Q&A: Josh Lerner on Entrepreneurship and Business School
Even as entrepreneurship centers and programs are sprouting up at business schools around the world, some still question what business school can do and how it can help those who want to be entrepreneurs. A recent study by Josh Lerner of Harvard Business School and Ulrike Malmendier of the University of California-Berkeley suggests peer learning is an important part of educating entrepreneurs, but in a surprising way. Graduate Management News caught up with Lerner, the Jacob H. Schiff Professor of Investment Banking at Harvard Business School, to discuss the study’s implications on business schools, admissions offices, and public policy.
Q: Your research found that an MBA’s business school peers may affect whether an MBA goes into entrepreneurship and how successful they are. What exactly did you find?
A: We exploited the fact that Harvard Business School has these sections where the students take all their classes together the first year. And what we found is that the peers that you have in those sections end up making a big difference in terms of whether you become an entrepreneur, and also what the outcomes of the ventures are. In particular, the more entrepreneurial peers — the people who had entrepreneurial experience prior to business school — that you have in your section, the less likely you are to become an entrepreneur, which was initially very surprising and the reverse of what we expected. But then when we looked more carefully at what the outcomes were, we saw that the more entrepreneurial peers you had in your section, the less likely you were to be an unsuccessful entrepreneur. In actuality, you were as likely, or even more likely, to be a successful entrepreneur.
Q: What are the implications for business schools and admissions offices?
A: Well, one of the important lessons is how powerful learning from one’s peers can be. Giving time for peers to really connect with each other isn’t just simply something that’s fun or leads to good memories of parties and so forth, but actually can lead to students making better career decisions going forward.
Certainly it argues for the sense of having a diverse class and, in particular, students who have been through experiences like an entrepreneurial startup. You can read all you want about startups, but I think everyone who’s been through one would say that you don’t really understand it in as much depth until you actually lived it. There’s actually a lot to be said for admitting people who have these deep experiences that give them the kind of perspective that they can then share with their peers.
Q: One point you make is that the benefit of exposure to entrepreneurship is not encouraging more entrepreneurs but in weeding out ventures that are likely to fail. For the policymakers, what would you suggest?
A: One of the things that you often see is cheerleading, claims that entrepreneurship is really a good thing in and of itself. What we’re emphasizing is that it’s not just simply about the number of students who do something entrepreneurial, but it’s also making sure that the entrepreneurs are successful.
Q: You mentioned that along the way you interviewed some of the students who had entrepreneurial experience, and you asked them why they went to business school. What did you find?
A: The initial assumption you might have is that the people who had been entrepreneurs prior to business school must be the ones who failed. That was very far from the truth. The students who come to our school who had been entrepreneurs before are disproportionally successful entrepreneurs, relative to the statistics on entrepreneurial success more generally. Rather, they learned their limits from doing these ventures. In many cases, you had people who had engineering degrees and who had a lot of interesting technological insights, but as the business grew, and as they brought in venture investors, they realized that there were many elements that went into making a successful business that had very little to do with the technology: finance and marketing and so forth. They realized they wanted to address those limitations before they went back in the entrepreneurial waters again.
Q: Your study was at Harvard Business School, a very high quality program with very high quality students. To what extent do you think that this whole idea of the peer learning in regards to entrepreneurs is applicable, to other less selective business schools, business schools in general?
A: Well, I think it’s a great question, and I don’t really know the answer to it. In an ideal world we want to do this analysis at a number of different schools. One aspect of Harvard is the incredibly cohesive first-year experience where people really bond together. Presumably there are many other business schools which also have very high quality student bodies. Looking at how peer effects work in both different groups and backgrounds of students, and different ways in which the business schools themselves are organized, is a very interesting set of questions that would well deserve exploration. And thinking about ways to try to create or encourage that kind of peer learning seems to be an important challenge for business school administrators.