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UNDERSTANDING ENTREPRENEURSHIP - A NEW DIRECTION

IN RESEARCH?

Bjrn Bjerke
Stockholm University

Summary: The paper starts by reminding the reader of the century-old discussion about differences between
explaining and understanding. After having discussed doing research with the ambition to explain and with
the ambition to understand, first in research in general and then in researching entrepreneurship, the paper
concludes that the field of entrepreneurship has everything to gain and nothing to lose to keep this distinction
in mind.

Introduction
It is fair to say that the role of science in society is more vital today. Science is also discussed more publicly
than what was traditionally the case. Themes in this discussion often include how research may improve on,
say, technological development or economic competitiveness. However, this is not all. Only twenty years ago
the picture of science was more united - and it was generally a positive one. Today it is possible to find
expressions for both optimistic confidence in science as well as pessimistic scepticism of the same.
But not only are the consequences of science under scrutiny today. Discussions also concern topics like what
separates research from other intellectual activities, whether there are any best scientific methods or what is
good or bad research.
We can say that, generally, attitudes to scientific results as well as scientific methods have become more
critical these days.
This paper is about one critical discussion concerning science, mainly held within science itself. However,
this discussion has been going on for a long time - and it has deep roots in Western mind. Numerous
methodological and theoretical debates have raged, in particular since late nineteenth century when social
sciences were born, over the modes of thought of "explaining" and "understanding". Arguments reached a

high point in the period immediately before World War I, and they have been part of social sciences ever
since. These arguments even seem to have returned with some renewed strength lately.
The basic purpose of this paper is to bring the discussion on explaining and understanding up in the context of
entrepreneurship. To claim a difference between "explaining" and "understanding" may seem irrelevant to
some. However, it has become customary, though by no means among everybody, to distinguish between
trying to get a picture of how events relate to each other and trying to penetrate human efforts as acts. It is
suggested that the term "understanding", in contrast to "explaining", ought to be reserved for the latter.
In its most elementary sense the controversy between using research in order to explain and in order to
understand (which is more of a controversy among those who aim at understanding than among those who
aim at explaining) rests on a presumed intrinsic difference between mind and all that is non-mind. The
controversy (if there is one) is thus a continuation of the debate over the mind-matter distinction - a debate
which, in the West, is already over two thousand years old: Plato and his followers considered knowledge of
ideal objects to be of a higher order of perfection than knowledge of physical things.
With the elaboration of Christian dogma in the European Middle Ages the distinction between mind and
matter was assimilated to that between spirit and flesh, sacred and profane.
The distinction between explaining and understanding (explaining or understanding may in broad terms be
referred to as the fundamental outcome of belonging to, in the case of "explaining", the "school" of Positivism
and, in the case of "understanding", being an anti-positivist; this might also be called being a Causalist in the
case of explaining or an Actionist/Intentionalist in the case of understanding) will probably continue to arise
as long as the mind-matter distinction persists in the West. This controversy will not be eliminated merely by
a choice of either the dominating scientific "school" in the West, consisting of explainers and commonly
referred to as Positivism or Logical-Empiricism, or becoming an understander, because most positivists have
retained the mind-matter distinction and propose only to reduce the problems of mind to those of matter.
When this is done the opposing point of view is suppressed for a time, emerging once again as soon as one
attempts to account for those properties uniquely identified with mind.

A brief history
The formation of social sciences took place at the end of the nineteenth century (as sociology and
anthropology; law started as a university subject already in the twelfth century in Italy and the beginning of

modern economics is often dated to the later half of the eighteenth century when Adam Smith published
Wealth of Nations. Business as a science and political science started only last century). This formation could
not have taken place without a powerful impetus toward the physical sciences (the "positive" sciences). In
fact, Auguste Comte, often recognised as one of the founders of sociology, made the term "positivism"
popular. In proposing to extend methods that had proved their effectiveness in dealing with the physical world
to social subject matter (the world of mind), Comte automatically laid the foundation for a series of
controversies on the mind-matter problem. Since the social sciences had arisen in territories formerly divided
between humanities and the physical sciences, they became the primary scene of contests that could no longer
be confined to philosophical circles.
In a manuscript from 1858 (later as book in 1868), we can read: "According to the object and nature of human
thought there are three possible scientific methods: the speculative (formulated in philosophy and theology),
the mathematical or physical, and the historical. Their respective essences are to know, to explain, and to
understand." [Droysen, 1958/68]. This may possibly be the first time the distinction between explaining and
understanding as modes of science appears. Droysen was influenced by the grounding of Hermeneutics in its
modern version by Schleiermacher at around the same time, which in turn is oriented towards the paradigm of
linguistic understanding. Later, in 1883 in his book Einleitung in die Geisteswissenschaften, Dilthey made the
dichotomy between understanding and explanation the terminological foundation for distinguishing between
the natural sciences and social sciences at large (the latter referred to as Geisteswissenschaften by Dilthey).
Dilthey suggested that a kind of "interpretive" psychology (trying to understand other human beings and their
efforts through "empathy") should be the philosophical foundation of the social sciences, an idea which was
never fully accepted by outsiders and which was also, later in life, abandoned by Dilthey himself. At any rate,
the idea was to contrast what is given directly experiencing ourselves and our environment as a way of life to
causal connections which are added supplementary to the given through the construction of hypotheses. We
understand culture, but we explain nature.
This attempt to ground the methodological and epistemological claim to the autonomy of the social sciences
was adopted among others by Weber. It was criticised by positivists and thus began the controversy over
explanation and understanding that continues to this day.
In the decades between the two world wars positivism returned more vigorous than ever, after an antipositivist reaction around the turn of the previous century. The new movement was called neo-positivism or,

later, logical empiricism. The attribute "logical" indicates the support which the revived positivism drew from
the new developments in formal logic. Out of the logical empiricism of the 1920's and 1930's grew the
broader current of philosophical thought which is nowadays commonly known as analytical philosophy [von
Wright, 1971, p. 8-9]. Analytical philosophy of science enetered the traditional battleground between
positivist and anti-positivist methodology and the old controversies flared up again in the mid of the last
century. The immediate source for the revived debate was a modern version of the old positivist theory of
scientific explanation provided by Hempel [ibid, p. 10]. Hempel modified the originally stringent
characterisation of explanation and to account for the fact that there are few general laws in social practice, he
suggested that many "explanations" in this area were only "explanation sketches". Such explanation sketches
could not generate reliable predictions; nonetheless, they would assist in developing a progressively more
complete formation of relevant laws and antecedent conditions. Also, many of the relevant laws in social
sciences are, in this view, statistical rather than universal. Furthermore, Hempel dismissed the methodological
claims of the "interpretive" Geisteswissenschaften and considered empathy as relevant only as a
psychological-heuristic procedure prior to science proper [Apel, 1984, pp. 19-21].
The waves, if that is the proper label, have come and gone in the discussion of explaining and understanding
within social sciences. However, it is definitely true to say that an absolute majority of social science scholars
in the Western world of today belong to the methodological field of Hempel et al, trying to establish
"explanation sketches", often applying quantitative methods like statistics. A few islands inhabited by
interpretive social science scholars exist, mainly outside the United States. They operate under the influence
of various non-analytical philosophers, like Gadamer, Wittgenstein or Foucault.
This is not the place to be precise in terms of labels or influences. However, the distinction between
explaining and understanding is still valid. Let us use these two categories as vague labels of two kinds of
social science research in general and of two different attempts trying to catch what entrepreneurship is all
about in particular.

Explaining and Understanding in General


There are several tenets of positivism. They include [von Wright, 1971, p. 4]:

Methodological monism, or the idea of the unity of scientific method amidst the diversity of subject
matter of scientific investigation.

Exact natural sciences set a methodological ideal or standard which measures the degree of development
and perfection of all scientific efforts.

Science should aim for explanations, which are, in a broad sense, "causal". It consists, more specifically,
in the subsumption of individual cases under hypothetically assumed general laws of nature, including
"human nature".

Hume is the father of causation. According to Hume the relation between cause and effect is a regular
sequence in time of (instantiations of) generic phenomena [ibid, pp. 34-35]. Hume implicitly set the task of
explaining the data by subsuming them under laws, that is, under empirically well-confirmed regularities and
sequences [Apel, 1984, p. 31].
Cause and effect should, according to Hume, be logically independent of one another. It is important,
therefore, to separate between semantic and/or logical relations on one hand, which both are intrinsic and do
not provide any explanation, and causal relations on the other, which is extrinsic - and explanation proper. So,
for instance, in the field of entrepreneurship, consider the following three examples:

1.

He started a business because he is an entrepreneur.

2.

He started a business because he wanted to change his life.

3.

He started a business because he wanted to become rich.

Only no. 3 is a (possible) causal explanation, as starting a business and getting rich are not necessarily a part
of each other. The other two are not causal relations (nor explanations in the Humean sense of the word), as
starting a business is related to an entrepreneur semantically and to wanting to change one's life logically.
By tradition, there are two kinds of scientific explanation: causal versus teleological explanation. Causal
explanations point to the past, teleological explanations to the future. Teleological explanations are related to
behaviour, even action-like [von Wright, 1971, pp. 86-87]. Apel [1984] has added an extra type of
explanation to these two, i.e., explaining sequences of events beyond the control of the individual case or the
individual human being. We may refer to these explanations as systemic explanations.

Anti-positivists reject methodological monism and natural sciences as standard, and also the positivist view of
explanation, making a distinction between explanation and understanding [von Wright, 1971, pp. 4-6].
According to anti-positivists, study of man includes study of culture (which nature has not) and the process of
trying to make life meaningful (which also makes no sense in nature). Human actions cannot have causes
[ibid, p. viii]! A "causalist" will perhaps link intentions, motives and reasons to causes, and actions to events.
An "actionist" (another name could be "intentionalist") groups the concepts differently: motives and reasons
with actions, and events with causes - and between the two groups he sees a sharp divide [ibid].
Many attempts to classify different kinds of understanding and interpretive work of science exist. Norn
[1995] makes a distinction between three categories:

1.

Hermeneutics: Researchers understand actors on researchers' terms.

2.

Actors' approach: Researchers understand actors on actors' terms.

3.

Phenomenology: Researchers understand actors as part of construction of social reality.

One classic [Bauman, 1978] separates understanding:

As the work of history (Marx, Weber, Mannheim)

As the work of reason (Husserl, Parsons)

As the work of life (Heidegger, Schutz)

There are obviously many differences between explainers and understanders. We have noted already that the
scientific ideal when explaining is to empirically testing theories of causal relations, when understanding to
interpreting content of subjective meaning; the epistemological presumption when explaining is that
behaviour is an outcome of general laws, when understanding is that action is an expression of subjective
meaningfulness.
Explaining and understanding not only imply different attitudes to the subject(s) participating in the study,
they are also different as far as ambition of the study is concerned. Explainers want to make good forecasts,
engineering society accordingly, understanders aim at providing an even higher degree of meaning, in turn to
be used, for instance, to overcome mental blockings and, say, superstitions.

One possible summary of this section could be:

Explainers presume an objective logic, understanders a subjective logic

Explainers presume a circumstantial world, understanders a meaningful world

Explainers presume that human beings are reactive, understanders that they are creative

Explainers want to simplify a complicated world by constructing models, understanders to complicate a


simplified world by generating interpretations

Explaining and Understanding Entrepreneurs


It is not possible to say whether it is better to explain or to understand social phenomena, of course. It all
depends on which presumptions the researchers put up for the situation in question. At least some of these
presumptions are not testable, as such a test would require further presumptions, which cannot be tested, etc.
Similarly, it is not possible to say whether entrepreneurs should be explained ot should better be understood in
general. All that can be done as a researcher is to choose a set of presumptions (not at will, of course, but
based on his convictions) and to act (research) accordingly, i.e., to apply methods of research in line with
what the researcher believes in.
Based on different such presumptions (below classified as different "perspectives" = ontological
presumptions), it is possible to categorise, say, six such types of entrepreneurs. The table below comes from
Bjerke [1996]. It is important to realise that the six types of entrepreneurs are not comparable (not even
compatible) with each other. The first three types of entrepreneurs are suitable to research by explaining, the
last three types by understanding.

PERSPECTIVE

WHAT
IS
AN
ENTREPRENEUR?

HOW
ARE
BUSINESSES
CREATED?

NEW

1. Reality as concrete
and conformable to law
from us independent
structure

A person, who responds


rationally to certain
objective, external
conditions and creates
something new

By providing suitable,
objective, external
conditions to persons
who respond rationally
to them

HOW TO IMPROVE
THE
BUSINESS
DEVELOPMENT
PROCESS
Introduce as many as
possible of those
stimuli, which best
explain the effect of the
business development
structure on rationally
responding persons

2. Reality as concrete
determining process

3. Reality as mutually
dependent fields of
information

4. Reality as world of
symbolic discourse

5. Reality as social
construction

6. Reality as
manifestation of human
intentionality

A person, who fits in as


a component in a
business developing
system, directed by a
goal
A person with superior
information about
customer needs and the
resources of the
company
A person, who sees
progress and change as
a dominating part of
his/her symbolic world

By a well functioning
business developing
system, directed by a
goal

Adapt entrepreneurs
and/or the business
developing system
better to each other

By information systems,
based on the principle of
negative feedback,
reacting to new
information
By a culture, which
contains new businesses
as symbols of exciting
developments

A person, who sees the


process of creation as a
dominant part of his/her
everyday reality
A person, who sees
his/her existence as a
result of own
expectations and as
potential contained in
what is factual

By business
development being a
natural part of the social
reality
By persons with an
eidetical intuition
about business
development

Refine the information


about resources creating
business ventures in the
system and the market
needs
Influence the culture for
development through
suitable symbols for
creating new business
ventures (and renewing
old ones)
Activate and renew the
language games about
and the actions in the
business of venturing
Liberate and visionalise
the imaginative power
of people, and trust their
inherent creative ability

From this table we can draw the conclusions that for explainers, entrepreneurs and entrepreneurship means
[ibid]:

Phenomena placed in a structure, in a process or in a field of information

To respond rationally and purposefully to external conditions and changes

Being driven by a need for achievement

Phenomena of which we can construct generally valid models

Exceptional phenomena

For understanders, entrepreneurs and entrepreneurship means [ibid]:

Phenomena intimately associated with the entrepreneur as an actor

To act according to one's own symbols, social reality and intentionality

Having an attitude of reflective analysis rather than an attitude of unreflective experience

A potential part of everyday reality

Given a very wide definition of an entrepreneur (as simply a person who "creates new business ventures"), we
can say that four types of explanatory research on entrepreneurship are going on in the world today:

a.

Entrepreneurship, growth and development

b.

The entrepreneurial personality and psychology

c.

The entrepreneurial circumstances

d.

The entrepreneurial process

Three possible kinds of explanation have been presented earlier in this paper, i.e., causal, teleological and
systemic. It is easy to see how these three dominate differently in the four types of explanatory research
above.
It is much harder (maybe not even possible) to classify various types of ongoing research aiming for
understanding entrepreneurship. Such a categorisation may include:

at the individual level


=> construction of entrepreneurial social reality (phenomenology)

at the business level


=> business culture and its manifestations (hermeneutics)

at the social level


=> controlling the social discourse; knowledge as power (Foucault)

A Few Illustrations
To give more body to the discussion in this paper, let us illustrate the discussion by summarising the
methodological aspects of four doctoral theses presented in Sweden during the past five years. Those
examples are meant as illustrations only and not as any representative picture of how research on

entrepreneurship is done in Sweden at the moment. This presentation is also not meant as any kind of
evaluation of what research is good and what is bad.

Ex. 1: Entrepreneurial behaviour & business performance [Delmar, 1996]

studying the relation between entrepreneurial behaviour on one hand and growth and effectiveness in
business on the other

empirical

central: motivational theories and intellectual ability

basic model: "environment" influences "individual" and "entrepreneurial behaviour"; "entrepreneurial


behaviour" is also influenced by "individual"; "entrepreneurial behaviour" influences "business
performance", which is also influenced by "environment"

stresses representative samples based on criteria which are set up in advance, also stresses collecting data
in categories provided beforehand

ambition: to verify or to falsify hypotheses being formulated

Ex. 2: Internationalisation as an entrepreneurial act [Andersson, 1996]

starts with extensive literature reviews within the fields of internationalisation and entrepreneurship

basic model: entrepreneurs are surrounded by an environment at business, meso and macro levels;
entrepreneurs generate strategy, part of which could be internationalisation

case studies of major companies in one industry

a mix of secondary data and interviews

types of entrepreneurs are identified based on their behaviour

Ex. 3: Networking industrial leader: the dynamism of creating identity [Whlin, 1995]

question: how is identity among leaders and well educated people constructed?

leaders are studied longitudinally in different networks between careers, information is generated
narratively, i.e., in stories

positioning (of people) means answering specific generic questions, which are included in all narrative
research

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'pilgrimage' (integrity) and 'tourism' (multi-identity) are used as metaphors

basic philosophy: constructivism (phenomenology)

basic relations: narratives are related to discourse, which in turn is related to language and speech

Ex. 4: Understanding advice given to small business [Johansson, 1997]

question: why is small business asking for consultants as little as they do in spite of the fact that the latter
are much needed?

a study of three aspects of advice, which are based on three different kinds of epistemology:
1.

the normative (the consultant assumes he knows what the client needs)

2.

the narrative (the consultant starts from the point of view of the client and assists in creating the
identity of the latter)

3.

the power based (according to Foucault) (giving and taking advice is another example of how
dominance is working in practice)

aims to classify situations where advice is given and taken according to their complexity and according
to symmetry (if any) between client and consultant

Conclusions
Two crucial questions could be raised in this paper. The answer to these questions might be used to conclude
the paper. The questions are:

1.

Is it meaningful and useful to make a distinction between explaining and understanding


entrepreneurship?

2.

If such a distinction is made, what would be the consequences for researching entrepreneurship?

The first question is, of course unfair as well as useless, at least in a way. The answer to it depends on in
which of the two camps you reside (there is no neutral camp), whether you are an explainer or an
understander. If you are an explainer, you believe in unity of science from a methodological point of view and
a distinction between explaining and understanding entrepreneurship makes little sense. If you are an
understander, on the other hand, your existence as a researcher is based on such a distinction. Still, question 1

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may be worth asking from a practical point of view as well as from a scientific point of view. From a practical
point of view, most people want to be understood, not explained. The more "human" an activity is, the more
this is true. Entrepreneurship is a very human activity and entrepreneurs might most likely feel more at home
being understood than being explained and be open-minded enough to have the wish to be exposed to the
difference. From a scientific point of view, the question is worth being asked as well - and answered
affirmatively. Research, by nature being such an experimenting activity, will most likely progress better,
particularly in such a dispersed area as entrepreneurship, the more lines of research that are open. This
requires, of course, that the various factions can, and want to, speak with each other on a more mutually
respectful basis than what is commonly the case.
Turning to question 2, if a distinction between explaining and understanding is made in the field of
researching entrepreneurship, what would be the consequences? First of all, turning to the title of this paper, is
understanding entrepreneurship a new direction? The answer is negative for several reasons. Firstly, the
philosophy behind such "direction" is, as noted in this paper, old. Secondly, such research is done already and
is not new. Thirdly, understanding entrepreneurship can never replace explaining entrepreneurship because, if
for no other reason, they are incompatible (if seen from an understander's point of view). This is not to deny
the most likely practical consequence of a situation, when, and if, understanders would have their way, which
would be that explanatory research would be neglected. Exactly the opposite position is ruling today, as
explainers are dominating the world of researching entrepreneurship. If, still, explainers and understanders
could live "peacefully" together, they would have nothing to lose and everything to gain in a co-operation.

References
Andersson, S (1996). Internationalisering som entreprenrshandling ('Internationalisation as an
entrepreneurial act'). Linkping: Department of Management, Linkping University
Apel, K-O (1984). Understanding and Explanation. Massachusetts and London: The MIT Press
Bauman, Z (1978). Hermeneutics and Social Science. London: Hutchinson
Bjerke, B (1996). "Explaining or understanding entrepreneurship", paper presented at UIC/AMA Research
Symposia on Marketing and Entrepreneurship, Stockholm, June 14-15
Delmar, F(1996). Entrepreneurial Behavior & Business Performance. Stockholm: Stockholm School of
Economics

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Droysen, J G (1858/68). "Grundrisse der Historik", translated into English as Outlines of the Principles of
History
Johansson, A W (1997). Att frst rdgivning till smfretagare ('Understanding advice given to small
business'). Academia Adacta: Swedish School of Agricultural Sciences
Norn, L (1995). Tolkande fretagsekonomisk forskning ('Interpretive business research'). Lund, Sweden:
Studentlitteratur
von Wright, G H (1971). Explaining and Understanding. London: Routledge & Kegan Paul
Whlin, N (1995). Nringslivets arbete i ntverk. Identitetsskapandets dynamik ('Networking industrial
leaders: the dynamism of creating identity'). Ume: Department of Business Administration,
Ume University

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