Four Enterprise Creation Schemes: Putting Jane Jacobs to Work

This note presents policy ideas about entrepreneurship and enterprise creation derived from or, at least, inspired by Jane Jacobs’ writings. The argument is that the main training grounds for entrepreneurial, technical, and business capacities are existing businesses. There are two ways that this training can lead to new growth—just as there are two ways that existing biological DNA can lead to the growth of bio-mass, namely, (1) existing organisms getting bigger or (2) by spinning out offspring who in turn can spin out more offspring. Where growth has been vibrant, e.g., Silicon Valley, it has followed the second route, growth by offspring which is also the biological principle of plenitude. The conventional ownership structures lessens the incentives for spin-offs since managers do not want to have a smaller “empire” under their control. The biological principle of plenitude is best implemented with employee-owned or cooperative firms (e.g., as in the Mondragon group). This paper explores ways for development agencies to address the conundrum or trap that those who have the on-the-job training in business capacities and their managers do not have the incentive to foster new businesses.

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