challenges.

The paper also notes that entrepreneurship, one of the fastest-growing subjects in today’s undergraduate curricula, has moved from the margins of higher education to the mainstream. Entrepreneurship has, on a variety of campuses, taken on a wider definition than startups and venture funding, though opportunities for students to develop their entrepreneurial acumen abound on campuses across the country.

The report discusses a wide range of issues related to the implementation of entrepreneurship programs on campus. It highlights the rich variety of ways in which universities craft curricular and co-curricular offerings and how they develop activities that balance learning and doing. The report lists the benefits of melding universities with outside communities through mentorship networks and other programs. The report also highlights the challenging issue of measuring progress, affirming their commitment to crafting meaningful learning opportunities for their students.

The paper recommends these strategies to create a campus culture that fosters effective entrepreneurship education:

  • Democratize ownership. This strategy allows schools and departments to “adopt, define and own concepts of entrepreneurship and programs themselves.”
  • Blend funding. This allows for university general funds and money raised from other sources to be combined.
  • Ensure the support of deans. A critical element of the entrepreneurial education program’s success at Rice University, for example, has been participation from the deans of engineering, science, and business, along with the Vice Provost for Research and Technology Transfer.
  • Cultivate university champions. Support from the top is crucial, and “the evangelism of a university president gives a program more clout within the university and more credibility outside,” the paper said.
  • Talk it up. Universities must raise entrepreneurship programs’ visibility. As one educator put it, “Talk about it again and again, everywhere.”
  • Combat stereotypes of entrepreneurship. Universities must show what entrepreneurship means in various contexts and discuss it in terms such as innovation and independence, which might appeal to students in a range of disciplines.

The second white paper, “Entrepreneurial Campuses: Action, Impact, and Lessons Learned from the Kauffman Campus Initiative,” assesses the activity and lessons shared by the educators and leaders on Kauffman Campuses and other entrepreneurial schools around the country. The now-concluded program included 18 universities.

Through Kauffman Campuses, entrepreneurship courses and co-curricular activities reached students who might not otherwise have had the opportunity to consider how to apply entrepreneurial problem-solving skills, innovative thinking, and value creation to their particular fields. The white paper observes that campus leaders and professors found that teaching students these lessons had a transformative effect on how they see their mission, and, as one campus put it, how they can “prepare students for the rest of their lives – and their lives at work.”

The Kauffman Campus paper draws on 16 reflective essays submitted by campus leadership and the Burton D. Morgan Foundation in 2012. In addition to expressing the rich experiences that the students and faculty shared as a result of the Kauffman Campuses grants, the essays detail a treasure trove of programs and initiatives on the campuses and “new avenues through which the faculty has expanded and sharpened both its scholarly and entrepreneurial practices,” as one essay put it. Outcomes range from establishing “entrepreneurship as a cultural value, not a goal or outcome,” to creating student venture funds, launching global entrepreneurship partnerships, and starting entrepreneur centers, to name a few. All the campus essay authors agreed that they have established a foundation for the future of entrepreneurship on their campuses and in their communities.

The Return of Business Creation

New business formation rebounded in 2011, after four years of decline, from the depths of the Great Recession.

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Freshly released government data show that new business formation rebounded in 2011, after four years of decline, from the depths of the Great Recession. This is a welcome development—new businesses are the engine of job creation in the United States economy and an important source of innovation and productivity. Perhaps most importantly, the rise in new business formation between 2010 and 2011 was geographically dispersed throughout the United States.

While the rise of new business creation in 2011 is a significant development—it is the first annual gain in five years and the largest percentage annual increase in nearly a decade—the bulk of this paper examines two classes of new businesses that most closely resemble entrepreneurship: companies less than one year old with one to four employees and those with five to nine. This analysis finds that the smallest of these new firms represent most of the increase in firm formation in 2011:

  • New companies with one to four employees comprise the vast majority of new businesses formed each year, accounting for, on average, 86 percent of new firms since the late 1970s in the BDS data.
  • Job creation at new businesses of all sizes increased by 4.3 percent, and rose by 5.4 percent in new companies with one to four employees, reversing four consecutive years of decline for those smallest companies.
  • Companies less than one year old with one to four employees have created, on average, more than 1 million jobs per year over the past three decades; those with five to nine employees have added, on average, half a million jobs per year.
  • With a promise of more detailed analysis in future reports, this paper presents maps that illustrate the increased share of new business formation in most states and metro areas across the nation.

2013 NCTQ Teacher Prep Review: A Review of U.S. Teacher Preparation Programs

With support from the Kauffman Foundation and 64 other foundation funders across the nation, the National Council on Teacher Quality undertook an exhaustive and unprecedented examination of the colleges and universities producing America’s traditionally prepared teachers.

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The inaugural edition of the NCTQ Teacher Prep Review was released in June 2013 in partnership with U.S. News & World Report.

The Review looked at 1,130 institutions that prepare 99 percent of the nation’s traditionally trained teachers.

Overwhelmingly, it found that U.S. colleges and universities are turning out first-year teachers with inadequate knowledge and classroom management skills. On a four-star scale, less than 10 percent of rated programs earned three stars or more.

NCTQ’s primary goal in publishing its findings is to give consumers better information to make more informed decisions.

The Review allows aspiring teachers, parents and school districts to compare programs and find which are doing the best — and worst — job of training new teachers.

NCTQ standards fall into four buckets:

  • Selection: The program screens for measurable attributes candidates bring to programs, principally academic aptitude
  • Content Preparation: Content preparation in the subject(s) the candidate intends to teach
  • Professional Skills: Acquisition and practice of skills in how to teach
  • Outcomes: The program’s attention to outcomes and evidence of impact

NCTQ intends to publish the Review annually, and it anticipates greater cooperation from colleges and universities for future editions, resulting in more ratings for more U.S. teacher prep programs.

Business Dynamics Statistics Briefing: Anemic Job Creation and Growth in the Aftermath of the Great Recession: Are Home Prices to Blame?

While the rebound in job creation emerging from the Great Recession is encouraging, its rate of recovery lags well behind the pace of other recent recessions. In a paper using BDS 2011 data, “Anemic Job Creation and Growth in the Aftermath of the Great Recession: Are Home Prices to Blame?”, researchers at the University of Maryland and Census Bureau explore the relation between the decline in housing prices at the heart of this recession and job creation at young firms.

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More work is required to determine the exact nature of that relationship, but whether through a demand channel or financing mechanism, it is clear that young firms experienced disproportionate declines in states most affected by the housing market collapse during the recession. Young firms have also not bounced back with their usual vigor.

To the extent that they have bounced back, however, the “Return of Business Creation” paper presents maps that illustrate the increased share of new business formation in most states and, for the first time, metro areas across the nation.

Sparsely populated states such as North Dakota, Wyoming and West Virginia saw the largest percentage increases, albeit from low bases. Louisiana and Mississippi experienced the largest declines.

The Business Dynamics Statistics (BDS) series compiled by the U.S. Census Bureau tracks the annual number of new businesses (startups and new locations) from 1976 to 2011. More information about the BDS can be found at the Census Department.

The BDS represents what can credibly be deemed the gold standard of business creation data. In contrast to other indicators that combine employer firms (those coming into existence with employees) together with non-employers and self-employment, the BDS tracks only employer companies.

It also allows researchers to separate firms (unique businesses) from establishments (multiple locations of single firms, such as a new Starbucks location) and make important advances in data collection and policymaking.

Leveraging Regional Assets: Insights from High-Growth Companies in Kansas City

Based on interviews with local Inc. 500/5000 companies, this study found that, while the Kansas City region has many entrepreneurial strengths, those assets could be tapped further to help young companies attain even greater success.

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The study, “Leveraging Regional Assets: Insights from High-Growth Companies in Kansas City,” says that more mentoring between experienced and startup entrepreneurs could add fuel to the region’s business engine. The study’s conclusion is based on interviews with 22 Inc. 500|5000 information technology, biotechnology and business services firms in the Kansas City area. Founders were asked about their views on the strengths and viability of Kansas City’s entrepreneurial ecosystem.

Most of the founders reported that locally based mentors had played a significant role in their success.

The study notes that people outside the region often overlook Kansas City and its successful entrepreneurs in economic development studies.

Other findings include:

  • Lack of venture capital or angel investment does not hinder the growth of Kansas City firms. Very few of the high-growth firms interviewed reported receiving venture capital or angel investments. Instead, most were self-financed or received financial assistance from founders’ close friends and families. Some bootstrapped by adapting their firms to customer needs to achieve growth, while others scaled up only as revenues increased and additional customers were found.
  • Kansas City firms have access to a high-quality regional talent pool. Most interviewees believe Kansas City offers high-quality talent with a strong work ethic. Growing firms often have long-term employee development strategies to hire young people and train them to be first-class professionals.
  • Most Kansas City entrepreneurs find support from customers, vendors, and/or collaborating firms in the region. These regional connections lead to innovations and growth.

Many high-growth firms serve only the Kansas City area or a limited market of regional cities. The company founders see this focus as a business strength, recognizing that a firm does not have to capture a national or global market to be highly successful.

An Overview of the Kauffman Firm Survey: Results from 2011 Business Activities

The Kauffman Firm Survey started with a cohort of nearly 5,000 firms that began operations in 2004. This cohort is tracked annually and asked an extensive set of detailed questions that cover a range of topics such as the background of the founders, the sources and amounts of financing, firm strategies and innovations, and outcomes such as sales, profits, and survival. This report, with results through 2011, is the final iteration of the Kauffman Firm Survey.

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Although entrepreneurial activity is an important part of a capitalist economy, data about U.S. businesses in their early years of operation have been extremely limited. Only recently has it become apparent what important contributions new and young businesses make to job creation and innovation activities.

As part of an effort to understand the dynamics of new businesses in the United States, the Ewing Marion Kauffman Foundation (the Foundation) sponsored the Kauffman Firm Survey (KFS), a panel study of new businesses founded in 2004 that are being tracked annually over their first eight years of operation. Tracking businesses over time allows us to follow business evolutions that would not be apparent in cross-sectional snapshots, the more typical collection method.

The KFS dataset provides researchers with a unique opportunity to study a panel of new businesses from startup to sustainability (or exit), with longitudinal data centering on topics such as how businesses are financed; the products, services, and innovations these businesses possess and develop in their early years of existence; and the characteristics of those who own and operate them. The data collection has been completed, and data are available through calendar year 2011, the eighth year of operations for continuing businesses. Additionally, since our panel came into existence before the most recent recession, following these businesses allows us to get a picture of how young businesses in the United States have recovered or been affected. A series of tables give a broad overview of the 4,928 businesses included in the Kauffman Firm Survey that are nationally representative of startups from 2004.

Kauffman Firm Survey Series

As part of an effort to understand the dynamics of new businesses in the United States, the Ewing Marion Kauffman Foundation sponsored the Kauffman Firm Survey (KFS), a panel study of new businesses founded in 2004 that are being tracked annually over their first eight years of operation.

The Kauffman Foundation Research Series on Firm Formation and Economic Growth consists of reports that explore the relationship between firm formation and economic growth in the United States from a variety of angles.

The reports in the series include:

The Constant: Companies That Matter

The pace at which the United States produces $100-million companies has been stable over the last 20 years despite changes in the economy. However, according to this paper, the locations and sectors in which those companies are created are changing.

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In the paper, “The Constant: Companies that Matter,” Kauffman Foundation Senior Fellow Paul Kedrosky explores the rate and founding locations of companies in the United States that “matter” from 1980 to present.

Kedrosky uses three criteria to define companies that matter: They must be scalable, quickly reaching $100 million or more in revenues; they must be able to generate jobs quickly and broadly; and, they must be disproportionate creators of wealth, both directly through profits and salaries and indirectly through equity.

Anywhere from 125 to 250 companies per year (out of roughly 552,000 new employer firms) are founded in the United States that reach $100 million in revenues. The largest contributors, in percentage terms, are from the consumer discretionary and industrials sectors. Taking into account sectoral contribution to U.S. GDP, the information technology sector produces more $100-million companies than might be expected.

Geographically, the most productive region in terms of $100-million company production is the U.S. southeast (Georgia, Florida, Kentucky, Louisiana) with the Pacific region (California, Oregon, Washington, Hawaii) coming in second. Following closely behind are the Mid-Atlantic and Central regions. Most regions are balanced with regard to sector, except for the Pacific region, which produces only slightly fewer $100-million information technology companies than the rest of the country combined, most of which are in California.

The United States averages 20 technology companies founded per year that reach $100 million in revenues, 17 of which are in 7 states: California, Florida, Illinois, Massachusetts, New York, North Carolina and Texas. Of these 17, 4 are usually in California. However, in the 1990s, California’s share of $100-million technology companies was around 35 percent. That share has declined to around 20 percent in recent years.

From Lab Bench to Innovation: Critical Challenges to Nascent Academic Entrepreneurs

This study examines the particular experience of nascent academic entrepreneurs (NAEs) and the implications of this experience for universities and policymakers.

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New technology innovations – and the startup companies formed to commercialize them – increasingly have their beginnings in university research labs.

And it’s more likely that PhD students, not faculty, form the initial idea for a new technology. While in later stages these ventures resemble typical technology startups, they experience a different early development process, decision points and potential conflicts that can make or break an innovation’s chances of making it to market.

“From Lab Bench to Innovation: Critical Challenges to Nascent Academic Entrepreneurs,” a new study released today by the Kauffman Foundation, examines the particular experience of nascent academic entrepreneurs (NAEs) and the implications of this experience for universities and policymakers. The study is among the few to focus specifically on this important group of entrepreneurs at the individual, rather than institutional, level.

Author Roman M. Lubynsky, senior venture advisor, MIT Venture Mentoring Service, followed and analyzed the experiences of 10 NAEs involved in eight ventures at the Massachusetts Institute of Technology, all of whom were enrolled in the university’s Venture Mentoring Service.

The cases spanned the product life cycle from idea to commercialization across a range of technologies and industries, with data collected through interviews, observation and archival data.

Lubynsky defines an NAE as a faculty, staff or student researcher at a university who has left the university, or intends to leave, to devote full-time attention to the development of a company based on research that originated at the university in which he or she was involved, and which has not yet achieved real economic activity through sales of the product or services.

Key study findings include:

  • Many academic entrepreneurs are students at the time they formed their initial idea and began exploring the possibility of a startup venture.
  • NAEs typically found academic ventures as “research-based startups” with the goal of completing or developing the new technology to make it ready for commercialization, and spend years – sometimes as much as a decade – in this phase. Their objectives, required resources, structure and funding sources differ at each stage.
  • The decision to launch a venture evolves as the NAE gains confidence in his or her entrepreneurial abilities and determines that the technology likely cannot be licensed unless they bring it to maturity first.
  • Finally, academic entrepreneurs are more likely than typical technology entrepreneurs to experience serious conflicts – particularly with their faculty advisors – over intellectual property and equity participation.

Based on these findings, Lubynsky also provides recommendations for both individual NAEs and university research labs and entrepreneurship programs to better support the unique process and requirements of academic ventures and improve their chances of successfully reaching the marketplace and contributing to the U.S. and global economy.

A Tale of Two Entrepreneurs: Understanding Differences in the Types of Entrepreneurship in the Economy

Not all startup companies are created equal. Although both innovation-driven enterprises (IDEs) and traditional small- and medium-sized enterprises (SMEs) can provide valuable products and services and create jobs, IDEs – startups focused on addressing global markets based on technological, process or business model innovation – can potentially create hundreds or even thousands of high-skill jobs if they succeed.

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The distinctive differences between these two forms of entrepreneurial ventures—and their importance for governments and policymakers wanting to support long-term economic growth—is the subject of a new paper released today by the Kauffman Foundation. “A Tale of Two Entrepreneurs: Understanding Differences in the Types of Entrepreneurship in the Economy,” examines IDEs and SMEs, their roles in local, regional, and global economies, and their differing needs in terms of financial and policy support.

While traditional SMEs don’t require an innovative product, process, or business model to succeed, IDEs are based on building competitive advantage through innovation on one or more of these dimensions.

For this reason, IDEs are more likely to be founded by teams of individuals with diverse skills and often higher levels of education than SME founders. SMEs focus on local or regional markets and create “non-tradable” jobs, whereas IDEs consciously pursue global markets and create jobs that can be performed in different locations. Funding sources also differ: SMEs tend to be individual or family-owned with little outside investment, while IDEs have a diverse ownership base with external investors.

Because of their global aspirations and the criticality of both capital investment and competitive advantage, IDE entrepreneurs face much greater risk than SMEs – but the payoff can be much greater. Unlike SMEs, which typically grow in a linear fashion, IDEs tend to start out losing money, but achieve exponential growth if successful. Government policies and programs, however, tend to favor SMEs, which often produce faster, more visible results—an approach that may undermine the success of potential new IDEs.