May 24, 2007
Lawless on "Law and Entrepreneurship"
Posted by Gordon Smith

Bob Lawless offers some thoughts on "law and entrepreneurship" in the wake of the Law & Entrepreneurship Retreat:

One concept of entrepreneurial studies might be that it defines a group of scholars with cross-disciplinary interests in what might loosely be called "emerging businesses." Under this concept, entrepreneurial studies is a label that helps a set of scholars identify papers, conferences, and other opportunities for scholarly exchange. Thus, entrepreneurial studies can be seen as a flag around which a group of scholars have rallied. This loose social organization facilitates the accumulation of knowledge because these scholars otherwise would have stayed within their own intellectual silos, and the information that each knew would not have been shared with the larger scholarly community. That is a useful role for entrepreneurial studies.

There is a stronger claim, however, about entrepreneurial studies on which I remain a strong skeptic. That claim is that there exists a phenomenon called the "entrepreneur" and that we would agree on who is an entrepreneur such that the phenomenon can be the subject of scholarly study. My skepticism is not people do not start business, for they obviously do. Are all business startups entrepreneurial? If so, then is entrepreneurial studies just the study of business startups?

I agree with Bob that even the modest version of "law and entrepreneurship" is useful, but I disagree with his characterization of the more ambitious version of the concept. Imposing a requirement of consensus over the definitional question "What is 'law and entrepreneurship'?" is a deal killer, and it is simply unnecessary.

Many who frequent this site consider themselves "corporate law scholars," but what is "corporate law," anyway? It obviously includes state incorporation statutes and judicial opinions relating to fiduciary duties. Surely, it also includes some aspects of federal securities law, but which parts are in and which parts are out? What about rules governing stock listings -- in or out? Could we include portions of the Internal Revenue Code or the Bankruptcy Code, both of which are mentioned in my Business Organizations casebook? Obviously, we do not need to define the boundaries of the field with precision before "corporate governance" is recognized as an important and distinctive phenomenon, and "corporate law" becomes a meaningful concept.

On the other hand, if we need a more precise definition of "corporate law," we simply specify the definition that we are using. You can see an example of this in my recent paper on The Dystopian Potential of Corporate Law, where I challenge Kent Greenfield's assertion that "Corporate law is a big deal." Likewise, when we need precision in the definition of "law and entrepreneurship," we simply specify the definition. Again, you can see this in my paper, with Masako Ueda, entitled Law & Entrepreneurship: Do Courts Matter?

My colleague Anne Miner spoke to the participants in the Law & Entrepreneurship Retreat and warned us of the perils of endless definitional debates. While I think that some attention to the definitional issue is necessary, I agree with Anne that we should not belabor the point. Rather, we should continue to explore the connections between law and entrepreneurship and observe what emerges from those studies.

The crux of Bob's skepticism, however, is not simply the lack of precision in "law and entrepreneurship," but a deeper skepticism about "entrepreneurship" as a distinctive phenomenon worthy of study. Just to be clear, no one is arguing that "entrepreneurship" is a discipline in the same way that economics, sociology, psychology, or political science are disciplines. That is, entrepreneurship has no distinctive causal theories. Rather, the claim is that "entrepreneurship" is something distinct from other forms of individual or institutional behavior, such as "corporate governance," and that legal scholars would benefit by organizing courses and scholarship around the intersection of law and entrepreneurship. In other words, "law and entrepreneurship" is not equivalent to the "law of the horse."

Though I disagree with Bob about the need to resolve the definitional problem, I have not fully come to terms with the notion that "law entrepreneurship" is more than merely the aggregation of various doctrinal areas of law, such as corporate law, intellectual property law, tax law, etc. Knocking down silos is worthwhile, but my hunch is that there is much more to be gained from this effort. In particular, my hope is that the study of "law and entrepreneurship" will yield insights that simultaneously enhance our understanding of entrepreneurial behavior and deepen our appreciation of various areas of law.

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Comments (1)

1. Posted by Jeff Lipshaw on May 24, 2007 @ 5:56 | Permalink

Gordon, your post caused me to go back to the little essay I put together after reading "Do Courts Matter?" largely because I wondered there in the first couple pages about the law of the horse issue. I don't doubt that entrepreneurship is a distinctive field of study; my skepticism is whether the law of entrepreneurship is a distinct discipline. (You have already pre-empted most of the area in which it does seem to be a distinct area - the down-round - in your analysis of the Benchmark case.) And my initial reaction in the essay (clearly an early-stage thought piece) was that I needed to dig deeper than what seemed to be mere categorization. That is, my intuition is that lawyers and entrepreneurs, by and large, are ships passing in the night, for very fundamental reasons about the way they see the world, and what is important to them in terms of risk, finitude and open-endedness, and the allocation of property versus the allocation of liability. That early stage "auto-brainstorming" morphed into something that I brown-bagged at Tulane called "ABOUTNESS, THINGNESS, VISCOSITY, AND THE ONTOLOGY OF FORMAL SYSTEMS IN LAW." (Faculty members are still scratching their heads, I'm sure.) But as I read recently on somebody's blog somewhere, just when I think I have it, it slips away from me again. Pardon the self-promotion, but I think the topic is fascinating (obviously) and the thought piece is still sitting out there: "Why the Law of Entrepreneurship Barely Matters".

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